House eliminates compensation for Prepa Governing Board members

SAN JUAN – The average compensation for Puerto Rico Electric Power Authority (Prepa) Governing Board members, around $62,555, and refundable expenses were eliminated Monday evening by the House of Representatives.

Shortly after 8 p.m., Governing Committee President Jorge Navarro Suárez presented House Bill 475, which alters Prepa’s Governing Board, as proposed by Gov. Ricardo Rosselló, as well as eliminating current compensation for the board’s members to establish a fixed stipend.

Puerto Rico Capitol (Juan J. Rodríguez/CB)

Puerto Rico Capitol (Juan J. Rodríguez/CB)

With 30 votes in favor and 12 against, the House approved the measure that now goes to the Senate and aims for Rosselló to integrate the Puerto Rico Fiscal Agency and Financial Advisory Authority’s (FAFAA) president, the Economic Development & Commerce Department (DDEC) secretary, and the chairman of the Public-Private Alliance Authority (APP) in Prepa’s Governing Board.

Currently, the law establishes that the Governing Board is composed of nine members, six of whom are named by the governor and require the advice and consent of the Senate.

With the approval of H.B. 475, only three of the six members designated by the governor must be approved by the Senate, and the remaining three would be executive branch officials.

The bill keeps 3 consumer representatives

Regarding board members’ compensation, the bill proposes to eliminate their current payment to establish a per diem concept. For every regular or special session, each board member will receive up to $200. If a member needs to carry out a task assigned by Prepa, he or she will be paid up to $150 a day.

See also: Prepa, bondholders agree to extend milestones on their RSA

The bill establishes that no member of Prepa’s Governing Board may receive more than $30,000 annually in per diems or reimbursements.

“Right before completing his leadership, former Gov. Alejandro García Padilla decreed that the [electric power] Authority’s Governing Board members will reap annual salaries between $60,000 and $72,000, plus the right to claim reimbursements for land and air transportation, lodging, and meals. These salaries are exorbitant and unjustified, especially if we consider the public corporation’s fiscal and economic crisis,” the Government Committee president said.

Navarro Suárez assured that voters chose new public policy to achieve changes in light of the fiscal crisis, and to see Prepa receive the investment it needs, as with public-private partnerships, for example.

See also: Senate to investigate Prepa contract with AES

Popular Democratic Party (PDP) Rep. Jesús Santa warned that the bill’s approval jeopardizes Prepa’s restructuring agreement with its creditors, because one of the conditions was to depoliticize the Governing Board, while the bill proposes that three executive branch officials will be a part of it.

“We are going back to the poor management of politicized boards. This agreement between the [electric power] Authority and bondholders won’t be achieved if we politicize the board. It is a big mistake,” he emphasized.

Meanwhile, Puerto Rican Independence Party (PIP) Minority Leader Denis Márquez said H.B. 475 will lead to Prepa’s privatization.

“One simple look at the bill establishes that FAFAA, DDEC, and APP directors will be members of the board. That is guaranteed privatization,” he said.

House Approves Enterprise Puerto Rico

During its session, the House approved another bill that creates the nonprofit Enterprise Puerto Rico, for this entity to foster the island’s economic development by attracting new capital investment.

Enterprise Puerto Rico’s board will be presided by the governor, and an amendment was included so new companies that come to establish themselves on the island buy an unspecified percentage of  local products.

See also: Mayors Association demands meeting with Rosselló to discuss CRIM law amendment

Another measure considered before the House session ended was Senate Bill 21, which amends the Municipal Revenue Collections Center’s (CRIM by its Spanish acronym) board so most of its members are affiliated to the party that prevailed in the general election instead of the party with most municipal officials. If approved, the New Progressive Party (NPP) would be the majority, instead of the PDP, which has 45 elected mayors.




Prepa files changes to renewable energy, net metering

SAN JUAN – The Puerto Rico Electric Power Authority (Prepa) has filed before the State Department new rulings to interconnect generators and participate in net-metering programs that reduce requisites and simplify the evaluation process to interconnect the systems.

For the past few months, the renewable energy sector has complained about Prepa’s pace in complying with renewable energy interconnection parameters.

