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Bill to privatize Puerto Rico utility eliminates provisions to prevent power rate hike

By on March 7, 2018

SAN JUAN – The Puerto Rico Electric Power Authority (Prepa), which has been widely criticized for its poor management historically, will be in charge of selling its own assets and facilities, a process that cannot be supervised or regulated by the Puerto Rico Energy Commission (PREC).

The public corporation may also permanently or temporarily transfer or delegate any of its operations under the framework provided by the Public-Private Partnerships Act of 2009, as long as not in conflict with the proposed legislation to privatize its facilities. The Energy Commission would also be prevented from intervening or regulating this type of contract.

That is what Senate Bill 860 would establish, with its sister bill in the House of Representatives (HB 1481) establishing the purchase of Prepa that was submitted to the Legislature on Tuesday.

Prepa’s Palo Seco power complex between the municipalities of Cataño and Toa Baja. (Felipe Torres/CB)

According to the proposed legislation, all Prepa property will be for sale, including its facilities, as well as generation and metering systems.

Any transaction the power company makes, whether it be a sale or transfer of operations through a public-private partnership, would not have to comply with the long-term integrated resources plan approved by PREC. That plan, among other things, establishes goals regarding the use of renewable energy.

Although the definition of a public-private partnership is used to refer to a contract in which a service is handed over to a private entity, under the proposed law it would be amended to include the process of selling electrical installations.

Prepa may establish a sale process under Article 6 of the Public-Private Partnerships Act, which establishes the creation and approval of regulation for the processes leading to the establishment of partnerships, including identifying the functions to be carried out under the alliance, as well as which candidate companies are chosen to request proposals from and their evaluation.

However, any transaction made by Prepa would not have to comply with Articles 6C, 7 and 10 of the Public-Private Partnerships Act, which prevent ownership of public facilities from being transferred to private hands, require desirability and convenience studies, and establish the content of a partnership contract.

Selling Puerto Rico’s electric power utility won’t be easy

The transactions Prepa undertakes related to its facilities would not have to comply with the requirement of an energy relief plan because the obligation to comply with that provision is eliminated.

Any transaction-related payment received by Prepa may be used to contribute to the utility’s employee retirement system to increase its capitalization.

Although the Energy Commission or its successor entity may not intervene with any transaction made with Prepa facilities, nor establish regulations for these, it may oversee the contractor’s performance under the partnership agreement as well as review the applicable rates after the transaction is completed.

The law nor the partnership or privatization contract cannot be used by the government to dismiss Prepa employees in regular positions. As for utility personnel who wish to remain employed by the government, they would be assigned in accordance with applicable statutes and retain their acquired rights. The government and Prepa, however, may offer voluntary transitions or voluntary resignation plans to those employees.

PC1481 TransformacióN De AEE (Text)

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