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PSC Approves LEAC Decrease, Only Half of Funding Needed for WAPA Maintenance

Along with quickly acting on a decrease in Levelized Energy Adjustment Clause rates, Public Services Commission members Tuesday night also voted to approve half of the V.I. Water and Power Authority’s request for an interim electric base increase to cover repairs for the Unit 25 generator.

The LEAC portion of Tuesday’s meeting went quickly, with the PSC approving a drop from the current electric LEAC of $0.191321 per kilowatt hour to $0.16279 cents per kilowatt hour, beginning Jan. 1 and ending June 30. The PSC also approved a water LEAC rate of $6.27 per 1,000 gallons.

The rest of the PSC’s discussion with WAPA focused on an emergency petition for base rate increases that was approved by the authority’s board late last month. The base rate increase is meant to cover six more months of lease payments for the Unit 25 generator, along with an overhaul to Unit 23 for a total $8.3 million.

The WAPA board approved the filing of three petitions during an emergency meeting in November; the first would cover an interim increase in the electric base rate that would be effective Jan. 1. The petition comes after more than a year of back and forth between WAPA and the PSC over the authority’s rate financing mechanism (RFM), a surcharge within the LEAC that helped WAPA pay for maintenance costs.

At a PSC meeting last November, the commission voted to remove that portion of RFM that would have allowed WAPA to bring on an independent agency to monitor the day-to-day operations of the utility. At the meeting, WAPA officials testified that proposals received from companies that could do the job were too expensive and what had so far been collected was not enough to cover the cost.

During its next meeting in December, based on additional recommendations from its consultants, the PSC voted to further reduce the RFM so that it took away funds that are collected to cover WAPA’s maintenance and spare parts costs, which the authority has said is needed to keep its plants operating at an efficient level. Commission members said they found the RFM had “exceeded its useful life” and was no longer needed as an emergency charge, but said WAPA could seek to cover the costs through the base rate.

The PSC gave its approval in June for the transfer of the RFM to the base rate, which would also increase base rates in each category by 1.8-cents per kilowatt hour.

Most recently, at a meeting in August, the PSC allowed WAPA reinstate a portion of the RFM from Sept. 1 through Dec. 31 that would allow the authority to collect an additional 1.8-cents per kilowatt hour. During WAPA’s November board meeting on St. Thomas, board members said the first “interim” or emergency petition asks that the 1.8-cents be extended until permanent rates are adopted and that the electric base rate increase to 2.69-cents per kilowatt hour for a total $3.56 electric rate increase for the average residential customer.

The PSC did vote Tuesday to extend surcharge and allow WAPA to collect the money it needs through the base rates, but only add what is needed for the Unit 25 generator. Discussion on funding for Unit 23 will be continued after WAPA has provided a report on its heat recovery steam generator, which was put out for retrofitting that was expected to be complete by the end of 2015.

WAPA will also be filing for a permanent electric base rate increase, which would go into effect July 1 if it is approved by the PSC. The rate increase is a follow up to WAPA’s 2012 rate case and will help WAPA maintain its investment grade credit rating, which WAPA Executive Director Hugo Hodge Jr. has said would cover the authority’s energy and capital projects.

“It’s not only tied to our future development of projects, but also to maintaining the current structure of the agreements we have right now with our bond holders,” Hodge said at a recent WAPA board meeting.

The proposed new increase – which would add $15.5 cents to the typical residential bill – would also cover $145.5 million in projects. WAPA’s board has also authorized the filing of a new water base rate petition, which would increase the water base rate by 9.2 percent, or $1.9 million, beginning July 1, 2016. Neither petition for permanent base rate increases was discussed Tuesday night.

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