“We have developed some advanced rulings whose purpose is to reduce time and simplify the interconnection processes of the solar photovoltaic projects of residential and commercial customers to our electric grid, while reducing the costs of distributed generation systems with capacities between 1 [megawatt]  and 5 megawatts [MW]. With the new ruling, Prepa will help promote the development of distributed generation (DG) that use renewable energy sources,” Prepa Executive Director Javier Quintana said in a written statement Tuesday.

Liberty solar panelsAs part of the new ruling, by March Prepa will have the digital portal that will allow online filing and management of all documents related to processes of evaluation, endorsement, inspection, and approval of DG projects.

The new ruling consolidates three active rulings into two, apart from creating expedited processes to interconnect DG systems with capacities of up to 1 MW. It also integrates the evaluation, endorsement and approval into one stage for projects of less than 10 kilowatts [kW]. Likewise, it eliminates requisites to submitting blueprints, designs and inspection for the project’s approval, and limits the time Prepa has to conduct supplementary studies, to reprogram or replace meters, among other aspects.

For DGs with 25 kW or less capacity, Prepa eliminated the requisite to carry out periodic tests every five years, except for those recommended by the manufacturer. For DGs of up to 300 kW, the requisite to install a manual interruptor for Prepa’s operation was eliminated, and the need for a public liability responsibility policy. In addition, the meter’s relocation when not accessible to Prepa staff  was eliminated.

The modifications included in the rulings are expected to result in compliance to the standards established by the Puerto Rico Energy Commission and thus, should represent a positive impact for renewable energy systems.

 




Energy panel could issue ruling on Prepa Resource Plan amendments Friday

SAN JUAN – Puerto Rico Energy Commission Chairman Agustín Carbó said Thursday that the panel will issue Friday its final determination on amendments to the Puerto Rico Electric Power Authority’s (Prepa) Integrated Resource Plan (IRP).

“We expect to have a ruling Friday. We are working on the final details,” he told Caribbean Business

The Puerto Rico Electric Power Authority (PREPA) logo is displayed in San Juan, Puerto Rico, on Friday, April 29, 2016. (Erika Rodriguez/Bloomberg via Getty Images)

The Puerto Rico Electric Power Authority logo (Erika Rodriguez/Bloomberg via Getty Images)

The IRP is a 20-year plan developed by Prepa that focuses on ensuring the development of the electric power system on the island, as well as reliability improvements, efficiency and transparency of the system.

Through a resolution, the PREC disapproved last year of Prepa’s IRP, but approved a modified resource plan and ordered the public corporation to submit “specific elaborations” to the altered document. The PREC ruled that the plan was “incomplete” for lack of a charge forecast with historical comparisons, a “trustworthiness evaluation, absence of resource optimization in the expansion model, and unfulfilling the standards for energy efficiency, renewable energy and generation performance.”

The PREC imposed a $15 million spending cap in the Aguirre Offshore GasPort and the shut down of several power plants by 2020. Prepa is already too deeply involved in the GasPort to go back and is relying on natural gas to reduce rates. It also asked the utility to begin construction on a new combined-cycle unit.

Prepa then asked the PREC to reconsider and amend its recent order on the utility’s IRP in order to be allowed to begin construction of the Aguirre Offshore GasPort and conversion of existing southern region powerplants to natural gas.




Consumer Protection Bureau demands Prepa improve call center

SAN JUAN — The director of the Independent Consumer Protection Bureau (OIPC by its Spanish initials), José Pérez Vélez, requested Puerto Electric Power Authority (Prepa) Director Javier Quintana to increase the number of representatives in customer service to attend the agency’s call center, after multiple people complained about increased wait times.

The Puerto Rico Electric Power Authority (PREPA) logo is displayed in San Juan, Puerto Rico, on Friday, April 29, 2016. (Erika Rodriguez/Bloomberg via Getty Images)

The Puerto Rico Electric Power Authority (PREPA) logo is displayed in San Juan, Puerto Rico, on Friday, April 29, 2016. (Erika Rodriguez/Bloomberg via Getty Images)

“Recently, the amount Prepa consumers complaining to our office about the long waiting time to communicate with the agency through the phone service has increased. Clients assure wait times exceed 60 minutes without being attended by a representative,” Pérez Vélez denounced in a written statement.

