P.R. Utilities May Be Forced to Provide Service to Gov’t Without Pay

SAN JUAN — Hundreds of utility providers in Puerto Rico for roughly 118 public agencies may be forced to continue to provide service without pay if federal Judge Laura Taylor Swain agrees to a government request to that effect.

The Puerto Rico Fiscal Agency & Financial Advisory Authority (Fafaa) filed a motion May 16 seeking to prohibit utility providers from altering, refusing or discontinuing service. On May 22, Fafaa filed the motion again to establish a procedure for determining adequate assurance of payment. The procedure gives utility providers a priority claim on their payments but it is “post-petition.”

The island’s 118 public agencies would be forced to provide service to the government without pay from three to four years, or to the extent of the bankruptcy process. (File Photo)

Rolando Emmanuelli, a bankruptcy lawyer, said the motion’s approval would be “disastrous” for providers because they would be forced to continue providing service to the government without getting paid for the duration of the bankruptcy process, which could take three to four years. Most utility providers on a list included in the government’s motion are companies that provide telephone, telecommunications or internet services.

In the Fafaa document, the government proposes a procedure for adequate assurance of future payment that gives utility providers an administrative expense-priority claim for unpaid utility services post-petition.

If a utility provider is not satisfied with the assurance of future payment provided by the commonwealth, the utility provider must serve a written request that establishes the location(s) for which utility services are provided; the account number(s) for such locations; the outstanding balance for each account; a summary of debtors’ payment history for each account; a summary of any security deposits provided by the debtors to such utility provider; and an explanation about why the Adequate Assurance Claim is inadequate assurance of payment.

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The government may try to resolve any issues with the utility provider and, at its discretion, provide additional assurances. If the commonwealth determines an Additional Assurance Request is unreasonable and is unable to reach an alternative resolution with the utility provider, the issue would then be decided by Judge Taylor Swain.

Emmanuelli noted, however, that besides the fact that payments to utility providers are uncertain, there is also the problem that many of them do not know if they will continue to have contracts with the government.

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