The VI Public Services Commission voted on Friday to approve an increase in the VI Water and Power Authority’s fuel surcharge, but the increase will come into effect on Tuesday alongside an equivalent decrease in the base rate, resulting in no change for taxpayers.
The current fuel surcharge, also known as the Level Energy Adjustment Clause, or LEAC rate, is 17.21 cents per kilowatt hour and the PSC voted to increase the rate equivalent to the 5.0125 cent decrease in the rate. base, for a new LEAC of 22.222 cents per kilowatt hour.
The PSC voted in January to authorize the expiration of a recovery fee of 5.0125 cents per kilowatt hour, which resulted in a decrease in the base rate effective March 1. The levy has been in place since 2017 to allow WAPA to pay fuel supplier Vitol $148.8 million for the infrastructure needed to switch from using fuel oil to liquid propane gas to generate electricity at power plants around the world. territory.
The fee represents approximately $2.48 million per month in revenue for WAPA, and PSC members refused to grant WAPA’s request for an extension.
The new LEAC rate will be in effect from March 1 to July 1, and the PSC is expected to consider other potential changes during a comprehensive throughput review in June.
PSC consultant Larry Gawlik recommended a LEAC rate of 23.14 cents per kilowatt-hour, while Joan Foy, WAPA’s director of prices and tariffs, said the Authority was asking for 25.78 cents.
Gawlik said St. Croix’s generators run on 100% liquid propane gas, but there are still generators in service that are “inefficient and basically old, for the most part. St. Thomas, on the other hand, is far from 100% propane, it’s only about 37% propane right now.
The switch to LPG was expected to cut costs, but fuel prices have risen and are now fluctuating wildly amid Russia’s attack on Ukraine.
PSC chairman David Hughes said fuel prices were “all over the place at the moment” and it was uncomfortable to establish a new LEAC under the circumstances.
“I have no confidence given the volatility in global fuel prices that any number we choose will be better than any other number,” Hughes said.
Ultimately, he recommended the neutral rate approach as a compromise so that WAPA could support but “not penalize the taxpayer for the uncertainty of fuel prices or the uncertainty of our process”.
Hughes and Commissioners Pedro Williams and Raymond Williams voted to increase the LEAC without interest rates, but Commissioner Andrew Rutnik abstained.
“I think there has to be more base for the 22.222 than just matching it to the base rate reduction,” Rutnik said.
Hughes said that as regulators, generally, “we would have sent the utility back for review and we would have filed this issue for at least a month, and we would have understood why we seem to have problems with this process.”
However, “I don’t think that’s a very practical approach when we know that fuel prices, at some level, are significantly higher than what they’re collecting for,” Hughes said.
The process, overall, “is broken, or not particularly transparent, by which we arrive at these numbers,” Hughes said.
Work on problem areas
New WAPA CEO Andrew Smith also expressed dismay at the inefficient and opaque way in which WAPA rates are calculated.
WAPA staff submitted four revisions to the petition to increase the fuel surcharge and filed the latest update on Tuesday after Gawlik completed its analysis and report for the PSC.
The filing was still not complete or in compliance with PSC orders, and “I don’t think any of us are happy with how this process has gone,” Commissioner Pedro Williams said. . WAPA “has continually refused to comply with simple and clear commission orders and there are never good reasons why.”
Smith acknowledged that “obviously there are a lot of challenges” at WAPA and “a long list of things that I need to address and work to resolve”.
He told the PSC that ‘we have a disagreement between staff, consultants and the Water and Power Authority tariff and pricing team. The source of these disagreements has been a source of frustration for me over the past four or five weeks that we have been through this process.
Smith said he wanted the WAPA staff, PSC and consultants to come together and “bring all the parties into a room and figure out why we can’t agree on the numbers. We’re doing calculations here, but we seem to be doing different calculations. And I don’t understand, as a general manager, why we can’t do this together and come to an agreement. Instead, we end up in his forum, debating the answer, and it’s not effective. So that’s on my long list of things we’re working on here at the Water and Power Authority.
Senator Genevieve Whitaker, who is an ex-officio member of the PSC, said WAPA discussions on tariffs were all kept out of public view and there was no mention of the issue at Thursday’s WAPA board meeting.
“Yesterday’s meeting was about contracts,” and the public heard nothing from WAPA about the rate controversy, Whitaker said.
Smith acknowledged that “it was not a good process” and promised the PSC and the community that “we will continue to manage this process and we will start to solve the problems”.