The official affirmed the OIPC has confirmed the complaints, adding that in certain cases “they have exceeded 90 minutes waiting. This situation is unsustainable,” he maintained.

Pérez Vélez sent a letter to Quintana requesting more representatives in the call center in order to improve interaction between the agency and its clients.

The OIPC was created under Act 57-2014, as amended, known as the Puerto Rico Energy Transformation and Relief Act. Among its duties and faculties, the agency must “establish strategic planning and information requirements that Prepa must provide to guarantee an efficient electrical system, promote transparency in its processes, and make active citizen participation feasible, among other matters.”




Expert Tells Commission Not to Hike Prepa Rates Permanently

SAN JUAN — A consultant from the Puerto Rico Institute for Competitiveness and Sustainable Economy (ICSE-PR) asked the Puerto Rico Energy Commission to refrain from setting new permanent rates at the island’s electric utility.

Víctor Glass, a professor at Rutgers University and director of that school’s Center for Research in Regulated Industries, cited a lack of transparency, inadequate methodology and the “uncertainty” of the Puerto Rico Electric Power Authority’s (Prepa) restructuring support agreement.

“I recommend that you don’t set up a permanent set of rates for the next couple of years, [and instead] figure out a way to continue to have provisional rates so Prepa has enough funds to keep going. Just based on what I have seen and read, it is premature to set upon a given methodology [with] the calculations seen so far,” he noted.

He was referring to discrepancies in Prepa numbers, which had to be corrected by the commission, to determine revenue requirements and the amount of the projected rate hike. In particular, Glass noted the disorganization and lack of transparency in the Prepa filing.

prepa billThe utility imposed a provisional rate hike of 1.299 cents per kilowatt-hour and is evaluating new permanent rates. The commission must decide on the rates by Jan. 11 or the matter will be left out of its jurisdiction.

Via Glass’s testimony, ICSE-PR virtually asked the commission to restart the process from scratch, with Glass stressing the need to develop a systematic filing process to improve transparency. “You should not require somebody who is an interested party to be an expert in accounting or economics, forecasting or an expert in using Excel,” he said. “It should be a standardized filing design where interested parties have summary chapter of the rate changes and the rationale for said changes.”

Glass said the filing should be divided in chapters focusing on revenue requirements, with each one containing a summary and workpapers backing up its contents. He also showed frustration that the Prepa tables were incomplete, and noted that a table that was used as an exhibit didn’t have footnotes or supporting papers.

“Some of the reduction in costs look suspiciously uniform. They could be perfectly legitimate, but I don’t have a complete narrative in front of me. It makes it difficult to understand whether the filing is reasonable,” he said.

Glass noted that if the filing were better organized, the commission would have spotted quickly the double counting of $37 million in subsidies that came up earlier in the hearing, as well as cost forecast discrepancies among Prepa consultants.

He also criticized the methodology used to calculate the hike, which is “based upon a modified cash basis revenue requirement with the formula rate mechanism,” adding, “It is basically a pass through; there is no risk on the surface associated with Prepa employees making mistakes. There is no risk associated with bondholders. The risk seems to fall on ratepayers,” he said, noting the uncertainty of the restructuring support agreement’s (RSA) approval.

Prepa reportedly has said it is seeking an extension of the RSA with creditors, as it won’t be able to meet a deadline to carry out a bond exchange to restructure its $9 billion debt.

Glass also told the Energy Commission that financial pressures seem to have created tunnel vision that prevents all parties from looking at other options. “It seems that everything is focused on paying back bondholders, getting to the bond market and keeping Prepa afloat. …All of the process is [centered on that and not in] other creative ways to raise funds and organize the industry,” he said, adding that provisional tariffs would allow Prepa to find other more socially conscious alternatives.

 




PREC to Hold Technical Hearings on Prepa Rate Hike

SAN JUAN (CyberNews)—Members of the Puerto Rico Energy Commission of (PREC), announced Monday that they will hold technical hearings on rate hikes at the Puerto Rico Electric Power Authority (Prepa) from November 29 to December 16.

