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Puerto Rico fiscal board questions electric power bill drop

By on October 4, 2018

SAN JUAN – The executive director of the Puerto Rico Electric Power Authority (Prepa), José Ortiz Vázquez, announced Thursday reduced electricity production costs that will be reflected in lower subscriber bills this month; however, the island’s fiscal board wrote to the governor, requiring information to support the ability to reduce rates and how these would affect the government’s fiscal plan and budget.

“What was done was to pass the operational savings to the customers, who will see it immediately in the fuel adjustment and energy purchase sections. From now on, customers should see this reduction reflected in their bills,” the utility chief said via a release.

As an example, Ortiz Vázquez explained that an average customer, who consumes 800 kilowatts (kW) and paid $180 last month, should receive a bill for $139 this month. The executive director said the cost of 1 kW is close to 22 cents.

“Now it should reflect a reduction to between 18 [cents] and 19 cents. Meanwhile, for industrial customers, the reduction will be 3.5 cents. For residential customers, 3.9 cents, and 3.8 cents for businesses.”

Ortiz Vázquez assured that Prepa intends to keep the lower production costs.

“We are going to work so that this reduction is maintained. Of course, there are factors we do not control, such as if the cost of fuel rises. It is common knowledge that many of our fuels are tied to oil prices. Thus, we will work with what relates to our operational efficiencies. For example, this month we have this reduction because much of the saving is that we used more natural gas in Costa Sur [power complex], versus what was projected in diesel fuel. That is part of the big difference.”

The Financial Oversight and Management Board for Puerto Rico sent Gov. Ricardo Rosselló Nevares and Ortiz Vázquez a letter requiring information related to the announcement because it believes the “assertions supporting the rate reduction announcement are inconsistent with the information and data that has been provided by PREPA about its liquidity, operational expenses, fuel costs, and revenue projections,” according to its release.

“As the Independent Debt Investigation Report found, we must ensure PREPA’s rate changes are not politically induced, in order to avoid the pitfalls that caused the fiscal crisis of this utility,” board Chairman José Carrión said.

The “proposed electricity rate reduction would have a direct impact on the revenue projections in the PREPA budget, and any operational efficiencies and fuel purchasing cost reductions would in turn impact expenditures. The Oversight Board is therefore requiring the development of a revised budget for FY19 to be submitted pursuant to Section 202 of PROMESA,” the board said.

Moreover, the board is requesting documentation that “explains the legal basis for why the proposed rate reduction would not constitute a rate adjustment that would require regulatory approval by the Puerto Rico Energy Bureau, under current Commonwealth law.”

Ortiz Vázquez had stressed, Prepa’s announcing release added, that he will keep his commitment to transparency. “Just like we announced this reduction, when there is a rise in fuel costs that have an impact on the bill, also inform it so people can prepare,” he said.

Ortiz Vázquez said the reduction is of about 15 percent and will represent more than $20 million in customer savings.

Regarding the skepticism with which some customers received the news, Ortiz Vázquez said he does not “blame them,” adding that for many years, there has not been a track record of much credibility. To start earning that credibility, you have to start speaking the truth, and that is what I intend to do.”

He also said the “savings for the people result in a better economy, and economic movement, at the end of the day, turns into greater energy demand, which helps us when the commitments to pay bondholders arrive, to be able to comply with those customers to whom we owe money.”

The fiscal board’s executive director, Natalie Jaresko, who signed the letter, added that it “is vital that all actions taken by PREPA are consistent with the transformation process being developed to provide residents of Puerto Rico more reliable and affordable electricity. The Board will continue to provide oversight over every element of PREPA’s operation and future transformation in order to achieve those goals.” 

See the full text of the board’s letter to the governor and Prepa’s CEO here.

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