Monday, June 24, 2019

Puerto Rico fiscal board warns electric utility about overspending

By on May 31, 2019

Electrical workers repair a utility pole in San Juan. (CB photo)

Prepa must provide funding sources to​ cover $10.5 million spent over budget

SAN JUAN — Puerto Rico’s Financial Oversight and Management Board informed the Puerto Rico Electric Power Authority (Prepa) that it has exceeded actual expenditures for the overtime pay and spending for the certified budget for the current fiscal year, which ends June 31.

“Prepa’s certified Budget for FY19 [fiscal year 2019] allocated $30,432,000 for Overtime Pay and $3,586,000 for​ Overtime Benefits. According to the Quarterly Report, PREPA’s actual expenditures as of the end​ of the third quarter reached $40,391,845 and $4,079,907, respectively, that is, $9,959,844 and​ $493,907 above the amounts in the certified Budget,” a letter signed by the board’s executive director, Natalie Jaresko, reads.

In the letter, addressed to Prepa Executive Director José Ortiz, the board said that while the salaries and wages (including pensions and benefits) budget reflects a $12.2 million​ surplus, the positive result is offset by the excess spending on overtime pay and overtime​ benefits, as reflected in Prepa’s year-to-date labor (YTD) operating expenses, which show a $6.6 million overspend when compared with the budgeted amount for the​ same period.

“Given Prepa’s Total Labor Operating Expense, of which salaries and wages is a​ part of, is currently overspent on a YTD basis, any proposal for salary increases in FY19 may have​ a negative effect on Prepa’s year-end financial results, unless appropriate corrective actions are​ taken,” Jaresko wrote.

In addition, Prepa has also exceeded the year-to-date budgeted amount for utilities and rent and ​Public-Private Partnerships (P3) Authority transaction costs.

Jaresko requested Ortiz provide ​information that explains “such inconsistency” between actual and certified expenditures.

“Please also​ provide the corrective actions PREPA will take to identify the sources of funding necessary to​ cover the deficiencies on Overtime Pay and Overtime Benefits, provide for the proposed salary​ increases and avoid an overspending for FY19 Budget for Utilities and Rent and P3 Authority​ transaction costs,” she added.

The information must be provided by June 7.

Ortiz said Prepa has “good” liquidity, with $290 million in its accounts.