The Puerto Rico Electric Power Authority (PREPA) logo is displayed in San Juan, Puerto Rico, on Friday, April 29, 2016. The indebted Caribbean island, home to 3.5 million U.S. citizens, has juggled dwindling resources from one hand to another for months now, to keep creditors at bay. The crisis is set to tip into a new phase this weekend when $422 million of payments are due and, as things stand, unlikely to be made in full -- threatening the biggest default yet. Photographer: Erika Rodriguez/Bloomberg via Getty Images

The Puerto Rico Electric Power Authority (PREPA) logo is displayed in San Juan, Puerto Rico Photographer: Erika Rodriguez/Bloomberg via Getty Images

According to a press release, Prepa and PREC representatives, along with intervenors in the rate revision process, will have the opportunity to participate in a lengthy question-and-answer session on the testimonies presented by the parties and their respective legal positions.

The PREC, as in previous occasions, organized the cross-examination of witnesses in the technical hearings for panels that will deal with several specific issues and topics, allowing an effective dialogue and a well-organized record, the statement added. Deponents may present their arguments in both Spanish and English, as simultaneous translation will be available to facilitating effective communication between the parties.

All panels will begin with questions from the PREC to the witnesses, followed by questions from Prepa to the commission’s intervenors and finally questions from the intervenors to the PREC’s witnesses and consultants.

The way in which the hearings are organized seeks to maximize time management and facilitate a detailed and effective analysis of the testimonies’ content, in accordance to the petition’s merits, the statement went on.

In addition to the PREC and Prepa, the participants in the technical hearing include Rooney Rippie & Ratnswamy LLP, the Independent Office of Consumer Protection, Sunnova Energy Corporation, Puerto Rico Aqueduct and Sewer Authority, Builders Association Of Puerto Rico, United Center of Retailers, Inc., CEMEX of Puerto Rico, Puerto Rico Association of Consultants and Contractors of Renewable Energy, Energy & Environmental Consulting Services Corp., Chamber of Commerce of Puerto Rico, Association of Industrialists of Puerto Rico, Association of Hospitals of Puerto Rico, Institute of Competitiveness and Economic Sustainability of Puerto Rico, State Office of Public Energy Policy and Windmar Group.

The technical hearings are slated to begin at 9:00 am in the PREC hearing auditorium, located on the 8th floor of the Seaborne Plaza Building at 268 Muñoz Ave. Rivera, in San Juan. The hearings will be recorded and transmitted live through the PREC website: energia.pr.gov.




Prepa Affirms $212M Contribution to Retirement System

SAN JUAN — The Puerto Rico Electric Power Authority (Prepa) claimed that as part of its public debt restructure, it contributed $212 million to the Retirement System during the past two years.

Prepa Executive Director Javier Quintana Méndez stated that one of the public agency’s priorities was to make monetary contributions to its employees’ Retirement System, both active and retired.

Puerto Rico Electric Power Authority headquarters in Santurce / Inter News Service

Puerto Rico Electric Power Authority headquarters in Santurce / Inter News Service

The public official rejected allegations by the Irrigation & Electrical Workers Union (Utier by its Spanish acronym) along with its chapter of retirees, regarding Prepa’s non-compliance to pay the $62 million it owed to the Retirement System due to prioritizing agreements with bondholders.

“We made a commitment to them and we have fulfilled with the $6.8 million monthly contribution to the Retirement System, despite the Authority’s current financial situation,” expressed Prepa’s executive director.

Workers said that by changing its priorities to comply with its $9 billion debt with bondholders, Prepa has set aside its commitment to contributions destined for retirees and active employees.

Quintana Méndez rebutted that he has defended the contribution, precisely as part of the forbearance agreements, achieved with primary creditors through a plan presented by Prepa Chief Restructuring Officer Lisa Donahue, from the AlixPartners consulting firm. He explained this has allowed Prepa to contribute over $212 million from June 2014 till the present year.

“Ironically, the agreements with our creditors, which Utier and the retirees association have consistently criticized, are what have given us liquidity to comply with the employer contribution,” he observed, adding that if those contracts with creditors hadn’t been achieved, Prepa’s debt to the Retirement System would surpass $260 million.

