WAPA board approves new fuel contract

The V.I. Water and Power Authority board has voted to approve a new fuel contract that is projected to save around $5 million a year.

WAPA’s current contract with Glencore, Ltd. expires Friday, and for months the Authority has been soliciting bids from other suppliers.

The Authority has been transitioning to liquid propane gas as a primary fuel source, but fuel oil is still required for startup and emergency operations of existing turbines, and is a backup fuel source when LPG isn’t available, according to Vernon Alexander, interim COO of electric systems.

On Thursday, the WAPA governing board approved the 12-month contract with Borinken Towing and Salvage for No. 2 distillate fuel oil and ultra-low-sulfur diesel, with an option to extend the agreement for an additional six months.

Board member Hubert Turnbull abstained from the vote, saying he has a relationship with two of the companies that submitted bids to WAPA.

To avoid any supply interruptions, the governing board also voted to authorize Interim Executive Director Noel Hodge to execute a month-to-month extension to the existing contract with Glencore until the agreement with Borinken can be executed.

WAPA attorney Dionne Sinclair said she expects the new contract to take three weeks to “a month at most” to finalize.

In response to questions from The Daily News, WAPA Director of Human Resources Sabrina King-Leonce provided additional information about the Glencore and Borinken bids.

“Glencore’s proposed pricing structure offers a base monthly minimum volume requirement of 16,000 barrels with the premium for delivery being set at $31.92,” per barrel, or 76 cents per gallon, according to King-Leonce, who has been acting as WAPA spokesperson following the death of Jean Greaux Jr.

She said the Authority is currently working to recruit a new Communications Director.

Under Glencore’s bid, all subsequent fuel purchases in increments of 16,000 barrels reduce delivery premium amounts “substantially” to a minimum of “$12.60 per barrel for 64,000 barrels in total monthly deliveries,” according to King-Leonce. “At the end of each monthly period, the accumulated delivery discounts are reset.”

A barrel of oil is equal to 42 gallons.

In addition, Glencore’s bid no longer includes a $13,000 per day fee for exclusive use of the fuel barge, “but instead has opted to implement a ‘zero-take’ surcharge in the amount of $395,000 monthly to maintain services during those months where no fuel is purchased by the Authority,” according to King-Leonce. “Partial and/or split discharges bare a fee of $15,000 and applies to each discharge after the first until the entire shipment had been offloaded.”

In addition to current supplier Glencore, WAPA considered bids from Borinken Towing and Salvage, DASREP and Peerless Oil & Chemicals before ultimately voting to select Borinken.

“Borinken’s proposed pricing structure is based on average shipment quantities ranging from 15,000 barrels to 30,000 barrels with delivery premiums of $22.05/bbl. and $14.91/bbl. on Net 30 payment terms, respectively,” according to King-Leonce.

Rates would be further impacted by discounts for prepayment, although Borinken had “not given any indications of its intent to implement either a ‘zero-take’ surcharge or surcharge for split/partial shipments.”

According to the information from King-Leonce, the Authority’s annual fuel consumption is estimated to be 381,461 barrels per year, or roughly 31,800 barrels per month.

Given that consumption fluctuates, different rates could apply to each shipment, and the forecasted costs could increase or decrease by a moderate margin,” King-Leonce cautioned.

“Nonetheless, based on current cashflow constraints and the various rate structures being proposed, it may be most beneficial for the Authority to elect to pursue future shipments in quantities no greater that 16,000 bbl. Under these constraints, Borinken would continue to be cheaper than Glencore in any typical, reduced, or even slightly above typical consumption year,” she added. “The yearly projected cost for Glencore (with all shipments falling within the 16,000 barrel minimum rate) is $44,136,326.14. For Borinken, the cost is $38,932,687.50 (with all shipments falling within the +/-15,000 barrel range rate). A difference of $5,203,638.64.”

The board also voted to approve a no cost 60-day extension for the contract with Fortress Electric from Dec. 31 to March 2, to complete installation of new equipment at the Richmond Power Plant on St. Croix.

The board cancelled a $2.65 million contract for the V.I. Port Authority to purchase land near Nisky Center for placement of a federally funded building for the Authority’s Transmission and Distribution Department.

“Such funding has not materialized. Further, the agreement called for VIPA to seek and obtain legislative approval which has not occurred,” according to information from WAPA.

The board modified a contract with FXB, Inc. for management of the underground project, including changes to language as it relates to per diem, subconsultant engagement, design services and expense reimbursement. The changes will not increase the $500,987 contract.

Board members also authorized Hodge to secure Directors and Officers and Employment Practice Liability Insurance Coverage.

Hodge told board members that WAPA is considering the possibility of purchasing a leased Aggreko unit currently in use at the Richmond plant.

“As it stands now with the lease, we would be paying in excess of $23 million over the next two years, and that is the time we would estimate conservatively it would take if we were to add a new unit to the Richmond plant,” Hodge said.

“This particular lease is in the base rate,” Hodge added. “There is the possibility for some significant savings without having the lease and just owning it, but also savings on the possible reduction on the base rate.”