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Judge Swain won’t intervene on behalf of Puerto Rico Energy Commission in case against fiscal board

By on April 2, 2018

SAN JUAN — U.S. District Court Judge Laura Taylor Swain has refused to issue an injunction in favor of the Puerto Rico Energy Commission (PREC) to prohibit the island’s Financial Oversight & Management Board from forcing the Electric Power Authority (Prepa) to follow guidelines contrary go the regulator’s orders.

In her decision, Judge Swain said the commission was requesting a legal opinion on the scope of the board’s powers and that it did not have a case nor was there any controversy. It is not yet known whether the energy regulator will appeal the decision.

PREC’s lawsuit was significant in that it was the first government entity to challenge the scope of the fiscal board’s powers while there are dozens of agencies with oversight faculties. Judge Swain issued the decision last week.

During a hearing last week, Energy Commission lawyer Scott Hempling, who was also the regulator’s examiner during the process of determining power rates, requested that the fiscal board be prohibited from interfering with the determinations issued by PREC, which regulates Prepa, stressing that the utility is “freely” disobeying its orders.

Hempling said the fiscal board wants powers it doesn’t have under the Promesa law and said that although the board can make decisions regarding the government’s budget, it cannot determine energy policy.

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As an example, the lawyer said the fiscal board could determine the University of Puerto Rico’s operational budget but it “cannot tell [the university] that it cannot have a history department.”

The commission requested, among other things, a statement declaring that the board may not order or authorize electricity-related action that is under the regulator’s purview and that PREC has not approved, such as power rates.

In addition, the energy regulator requested a declaration aimed at establishing that when the board exercises its fiscal powers over Prepa it do so in a manner “consistent with the actions, orders and regulations of the Commission regarding substantive electricity matters,” in addition to measures that ban Prepa from enacting fiscal board decisions if they are contrary to PREC determinations.

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Hempling said the commission was not seeking to have to approve Prepa’s fiscal plan before it was certified by the fiscal board, but to ensure it was not at odds with energy policy.

The board reiterated its power under Promesa to make decisions over what was established by Act 57, which created the Energy Commission. The lawyer insisted that, under Promesa, the fiscal plan cannot be challenged and that in conflicting local and federal law, the latter prevails.

Gregg Mashberg, of the Proskauer & Rose law firm, said the energy commission cannot interfere in the fiscal plan and that if it has something to say, it must wait for an adjustment plan to be presented. To this, Judge Swain questioned if it was Promesa’s intention that Puerto Rico work on an adjustment plan for years, which is not feasible since the regulatory agencies cannot voice their opinion.

The fiscal plans have not been officially certified because the oversight board required new amendments last week. Gov. Ricardo Rosselló said in response he would present new fiscal plans Thursday but not include many of the board’s recommendations, which has raised tensions between the government and regulating entity. The government has 90 days to inform the U.S. president and Congress the reasons for not adopting the board’s recommendations.


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