Virgin Islands government bails out power authority

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The Virgin Islands Senate and governor voted to give $6 million to the islands’ Water and Power Authority Friday, at last temporarily averting an islands-wide power outage.

The Senate voted 11-0 with 3 absences to reapportion $6 million from the current fiscal year budget to pay Vitol, the authority's propane supplier.

Gov. Albert Bryan Jr. said the re-appropriation would "avert a crisis that would have significantly and negatively impacted the people of this territory.”

WAPA owes about $187 million in bonds and $66 million in bond anticipation notes as well as other sums for other obligations to other creditors and suppliers.

In mid-December, Vitol declared WAPA in default for the authority’s propane fuel and cut off supply on Saturday, Dec. 21. Bryan sent a press release on Dec. 23 saying the government would re-appropriate $6 million from the miscellaneous section of the island’s budget to pay Vitol.

According to a Dec. 20 WAPA statement, “the authority has been petitioning the Public Service Commission for rate relief for over one year so that the authority may pay its Vitol and other obligations. The PSC’s actions at last week’s meeting [rejecting a base rate increase] make it impossible for WAPA to pay its obligations to Vitol, re-finance the LPG project at longer terms and lower rates, and complete other critical re-financings that will lower the cost of electrical service to our customers.”

WAPA concluded, “The authority does not have revenues to pay their higher fuel costs and will not be able to sustain electrical generation without an immediate infusion of cash.”

On Friday senators complained about the authority’s failure to provide adequate financial information at the hearing.

The senators said that Vitol had stopped providing propane — normally one of the authority’s two primary fuels to generate electricity — on Saturday but that it had restarted providing some propane Friday. In the meantime, the authority had switched over to using No. 2 fuel oil as a fuel at its power plants, which is much more expensive. No. 2 fuel oil is similar to diesel gas. As of Friday afternoon, the authority was still using fuel oil at its St. Thomas power plant.

On Friday one senator said that the authority’s No. 2 fuel oil supplier, Glencore, was demanding payment for its due charges.

If the authority had neither propane nor diesel, the islands would essentially have no central provider of electricity. The authority gets a small sliver of its supply from solar sources and some residents and businesses have their own electrical supply through things like solar panels and wind turbines.

“The re-appropriation of $6 million in funds is only a short-term fix, and now we have to look more comprehensively at the long-term solution,” Bryan said after the vote. “We must address WAPA’s request for a base rate adjustment to help to stabilize the utility’s unstable financial position.”

At a meeting Friday morning, the islands’ Public Service Commission voted to extend a Leased Generation Surcharge for WAPA of 3.08 cents per kilowatt-hour for a maximum period of 120 days. The surcharge funds a propane unit on St. Croix and two diesel units on St. Thomas. It also provides funding for maintenance on a new unit on St. Thomas.

WAPA is currently appealing the commission's decision to reject a base rate increase.

At Friday’s meeting, commission Executive Director Donald Cole said: “The PSC will act … to conclude a proper base rate examination in a manner that demonstrates our commitment to the rule of law and financial transparency. We strongly believe such a process is critical to restoring citizen and investor confidence in the utility, and necessary to WAPA’s attempts to identify new, efficient sources of capital funding.”

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Speculative grade bonds Utilities Virgin Islands Water and Power Authority Government of the Virgin Islands U.S. Virgin Islands
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