Friday, May 24, 2019

Civil organizations warn of Puerto Rico utility’s debt restructuring support agreement

By on May 13, 2019

Prepa headquarters in San Juan (File)

Say it will bind consumers to a debt charge for 40 years, focuses on privatization

SAN JUAN – A group of renewable energy advocates is urging the public to oppose the Puerto Rico Electric Power Authority’s (Prepa) restructuring support agreement (RSA), saying it penalizes citizens who decide to install solar panels in their homes.

The island’s Financial Oversight and Management Board submitted the settlement agreement of the RSA to court on Friday. It is slated to be evaluated at a hearing in June.

“This is a nefarious agreement that protects the interests of the bondholders over the best interests of the people of Puerto Rico. Not only will we be paying between $130 and $220 more per year, according to a study by IEEFA [Institute for Energy Economics and Financial Analysis], to satisfy the demands of the bondholders, but the payment to the bondholders is established as the first priority of the Authority, relegating to a second or third the condition of the electrical system, its maintenance or the quality of the service offered,” said the director of El Puente Enlace Latino de Acción Climática (ELAC), David Ortiz.

The RSA calls for a transition charge to pay the utility’s legacy debt, $8.3 billion.

A settlement charge of 1 cent per kilowatt hour (kWh) is slated to go into effect in July. Afterward, there will be transition charge to pay debt that starts at 2.768 cents per (kWh) and gradually escalates over the next 24 years until it reaches a maximum of 4.55 cents per kWh.

At the news conference May 3 to announce Prepa’s latest RSA, the utility’s chief, José Ortiz, said he expected to achieve savings from certain measures at the power corporation to offset the expected transition charge to pay the debt. He said Puerto Ricans would end up paying $7 billion in debt over the next 10 years without an agreement.

Ruth Santiago, a lawyer who represents the organization El Puente and other community and environmental groups, said the multi-sectorial proposal Queremos Sol is pushing for a thorough audit of the debt and for the government to act against those who participated in the issuance of illegal debt. The group promotes a debt restructuring that safeguards island entities such as cooperatives and ensures the total elimination of subsidies to Prepa clients.

“This is necessary to achieve an affordable and financially sustainable electricity system. The tariff charges presented in the agreement will aggravate the already precarious situation faced by Puerto Rican families and will have a negative effect on our economy, ” she said in a statement.

Former La Fortaleza Chief of Staff Ingrid Vila, who founded Cambio, an entity that promotes sustainability, said “the agreement punishes the transformation to a system based on renewable energy and punishes those who install photovoltaic systems, because even if you are generating your own energy with a photovoltaic system in your home or business, the agreement establishes that you will have to pay a tax on the sun, which is why we have maintained over and over again that it is not only about establishing objectives to reach percentages of renewable energy, but also about the actions of the government.”

Vila said the agreement, together with the boost in investments in natural gas, make clear that there is no commitment from the government to the transformation based on distributed renewable energy but only to push for Prepa’s privatization.

Christian Sobrino, the executive director of Puerto Rico’s Fiscal Agency and Financial Advisory Authority, recently said that individuals who disconnect from Prepa will not incur the debt charge and that those who have solar panels will obtain credit for their use in their utility bills through the net-metering program. However, because these homes will be connected to Prepa’s transmission and distribution system, he said, they will be paying the transition charge for the utility’s debt.

Prepa subscribers have until September to join Prepa’s net-metering program to be grandfathered in and not incur the charge for 20 years.

Meanwhile, attorney Pedro Saadé said “everything possible” must be done “in a united way to defeat this agreement. The proponents of Queremos Sol congratulate and join the expressions of Congressman [Raul] Grijalva aimed at Judge Laura Taylor Swain rejecting this agreement and we demand the legislators, who have the responsibility to watch over and protect the best interests of the people of Puerto Rico and those who drafted the public energy policy, which does not give way to it.”

Myrna Conty, coordinator of the Coalition of Anti-Incineration Organizations, echoed that “this agreement would impact all Puerto Ricans for the next 40 years as a regressive agreement that would impact proportionately more communities with fewer resources that represent at least 50% of our population. We urge all citizens to call their legislators not to approve this agreement.”