When Karl Knight stepped into the role of CEO at the Virgin Islands Water and Power Authority, the utility was, in his words, “on the brink of insolvency.” Expenses were outpacing revenue by nearly $8 million a month, deferred maintenance was catching up, and public confidence was at an all-time low. A year later, Knight says the hole is narrowing — but the climb out is far from over.
“It’s better than when I first started,” he said during an interview with the Source for the kickoff of Public Power Week. “We’ve shrunk that monthly deficit from around $8 million to about a million and a half. We’re still operating in the red, but we’re rapidly working to close that deficit.”
Knight credits that progress to a series of tough fiscal and operational reforms — renegotiating diesel contracts, pursuing a lower-cost long-term propane supply, trimming payroll, and cutting expenses wherever possible. He confirmed that WAPA has also made strides in lowering its diesel costs and securing a temporary LPG agreement that’s less expensive than before. Procurement is underway for a new, permanent LPG supplier, which Knight hopes will “bring more favorable pricing and help really offset some of that expense.”
The deeper challenge isn’t just cutting costs — it’s structural. WAPA’s financial pressure comes largely from its deferred fuel balance, a running tab of fuel costs that have been paid but not recovered from customers through the fuel surcharge, or Levelized Energy Adjustment Clause. That balance ballooned as WAPA froze rate increases to spare residents from higher bills, despite global spikes in oil prices. “We’ve been spending more on fuel than we’ve been able to bring in,” Knight said, “but we didn’t want to raise rates and hurt people. There’s a balance between what’s affordable and what’s sustainable.”
That balance is now formalized in a settlement agreement with the Public Services Commission, holding the LEAC rate steady through June 2026 while WAPA and the PSC evaluate both its base rate and fuel surcharge structure. The Source previously reported that the PSC approved the settlement in August, with WAPA agreeing not to seek new fuel surcharges during the period — a decision that locks in revenue but limits flexibility if fuel prices rise again.
In the meantime, WAPA continues to rely heavily on federal capital funding to offset the cost of major infrastructure projects — but as Knight emphasized, “those funds can’t buy fuel or pay salaries.” Federal dollars can rebuild power plants and fund resiliency projects, but the authority’s day-to-day operations must still come from customer payments. “We are a public utility,” Knight said. “We’re accountable to the people of the Virgin Islands, but we also have to function like a business. Every dollar that pays for maintenance, fuel, or salaries comes from the bills we send out.”
WAPA currently budgets roughly $40 million annually for fuel, an amount that fluctuates depending on generation needs and global prices. Knight estimated the authority faces around $35 million in deferred maintenance — the cost of fixing aging units, restoring turbines, and addressing years of postponed repairs. “If you’re supposed to change the oil in your car every 5,000 miles, and you don’t do it until 15,000, eventually something breaks,” he said. “That’s what we’ve been dealing with for years.”
Still, there are signs of progress. Knight said that solar generation on St. Croix has already reduced operational costs, and with additional renewable projects coming online on St. Thomas next year, he expects efficiency to improve further. WAPA has also reduced what it pays for diesel deliveries and projects lower overall fuel costs once propane conversion on all Wärtsilä units stabilizes, he said.
Looking ahead, Knight believes 2026 will mark a turning point. “By the end of next year, we expect to be operating in the black,” he said. “That means we’ll finally be cash-flow positive — paying our vendors on time, catching up on our payables, and being able to pass at least a portion of the savings back to our customers who’ve been so patient.”
The optimism is tempered with realism. The authority still carries tens of millions in debt and must continue negotiating with the PSC to find a sustainable long-term rate structure. But Knight says the difference between now and a year ago is that the utility is no longer in free fall. “When I came in, we were in what the EY report called the ‘zone of insolvency,’” he said. “Now, we’re managing that risk. We’re cutting expenses, we’re seeing results, and we’re starting to rebuild trust.”
For residents still grappling with outages and billing frustrations, that trust may take longer to restore. But if the financial turnaround holds — and if WAPA can stabilize its revenue while reducing costs —solvency and stability could be around the corner, he added.
St. Croix Source
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