WAPA Board OKs Contract for New Fuel Supplier

V.I. Water and Power Authority governing board members meeting Thursday approved a new contract for fuel delivery to the territory’s power plants on St. Croix and St. Thomas.

Borinken Towing and Salvage, a company of Borinken Marine Group out of Puerto Rico, will begin delivering both No. 2 fuel oil and ultra-low sulfur diesel fuel as soon as the contract is finalized.

“Although the authority intends to utilize LPG as its primary fuel source at the power generation stations, No. 2 fuel oil would be required for startup and emergency operation of all existing gas turbines,” Vernon Alexander, director of project management, told the board.

The No. 2 fuel also would provide a backup in case propane supplies are interrupted, said Alexander. Additionally, diesel is required to run backup emergency generators, as well as for the normal operation of the new Wartsila engines currently under installation on St. Thomas, he said.

“We decided to use the services of Borinken Towing and Salvage because of their payment structure, the offerings, and the comparison between what it would cost the authority when looking at the other suppliers,” said Alexander, who said WAPA entertained bids from six providers.

According to the contract, WAPA would pay $14.91 per barrel of oil delivered for plus or minus 30,000 barrels and $22.05 if the volume drops to plus or minus 15,000 barrels. If prepaid, the amount is $13.65 and $20.79, respectively.

Glencore Ltd., which currently supplies fuel to WAPA, will continue deliveries on a month-to-month basis until Borinken’s contract is finalized, hopefully by the end of January. The term is for 12 months, with an opportunity to renew for another six, said Alexander.

WAPA has been extending its contract with Glencore by monthly increments since at least 2016 while it sought a more cost-efficient provider that would not require monthly purchase obligations as the utility began the switch to cleaner-burning propane and using less fuel.

Board Chairman Kyle Fleming and members Joel Lee, Anthony Thomas, and Cheryl Boynes-Jackson voted in favor of the contract, with member Hubert Turnbull abstaining.

In his report to the board, interim Executive Director Noel Hodge said he is in talks with Agrekko to purchase its generating units at the Richmond Power Plant on St. Croix, which he said could result in savings on WAPA’s base rate.

Residential customers currently pay 40 to 43 cents per kilowatt-hour, depending on consumption. Commercial entities pay 47 cents/kWh.

“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 that we estimate, conservatively, that it would take if we were to add a new unit to the Richmond plant. Over that time we would pay $23 million but we feel that the possibility exists here where we could purchase those units which are currently on LPG and … can be converted to also burn LNG,” said Hodge.

“I wanted to bring this to the attention of the board so moving forward we can continue with those discussions and follow up on that because this particular lease is in the base rate, and so there is a possibility for some significant savings without having the lease and just owning it,” said Hodge.

Additionally, Hodge said issues with the LPG fuel delivery system that were causing generators to trip offline on St. Thomas appear to have been resolved, with no incidents the last couple of weeks. “They have made some corrections in the placement of components that they felt were part of the problem,” said Hodge, adding that WAPA will accommodate scheduled maintenance requests to prevent outages in the future.

Hodge also lauded the utility’s debt payment to Wartsila in October after the board authorized as much as $40 million in bond anticipation notes to cover the remaining balance plus interest – about $21 million – owed on three leased units in operation at the Randolph Harley Power Plant on St. Thomas since June 2019. In turn, Wartsila has dropped a lawsuit it filed to recoup its money.

“That was a big milestone,” said Hodge.

In other business the board:

– Unanimously approved the sixth no-cost extension to Fortress Electric’s contract for work on a double-ended load center at the Richmond Power Plant on St. Croix, intended to guarantee the operability of the facility. Kevin Smalls, director of production, said the work is 95 percent complete and should be finished by March.

– Unanimously approved a $234,210 contract for $4 million in employment practice liability and director and officer liability insurance coverage with Willis Towers Watson. EPL policies cover issues such as workplace discrimination or wrongful termination lawsuits. The policy for WAPA’s directors and officers likewise protects them in the event of legal action.

Thursday’s meeting, which started at 9:30 a.m. and immediately went into executive session until 11:15 a.m. to discuss legal matters, was attended by board Chairman Kyle Fleming and members Joel Lee, Anthony Thomas, Cheryl Boynes-Jackson and Hubert Turnbull. Secretary Juanita Young had an excused absence and Elizabeth Armstrong was absent.