PIP Gubernatorial Candidate Reacts to Prepa Revitalization Bill
SAN JUAN – María de Lourdes Santiago, senator and candidate for governor from the Puerto Rican Independence Party, expressed her views to Caribbean Business regarding the Legislature’s approval of the Puerto Rico Electric Power Authority (Prepa) Revitalization Bill.
“I think it was perfectly foreseeable that, despite initial objections, the parliamentary majority would end up falling in line because that has invariably been the story. The Legislative Assembly, far from acting as a counterweight to the excesses of the executive [branch], has been an unconditional accomplice.
“The problem with the approved project is that it incorporates the agreement with the creditors, whose content was never part of the legislative considerations. We do not know what’s there, except that there are dispositions such as that the new governing board will manage those agreements, which include a decrease in spending. Right there, you have a huge red flag. What does this mean? There is the fallacy that the great expense at Prepa is payroll. But that does not reach 10%, and Lisa Donahue herself has said it.
“Now, as testified in the oil-purchase hearings, there is an attempt to artificially reduce the spending volume with such measures as not buying enough fuel to have reserves. That has the effect that if fuel were needed at Cambalache [powerplant in San Juan], ground transportation has to be arranged, which is more expensive than maritime transport. This is the type of measures the Legislative Assembly is committing to without understanding the real repercussions.”
With respect to the repercussions the bill may have for the people, she said there an increase in the electricity bill would definitely be seen.
“The first two increases that will happen: First, what is known in the bill as the ‘Initial Rate Review.’ When you hear the legislative leadership saying, ‘No, this bill does not increase [the rate],’ one says, ‘But of course, aren’t rates increased by laws.’ The rate is increased through an administrative process. But for that administrative process there is a provision in the bill and an agreement with creditors that it be increased.
“Creditors tell Prepa it has to generate more revenue, or charge more for electricity. But at this moment, people are leaving the country, businesses are closing, people are using more efficient appliances at home, consumption is decreasing. What is the only thing Prepa can do to comply with that requirement of increasing revenue? Increase the rate. The first effect will be a rate increase. We do not know when, but it will happen.
“But besides that cost, that rate increase, there is an additional charge, one that will be used to address all spending related to debt restructuring. The bill creates a new corporation, the Prepa Revitalization Corp. We are the ones who will pay for that entity’s operation. It will be reflected as a separate charge in the [electricity] bill, in amounts we do not yet know. It will be used to pay for technical consulting, office spending, any expense you can imagine, we are going to pay for it in a separate amount on the electricity bill.”
The bill went back for Senate approval after the House of Representatives made some amendments, which in the senator’s believes deserve some attention.
“Another important detail is the House’s amendments. Prepa’s debt is of some $8 billion, bordering $9 billion. Half of that amount is being audited by the Securities and Exchange Commission because, apparently, when it was issued, it was known that Prepa was insolvent and could be a questionable or a transaction that could be nullified. The thing is there are $4 billion for which we do not know if their issuance and the purchase of those bonds was legitimate. In the House’s language [in the bill] text was included to safeguard the responsibility of all officials involved. It is an immunity clause, anticipating that there could be a determination by the Securities and Exchange Commission on the legitimacy of that debt.”
Gov. Alejandro García Padilla signed the legislation into law Tuesday night.