Friday, February 28, 2020

Energy Bureau not advised of Puerto Rico power company rate drop

By on October 5, 2018

SAN JUAN – A decision by the Puerto Rico Electric Power Authority (Prepa) to reduce energy rates may be in violation of a Sept. 28 order issued by the Puerto Rico Energy Bureau (PREB) ordering the energy utility to implement a permanent rate approved last year by Dec. 1.

Caribbean Business examined PREB files and did not find any motion by Prepa informing the regulator about a proposed rate reduction for October.

The PREB, however, gave Prepa until Oct. 31 to file a detailed work plan with relevant steps and deadlines to perform the reconciliation between the provisional rate that is currently being used and the permanent rate that will go into effect. It also ordered Prepa to file, no later than Oct. 15, a draft of the language to be included in customers’ bills explaining the approved permanent rate.

Prepa Executive Director José Ortiz Vázquez announced Thursday a reduction in electricity costs that will be reflected in lower subscriber bills this month; however, the island’s Financial Oversight and Management Board wrote to the governor, requiring information to support the ability to reduce rates and how these would affect the government’s fiscal plan and budget.

Ortiz Vázquez stressed, according to Prepa’s release Thursday, that he is committed to transparency. “Just like we announced this reduction, when there is a rise in fuel costs that have an impact on the bill, also inform it so people can prepare,” he said. The utility chief did not mention that the public power company must implement fixed rates by Dec. 1.

The fiscal board sent Gov. Ricardo Rosselló Nevares and Ortiz Vázquez a letter requiring information related to the announcement because it believes the “assertions supporting the rate reduction announcement are inconsistent with the information and data that has been provided by PREPA about its liquidity, operational expenses, fuel costs, and revenue projections,” according to its release.

“As the Independent Debt Investigation Report found, we must ensure PREPA’s rate changes are not politically induced, in order to avoid the pitfalls that caused the fiscal crisis of this utility,” board Chairman José Carrión said.

Moreover, the board requested documentation that “explains the legal basis for why the proposed rate reduction would not constitute a rate adjustment that would require regulatory approval by the Puerto Rico Energy Bureau, under current Commonwealth law.”

Ortiz Vázquez said the reduction is of about 15 percent and will represent more than $20 million in customer savings.

According to PREB documents, however, in January 2017, the regulator approved Prepa’s revenue requirement and ordered Prepa to submit final rates for customers but the power utility requested extensions, including two after hurricanes Irma and Maria hit the island in September 2017. The provisional rates and the extensions were postponed until this year.

In September this year, Prepa informed the PREB that to prevent “rate shock” and due to the devastation of the hurricanes, it did not adjust the fuel and purchased power factors from September 2017 to May 2018 as required by the Adjustment Clause.

Therefore, Prepa requested certain modifications to its adjustment clause to recover certain fuel and purchased-power costs, a request that the PREB denied.

“The Energy Bureau will consider the reconciliation of the fuel and purchased power costs backlog as part of the process to reconcile the provisional rate with the permanent rate,” the regulator said.

Puerto Rico fiscal board questions electric power bill drop


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