Friday, November 22, 2019

Transition Charge Won’t Protect Prepa Customers Against Legal Claims, OIPC Says

By on June 20, 2016

SAN JUAN – The transition charge that the Puerto Rico Electric Power Authority Revitalization Corp. is proposing to pay for the utility’s securitized debt will cover only 70% of the utility’s debt, leaving consumers to foot the bill for some $730 million not covered in the debt restructuring agreement.

The information is contained in a brief filed at the Puerto Rico Energy Commission (PREC) by the Independent Office for Consumer Protection (OIPC by its Spanish initials), which expressed concerns about the proposed transition charges that were modified by the corporation after first presenting them to the PREC two months ago.

The OIPC, which was created by law to protect Prepa consumers, quoted testimony offered by PREPA representative Michael Mace and Chief Restructuring Officer Lisa Donahue during technical hearings on the transition charge at the PREC. Donahue was quoted as saying the debt that is not covered by the restructuring agreement will appear in the utility’s “new transparent bill” as “Prepa debt.”

The OIPC is also concerned that Prepa bondholders that did not participate in the utility’s $9 billion debt restructuring agreement will still go to court to get payments that will ultimately translate in high utility costs for clients.

“The totality of the debt will be paid for by Prepa clients…. Consequently, this raises other questions for the consumer related to the 30% of the creditors who did not accept the agreement because it means they could legally seek payment for the totality of the debt and as a consequence Prepa clients will continue to pay excessive fees for power,” the OIPC said.

Besides noting that the transition charge petition was written in technical language and in English, which makes it more difficult for some customers to understand the voluminous document, the OIPC said the transition charge may be in violation of the law because it is not uniformly spread across the customer base.

The Revitalization Corporation recently submitted a revised transition charge for residential customers based on their energy usage history instead of a per servicing agreement charge. The modified petition would impose a transition charge on the net usage of “grandfathered” customers who have or are eligible to enter into net-metering agreements that satisfy the requirements of the Revitalization Act. The non-grandfathered customers will pay a transition charge calculated and adjusted based on gross usage.

prepadeal (1)The “Grandfathered Net Metered Customer” are those (whether residential, non-residential or governmental, as specified) who had a net-metering agreement with Prepa as of Feb. 16, when the Revitalization Act came into effect. Any customer that increases the capacity of their renewable energy system up to a 20% cap, as provided in the Revitalization Act, will cease to be considered a grandfathered net-metered customer the moment the increase in capacity to Prepa’s system was completed.

The OIPC noted, as reported by Caribbean Business on June 16, that the transition charge will hinder efforts to promote renewables, as several renewable energy companies have claimed.

Net-metered customers would pay transition charges for energy generated behind the meter. The transition charge for these customers would be around $0.03 per kilowatt-hour and may increase an average customer’s bill for utility related charges by more than 600%.

In a legal brief, Prepa says the modified transition charges address concerns raised during technical hearings and are lawful.

Just as Caribbean Business previously reported, the OIPC criticized as “excessive” the $124 million for the estimated upfront costs of the agreement and $19 million in ongoing financing costs, the latter consisting of fees paid to legal advisers in Puerto Rico and the mainland U.S. Both of the charges will also be paid by customers.

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