Crises multiply for Virgin Islands’ power authority
The U.S. Virgin Islands Water and Power Authority is seeking to raise electric rates to almost four times the national average as it struggles to resolve a mounting list of crises.
The sole provider of electricity and water to the Virgin Islands is faced with a threatened cutoff of fuel from an unpaid supplier, an FBI investigation of $2.3 million of illegal wire transfers, an employee lawsuit, and reduced demand for its services. These problems add to the existing burdens that earned the authority's senior revenue bonds ratings of Caa1 from Moody’s Investors Service and CCC from Fitch Ratings.
In late April WAPA executive director Lawrence Kupfer told the local Public Services Commission that its propane supplier VITOL was insisting that the authority keep current on its bill, according to the Virgin Islands Consortium news website. Along with supplying propane for its electrical power plants, VITOL also is being paid to convert plants to burn propane. WAPA owes it about $160 million.
“Many critical vendors have indicated that they will no longer continue to provide their services to the authority if the amounts owed are not addressed,” Kupfer told the Virgin Islands Senate Wednesday, the Consortium reported. “Should this occur, the authority will not be able to continue to provide necessary services.”
According to Moody’s, as of July 31, 2018, WAPA had $327 million of debt outstanding, of which $191 million was bond debt. These figures don’t include sums the utility owes to its suppliers. Fitch Ratings said that as June 15, 2018 the authority had $215.6 million of bond debt outstanding, of which at least $5 million was retired on July 1, 2018.
In addition as of fiscal 2016 WAPA had an adjusted net pension liability of $259 million and Other Post-Employment Benefits obligation of $48 million, Moody’s said.
On April 24 the PSC conditionally approved a six-month, 3.1-cent-per-kilowatt-hour increase in rates for the authority to cover the costs of leasing power generation units on St. Thomas and St. Croix. A WAPA spokesman said Thursday that the authority was about to certify the PSC-required conditions, opening the door to the rate increase.
WAPA has also requested the PSC approve a 6 cents per kWh increase to cover its ongoing costs and the money it owes its suppliers. The spokesperson said he didn’t know how long it would take the PSC to consider this request.
Without these increases, WAPA’s rate is 38 cents per kWh, higher than anywhere else in the U.S. Taken with a planned request for a 4 cents surcharge in addition to the 6 cents base increase, the authority is proposing to increase the rate to 48 cents per kWh. The U.S. average is 12.8 cents, according to the Choose Energy website.
On Thursday the St. Croix Chamber of Commerce delivered a statement to Virgin Islands Gov. Albert Bryan opposing the rate increases.
“Continuing to penalize the people of the Virgin Islands for government mismanagement is an undue hardship that many simply cannot afford and will have a negative impact on already financially stressed households and businesses across the territory.
“The St. Croix Chamber of Commerce is strongly against the WAPA rate increase and takes the position that the private sector can no longer be relied upon to bail out WAPA due to the authority’s and the Government of the Virgin Islands’ mismanagement,” the chamber continued. St. Croix is one of the three main islands on the Virgin Islands.
On Wednesday WAPA General Counsel Lorelei Carrington told the Virgin Islands Senate that $2.3 million had been illegally wired to an offshore account. The money was sent in two wires, one in May 2018 and another a month later. WAPA has referred the matter to the FBI.
Adding to its difficulties on April 9 two employees of WAPA sued the authority. In February they had made a presentation to the WAPA board of directors questioning the authority’s choice to rely on rented facilities rather than repairing its own units. They had said the choice increased the authority’s costs by 20% to 40%.
Since then, WAPA supervisors have harassed and made impossible demands of them, they claim. They ask the judge to order the halt to this and to order the authority to pay the fees connected with the case.
In August 2018 Moody’s released a credit opinion on the authority, saying that its challenges include customer peak demand and revenue collections well below pre-hurricane levels, very limited liquidity resources, high amounts of government receivables, high retail rates, and challenging capital projects. In June 2018 Fitch pointed to the same factors and also mentioned that the authority had nearly depleted its lines of credit and that it serves a territory with a “narrow economy with low per capita income.”
In mid-May Fitch Ratings Managing Director Dennis Pidherny said the authority’s pathway to stability “eludes us.”
On June 1 the authority posted a notice to the Electronic Municipal Marketplace Access website stating it would be calling $5.5 million of its Series 2012A electric system revenue bonds on July 1. The authority provided no explanation for the action.