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I N A N C I A L
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T A T E M E N T S A N D
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U P P L E M E N T A L
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C H E D U L E

Electric System of the Virgin Islands
Water and Power Authority
Years Ended June 30, 2007 and 2006
With Report of Independent Certified Public Accountants

0708-0856811
Financial Statements and Supplemental Schedule

Electric System of the Virgin Islands
Water and Power Authority

Years Ended June 30, 2007 and 2006




Contents

Report of Independent Certified Public Accountants ......................................................................1
Managements Discussion and Analysis .........................................................................................3

Financial Statements

Balance Sheets ...............................................................................................................................13
Statements of Revenues, Expenses, and Changes in Net Assets ...................................................15
Statements of Cash Flows..............................................................................................................16
Notes to Financial Statements........................................................................................................18

Other Report

Report on Internal Control Over Financial Reporting and on Compliance and Other
Matters Based on an Audit of the Financial Statements Performed in Accordance
With Government Auditing Standards........................................................................................38

Supplemental Schedule

Five-Year Comparative Summary of Operations ..........................................................................40


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Report of Independent Certified Public Accountants

The Governing Board of the Virgin Islands
Water and Power Authority

We have audited the accompanying financial statements as listed in the table of contents of the
Electric System of the Virgin Islands Water and Power Authority (the Authority), a component
until of the Government of the Virgin Islands (Government), as of and for the years ended
June 30, 2007 and 2006. These financial statements are the responsibility of the Authoritys
management. Our responsibility is to express opinions on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an audit of the
Authoritys internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Organizations internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinions.


As discussed in Note 1, the financial statements present only the Electric System (a major fund
of the Virgin Islands Water and Power Authority) and are not intended to present fairly the
financial position of the Virgin Islands Water and Power Authority, and the changes in its
financial position and cash flows, in conformity with accounting principles generally accepted in
the United States.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Electric System of the Virgin Islands Water and Power Authority as
of June 30, 2007 and 2006, and the changes in financial position and its cash flows for the year
then ended in, conformity with accounting principles generally accepted in the United States.
In accordance with Government Auditing Standards, we have also issued our report dated
February 11, 2008, on our consideration of the Virgin Islands Water and Power Authoritys
internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements and other matters. The purpose of that

0708-0856811

2

report is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion on the internal control
over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
Managements Discussion and Analysis, as listed on the table of contents, is not a required part
of the basic financial statements but is supplementary information required by the Governmental
Accounting Standards Board. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation
of the required supplementary information. However, we did not audit the information and
express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the basic financial statements of
the Electric System taken as a whole. The accompanying supplementary five-year comparative
summary of operations listed in the table of contents is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such information has not
been subjected to the auditing procedures applied in the audit of the basic financial statements
and, accordingly, we express no opinion on it.

ey

February 11, 2008
Electric System of the Virgin Islands
Water and Power Authority

Managements Discussion and Analysis

June 30, 2007 and 2006


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The Virgin Islands Water and Power Authority (the Authority) owns, operates, and maintains an
electric generation and distribution system (the Electric System), and a water production and
distribution system (the Water System), which are separately financed and require separate
accounting and reporting. Each of these Systems is accounted for as a separate enterprise. As
management of the Authority, we offer readers of the Authoritys Electric System financial
statements this overview and analysis of the financial activities of the Authoritys Electric
System for the fiscal years ended June 30, 2007 and 2006. We encourage readers to consider the
information presented here in conjunction with the financial statements that follow this section.
The Electric System service territory includes the islands of St. Thomas, St. Croix, St. John, and
Water Island. The electric generating facilities for St. Thomas, St. John and Water Island are
interconnected while the St. Croix generating facilities serve on a stand-alone basis. The
Authority is the only electric utility that operates in the Virgin Islands. There are a few
commercial entities, however, that produce electricity for their own use.
The Authority provides electric service to more than 51,000 customers. The Authority also
provides water service to more than 11,000 customers. The Authoritys Electric System rates are
under the jurisdiction of the Virgin Islands Public Services Commission (PSC), unlike many
other municipal systems. These rates provide revenues to recover operating and maintenance
expenses, funds for debt service coverage requirements, and funds for working capital and
capital additions. The Authority does not use rate base rate of return principles for setting rates.
Electric System
Financial Highlights 2007
Net assets increased by $3.2 million, or 3.0%, as a result of fiscal year 2007 operations.
Current assets increased to $76.8 million, a net decrease of $2.8 million. This is primarily
as a result of increases in cash of $4.6 million, amount due from Water System of $2.5
million, Accounts Receivable of $0.8 million, and a decrease in Deferred Fuel of $11.5
million.
Noncurrent asset