Vitol Demands a Payment or Islands Could Go Dark

Lawrence Kupfer, executive director WAPA, addresses the issue of payments to Vitol during Wednesday's Senate discussion. (Photo by Barry Leerdam, Legislature of the Virgin Islands)
When Hugo Hodge, then executive director of the Virgin Islands Waste Management Authority, was pushing for a deal with Vitol to convert WAPA’s generators to burn propane, he said Vitol was building the infrastructure at no upfront cost for WAPA.
Lawrence Kupfer, executive director WAPA, addresses the issue of payments to Vitol during Wednesday’s Senate discussion. (Photo by Barry Leerdam, Legislature of the Virgin Islands)

When Hugo Hodge, then executive director of the Virgin Islands Waste Management Authority, was pushing for a deal with Vitol to convert WAPA’s generators to burn propane, he repeatedly said Vitol was building the infrastructure at no upfront cost for WAPA.

While propane saves money on the fuel part of ratepayers bills, the cost of the infrastructure is not accounted for in that part of the bill. Ultimately, ratepayers have to foot the cost.

The up front costs WAPA did not have to pay for the propane conversion doubled over the years. The original contract called for Vitol to be paid $87 million. In November 2014 the board voted to raise the contract budget for the conversion project to $150 million and then in November 2016 The governing board of the V.I. Water and Power Authority authorized another $10 million for the project.

Payments are now coming due and it is not good for Virgin Islanders. Vitol recently sent a letter to Senate President Novelle Francis saying some immediate payments were necessary.

The letter came to light during a Senate discussion Wednesday of how to disburse $39 million awarded to the V.I. Medical Assistance Program to reimburse medical facilities for underpayment during the years 2011, 2012 and 2013.

WAPA Executive Director Lawrence Kupfer told senators WAPA owes Vitol $100 million and the company is losing patience.

“If we don’t pay we will be in darkness,” Kupfer said.

Vitol had asked for $20 million before June 1 but then extended the deadline to the end of June.

When Francis asked just how much time WAPA had, Kupfer answered, “a couple weeks, maybe a month or two” and if payments were not made the islands may have “rolling blackouts or brown outs.”

The Senate was considering a bill that would have designated $14 million to go to WAPA. Kupfer said WAPA hoped the amount would be around $23 million – the amount the territory’s two major hospitals owe WAPA. He said whatever WAPA got would go to Vitol.

As the Senate sent the bill back to committee for amendments, it was not positive WAPA would even get $14 million.

Moleto Smith, representing St. Thomas East End Medical Center, told senators his agency should receive a slice of the reimbursement funds. (Photo by Barry Leerdam, Legislature of the Virgin Islands)
Moleto Smith, representing St. Thomas East End Medical Center, told senators his agency should receive a slice of the reimbursement funds. (Photo by Barry Leerdam, Legislature of the Virgin Islands)

Massarae Sprauve-Webster, representing Frederiksted Health Care, and Moleto Smith, representing St. Thomas East End Medical Center, made the case that their clinics should get some of the money. Those two clinics had provided some of the care Medicaid was reimbursing.

Jenifer O’Neal, director designee of the Office of Management and Budget, said as far as she knew, those two clinics were not brought into discussions concerning where the money should go. It was her understanding the clinics would get money the next time such a federal payment was made, she said. However, it was pointed out there may not be another such payment.

Juan F. Luis Hospital was also to receive $5 million to pay outstanding taxes owed to the Virgin Islands Bureau of Internal Revenue, $2 million was to go to the Department of Health for behavioral health programs, and $200,000 to the Department of Education for mental health services for students and staff.

The bill as presented to the Senate had appropriations from the payment to the Medical Assistance Program unrelated to medical care. The V. I. Waste Management Authority was supposed to receive $3 million for outstanding vendor payments. Waste Management has been getting complaints from haulers who are threatening to quit picking up garbage if they are not paid.

The sum of $4.5 million would have gone to the General Fund to assist in covering the cost of negotiated salary increases.

Other checks were proposed for the following: $125,000 to the Department of Sports, Parks and Recreation for the purchase of garbage trucks; $105,000 to Department of Human Services to purchase two vehicles for the Meals on Wheels program; $150,000 to the Legislature of the Virgin Islands for a summer employment program; $420,000 to Bethlehem House to retrofit its building and purchase equipment; $150,000 to the Department of Sports, Parks and Recreation for playground equipment for the Alvin McBean Ballpark; and $150,000 to the Tax Study Commission.

The senators had trouble focusing on how to disburse these funds while having WAPA representatives before them. WAPA has recently requested a rate increase that will raise the rate to 48 cents per kilowatt hour. This is four times the average cost in the states.

Kupfer insisted the propane conversion was saving the authority $60 million dollars a year. However, Francis could not see how that went along with rates going up.

“We are going backwards,” Francis said.

At the groundbreaking in 2014 for the propane project, Hodge said, “We expect ratepayers to see a 30 percent smaller fuel bill. Some months, it will be even 40 percent.” If the increase rate request goes through, residents will be paying five cents less than the highest rate WAPA has ever had.

The letter from Vitol to Francis said, “Vitol required a minimum payment by end of May of $20 million towards the debt to enable it to continue fulfilling its contractual obligations.”

Later in the letter Mike Loya, president of Vitol, wrote the deadline was extended because of a WAPA proposal to pay, although the proposal was unacceptable. He noted, “We also point out that Vitol is not involved in, nor is our debt subject to, the vagaries of the company’s financing sources.”

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