By The Star Staff
The Puerto Rico Energy Bureau (PREB) has postponed the utility rate review process, arguing that if the Puerto Rico Electric Power Authority’s (PREPA) debt adjustment plan is confirmed, the energy regulator will have to include charges in customers’ rates to pay the utility’s debt and pension obligations.
“The Title III Court’s final decision on the amended plan will directly affect this proceeding because, once confirmed, future electricity rates will need to incorporate a Legacy Charge, while also funding the operators of Puerto Rico’s electricity system -- PREPA, LUMA, and Genera -- and PREPA’s pension obligations,” the PREB said in a ruling issued last Friday. The PREB said all parties will continue to use the rates approved in 2017.
PREPA has been in bankruptcy since 2017 to restructure some $9 billion in debt. The Financial Oversight and Management Board has proposed a plan that would reduce the utility’s debt by about 80% to $2.5 billion. The plan would raise electricity rates for 35 years or more to pay debt service on bonds and other payments to bondholders. It imposes a legacy charge on customer bills to pay off the debt.
PREB began a rate review process in June 2023, and in March of this year divided the process into stages. Phase II of the rate review process was divided into a two-step review of revenue requirements and rate design and established milestones for the rate review process. Additionally, the PREB gave PREPA, LUMA Energy and Genera PR instructions on the fiscal year 2025 budget.
After LUMA Energy requested the cancellation of an April 17 technical conference on the rate, the PREB said it recognized that PREPA’s ongoing Title III case directly affects the rate proceeding.
The PREB also said the bankruptcy case has an impact on the contract with LUMA Energy to operate PREPA’s transmission and distribution system because the contract is not truly effective until all conditions have been met including the exit of PREPA from the Title III bankruptcy process.
In the amended debt adjustment plan, “the Financial Oversight and Management Board has proposed a ‘Legacy Charge’ -- defined as a hybrid fixed monthly customer volumetric charge, to be included in PREPA’s rates to pay principal and interest of bonds that shall be issued under the amended plan. The Amended Plan requires the PREB to review and approve the Legacy Charge,” the PREB said.
PREPA’s pension obligations will also be addressed in the amended plan.
“As such, any information about the inclusion of charges in customer bills designed to collect revenues for payment of PREPA’s Legacy Debt and pension obligations is subject to the confirmation of the amended plan,” the PREB said.
The PREB will need to review the revenue requirement including the legacy charge and PREPA’s pension obligations along with the rest of the revenue requirement components, including the rate design, as part of the rate review request.
From March 4 to March 18, the federal Title III court held hearings in which it considered evidence and arguments to determine whether to confirm the amended debt plan. The court considered the matter, required all stakeholders to file updated findings of facts and conclusions of law in support of or opposed to the confirmation of the debt adjustment plan on April 1 and objections on April 5.
“Based on available information, it is expected that the Title III Court will issue its decision on the Amended Plan soon,” the PREB said. “While the timing of the conclusion of PREPA’s Title III proceeding remains uncertain, the Energy Bureau determines that to have an integral handling of the rate case it is in the best interest of ratepayers, when considering procedural economy and use of resources, to modify the timeline of this proceeding.”