Read more: Credit-Rating Agencies, Banks Conspire to Defraud Prepa Bondholders

“However, we listened to Utier’s leadership and the retirees association opposing agreements with creditors, opposing savings measures implemented in the company, and they also oppose the provisional tariff of 1.29 cents kilowatt/hour, which gives us liquidity to fulfill our obligations,” added the electricity company’s president.

According to Quintana Méndez, the debt of nearly $62 million of ordinary contribution referenced by Utier precedes the forbearance agreements, and it was accumulated due to Prepa’s lack of liquidity.

“As soon as we signed said agreements, which allowed us to renounce certain requirements and arrangements from the Trust Agreement of 1974, we began to have sufficient liquidity to cover some ordinary obligations, such as the budgeted employer contribution,” he concluded.




Senate Questions Donahue About Work in Prepa

SAN JUAN—The chief restructuring officer of the Puerto Rico Electric Power Authority (Prepa), Lisa Donahue, confirmed on Tuesday rumors that the Security and Exchanges Commission (SEC), a U.S. federal agency in charge of enforcing federal securities laws, is in the midst of investigating two bond issues made by the public corporation.

donahue-questioned

Lisa Donahue, chief restructuring officer of the Puerto Rico Electric Power Authority (CB/Agustin Criollo)

Donahue confirmed the existence of an investigation during public hearings held by the Senate Committee on Energy and Water Resources to identify the causes of the September 21 blackout that left nearly 1.5 million subscribers without electric power.

When questioned by Senate President Eduardo Bhatia to shed light on the whereabouts of more than $3 billion in bonds issued by Prepa between 2010 and 2013, the official candidly accepted that the SEC has requested information concerning these issues. However, she acknowledged that she has not yet identified the money’s whereabouts.

“My job involves working with the liquidity crisis and stabilize the utility. We did not do any forensic exercise to go back and track the money that was received in the time before my intervention in Prepa […] the SEC is looking at the issue and I know that Prepa is cooperating with them and delivering documents on bond issues from 2013 and 2014, and I think that they will then determine if there was any violation of regulations,” said Donahue.

She also categorically denied that the measures implemented to restore liquidity to the public corporation had anything to do with the nearly four-day blackout.

“We did not recommend any austerity measure. There is no austerity measure imposed in Prepa at this time. Any savings have been generated through [revised] contracts, cash [influx], preventive maintenance, [and] negotiations with creditors to access previously restricted accounts so that we could bring funds to work with the infrastructure. For me, austerity means holding back [on cash expenditures] and laying off workers. We have been very careful to ensure that none of the recommendations regarding flexibility had nothing to do with layoffs, ” she said.

“The savings we have achieved [mostly have to do with] training and succession plans. Preventive maintenance, on the other hand, seeks to address situations before they become outright problems. Cash [influx] is carried out by collecting cash accounts, billing more effectively and minimizing energy theft. [Meanwhile], fuel savings have to do with savings that have been previously negotiated with suppliers and achieving better terms of credit, ” she added.

On the problem of communication between the public corporation and its customers, Donahue acknowledged that so far, the utility has not worked diligently to provide information to the public.

“I recognize that we have not done a good job in the aspect of communicating all the changes that were happening in Prepa to the public. It is impossible to refute any news that arise when certain people make allegations,” she said.

Although she made clear on several occasions that her field of expertise is in finance and not engineering, Donahue explained that one of the reasons for the delay in the recovery time of the distribution system is the very reality of being a utility based on an island.

“There have been blackouts in other jurisdictions in which I have worked, but they have recovered quickly because utilities based in the U.S. mainland have the ability to connect to a network in case of a massive power outage to restore service within a reasonable time. The difference is that Prepa is a utility on an island and is thus fully autonomous and isolated,” she said.

Regarding Prepa’s fiscal situation, Donahue said that bringing the public corporation forward would require $2.5 billion in infrastructure improvements.

“We require capital to invest in energy transmission infrastructure [and] invest in [more effective] generation facilities. And this has been established in the capital improvements program that we have prepared. That would require an investment of approximately $2.5 billion over the next ten years, which would include an investment in the [Aguirre Gasport] that the Puerto Rico Energy Commission did not want to approve. At present, Prepa does not have that capital,” she said.

