ST. CROIX — The members of the Virgin Islands Public Services Commission are feeling pressure from the governor to rescind the 5-cent reduction to the Levelized Energy Adjustment Clause on electricity bills the PSC recently approved as the Virgin Islands Water and Power Authority petitions the Commission to reconsider and reverse its oral decision.
The PSC voted on June 10 to reduce WAPA’s LEAC on electricity bills to 17 cents per kilowatt-hour from 22.22 cents.
WAPA, in its petition for reconsideration submitted to the PSC Tuesday, argued that the Commission’s ruling was premature, procedurally flawed, and financially detrimental.
The Authority emphasized that the LEAC ensures recovery of actual, prudently incurred fuel costs, including deferred fuel expenses — the shortfall between costs paid and revenues collected under previous rates.
The Authority warned that a reduced LEAC rate lacking deferred cost recovery could impair its ability to pay fuel suppliers, undermine financial stability, and put essential power and water services at risk.
While WAPA has officially requested that the PSC vacate its oral LEAC reduction and restore the current rate that properly includes deferred fuel costs as required by law, Governor Albert Bryan Jr. has also reached out to members of the PSC to persuade them to reconsider the reduction.
“The governor has expressed some concern with the proposal to the PSC to reduce the LEAC 5 cents,” Richard Motta Jr., Government House spokesperson, said, adding that the governor informally discussed the matter with certain members of the PSC on Monday.
Motta said the governor’s position is that although WAPA is improving its financial standing, the Authority remains in arears when it comes to paying vendors and must continue improving its finances before it can operate with a reduced LEAC rate.
Bryan, during last Thursday’s episode of “Analyze This with Neville James,” compared the relationship between the PSC and WAPA to that of the Crips and Bloods, two of the nation’s most well-known street gangs. The governor’s characterization of the two entities came after the PSC voted to reduce the LEAC for a three-month period beginning July 1.
“We gotta repeal that 5 cents reduction,” Bryan said. “I tell the public, ‘if we don’t, like, WAPA’s done. I mean, it’s over.’ So, we gotta get the PSC to hold it.”
The governor discussed a report from Ernst & Young, known as EY.
“It says if we don’t keep the rates the same, WAPA is going to be sunk,” Bryan said.
EY Turnaround Management Services LLC issued its initial assessment report of WAPA on January 29 at the request and direction of the Virgin Islands Public Finance Authority following enactment of Act No. 8471, which required the government to engage the services of a utility turnaround management company.
Over the past three years, the revenue provided by the LEAC and base rates have not been sufficient to fully recover WAPA’s costs, according to the report. To fully recover fuel costs, the LEAC rate would have needed to be raised by an estimated 3 cents to 5 cents, representing an increase of 15% to 25%. A slight 1-cent per kilowatt-hour decrease to the current LEAC (or base) rate would reduce cash inflows by about $3 million.
The report noted that transition to LPG and renewables is projected to decrease fuel costs. However, debt service may continue to pressure the need to maintain or increase rates. WAPA’s debt service and operations and maintenance contractual obligations appear to hinder the Authority’s ability to reduce the rate to consumers given WAPA is obligated to repay in full. If the PSC seeks a reduction in rates, WAPA may need to renegotiate existing contractual obligations, including operations and maintenance and fuel contracts, and/or resolve outstanding debt obligations and overdue vendor payables through a funding source other than existing customers, according to the report.
WAPA, in a statement released following the PSC’s meeting on June 10, said the Commission deliberately overlooked facts when it ordered WAPA to lower electric rates. WAPA described the move as “not only irresponsible, but harmful to the public interest,” noting it would reduce the Authority’s budget by $2.5 million per month or $30 million annually. WAPA noted the decision places the Authority at risk of defaulting on its obligations to vendors, contractors, and employees.
The Authority argued in its petition for reconsideration that the PSC’s action to reduce the LEAC violates Title 30 of the Virgin Islands Code, which mandates that rates reflect actual costs. WAPA criticized the PSC for ignoring statutory obligations, applying arbitrary deductions, and punishing WAPA for unrelated unpaid assessments.
The governor said during his interview on “Analyze This” that the PSC is “mad” and he is “a little upset” at WAPA CEO Karl Knight because the Authority does not want to pay its assessment fee.
“I told him this, ‘you gotta play ball with them,’” Bryan said.
WAPA requested that the PSC grant its petition for reconsideration, reverse its premature and unsupported LEAC reduction, and approve a revised LEAC rate that properly recognizes the Authority’s deferred fuel balance in accordance with law, fiscal prudence, and the public interest.
The PSC has 30 days to call an emergency meeting to decide whether it will reconsider the LEAC rate reduction. If no action is taken, the petition would be denied by statute at the end of the 30-day period.
