Fiscal board nixes use of Emergency Reserve to stabilize energy grid
By The Star Staff
The Financial Oversight and Management Board for Puerto Rico on Thursday rejected an island government request to use the Emergency Reserve to provide the government with an immediate source of funding to expedite the implementation of temporary generation to augment system capacity and complete priority emergency repairs to stabilize the energy system without significant service interruptions.
The oversight board urged the government to search for other sources of funding.
“The Oversight Board understands that utilizing the Commonwealth Emergency Reserve for PREPA to stabilize generation would impair a much-needed safety net for the Commonwealth’s use in case of another natural disaster or similar unforeseen event, and set a negative precedent that disincentivizes public corporations from practicing fiscal responsibility,” the board said in a letter to Gov. Pedro Pierluisi Urrutia dated Dec. 15. “The Oversight Board acknowledges the opportunity represented by FEMA’s approval of Direct Federal Assistance, an estimated investment of approximately $2 billion in power system stabilization efforts. We advise the Government to explore alternative sources of funding, including the American Rescue Plan Act of 2021 and the CDBG-DR Program.”
The oversight board took notice that the government request means to capitalize on an opportunity for increased funding, addresses core issues of Puerto Rico’s energy generation shortfalls, and means to shore up those deficiencies in the short to medium term to stabilize the grid while the complete transformation of the Puerto Rico electricity sector and its transition to renewables continues.
“However, while Hurricane Fiona intensified the generation and resource adequacy issues faced by Puerto Rico residents, the legacy PREPA generation system has been experiencing high forced outage rates and delayed maintenance schedules for many years,” the oversight board said in the letter. “The Government’s request raises concerns with regard to the uses and purpose of the Commonwealth Emergency Reserve and the independence of public corporations.”
Accessing the Emergency Reserve for the purposes requested by the governor in a letter in November would make the island more vulnerable in the event of a natural disaster, the oversight board pointed out.
“As we have mentioned in response to prior requests to access the Emergency Reserve, the 2022 Certified Fiscal Plan for the Commonwealth provides that “the Emergency Reserve is only intended for extraordinary events like natural disasters or as otherwise agreed with the Oversight Board and that are generally outside of human control and unpreventable.”
“[It] is not intended to mitigate emergencies related to operational inefficiencies,” the board said.
The oversight board said it has sought to empower public corporations to become self-sustaining and capable of providing services to their customers without relying on funding from the commonwealth government.
“Given the nature of the services they provide and their ability to implement or seek revisions to the rates and fares they charge, public corporations are expected to fund their expenditures through their own revenues in order to establish the fiscal responsibility and independence necessary to enable their long-term success and sustainability,” the board said.