Subsidy or Collapse: WAPA Says it Needs $48 Million in Funding For Fuel From Gov't to Stay Afloat
The V.I. Water and Power Authority has projected that it will need $48 million in fuel subsidy from the government to prevent the company from “running out of cash” in the next fiscal year.
2022-07-28 14:21:31 - VI News Staff
Andrew Smith, CEO and executive director of the authority told senators during the latest budget hearing before the Committee on Finance on Wednesday that the estimation is based on the current fuel prices on the world market.
"We're relying on government's support to not run out of cash. We pay for fuel, we pay for debt, we pay payroll and that's it," Mr. Smith remarked, noting that the company only has an average of $70,000 left back after making these monthly payments.
Jacob Lewis, chief financial officer at WAPA said the cost of the fuel subvention needed was calculated based on electricity consumption and the cost of production.
“We looked at how much power we sold to our customers over a recent trailing 12 months period and that became the basis for our sales assumption for fiscal year 2023. We then looked at how much fuel we had to purchase and consume over that same period of time to produce that amount of energy,” he explained.
Mr. Lewis said that to arrive at the fuel cost, WAPA layered the latest market pricing of fuel on to the purchase requirement which created an estimate of fuel cost.
To date for the fiscal year 2022, WAPA has received approximately $20 million from the American Rescue Plan (ARPA) to offset the cost of fuel on its operations.
Mr. Smith said customers are also saving as the subsidy has prevented 40 percent of utility cost to be added on to customers’ bill. “Average customer bills were $250; we save them $70 – that’s about 40 percent,” he said.
According to information from the U.S Energy Information Administration, valid up to January 2022, the average price of electricity paid by U.S. Virgin Island residents was about 43 cents per kilowatt-hour in mid-2021, which was more than three times higher than the U.S. average power price of 14 cents.
But there is no guarantee that the government will continue to provide this grant support each month and without it, Mr. Smith said the options are “all bad.”