The U.S. Virgin Islands government is hammering out a plan to direct cash to the island's junk-rated power authority to prevent a fuel cutoff threatened for as early as this Sunday.
The Senate Rules and Judiciary Committee on Monday approved a bill that would send $22.9 million of a $39.5 million windfall from Medicaid to the Water and Power Authority. The whole Senate was expected to approve the bill Tuesday afternoon. A spokesman for Gov. Albert Bryan told The Bond Buyer that he supports the government of the Virgin Islands and its instrumentalities paying their obligations.
On June 3 the president of the propane supplier for WAPA, Vitol Inc., sent a letter to Senate President Novelle Francis, demanding a $20 million payment toward a more than $97 million debt owed to Vitol by Sunday, or Vitol would “pursue its legal and contractual rights.”
According to the Virgin Islands Consortium web site, in mid-June Vitol told WAPA that if the authority could not come up with a feasible and consistent way to pay its bills when due on a monthly basis, it would halt all operations including providing propane. Vitol also does work converting WAPA’s generators to propane generators.
WAPA has about $200 million in bond debt outstanding. Its senior debt is rated Caa1 by Moody’s Investors Service and CCC by Fitch Ratings.
On June 12 the islands’ public service commission denied the authority’s request for a 9 cents per kWh increase in electrical rates. WAPA’s rates are 38 cents per kWh, higher than anywhere else in the U.S.
At the June 12 hearing the commission’s consultant Georgetown Consulting Group recommended denial the rate increase. In a report it said that increasing the authority’s rates would push customers to install their own electrical generation systems, like solar panels. This would reduce the authority’s customer base.
“Absent WAPA taking more aggressive and proactive steps to restructure its business model, its operating and maintenance practices, its staffing levels and incorporation of best practices and key performance [indicators, WAPA's] financial position will continue to erode as more of its ratepayers self-generate," the consultants said. "Meanwhile, WAPA will be forced to seek repeated rate increases on an ever-shrinking rate base that will only drive more of its ratepayers off the grid. Left uncorrected a strategy of chasing repeated rate increases is a strategy that will assure WAPA’s failure.”
The consultant said that WAPA needed to provide more data to the commission. The consultant recommended that the commission take no action until 45 days after receiving the information.
On June 14 Virgin Islands Sen. Kenneth Gittens called for hearings to discuss what steps should be taken for WAPA. These hearings have yet occurred.
Vitol officials and Virgin Island senators met on May 4 to discuss WAPA’s debt to Vitol and its history of not making its payments. According to Loya’s letter to Francis, since then Vitol has made its monthly payments.
Loya said in his letter that nothing had been done about the outstanding debt. “We requested a repayment plan from the company that could be acceptable to us as much of the debt is overdue by more than 730 days.” Loya said Vitol is demanding that after the $20 million payment is made, each month WAPA pay $2.5 million toward the debt.
Loya said that WAPA was already saving $5 million per month by using propane rather than diesel to generate electricity and that this savings is likely to increase as more generators are converted to propane.
