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Senators demand Puerto Rico energy regulator involvement in utility’s privatization

By on March 19, 2018

SAN JUAN – Several members of the Special Committee on Energy Affairs of the Puerto Rico Senate, including its chairman, Larry Seilhamer, asked the commonwealth government to not hinder the Energy Commission (PREC) during the process of privatization of the beleaguered Electric Power Authority (Prepa) as the Legislature considers the measure.

Seilhamer proposed amending Senate Bill 860, which establishes the regulatory framework for privatizing Prepa, to provide that PREC cannot be eliminated from the oversight process to guarantee contracts’ fulfillment; nor to be prevented from reviewing and approving the applicable rates “to any regulated service provided under a [Public-Private Partnership] Contract.”

Sen. Larry Seilhamer, second from left, is the vice president of the Senate and chairs the Special Committee on Energy Affairs. (Courtesy)

As it stands, the language in the merely 18-page bill stipulates that “after the consummation of any PREPA transaction” PREC may supervise and review these two areas, “except as provided in the [Partnership] Agreement,” which could lead to the possibility that the parties decide to exclude this authority.

“There is no objection, in principle, to amending the language,” responded the chairman of the Fiscal Agency and Financial Advisory Authority (Aafaf), Christian Sobrino, to Seilhamer’s proposal to establish that PREC’s supervisory role not be challenged.

Sobrino said the Public-Private Partnerships Authority (P3A) would not be opposed to PREC offering technical assistance to the Partnerships Committee tasked with evaluating and approving each Prepa transaction. However, he was emphatic that the regulator would not participate or vote in their approval.

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“Requiring [PREC’s] approval would be counterproductive, would unnecessarily delay the processes and significantly increase government spending,” Sobrino explained.

S.B. 860 provides that each Prepa transaction is approved by the Partnerships Committee, the P3A board and Prepa’s governing board.

Senate Minority Leader Eduardo Bhatia argued that for other privatizations on the island—such as Luis Muñoz Marín Airport’s in 2011 and the sale of the Puerto Rico Telephone Co.’ assets— regulators endorsed the transactions.

“Here, the regulator does not have to approve anything, the regulator come in later. That is a mistake…because [PREC] is regulated by law today to make an Integrated Resource Plan, to create the course, the model, but where is Puerto Rico headed” Bhatia questioned. “The idea that the regulator comes in later does not make any sense. The regulator has to come in beforehand and has to say [that] within the transaction these [particulars] have to occur.”

The idea was dismissed by Sobrino and P3A Executive Director Omar Marrero, saying the privatization process would have enough evaluators to ensure its transparency. The bill establishes that PREC will not have the authority to alter or amend contracts.

PREC Consolidation Criticized

Meanwhile, Puerto Rican Independence Party Sen. Juan Dalmau questioned during the public hearing that the reorganization plan that consolidates PREC provides that the chairman of the Public Service Regulatory Board may overturn bureau decisions, including the proposed Energy Bureau’s.

Dalmau said this would mean it is “in the hands of a political entity—because they are named by political bodies—a determination that [should]comes from a technical group of energy experts.”

“My concern is that, in the end, the only thing that can hold back an imposed increase in billing for electricity consumption is being left without effect for the purposes of this privatization process. That is, there is no protection for consumers,” Dalmau stressed.

Sobrino also assured that the “Executive [branch’s] intention when presenting the repeal bill that has to accompany that plan of reorganization, according to the New Government Act, is that in the case of the Energy Bureau there is no such administrative review.”

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