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Jenniffer González Says Prepa Rate Hike Could Have Been Avoided

By on August 1, 2016

SAN JUAN – Jenniffer González, the New Progressive Party’s (NPP) candidate for resident commissioner, said the provisional hike in the electric bill that went into effect Monday is “unnecessary,” but declined to say if the party would cancel the utility’s debt restructuring agreement that enabled the hike.

González said the 1.299-cent per kilowatt-hour hike that went into effect Monday could have been prevented by merely reorganizing the Puerto Rico Electric Power Authority (Prepa) to reduce costs, enabling renewable energy projects and moving forward the use of natural gas. She also said the NPP will cut the contract for Prepa’s debt advisers, including Chief Restructuring Officer Lisa Donahue’s and debt adviser Jim Millstein’s.

“If we put forward those measures. All of those increases can be reverted,” she said, declining to say whether the NPP will cancel the agreement that seeks to restructure Prepa’s $9 billion debt.

The NPP delegations in House and Senate voted against the legislation that enabled the debt restructuring because of the hike to the cost of electricity, which had not been increased since the 1980s. She also said the delegation believes the government could have negotiated better terms in the restructuring deal.

The bill got votes at the last minute after Popular Democratic Party (PDP) gubernatorial candidate David Bernier intervened. “Is David Bernier in favor of the hike…? He has not said,” she noted, urging the PDP candidate to push for a special legislative session to cancel the hike.

“These hikes are not necessary and are undignified,” she said, adding that Prepa is lying when it says it has taken measures to reduce costs.

The rate hike will cover a $222.25 million annual revenue shortfall and will remain in effect while the Puerto Rico Energy Commission (PREC) considers a permanent rate hike request from the utility. The rate increase process is separate from a transition charge of 3.10 cents per kilowatt-hour and an adjustment mechanism to be imposed on all customers to pay for a bond exchange that has yet to be carried out.

According to González, Prepa reports state that as of May 31, it billed more than 17.2 billion in kilowatt-hours in a year. If that amount is multiplied by 4.4 cents, the sum of the hike and the transition charge, the hike will cost $758 million to consumers.

That means that a 4.4-cent hike is a 27% increase to the residential tariff, a 24% increase to the commercial tariff and a 30% increase to the industrial utility rate, she said.

Rep. Jenniffer González, House minority spokesperson for the NPP and resident commissioner candidate (CB/Yoel Parrilla)

Rep. Jenniffer González, House minority spokesperson for the NPP and resident commissioner candidate (CB/Yoel Parrilla)

Meanwhile, Senate Energy Commission Chairman Ramón Luis Nieves accused the NPP of taking the utility to bankruptcy to pay for loans that were taken out irresponsibly and in some cases criminally. He also rejected the “demagoguery of the NPP and the Utier [Spanish acronym for Irrigation & Electrical Workers Union],” who blamed the Energy Reform and Revitalization Act for increasing the utility rates.

“The Energy Reform had nothing to do with the financial collapse of Prepa. Without Energy Reform, without the Energy Commission, without the Revitalization Act, Prepa today would be in the hands of a trustee and bondholders, who would have already increased power rates by 8 to 10 cents per kilowatt-hour, only to repay the bonds,” he said in a radio interview.  

According to Nieves, Prepa studies show that an increase in the tariff of 7.8 cents was needed to cover utility expenses. He said the restructuring and other initiatives have resulted in hikes that are much lower than that amount.

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