By The Star Staff
Puerto Rico Electric Power Authority (PREPA) bondholders and the Financial Oversight and Management Board began closing arguments Thursday on the size of the bondholders’ claim.
Margaret Dale, a lawyer for the oversight board, stressed the quality of the work prepared by the entity’s experts. Bondholders are insisting that they are owed $8.5 billion while the oversight board says the amount is $2.1 billion as of 2017.
Dale said the yearly income of Puerto Rico’s households is not rising with inflation. One of the oversight board’s experts has said any rate hikes should not be more than a 6% share of the wallet of the average yearly income, which is about $24,000.
Martin Bienenstock, a lawyer for the oversight board, supported the analysis of David Plastino, one of the experts, who noted the impact of high power rates at a time when PREPA’s power sales are expected to fall in coming years.
Unsecured Creditors Committee lawyer Pedro Jiménez contested the bondholders’ idea of putting PREPA under receivership. A receiver will not be able to raise rates as all rate changes must go through the Puerto Rico Energy Bureau.
The size of the bondholders’ claim is crucial to PREPA’s restructuring. The judge in the bankruptcy case, U.S. District Court Judge Laura Taylor Swain, asked for an estimation of the claim after ruling in March that bondholders’ did not have a lien over PREPA’s revenues.
The bondholders are arguing that PREPA can pay the $8.5 billion and that rate hikes will not hurt consumers.
The New Progressive Party (NPP) minority leader in the island House of Representatives, Carlos “Johnny” Méndez Nuñez, and NPP Rep. Víctor Parés Otero reiterated their rejection of the 28% increase in the electricity rate that is being discussed.
“Right now the economic future of Puerto Rico is being discussed in the courtroom of Judge Swain -- that hearing is that important,” Méndez Nuñez said. “We reiterate our rejection of the increase of around 30 percent -- after materializing all the details -- that has been discussed at that hearing. That is a very heavy burden on our people and will undoubtedly result in the collapse of many small and medium-sized enterprises (SMEs), as well as a marked deterioration in people’s quality of life. We uphold our rejection.”
“The numbers they indicate -- 28 percent and 40 years -- are unrealistic and not sustainable. A fixed increase of six cents a kilowatt-hour is too much,” the lawmaker added. “We urge Judge Swain to carefully evaluate the disastrous impact that this increase will have on people, not to mention the economic collapse that we will see with the closure of thousands of SMEs; this at a time when the federal government promotes renewable energy and that each month more than 3,000 structures, including residences and businesses, install photovoltaic energy systems, which at some point will reduce consumption and place an even greater burden on people who are still connected to the traditional system.”
The debt established by the bondholders, of around $8.5 billion, its repayment and the payment of pensions for PREPA retirees, “entails an increase of almost a third of the regular bill and that cannot be allowed,” the NPP legislators said.