Fiscal board approves 5th revised PREPA budget

By THE STAR STAFF

The Financial Oversight and Management Board for Puerto Rico has certified the fifth revised fiscal year (FY) 2026 budget for the bankrupt Puerto Rico Electric Power Authority (PREPA), formalizing a new spending framework aligned with the latest rate determinations issued by the Puerto Rico Energy Bureau (PREB).

In a June 17 letter to Gov. Jenniffer González Colón, the oversight board confirmed that the revised budget complies with the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, requirements and reflects a consensus among the governor, PREPA and the board.

The certification follows the PREB’s April 15 Final Resolution and Order on electricity rates, which established a permanent base-rate structure for PREPA, electric power transmission and distribution system operator LUMA Energy, and power plant fleet operator Genera and set a systemwide, non-federally funded revenue requirement of $1.78 billion for the fiscal year. After the rate order was issued, LUMA requested adjustments to the GridCo budget to align with the PREB’s allocations, prompting the submission of the revised spending plan.

According to the certified document, PREPA projects total gross revenue of $4.45 billion for FY 2026, driven primarily by residential and commercial customers. Fuel and purchased power remain the utility’s largest cost category, totaling $2.44 billion. GridCo’s operating and maintenance expenses amount to $968.8 million, while GenCo’s operations total $262.1 million. HydroCo’s budget stands at $11.1 million, and HoldCo’s operating and maintenance expenses, including pension obligations and shared services separation costs, reach $64.2 million.

The budget also incorporates $25 million from a commonwealth loan earmarked exclusively for PREPA Employee Retirement System obligations. The oversight board emphasized that those funds, along with the $4 million allocated for the transition away from LUMA’s Shared Services Center, may only be used for their designated purposes and cannot be redirected.

The resolution imposes strict controls on spending and reprogramming. All prior‑year expenditure authorizations are terminated unless specifically allowed, and any reprogramming of FY 2026 funds -- other than adjustments related to fuel and purchased power -- requires the board’s express written approval. PREPA, LUMA and Genera executives are also responsible for ensuring that operational expenditures do not exceed the amounts authorized for GridCo, GenCo, HydroCo and HoldCo.

The document establishes additional reporting requirements. LUMA must submit monthly federal funds reports detailing obligations, disbursements and reimbursements, while PREPA must provide quarterly budget-to-actual reports explaining variances. The oversight board reserves the right to require additional budget revisions if necessary.

Although the certification was issued on June 12, the FY 2026 PREPA budget remains in effect for the entire fiscal year beginning July 1, 2025. In its letter, the oversight board said it looks forward to working with the government and PREPA to implement the revised budget “for the benefit of the people of Puerto Rico.”

PREPA has been in bankruptcy since 2017 to restructure some $9 billion in debt.