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Open market for Puerto Rico energy sector isn’t viable, official says

By on March 19, 2018

SAN JUAN — Government Development Bank Chairman Christian Sobrino acknowledged Monday that “it isn’t viable” to immediately promote competition among several private companies in Puerto Rico, even if the Electric Power Authority  (Prepa) is privatized due to the poor state of its infrastructure.

His remark was in response to questions by New Progressive Party Sen. Henry Neumann, who expressed confusion over Senate Bill 860. The government administration-drafted bill affirms making the “step forward to a model centered on the consumer, where residents can have options.”

(Courtesy photo)

“Today, with the energy infrastructure system of Puerto Rico, that [companies competing to provide the service] isn’t viable; that requires, which is an important component, a dramatic investment of recovery funds to update our electrical system…the energy infrastructure,” Sobrino said.

Neumann then questioned during the first public hearing of the Special Committee on Energy Affairs of the Senate that “at this time, and even after approving this measure, and opening up free competition for the different facets we want to sell or concession, do citizens continue without options?”

Sobrino, who is also the governor’s non-voting representative to the island’s fiscal oversight board, said an open market would require several phases, such as investment in infrastructure and, secondly, a regulatory framework for the electricity system, which is what the government is seeking to establish with S.B. 860.

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“Any person in Puerto Rico who has tried to install batteries and solar panels in their home knows that the electric power system does not allow that level of competition,” Sobrin said. “The investment in the infrastructure will eventually allow several parties to distribute energy in the same system, and you will also have a regulatory framework that allows investment behind the meter,” referring to investments by homeowners, community grids “or some kind of project of the municipalities. That will eventually be possible, but it requires infrastructure investment.”

“We are clear that many things have to happen for that what is included in the [bill’s] preamble becomes a reality,” Neumann said in reference to the bill’s assurance that power customers will have energy options.

Prepa retirement funding in doubt

The bill introduced to the Legislature shortly over a week ago provides that “any payment received with respect to a Prepa transaction may also be used to contribute to the Retirement System of Prepa in an effort to improve the level of its capitalization.”

Senate Minority Leader Eduardo Bhatia argued that because the public utility is in a bankruptcy process under Title III of the Promesa law, the person who would decide where money from the sale of Prepa’s assets would go is Judge Laura Taylor Swain, who oversees the process.

“How can you present it to the workers that the money is going to be for them when the judge is who will decide that? When the one who is going to decide what is going to happen with the assets of a corporation that is bankrupt is the bankruptcy judge,” Bhatia questioned. “The judge will say the money will go to whomever you owe. If you are bankrupt, you are getting rid of the assets you have and the assets guarantee the bankruptcy money.”

Sobrino, however, argued that the control of the assets remains in government hands and that the judge will only have jurisdiction to approve the public corporation’s “debt restructuring adjustment plan.”

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