Thursday, March 22, 2018

Energy Commission sues to reassert regulatory power over Puerto Rico electric utility

By on March 5, 2018

SAN JUAN – More than a month after being described as intransigent in the latest Puerto Rico Electric Power Authority’s (Prep) fiscal plan, the Puerto Rico Energy Commission (PREC) has sued in U.S. District Court to stop the Financial Oversight and Management Board (FOMB) from forcing the utility to take actions that are subject to the commission’s jurisdiction and that the energy regulator has not authorized.

The energy commission filed its adversary complaint for a declaratory judgment and request for injunctive relief against the fiscal board and Prepa on Sunday. It comes after PREC Chairman José Román refuted in a recent Caribbean Business interview statements in Prepa’s fiscal plan that described the panel he heads as “intransigent and unreasonable” to the detriment of the public utility and investors seeking to obtain the utility’s assets.

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“Our purpose is to prevent irreparable harm and eliminate uncertainties arising from imminent ultra vires action by FOMB and continuing and imminent unlawful actions by Prepa,” the commission says.

The utility’s fiscal plan, the energy regulator says, proposes actions that affect Puerto Rico’s electricity policy involving power supply mix, capital and operating expenditures, internal operations, revenue requirements and rate design, “all subjects and actions that lie within the commission’s jurisdiction under the law.”

“Prepa has submitted this Fiscal Plan to FOMB without presenting its substance to the Commission for its review—a review necessary to determine whether the proposed actions are consistent with Commonwealth statutes, as interpreted and applied by the only agency legally authorized to interpret and apply those statutes. FOMB has declined to provide the document to the Commission,” the legal recourse reads.

The court’s clarification, PREC adds, will also cause the fiscal board to drop “its unexplained, nine-months-long resistance to collaborating with the Commission to create a sensible decision-making protocols” that make effective use of each entity’s legal powers.

PREC argues that the fiscal board’s assertion of power over the public utility is in conflict with its duties under the law to oversee Puerto Rico’s electric power industry. “Both the assertion and application of that power (as FOMB sees it), and the resulting legal uncertainty, is currently, and will continue to be, harmful to the Commission, PREPA’s electricity customers, existing and future bondholders and the public interest,” the commission says.

The complaint requests the court declare that the fiscal board can neither mandate nor authorize Prepa to take actions that are subject to the PREC jurisdiction or are core regulatory matters  Puerto Rico law assigns to the body, and that Section 303 preserves for the commonwealth and thus for the commission.

The requested declaration, the commission says, is necessary to preserve the commonwealth’s ability “and any successor regulatory entity,” to determine, “free of the FOMB’s interference, the essential characteristics” of the island’s electric industry, “including but not limited to resource mix, market structure, transactional relations, operational standards and capital expenditure priorities.”

The commission also says it seeks an order prohibiting Prepa from complying with any fiscal board mandate or authorization to carry out “substantive electricity actions” that are under PREC jurisdiction and it has not authorized.

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In the past, the regulator argues, the court has held that the fiscal board does not have “broad executive and managerial authority over PREPA’s operations,” the authority to “interfere unilaterally with [PREPA’s] powers … or with [its] property or revenues,” nor the power to “control virtually everything PREPA does,” the document reads in reference to the board’s intent to name its revitalization coordinator to head the power company.

“Despite the Court’s clarity, FOMB still acts as if it has powers to direct not only PREPA’s current activities but also the substantive transformation of Puerto Rico’s electric industry. This Complaint asks the Court to correct FOMB’s misunderstanding by making clear the scope of FOMB’s powers. Then the restoration and transformation of Puerto Rico’s electric industry can occur without further litigation and uncertainty,” PREC says.

The court decision sought is to ensure that island energy decisions rest with the commonwealth and not with the federally established board whose duties do not include “shaping the structure and operations of Puerto Rico’s electric industry,” the commission stressed.