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Puerto Rico power cost will rise in the future

By on July 31, 2018

SAN JUAN – While officials have said energy rates will increase between 2 cents to 4 cents per kilowatt-hour (kWh) if an agreement between the Puerto Rico Electric Power Authority (Prepa) and a large group of bondholders reached this week becomes a reality, sources said the rates will be much higher in a decade.

The so-called transition charge, a fee that will be used to pay the utility’s debt service, will be 2.35 cents per kWh for years one to five; 2.7 cents for years six to 10; and 2.8 cents for year 11. However, starting year 12, there will be annual 2.5% increases over the prior year’s transition charge. The transition charge for revenue refunding bonds issued by Prepa in 1974 will be capped at 4.3%.

“That is going to be much higher when you take into account possible fluctuations in the price of fuel,” the source said.

Gov. Ricardo Rosselló said Tuesday that the only way to be exempt from paying the electricity bill increase of 2 cents to 4 cents per kilowatt-hour required to comply with an agreement with Puerto Rico Electric Power Authority (Prepa) bondholders is to go off-grid.

“This ‘opt in or opt’ out isn’t that trivial. Most likely, most people opt for a version where they can generate their own energy but are also interconnected to the system. In that way, they’ll be able to produce their own energy at a lower cost but if they need to, they can consume energy produced by the authority,” the governor said at a press conference.

“If you’re not connected to the authority system, you won’t have to pay the charge,” he added.

However, it is not clear if the preliminary agreement between Prepa and the Ad Hoc Group of Bondholders, who agreed to a 30% haircut, will become final. A source said Prepa still has to negotiate with fuel lenders and monolines, which were some of the groups that had agreed to restructure debt through a restructuring support agreement the Financial Oversight and Management Board rejected in 2017 after numerous forbearances.

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