Tuesday, January 31, 2023

Governor announces working group for transformation of Puerto Rico energy system

By on January 31, 2018

SAN JUAN — Gov. Ricardo Rosselló announced Wednesday the creation of a working group in tasked with transforming the Puerto Rico Electric Power Authority (Prepa).

The governor said that together with this working group, “we will be collaborating with the Fiscal Oversight Board because there is a Title III component that is important in this process… We intend to do this in a coordinated manner; the direction and execution will be done by the Government of Puerto Rico as it was already clearly established in court.”

The team will consist of the governor’s representative to the island’s fiscal board, Christian Sobrino; the governor’s chief restructuring adviser, María Palou; Prepa’s chief economic adviser, Todd W. Filsinger; the Rothschild firm; and Prepa and government lawyers.

Rosselló participated as speaker Wednesday in the Puerto Rico Chamber of Commerce’s 2nd Promesa Conference. During his speech, he explained the transformation of the electric power system and its impact.

He explained the aim is to rely on an efficient energy system that is focused on its consumers, provides options, is sustainable and stimulates economic growth.

In addition, the governor indicated that the components in the transformation model would allow a reduction in the kilowatt-hour rate.

Fiscal opportunities

Moreover, he discussed some differences in the current fiscal plan and the opportunities it offers to the island.

First, he said the fiscal plan created before Hurricane Maria became incomplete due to demographic and infrastructure problems; as well as the drop in the economy revenue collections.

The reevaluation of the new fiscal plan began, he said, with a “traditional macroeconomic model,” to which considerations were added, such as the hurricane’s negative impact and the positive impact of resources that may reach Puerto Rico. These include the Federal Emergency Management Agency (FEMA) and the supplementary aid resources.

Then, by adding and subtracting fiscal measures and evaluating the positive impact of structural reforms, historical deficiencies now appear as an opportunity for change, he said.

Rosselló added that there are structural reforms whose transformation was originally seen as long-term but that, given current conditions, must now be accelerated.

Tax reform

Regarding local tax reform, Rosselló explained that an earned income tax credit, which has been requested at federal level for several years but not been granted, will be approved locally to encourage people’s reintegration into the labor market.

Puerto Rico’s labor-force participation rate is the third lowest in the world and the lowest in any U.S. jurisdiction, according to a release from the governor’s office.

Rosselló further said the business-to-business (B-to-B) tax would be reduced by half the first year after reform is approved and eliminated by the second year to keep and create businesses on the island.

Another part of the reform will be a tax reduction on the consumption of prepared foods.

Likewise, the governor indicated that the most important parts of the tax reform will be the reduction of income tax rates for individuals from the maximum of 33 percent to 29 percent and the minimum of 7 percent to 1 percent; other reductions in intermediate rates; and the tax rate that would go from a maximum of 39 percent to 29 percent.

“My commitment to you is to take this great opportunity that arose from a catastrophe to make all those transformations and execute them now. If we do this, in five years we will be able to talk about the impact that all these measures, which we said would be implemented, could have on Puerto Rico,” Rosselló said when concluding his message.

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