Energy rate case hearing examiner denies repeal of bondholder witness testimony on potential reserve fund

“Uncertainty about government assistance, like uncertainty about storms, is part of life in Puerto Rico,” Scott Hempling, the hearing examiner overseeing Puerto Rico’s energy rate proceedings, wrote in a ruling. “To make decisions about rates that will affect customers with certainty, the Energy Bureau must assess all nonrate possibilities.” (Facebook via Autoridad de Energía Eléctrica)

By THE STAR STAFF

The hearing examiner overseeing Puerto Rico’s energy rate proceedings has denied a motion by the pension system for employees of the Puerto Rico Electric Power Authority (PREPA) to strike testimony referencing a potential $683 million government reserve fund.

The Electric Power Authority Employees’ Retirement System (SREAEE by its initials in Spanish) had objected to a passage in the prefiled testimony of bondholder witness Anthony Hurley, who cited a news report about the creation of an “Energy Sector Reserve” by the Puerto Rico Office of Management and Budget (OMB). The fund, Hurley testified, was announced as a mechanism to address future needs related to legacy pension obligations and debt service, though it could be used at the government’s discretion for other energy-related purposes.

The SREAEE argued that Hurley’s statement was based solely on a news article and lacked corroboration. The pension system noted that PREPA’s comptroller, Juan C. Adrover Ramírez, had publicly stated he had no personal knowledge of the fund beyond what was reported in the media.

Despite acknowledging the accuracy of the SREAEE’s summary, Scott Hempling, the hearing examiner, ruled that the testimony should remain in the record.

“Uncertainty about government assistance, like uncertainty about storms, is part of life in Puerto Rico,” the examiner wrote. “To make decisions about rates that will affect customers with certainty, the Energy Bureau must assess all nonrate possibilities.”

If the government were to allocate part of this reserve to cover those obligations, PREPA could reduce its revenue requirement -- the total amount it needs to collect from ratepayers. That, in turn, could lead to lower electricity rates for consumers.

The examiner emphasized that Hurley’s testimony was not a recommendation to reduce PREPA’s proposed revenue requirement by $683 million, but rather a call to remain alert to alternative funding sources. The ruling also noted that similar uncertainty surrounds potential Federal Emergency Management Agency funding, which has not been excluded from consideration.

The $683 million Energy Sector Reserve was announced by the OMB earlier this year as part of broader fiscal planning efforts. While its stated purpose includes supporting pension and debt obligations in the energy sector, the fund’s use remains discretionary, and its availability to offset ratepayer costs is uncertain.

PREPA has been ordered to notify the Puerto Rico Energy Bureau, the island’s energy sector regulator, if it obtains more information about the reserve fund. For now, the examiner concluded, the possibility of the $683 million reserve is relevant to the bureau’s deliberations on rate-setting.

The decision underscores the complexity of Puerto Rico’s energy transition, where financial uncertainty and infrastructure challenges continue to shape regulatory proceedings.