GOVERNMENT OF THE UNITED STATES VIRGIN ISLANDS



PUBLIC SERVICES COMMISSION



In Re The Virgin Islands Water and Power Order No. 6/2012

Authority’s Levelized Fuel Adjustment Charge



PSC Docket No. 289



ORDER



WHEREAS, this matter is before the Virgin Islands Public Services Commission

(“Commission” or “PSC”) on remand from the Superior Court of the Virgin Islands, addressing

the Court’s concern that the Commission’s requirements and criteria for the inclusion of costs



within the LEAC are not sufficiently detailed and specific for future judicial review and



WHEREAS, the Commission first created the LEAC to address volatility in fuel prices in

the late 1980s; and



WHEREAS, the Commission at meetings in November and December 2010 the



Commission received testimony on the refinancing of the Note; and



WHEREAS, the Commission has previously considered the imposition of Minimum



Filing Requirements over the course of the past several years; and



WHEREAS, the Commission ordered the Authority to work with the Commission staff in



preparing a final set of Minimum Filing Requirements in its final order in Docket 576; and



WHEREAS, the Commission has encouraged a policy of transparency in the calculation



of the LEAC, through the public availability of the petitions and consultant reports; and



WHEREAS, the Commission recognizes that it must maintain flexibility in setting the

LEAC to reflect changing conditions, such as the conversion of water production facilities to



reverse osmosis, and the change in electrical generation from the current plants to new

Order No. 6/2012

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arrangement that may include waste-to-energy, solar, wind, interconnection with Puerto Rico,



leased facilities, or as yet unidentified options; and



WHEREAS, the Commission has every expectation that numerous changes will occur in

the Authority’s electrical generation and water production activities over the next several years,



including increased fuel diversity and use of renewable energy;

NOW, THEREFORE, THE COMMISSION FINDS:



1. There are several purposes for these MFRs, which include:



1.1. Providing clear statement of the information to be considered in setting the LEAC;



1.2. Conveying information on the regulatory priorities to the regulated utility and the

ratepayers;



1.3. Reducing the time and expense necessary to conduct quarterly reviews;



1.4. Providing consistent information which permits the Commission to track performance

over time; and



1.5. Providing as seamless a presentation to the Commission regarding rate requests that

have an enormous impact on both WAPA and the general populace.



2. That it is essential that the Commission have information timely and fully submitted to

provide opportunity for review and identification of areas available for savings and



improvements; and



3. That the Commission must maintain sufficient flexibility to modify the criteria to reflect



changing conditions, which are key to restoring a healthy economy to the Virgin Islands;



NOW, THEREFORE, IT IS HEREBY ORDERED, that all future LEAC filings by the



Authority shall include, at a minimum:



l. Cover Letter to the Commission



WAPA to continue to provide a cover letter to the PSC instead of formal testimony to

accompany the detailed exhibits described below. In addition to narrative describing the

recommended factors for each department and the impact on sample ratepayers’ bills ($$

and %), WAPA must also describe its position on the amortization period it seeks to

recover any deferred fuel balance that may exist (or projected to exist) for each

department. WAPA must provide a narrative of major changes in operations that impact

Order No. 6/2012

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N



the requested change, e.g. outages, boiler failures, reduced oil prices, higher than

expected losses, improved efficiencies, hedging contracts, etc.



LEAC workbooks



WAPA to continue to file the two workbooks for LEAC results for two fiscal years. The

first workbook is called the historic workbook and the second workbook is called the

projected workbook. The projected workbook is used to calculate the proposed LEAC

factors and will over the year become partially projected and partially projected. The

historic workbook is to be filed for every LEAC filing until it is consistent with the

financial audit (usually six or more months after the end of the fiscal year).



Annual “LEAC” audits be an automatic requirement of the MFR and be filed with the

PSC for its review every year. The format would be identical to the LEAC workbooks

described below with explanation and reconciliation of that workbook to the amounts in

the financial reports for both departments, e.g. deferred fuel costs, fuel revenues and fuel

expense.



Schedule la: Electric Summary



Existing schedules to continue in use. The opening balance of deferred fuel expense in

the projected workbook must be the same as the closing balance in the historic workbook,

or any difference explained in detail. If for some reason WAPA believes that it may need

additional time to reconcile the balances, it should discuss this in the cover letter. All

cost items to be included in this schedule are clearly listed and any “new” item should be

fully justified in the cover letter.



Schedule 1b: Water Summary



This summary schedule is acceptable as currently filed. However, WAPA must identify

and quantify the cost for the RO contract (or future contracts) if it wants recovery of this

and future contract costs in the WLEAC. (See MFR #3)



WAPA should add an additional worksheet showing the assumptions being used for these

costs in the projected workbook and provide detail payment calculations in the historic

workbook. All cost items to be included in this schedule are clearly listed and any “new”

item should be fully justified in the cover letter.



Schedules 2 and 3: Unit Dispatch, Efficiency, Oil Consumed, Price of Delivery, Inventory

Pricing, Water Department Allocation and Electric Department Costs (STT — Schedule 2

and STX Schedule 3).



These two-page schedules are to substantially remain the same, although support for

assumptions used in the projected workbook is necessary. (See MFR#4)



WAPA is to provide the basis for the unit-by-unit efficiencies, by including a separate

schedule or providing a separate workbook of production summaries showing the

efficiencies of the units over a period of time.

Order No. 6/2012

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WAPA is to provide the latest unit availability sheet to accompany the LEAC.



WAPA is to provide support and data for the assumptions used for allocating fuel costs to

the water department (currently an input).



The efficiencies and allocation of costs must be based upon historic data and should be

supported by the historic workbook.



Schedule 4a: Electric Department Sales and Losses

For the historic workbook these should be the same as the monthly financial reports.



WAPA is to continue to provide the monthly financial reports as support for the actual

results. (See MFR#1.)



For the projected workbook WAPA needs to provide support for these projections.

WAPA is to provide the latest sales forecasts that were used for the LEAC projections,

including workpapers or subsidiary schedules showing the assumptions WAPA used.



WAPA is to provide historic data used to estimate the losses and plant use with some

explanation of how this data “translates” to the estimates.



Schedule 4b: Department Sales and Losses

If the historic workbook includes inventory changes, the gross and net amounts must be

consistent with the financial statements. However, the “Available for Sale Gross” must

be divided between water produced through RO and water produced from IDE. (See

MFR#1.)

WAPA is to segregate the supply available for consumption by method of production.

Schedule 5.1: Price Forecast

Continue as filed, but with the imminent closure of the HOVENSA refinery this schedule

will likely require modification in the near future. WAPA has been on the HOVENSA

inventory pricing method. At some point, it may very well go to the NY Harbor (less 25



cents) price. (See MFR#2)



WAPA to provide with each LEAC a copy of the most recent consultant or Bloomberg

report showing WAPA’s calculations to determine the pricing method.



Schedule 5.2: Hedging Costs



Should be eliminated with the closure of the two credit lines.

Order No. 6/2012

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Schedule 6: GO Note Amortization Schedule

Continue as filed.



Date: 27 January, 2012 OaléP - ks



Donald G. Cote

Chairman