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Fiscal board nixes bills that would alter PREPA-LUMA contract


One measure in the island House of Representatives would, among other things, declare an emergency in the Puerto Rico electrical system and mandate the Public Private Partnership Authority to refrain from awarding an operation and maintenance or similar contract for the private operation of PREPA’s generation assets until July 1, 2023.

By The Star Staff


The Financial Oversight and Management Board objected on Monday to several bills that seek to alter the contract between the Puerto Rico Electric Power Authority (PREPA) and the private operator of its transmission and distribution (T&D) system, LUMA Energy.


The oversight board in letters to the governor and legislative leaders said it reserves the right to challenge the proposed laws.


The first bill taken up by the oversight board was House Joint Resolution (HJR) 235, which the island House of Representatives passed on Nov. 10, 2021. The oversight board said it has serious concerns about HJR 235 because of its inconsistency with the certified fiscal plans for the commonwealth and PREPA, and because the bill if enacted into law will impair and defeat the purposes of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), as determined by the oversight board.


HJR 235 purports to, among other things: declare an emergency in the Puerto Rico electrical system; prepare an accelerated conservation and repair plan for the electric power generation system that appears to relax requirements for procurement of contracts by PREPA related to the generation system; mandate the Public Private Partnership Authority (P3A) to refrain from awarding an operation and maintenance or similar contract for the private operation of PREPA’s generation assets until July 1, 2023; and prohibit the Puerto Rico Energy Bureau (PREB) from approving or endorsing any request for reconciliation or an increase in the cost of electrical energy except for those issues relating to the cost of fuel or the purchase of energy.


The oversight board also objected to House Bill (HB) 1397, which proposes to, among other things: amend Act 29-2009 to exempt from the P3A’s supervision all P3 contracts in which PREPA is the participating government entity; and (2) amend Act 17-2019 to authorize PREPA to recruit the necessary personnel to supervise private operators.


“The bill seeks to reinstate the prior regime by placing the PREPA Governing Board in control of a utility that is in the process of transferring operation and maintenance responsibilities to experienced private-sector operators,” the oversight board said.


The oversight board also objected to HB 1429 because, the board said, it has a negative fiscal impact, is directly contrary to PROMESA, and is inconsistent with the certified fiscal plans for the commonwealth and PREPA.


HB 1429 would amend Acts 89-1941, 57-2014, and 4-2016 to establish minimum conditions for the restructuring of PREPA’s debt and other legacy obligations, as well as the issuances of PREPA bonds.


“These conditions would place limitations on PREPA’s ability to set consumer rates, mandate PREPA’s bond debt be ‘significantly cut,’ dictate requirements regarding the treatment of PREPA’s pension system, impose restrictions on bonds to be issued under a PREPA plan of adjustment, and require that all government agencies only support and/or approve a debt restructuring if it meets the Bill’s conditions,” the oversight board said.


The oversight board also said it has become aware of HJR 315 as approved by the House of Representatives, which among other things purports to require the termination of the operation and maintenance agreement between PREPA and LUMA Energy within 60 days of days of the legislation’s enactment for supposed breaches of contract by LUMA and its subsidiaries.


The board said LUMA’s continued operation of PREPA’s T&D system is mandated by the current certified fiscal plans, and is critical to the success of the fiscal plans and Puerto Rico’s energy future.


The oversight board also came out against Senate Joint Resolution 326, which among other things purports to require PREPA and the P3A to submit, within 20 days, a “work plan” for the possible cancellation of the operation and maintenance agreement with LUMA Energy. The board said the bill also is inconsistent with the fiscal plan.


Gov. Pedro Pierluisi Urrutia said that if bills do not meet requirements set by PROMESA, he is prevented from turning them into law.


“I have said so before, on December 1 we will have LUMA Energy providing a better service to the people,” he said.

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