Divided House Passes Prepa Revitalization Bill
SAN JUAN – The House passed the Puerto Rico Electric Power Authority Revitalization Bill with 26 votes in favor and 22 against after a debate punctuated by long recesses.
Senate Bill 1523 must now return to the Senate so senators can concur with the House amendments to the legislation. Rep. Carlos Bianchi and NPP Rep. María de Lourdes Ramos asked to abstain from the vote because they are Prepa employees. PDP Rep. Manuel Natal voted against the bill. The NPP delegation announced it was going to submit a written explanation of its vote against the bill.
The House, which convened the session at 11 a.m. Monday, began the debate on the bill at 4:50 p.m. and voted on the bill at about 10:30 p.m. Minority Leader Jennifer González said her delegation received part of the House amendments to the bill but that, nonetheless, the group was willing to debate on the bill.
Outside the Capitol, members the Irrigation & Electrical Workers Union (Utier by its Spanish acronym) protested the bill. Some began to shout their discontent from the House galleys after the bill was passed. The bill does not guarantee workers rights.
The legislation would create a separate corporation, the Prepa Revitalization Corp., that will issue new bonds that will be exchanged for the Prepa bonds that are currently on the market through a new securitization that will also be used to finance the $2.4 billion Aguirre liquefied gas facility. It will overhaul Prepa’s board, create a new structure of contribution in lieu of taxes with cities and promote a hike in the utility rates through the Energy Commission. The restructuring will be financed through a so-called transition charge to consumers. As part of the deal, bondholders are accepting a 15% haircut of their investment.
Initially, there were concerns about whether the bill was going to get the needed votes for approval. House Speaker Jaime Perelló gathered the votes he needed after he swore in Luis Eli Torres Monsegur as the new representative for District 23 that comprises Yauco, Guayanilla, Peñuelas and Ponce to replace former Popular Democratic Party (PDP) Rep. Nelson Torres Yordán, who resigned to become mayor of Guayanilla. However, PDP Rep. Javier Aponte Dalmau told reporters he had misgivings about the bill and wanted the vote on the bill to be postponed, insisting that bondholders and Prepa should negotiate further cuts to the utility’s $9 billion debt as he was not happy with the 15% cut.
Aponte Dalmau said he talked to Stephen Spencer, general director of Houlihan Lokey and adviser to Prepa’s Ad Hoc group of bondholders. Spencer assured the lawmaker that he would talk to bondholders to see if they could accept further cuts. Nonetheless, he said his vote on the bill was conditioned to the amendments introduced to the bill.
“I am proposing language in the bill stating that the 15% cut is the minimum amount in the cut. I don’t want us to limit ourselves…. If that does not happen, then I have to see which amendments are introduced in the bill so I can determine how am I going to vote,” Aponte Dalmau said.
The amendment Aponte Dalmau requested, however, was accepted by the majority late Monday and he announced he would vote in favor of the bill.
The House debate on the Prepa Revitalization bill began late in the afternoon and was interrupted several times by long recesses that extended the session well into the night.
Following a Senate probe into irregularities in Prepa’s fuel purchases that officials say cost millions for customers, Santa said the legislation calls for a separate office to handle the purchases.
During her speech in the House opposing the bill, González complained that the restructuring support agreement between Prepa and the bondholders was not included in the bill that enables it.
“If this bill validates the agreement, why it is not in the bill? We have to go to the GDB [Government Development Bank] website to look for it,” she said, noting that the 30% of the bondholders who held out from the agreement can still sue the government to get paid.
She alerted the public to the fact that the wording in the restructuring support agreement (RSA) and the wording of the bill were not the same. The RSA, she said, contained language that appeared to make Prepa customers responsible for the debt if the corporation or Prepa failed to pay the debt.
“It appears that the debt here is not divided among everyone but that the customers are responsible for it together with Prepa,” she said.
After a recess that lasted several hours, an amendment was introduced in the bill that made it clear that Prepa’s clients could not be held liable for the debt. Another amendment introduced by the House made it easier for consumers to challenge the amount in their utility bills.
González then asked Santa, who presented the bill, if the legislation was eliminating customers as “olbligors” of the debt. He did not answer the question.
During his speech on the floor, Aponte Dalmau noted that two years ago he had proposed the creation of a separate corporation for Prepa but was called “crazy.” He was referring to a bill he introduced in 2013 that would have replaced Prepa with a new entity, end the utility’s monopoly in the area of power generation and create separate entities to purchase fuel and set consumer power rates. He did so at the time to help make the utility more efficient.
The utility ended up paying Alix Partners nearly $30 million to come up with the idea of creating a separate corporation to handle the securitization of Prepa’s bonds. The new corporation will not be able to incur new debt.
“This new corporation will securitize the debt but the only project it can finance is the Aguirre one,” he said.