WAPA won't convert to propane until next year

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ST. THOMAS - The territory's utility customers will not reap the benefits of the V.I. Water and Power Authority's conversion to propane until next year.

Despite insisting for months that ratepayers would see savings resulting directly from a 30 percent drop in the cost of fuel come November, WAPA Executive Director Hugo Hodge Jr. said that the utility would not begin the conversion to propane until the first quarter of 2015.

Despite the new timetable, WAPA still anticipates a 30 percent reduction in fuel costs, which Hodge said would be passed directly on to customers.

"It will be like a hidden paycheck," Hodge said Thursday during a conference call that he initiated from off-island.

Since the project was announced in July 2013, WAPA has encountered several setbacks including difficult soil and underground obstacles in St. Croix; an underestimated amount of rock that needed to be moved on St. Thomas; adverse weather conditions in the early phases of the project; and challenges regarding permits and regulations.

The process of permitting, contracting, demolishing and disposing of structures with lead-based paint was particularly complex, Hodge said.

"We will do everything in our power to try to improve the schedule," Hodge said.

WAPA crews are working with the utility's contractor, Vitol Virgin Islands Corp., 10 hours a day, six days a week, according to Hodge.

In July, WAPA signed an agreement with Vitol to build storage terminal facilities at the St. Thomas and St. Croix power plants and to upgrade eight turbines to burn liquefied petroleum gas - better known as propane.

WAPA will use about 250,000 tons of propane annually, according to Vitol officials. The utility will pay only for the propane that gets used and does not have to buy propane up front.

Vitol is financing the $93 million project at no cost to WAPA.

After seven years of operation, when Vitol has recouped its investment with a 10 percent return, the ownership of the facility will transfer to WAPA.

Hodge said Thursday WAPA's cost-savings resulting from the conversion to propane will be passed in their entirety to the customers. The territory is expected to save $90 million annually, he said.

The fuel-cost reduction will be evident in the decreased rate of the LEAC, or the Levelized Energy Adjustment Clause, which the Public Services Commission approves on a quarterly basis during the year.

If WAPA's new projected timeline stays on track, the Public Services Commission likely would approve a reduction in the LEAC rates for electricity during its December meeting, Hodge said.

Hodge did not say when precisely the conversion would take place, though no electricity units have been converted yet.

WAPA already has begun construction on St. Croix, and the utility has received 10 of the 18 propane tanks, which were built in Belgium. The remaining eight are expected to arrive in the near future.

Ten tanks - each measuring about 174 feet long and 21 feet in diameter - will be placed at the St. Thomas facility. The eight tanks to be installed on St. Croix are slightly smaller, about 157 feet long and 21 feet in diameter.

The propane will be delivered to the territory on gas carriers, and smaller vessels will take the propane to the power plants every three days, Hodge said.

The two delivery boats, the Epic Curacao and the Epic Caledonia, are being built in Japan.

WAPA is finalizing the plans and permits required to make the necessary upgrades to its docking facilities in each district.

With the recent federal push to curb carbon emissions, the switch to propane now will prevent the utility from having to spend more money on sulfur fuel oil in the future, Hodge has said in the past.

The project is additionally expected to reduce the territory's greenhouse gas emissions by 20 percent, Hodge said.

"The new construction schedule will not impact the amount of savings expected for WAPA's customers or the improvements in air quality that the conversion project will deliver for the territory," Hodge said.

For more information about WAPA's propane project, go to www.poweringvi.vi.

- Contact Jenny Kane at 714-9102 or email jkane@dailynews.vi.

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