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Manufacturers Association Blasts Prepa’s Planned Transition Charge

By on June 1, 2016

SAN JUAN—The Puerto Rico Manufacturers Association (PRMA) rejected on Wednesday the transition charges sought by the Puerto Rico Electric Power Authority (Prepa) to pay for the utility’s securitization and restructuring because, according to the PRMA, it is not based on economic studies.


Puerto Rico Electric Power Authority central offices in San Juan

On April 7, 2016, the Prepa Revitalization Corporation, a special purpose public corporation and instrumentality, submitted its Verified Petition for Restructuring Order to the Puerto Rico Energy Commission (PREC). The transition charge is needed to implement the securitization mechanism, according to the petition, which is essential to achieve investment-grade rating of new bonds that would be exchanged with creditors.

Nonresidential customers (commercial and industrial) would see their rates increase by an initial 3.055 cents per kilowatt-hour (kWh). The charge will be adjusted every three months, and during the next two years, it will fluctuate, reaching 4.2 cents per kWh in 2018, the petition stated.

Almost two months after asking for the imposition of a transition charge, Prepa last week filed its official rate hike request to the PREC.

Meanwhile, the Manufacturers Association says the transition charge, as well as the hikes in basic rates, would increase energy costs by 25%, further hurting production costs for industries that are trying to stay afloat amid the economic recession. The PRMA also says the securitization charge is based on the direct payments by consumers of a $6.84-billion debt that would be revised every year.

“The association’s energy committee and other private entities that have participated in the process have alerted that there are no studies to sustain such charges” said Tomás Torres, head of the PRMA’s Energy Commission and executive director of the Competitiveness and Sustainability Institute.

He said that instead of investing in securitization, all efforts must be headed toward investing in the generation and transmission of energy.

Earlier this month, four entities argued that the costs of the securitization were not distributed evenly among all consumers.  The Windmar Group noted that the fixed charge penalizes low energy consumers, rewards high-energy consumers, and goes against federal policies that promote the use of renewables. The upfront financing costs of the restructuring are $124 million, which will be paid for by consumers.

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