WAPA’s Finances, Part 3: Is There Light at the End of the Tunnel?

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Estate Richmond Power Plant on St. Croix. (Source file photo)
Estate Richmond Power Plant on St. Croix. (Source file photo)

This is the eighth installment in an ongoing series on issues facing the V.I. Water and Power Authority.

WAPA is losing money and swimming in debt, with very high electricity costs. Decades of hospitals and government agencies using it an involuntary lender by not paying power bills, combined with decades of force borrowing due to slow recovery of fuel costs have starved it, forced chronic delays in maintenance and upgrades.

But not all is doom and gloom. Some real and important changes have recently been made, and more appear on the way. While rates will remain much higher than stateside, they could go down significantly from where they are now. But much of that will go to naught unless the base rate is raised. Is there light at the end of the tunnel or is that a train coming?

Light at the End of the Tunnel

Believe it or not, there really is good news, Homeowner rates now are about 40 cents per kilowatt hour for the first 250 kilowatts and 43 cents for each kilowatt hour above that. That’s very expensive. But it is also a full 10 cents, or 25 percent, less per kilowatt hour than the 2014 peak. Much of that is due to the switch to propane. Even with the high debt payments to Vitol, the switch is saving Virgin Islanders about seven cents per kilowatt hour, according to WAPA Executive Director Lawrence Kupfer.

And total rates should go down by another 10 cents or more, if all goes well with WAPA’s plans, including the base rate increase.

WAPA Executive Director Lawrence Kupfer said he believes the string of recent power outages in the territory is over, and called the recent problems "unacceptable." (File photo)
WAPA Executive Director Lawrence Kupfer (File photo)

Just a few months ago, WAPA was unable to pay Vitol to purchase propane and the government owed $30 million for utility bills. WAPA warned it might have to institute rolling blackouts due to lack of fuel.

Since then, the Bryan administration and V.I. Senate devoted a federal Medicaid reimbursement of $22.9 million to pay past-due bills for the hospitals and Waste Management Authority.

“And the Virgin Islands government kicked in about $6 million,” Kupfer said.

Also, the Bryan administration implemented a 2013 law called the “Single-Payer Utility Act.” Sponsored by Sens. Craig Barshinger and Positive Nelson, it enables the government to directly pay utility bills instead of individual hospitals and agencies.

“So government receivables have been paid down and government entities have remained current. The old balances have been wiped,” Kupfer told the Source.

Enacted over Gov. John deJongh’s veto, neither deJongh nor his successor implemented this mechanism. DeJongh objected that it would “expand the bureaucratic layers for processing” payments and take away any incentive for agencies to conserve or control costs.

Bryan’s administration has deducted utility costs from agency and hospital allotments. For now, the chronic vandalizing of WAPA by using it as a government piggy bank is solved.

Federal Windfall Improving Efficiency, Expanding Solar

Spanish Town solar farm on St. Croix (Bill Kossler photo)

There is a lot of federal money coming in. Sadly, the federal grants don’t directly help WAPA’s cash-flow, debt load or credit ratings. But they will help improve WAPA’s facilities without adding to its high debt.

Right now, WAPA is using a HUD grant to put in another 40 megawatts of more efficient power generation on St. Thomas, along with battery storage and will not only save money but improve reliability, according to Kupfer. It is out to bid now and the generators should be online by the end of 2020. That is funded with some $65 million in HUD grants.

“Not only are the new units going to be more efficient, but we will get rid of the leased units, saving at least five cents per kilowatt hour,” Kupfer said.

Federal funds are helping. “Renewables on the grid will also enable us to drop a couple of cents per kilowatt hour and we believe that can be online by the end of next year,” Kupfer said.

About $45 million in HUD funds are paying for that too, he said.

That money is from some $67 million of a $2 billion pool of funds for Puerto Rico and the USVI to not just rebuild, but upgrade power generation. Gov. Albert Bryan and Delegate Stacey Plaskett are both trying to get the USVI share of those funds increased.

“We have ready to go about 25 megawatts of solar for St. Croix and three megawatts solar for St. John. The plans are for about 31 megawatts of solar and we think we can do that. … And as we get more HUD monies, we would get more projects,” Kupfer said.

The four megawatt St. Thomas solar farm at Estate Donoe, devastated in the 2017 storms is being rebuilt to produce five megawatts.

And the seven megawatt St. Croix solar farm is still in place and in operation.

While those numbers look large, “you only get about 25 percent of the maximum energy out of a solar field,” due to passing clouds, the sun being low in the sky and night.” Kupfer said. If federal funding permits, they may add battery storage to some of these solar projects, he said.

WAPA also has a very big pool of federal money for rebuilding after the storms, putting a lot of lines underground and installing thousands of expensive, wind-resistant utility poles.

“HUD has obligated $200 million and FEMA $600 million … and we expect those amounts to grow,” he said.

Those numbers do not improve WAPA’s current bottom line much. But they will save money.

So to recap: If the base rate is not increased by 2.5 cents, WAPA will continue to lose money, which will lead to problems buying fuel and force it to borrow at extremely high rates, which will cost ratepayers more in the long run. If WAPA cannot borrow to buy fuel, there may be rolling blackouts. If it has to borrow, it’s already heavy debt load will go up more and ratepayers will pay for it.

Or the PSC can approve the base rate increase, the sooner the better, and soon thereafter improved efficiency and refinanced loans will reduce the fuel portion by more than the base rate increase. Rates should continue to improve but remain high.

Either way, hundreds of millions of dollars in federal funding will improve efficiency, resiliency and reliability and lower rates a little from the worst case scenario.

Previous installments in this series:
Melee and Missed Opportunities: A Short History of WAPA Part I
The Power Players: A Short History of WAPA Part II
Fact and Reality Check: A Short History of WAPA Part III
After Alpine: A Short History of WAPA Part IV
Businesses Lose When WAPA Goes Down
WAPA Finances: Raise Base Rate and See Lower Total Rates Soon, or Pay More Forever
WAPA’s Finances Part 2: A Case of Chronic Starvation

Original Source: https://stjohnsource.com/2019/11/06/wapas-finances-part-3-is-there-light-at-the-end-of-the-tunnel/