“There are a couple of solutions that can be applied. Our plan was to try to get that capital across multiple areas. Number one, through concessions in the agreement with bondholders. Number two, through savings in cash generation that Prepa itself has done. Number three is to achieve a competitive request for proposal to establish whether an alternative mode of investment could be safer and faster,” she added.

After leaving the hearing, the Senate president said they were satisfied with Donahue’s presentation, although he added that Donahue’s statements revealed that Prepa still has a long way to go walking in terms of restructuring. Bhatia also criticized the delay in the work of restructuring that Donahue is spearheading.

“It is unacceptable that it is taking so long. If they say that they will take out requests for external entities to come help them, well, get on with it already. There is not much going on and I believe it causes a lot of frustration, and it obviously still surprises us all that the debt has not been audited yet. How is it possible that have not audited if that was the first thing they had to do? ” he asked.

]”This is not a trial, and I do not want it to be. We are listening. If there’s anyone else who wants to come to testify, let them come and say so. The committee’s technical personal will now study all evaluations were made today and, on that basis, will make recommendations that we will communicate to the people, “he said.




SEC Investigating Three Prepa Bond Issues, Officials Say

SAN JUAN—The Securities and Exchange Commission (SEC) has made two requests for information to the Puerto Rico Electric Power Authority (Prepa) involving three bond issues from 2013 and 2012, the utility’s executive director Javier Quintana said Tuesday.

The SEC is investigating a $670 million bond issue made in 2013, as previously reported by Caribbean Business, but is also investigating two bond issues done in 2012—bond series 2012A and 2012B—which together totaled $650 million, he told reporters Prepa

He said the SEC made one of the requests for information when former Executive Director Juan Alicea was at the helm of the utility sometime before August 2015, and the second when Quintana was already heading Prepa before January 2016.

Quintana said he did not know the reasons for the probe. He added he did not want to speculate on whether the reason for the probe was an alleged misrepresentation made either by the firms in charge of the bond issue or the government.

“I have not been informed about the reasons for the probe. They are keeping it under wraps,” he said.

 




Hearing on Blackout Kicks Off with Interruptions and Protests

SAN JUAN—A public hearing by the Senate Committee on Energy, and Water Resources investigating the causes of the massive blackout that less than two weeks ago left Puerto Rico in the dark for nearly four days, was temporarily halted Tuesday after several members of the group called Basta Ya (“enough” in Spanish) rose in protest during the presentation by the chief restructuring officer of the Puerto Rico Electric Power Authority (Prepa), Lisa Donahue.

Basta Ya spokesperson Jesús Antonio Valdés Ayala (CB/Agustin Criollo)

“Lisa Donahue has to leave Puerto Rico. She foresaw and said we would have blackouts. If she knew, she is just looking for another multi-million contract and one in Puerto Rico has put a stop to that. We are saying that she has to leave Puerto Rico and stop being earning such exorbitant amounts of money, ” group spokesperson Jesús Antonio Valdés Ayala said as he was escorted out of the Leopoldo Figueroa room in the Senate.

“We went to the headquarters and try to talk to Lisa Donahue and Javier Quintana and they never listened to us. Not only that, expect another collapse to comes around because that is their purpose, to take money out of Puerto Rico,” the activist said.

Ayala Valdés said that on June 27, the group claimed that there would be a collapse in the electric system, but nobody listened.

The Basta Ya spokesman also questioned the unconditional support that the governor of Puerto Rico, Alejandro García Padilla, has shown publicly for Lisa Donahue.

“If the Governor says that this lady has saved money for the people, with the $ 47 million [that she has gotten], well, that money that we have allegedly saved has just gone out with this four-day blackout that has so damaged our economy,” he said.

The community leader said that soon there will be a similar incident to the Prepa collapse, but this time in the Puerto Rico Aqueducts and Sewers Authority (Prasa).

“You will see, today I announce that Prepa is on the verge of collapse. [Prasa Executive Director Alberto Lázaro] said so last night. If we have no electricity and no water, what are we going to do,” he lamented.

Ayala Valdés said Basta Ya is a peaceful public resistance movement and added that he will publicly denounce what the group categorizes as as the intrusion of foreign companies to embezzle local funds.

Meanwhile, Bhatia did not censure interruption, indicating that the concerns shown by the group mirror those of the people of Puerto Rico.