The Water and Power Authority Board Friday OK’d a plan for the utility to pay Vitol another $150 million, but it wasn’t easy, the measure at first failed to get the go-ahead from a majority of board members. When the vote came in it was two to two and the measure was pronounced dead. Questions were raised about adjourning at that point. However, a phone call was made, and the third positive vote was obtained.
WAPA CEO Andrew Smith told the board the agreement would “dissolve” the “problematic” relationship WAPA has had with Vitol, the company that helped the Authority convert generators to use propane.
When the deal was signed in 2012, then WAPA Executive Director Hugo Hodge Jr. said the partnership with Vitol would cut costs by 30 percent and WAPA would be able to buy the infrastructure from Vitol for a dollar in 2021. That did not happen.
A report by Inspector General Steven Van Beverhoudt at the end of 2021 found many faults with the deal. It said, “The plan was originally for eight generating units to be converted to propane. Only three of those eight units can burn propane now. Three of the units were not deemed capable of being converted, another was damaged during conversion, and another was converted but failed to work after being converted. It became necessary for WAPA to rent generating units.”
Vitol has already received a great deal of money from WAPA. Smith texted the Source after the meeting that the total obligation for infrastructure is $312 million. Wapa has paid $84 million to date for infrastructure.”
According to comments made by Smith in November, WAPA has paid over $40 million for the operation of the propane system through a maintenance fee, and almost $400 million for fuel.
The negotiated agreement will settle the Authority’s debt to Vitol and terminate the agreement which required WAPA to buy its fuel from Vitol.
The first payment of $45 million is due Monday and the final is due in August. The payments are possible because the legislature, after a bitter debate, and the governor approved a $150 million line of credit. Smith has indicated that he is optimistic that WAPA will be able to pay the government back with a federal grant.
Board members Kyle Fleming, Juanita Young, and Cheryl Boynes-Jackson voted to approve the agreement. Board members Hubert Turnbull and Elizabeth Armstrong voted against it.
A second measure allowing WAPA to sign a promissory note to the government for the funds used in the settlement received the same three yes votes. Turnbull again voted no, and Armstrong did not vote.
Smith told the board, “This is a critical path to continue to fix the single largest debt and expense that the Authority has been unable to pay,” He added, “The finalization of this settlement will enable WAPA to effectively manage fuel supply, remove some risk and lower the cost of fuel.”
Sen. Kenneth Gittens has been vocal in his opposition to the deal. He said in a senate session, “This is another bailout for WAPA that is going to rest on the back of the ratepayers. At the heart of all WAPA’s problems, financial and otherwise, is mismanagement and a lack of accountability.”
Gov. Albert Bryan Jr. has advocated the buyout warning customers could face rolling blackouts without this deal.
Board Chair Fleming emailed the Source after the meeting writing, “Today’s action represents one of the first and most critical steps to financially and operationally stabilizing the V. I. Water and Power Authority. With this hurdle overcome the board looks forward to shifting the focus to innovative measures being taken to deliver reliable and affordable utility services to the people of the Virgin Islands.”