Fiscal board seeks to join PREPA-NFE litigation as court moves to protect alternative gas supplies
By THE STAR STAFF
Puerto Rico’s Fiscal Oversight and Management Board has moved to join key portions of the ongoing litigation between the Puerto Rico Electric Power Authority (PREPA) and New Fortress Energy (NFE), warning that disruptions in natural gas supplies could threaten not only the island’s electrical system but also its broader economic recovery.
The request comes days after U.S. District Judge Pedro A. Delgado Hernández granted PREPA a temporary restraining order against NFEnergia LLC, a subsidiary of NFE, requiring the company to provide information about fuel inventories and terminal operations while preventing it from blocking natural gas deliveries from alternative suppliers.
The court action stems from a lawsuit PREPA filed in September against NFEnergia, New Fortress Energy Inc. and related entities, alleging breaches of a gas sales agreement governing liquefied natural gas (LNG) deliveries to the San Juan power complex.
According to the oversight board, ongoing uncertainty surrounding LNG supplies raises concerns that extend beyond the contractual dispute. The board said it wants to participate in proceedings involving access to terminal facilities, vessel requirements and operational information needed to ensure continued fuel deliveries. It also warned that interruptions in natural gas supply could undermine Puerto Rico’s economic recovery.
The dispute intensified after NFEnergia executives acknowledged during a legislative hearing that the company could not guarantee when the next LNG cargo would arrive at its San Juan terminal. PREPA subsequently argued that the Amur River, the vessel serving as the terminal’s principal gas reserve, was at risk of running out of fuel without a confirmed replacement shipment.
Judge Delgado Hernández’s order requires NFE to disclose how much LNG remains aboard the vessel, when those supplies are expected to be exhausted, and when the next cargo is expected to arrive. The company must also indicate whether its facilities are available to receive, regasify and deliver LNG supplied by third parties.
In addition, the court ordered NFE to provide terminal operating procedures and vessel compatibility requirements, designate a representative available at all times, and refrain from delaying or obstructing deliveries from alternative suppliers. The order also bars the company from conditioning access to its facilities on PREPA’s payment of disputed invoices.
PREPA has argued that the fuel dispute is already producing significant financial consequences. According to estimates submitted by Genera PR, operating certain generating units on diesel rather than natural gas cost more than $18 million during the second half of September alone.
The utility also alleges NFE owes some $45.8 million in contractual “Deliver or Pay” penalties, including $13.8 million from January through July and another $32 million tied to the fuel interruption between Sept. 16 and Oct. 13. PREPA contends those amounts already exceed the contract’s $40 million annual liability cap, limiting the company’s additional financial exposure unless the court ultimately finds willful misconduct.
PREPA further claims that supplying the San Juan TM2500 temporary generating units through ISO containers instead of traditional terminal deliveries has increased costs. Under the contract, each container delivery carries a $250 fee, which the utility says translates into between $5,000 and $7,500 in daily charges.
The court concluded that a loss of natural gas supplies could force generating units to rely more heavily on diesel fuel, reducing generation capacity by roughly 10% and increasing the risk of equipment failures, factors that could threaten the reliability of Puerto Rico’s electric system.
A hearing is scheduled for today, Nov. 2, at 3 p.m., when the court is expected to review compliance with its order and consider additional requests for relief. With the oversight board now seeking a role in the case, the litigation has evolved from a commercial contract dispute into a matter with potentially significant implications for Puerto Rico’s energy security and economic stability.
