Monday, September 24, 2018

Puerto Rico House passes bill to privatize public power company

By on May 11, 2018

SAN JUAN – Puerto Rico lawmakers passed Thursday House Bill 1481 to create the Law to Transform the Puerto Rico Electric System, which would make possible the concession of Electric Power Authority (Prepa) assets.

The purpose of the law is to establish energy public policy on the island; authorize the legal framework required for the sale, regulation and transfer of Prepa assets, operations, functions and services; and establish the safeguards for a “just and transparent process.” In addition, it amends the Puerto Rico Electric Power Act, the Public-Private Partnerships Act and the “Energy Transformation and Relief Act.

“Today in the chamber we will approve the tools to create a resilient system; the price the people of Puerto Rico pay today is high and doesn’t work,” said Rep. Víctor Parés, chairman of the Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy Committee.

He added that “transparency will be ensured in this bill. There won’t be a blank check for this.”

U.S. Congress Raises Concerns Over Prepa Privatization

Earlier Friday, Minority Popular Democratic Party (PDP) Reps. Rafael “Tatito” Hernández, José “Conny” Varela and Luis Raúl Torres sent a letter to the members of the U.S. House Natural Resources Committee saying the bill passed by the majority New Progressive Party lawmakers does not address any of the questions asked about Prepa’s sale in a letter sent by Reps. Nydia Velazquez, Raúl Grijalva and José Serrano to Gov. Ricardo Rosselló on Feb. 1.

The members of Congress emphasized the importance of transparency to avoid the kind of controversy that arose “as a result of mismanagement in the hiring of companies to restore electric power after Hurricane Maria,” reads the release issued by the minority legislators.

In their letter to the members of Congress, they said:

“We do not know the response of the Governor to your letter, but we can attest that the following issues have not been addressed in the legislation that will be approved today:

  1. It makes no reference to any other model that has been considered and does not mention how failures in the privatization of Prasa [Puerto Rico Aqueduct & Sewer Authority] and the resulting substantial loss for the people of Puerto Rico will be avoided. It seems we do not want to learn from previous mistakes.
  2. It does not guarantee total transparency during the public-to-private transition. The government intends to use the existing legislation for Public-Private Partnerships to carry out the transaction, but it does not clearly ensure that the details of the negotiation and the eventual transaction are fully disclosed to the public. The legislation according to the amendments contained in the Electronic Draft establishes that the P3 [Public-Private Partnerships] Authority completes the negotiation, sends the contract to the Governor and the Governor sends it to the Legislature for final approval. However, if the Legislature does not approve such contracts within 30 days, the contract will be approved.
  3. The people who negotiate the privatization on behalf of the Puerto Rican government shall be the officials of the Public-Private Partnerships Authority without taking into consideration the Energy Commission.
  4. Therefore, there is no regulatory or oversight mechanism with the necessary expertise during the negotiation with a private entity since the authority of the Energy Commission was eliminated from the negotiation process with a contracting entity. In H.B. 1481, its role is defined as an adviser to [Prepa]. It will only provide technical assistance, when necessary.
  5. The PDP Delegation clarified that the consolidation of the Energy Commission did not materialize. However, H.B. 1481 leaves it inoperative and impotent. Therefore, as the measure is drafted with amendments included in the House of Representatives, the Prepa Partnership Contract will not have an independent audit office to protect the consumer. It also does not establish which office the subscribers will be able to use in the case of a complaint, nor what the arbitration clauses would be for consumers, nor does it provide for the right of consumers to file class actions in the privatization contract.
  6. The measure eliminates the current environmental controls. Since it repeals the clause that imposed as a requirement submitting an “Energy Relief Plan” to the Commission for approval.
  7. There is no provision in the legislation on what will be required of the private entity regarding the existing employee union during and after the privatization process, nor labor guarantees nor protection of the right of the employees to organize that they be protected by some government agency.
  8. It is not clear in the legislation whether the government and / or the successor private entity of PREPA will safeguard employees’ pensions. There is a vague disposition that establishes that the government will “do its best” to provide funds to the PREPA Retirement System through the proceeds from the sale of assets.
  9. It does not make any reference to Contributions in Lieu of Taxes under a privately owned model.
  10. It does not exclude that the federal funds provided to rebuild the electricity system will in no way benefit the private entities that assume the role of PREPA.

As you can see, all these valid questions you have raised, have also been our concerns, but have not been addressed in this legislation. The reengineering of PREPA is perhaps the most important transaction for the people of Puerto Rico in decades. We share your interest, and that of the United States Congress, to ensure that in the end a transaction is reached that is fair, reasonable and clearly in the best interest of the people of Puerto Rico. Rest assured that our delegation will insist on an open and transparent process that informs the people of Puerto Rico and Congress as the negotiations progress. We appreciate the opportunity to work together with you to share concerns and provide responsible oversight of the transformation of PREPA.”

The bill now goes to the Senate for consideration.

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