WAPA continues to bleed as V.I. government continues to fail to pay multi-million bills
Published: December 31, 2013
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ST. THOMAS - Financial audits discussed at a specially called meeting of the V.I. Water and Power Authority board on Monday revealed that the utility suffered a net loss in its electric system of almost $10 million in 2013 and that the amount the V.I. government owes to the utility for electricity has increased by almost $7 million.
The external audits of the electric and water systems, conducted by BDO USA, LLP, covers the last two fiscal years, ending June 30, 2013 and 2012.
WAPA's 2013 net electric deficit of $9.9 million, or 15 percent, is actually an increase from an 18.7 percent deficit - $15.3 million - from 2012.
At the same time, the WAPA's electric accounts receivable for the V.I. government climbed from $18,622,893 in 2012 to $25,458,791 in 2013 - an increase of $6,835,898.
The increase overshadowed the improvement made in 2012 when the V.I. government decreased its unpaid dues to WAPA by about $500,000.
On the positive side of the balance sheet, WAPA's water system increased is net position by $3.4 million in 2013, a substantially greater increase than its 2012 net gain of $894,000.
WAPA officials announced the numbers after releasing the two financial audits Monday after the authority's governing board held an hour-long emergency meeting.
The meeting was to approve the audits that analyze WAPA's financial data from the beginning of Fiscal Year 2012 to the end of Fiscal Year 2013.
One of the audits was for the electric system, which had 55,000 customers as of June 30, 2013.
The other was for the water system, which has 12,000 customers in the territory.
The audits, which were filed on time for the first time in seven years, were approved in June and cost $340,000 to conduct.
Among the highlighted items of the 2012 and 2013 audits for WAPA's electric system was the increase in the government's unpaid dues to WAPA, or accounts receivable, which now is at about $30 million.
WAPA has classified $5.6 of the 2013 debt as noncurrent, because it is expected to take longer than one year from the balance sheet date to be paid by the various government agencies, according to the audit.
The majority of the current bill belongs to Luis Hospital, which owes between $13 million and $14 million, according to WAPA's Chief Financial Officer Julio Rhymer.
The government's recent street lighting project also has racked up about $6 million in unpaid dues, though Rhymer said that those dues are usually turned around more quickly.
The remainder of the debt is accrued by the multitude of government agencies, he said.
Rhymer said he expects that about 20 percent to 30 percent of the V.I. government's current outstanding bill - more than $25 million - will be collected in 2014, with little, if any of it, coming from Luis Hospital.
WAPA's public consumers also are racking up more unpaid bills, with the utility paying more for fuel than it received in payments in 2013 and in 2012, leaving it with a total of $51.7 million in unrecovered fuel costs.
The unrecovered fuel costs increased by about $600,000 in 2013, which is far less than the $4 million increase in 2012.
"The Levelized Energy Adjustment Clause permitted by the (Public Services Commission) did not adequately allow the authority to recover its cost of fuel during the year," the audit reported for both years.
The LEAC is a cost added on to water and electric base rates to offset the cost of fuel oil to run WAPA's generators.
Additionally, the audit noted that WAPA collected substantially more in federal and local grants for the electric system in 2013, about $4.9 million, compared with the $2 million it collected in 2012.
WAPA's water system seemingly was more cost-effective during the last two years than the electric system.
WAPA had a decrease in the water system's deferred fuel balance, meaning it spent less on fuel than it received in payments in 2013.
The deferred fuel balance decreased by $2 million - 40 percent - mainly because the revenue from the LEAC "was adequate to recover the cost of fuel in the current period," the audit reported.
In 2012, it deferred fuel balance dropped by even more - about $3.5 million - for the same reason, according to the audit.
Additionally, the water system's revenues increased by $3 million in 2013, which was attributed to the increase in water sales by about $3.2 million, the audit reported.
However, the audit also noted a $1.1 million decrease in revenue from the water system LEAC charges.
Water system expenses also dropped, by $2.1 million to $36 million, a decrease of 6 percent from 2012. The decrease was attributed mainly to the $2.6 million less it cost WAPA to distribute water in 2013.
In 2012, expenses also dropped - by $1.1 million - for the same reasons as in 2013, but revenues also dropped - by $2.9 million - because of a downturn in water sales, likely tied to the higher LEAC charges at the time.
WAPA's governing board on Monday also extended the maturity dates for $3 million in loans.
The goal is for the loans to be paid off by the new date, Nov. 13, 2014, allowing WAPA to apply for other loans without any debt, according to Chief Operating Officer Gregory Rhymer.
The WAPA loans that were extended both originated in 2003.
The first, in the amount of $1.875 million, was from Banco Popular, and the second was in the amount of $1.125 million from FirstBank Puerto Rico.
Initially, the maturity date for both bank notes was Nov. 13, 2013.
"This gives us a chance to pay it off in full, and then extend the line of credit," said WAPA spokeswoman Cassandra Dunn. "Later, if we seek credit, we'll be able to negotiate for bigger loans for other projects."
- Contact Jenny Kane at 714-9102 or email firstname.lastname@example.org.