The Public Services Commission on Tuesday approved the V.I. Water and Power Authority’s petition for an extension of the current Levelized Energy Adjustment Charge (LEAC).
WAPA’s Executive Director and Chief Executive Officer, Andrew Smith, presented the board with the details of authority’s request.
“At a high level what we’re requesting the Commission to do today is to leave the existing LEAC rate of 22.22 cents per kilowatt hour in place,” Mr. Smith explained. “We submitted materials to the Public Services Commission last week illustrating that not only is our trailing fuel cost higher than the 22 cents, but also that our forward looking fuel cost is also higher than the 22 cents.”
Residential customers currently pay about 44 cents per kilowatt, which is a combination of the LEAC and the Base Rate, the latter covering WAPA’s payroll, operations, vehicles and other expenses.
Mr. Smith added, “If we look at commodity prices on the market, propane prices have come down fairly materially since LEAC was set back in January of this year. I would note that the 22 cents does not actually include a specific price point. The 22 cents came about by letting the Vitol base rate of 5.1 cents expire.”
Mr. Smith said one of the things that “just wasn’t accurate” in the LEAC calculations historically was the heat rate as it related to the system’s efficiency. He said previous LEAC filings included a heat rate of approximately 12,000 Btu/kilowatt hour, however the actual heat rate was closer to 15,000 Btu/kilowatt hour, the CEO said.
“Higher is worse,” Mr. Smith stated, explaining that the heat rate in combination with the current fuel prices “hurts us from a cash flow perspective.” He further stated that the authority did not bill their customers for every kilowatt hour that they produced and it was “something we have to address as well.”
In terms of the heat rate dynamic and the associated effects, Mr. Smith said it could only be fixed “with new stuff.”
“We could operate the machines as best as we possibly can and the 15,000 heat rate might go to 14,500, or 14,800, but it’s not going to go to 10,[000] where it needs to be,” he said.
During Tuesday’s meeting, Mr. Smith also said WAPA’s propane-compatible Wartsila generators are expected to go online in March 2023. However, whether they will be utilized remains uncertain, with Mr. Smith pointing to WAPA’s strained relationship with Vitol.
“Obviously with our relationship with Vitol as it exists today, it’s unclear how that will advance,” he said. “I wish I had better clarity on that today. We have stressed repeatedly the importance of that corporation in terms of its impact on the community, but we are still hopeful that March is the online date for the Wartsilas.”
According to Mr. Smith, the cost of fuel for each month the project was advanced or delayed was approximately $3-$3.5 million.
Later in the meeting, the CEO clarified that the WAPA government subsidy for energy costs was all grant funding and not an obligation that needed to be repaid. And he said he saw “a very clear path” to eliminating government support, which requires investment and infrastructure.
In terms of the current fuel rates, PSC Chair David Hughes said it was “at least as low as it should be” as WAPA is currently under-recovering for fuel costs.
A motion was approved to extend the current LEAC rate of 22.22 cents for a period of no more than six months starting January 1, 2023.
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