By The Star Staff
The Financial Oversight and Management Board told the island government this week to refrain from executing Act 10 of 2024 because it is inconsistent with Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) and the certified fiscal plan.
The law in question would prevent the Puerto Rico Energy Bureau (PREB) from making any changes to the commonwealth’s current net metering and energy distribution policy until at least 2031.
“The Oversight Board has significant concerns about the implications of the Act on Puerto Rico’s energy transformation under the Fiscal Plans, namely its effect on PREB,” a letter from the oversight board said. “The PREPA [Puerto Rico Electric Power Authority] Fiscal Plan requires that PREB determine whether to make changes to the net metering system and initiate those changes by April 11, 2024. Act 10 postpones that date by at least six years, and price modifications for current and new net metering program participants for 20 years after PREB makes changes to the net metering policy. As such, the Act is directly at odds with the PREPA Fiscal Plan.”
Act 10 is also significantly inconsistent with the fiscal plan’s requirement that the PREB be able to operate independently and “free from any direct or indirect political influence or interference,” the oversight board noted in the letter.
Net metering programs can be an effective way to encourage individual consumers to invest in green energy, and therefore require careful study and calibration by an experienced regulator insulated from political influence that compromises the objective evaluation of the policy. Act 10 intrudes on the PREB’s independence in this important area, and in so doing, it violates PROMESA, the board said.
The island government, by enacting Act 17-2019, tasked the PREB, as PREPA’s independent regulator, with conducting a study to “consider the costs and benefits associated with net metering to ensure that the net metering program established by Act 114 was structured optimally.
“In entrusting the analysis to PREB, the Government recognized the importance of de-politicizing the energy sector and entrusting important decisions about PREPA to an independent, experienced regulator,” the oversight board said. “This is consistent with the Fiscal Plans, which recognize that a strong, independent, regulator is a key pillar of Puerto Rico’s much needed energy sector transformation.”
Pursuant to Act 114 and Act 17 and the PREPA Fiscal Plan, the PREB is required to conduct and complete a study concerning the commonwealth’s current net metering and energy distribution policy, and has until today, April 11, 2024, to implement any changes to PREPA’s net metering structure it deems appropriate based on the results of the study. Act 10 suspends this schedule, requiring the PREB to redo its net metering and energy distribution study, but prohibits the regulator from commencing such work until January 2030.
Act 10 reflects not only a concerning departure from the government’s policy and the fiscal plans’ requirement regarding the need for PREPA to be managed by an independent, experienced regulator, but also is a vivid illustration of the PREB’s vital importance, the oversight board said. Prior to the enactment of Act 10, the PREB was set to make changes to the net metering program based on the results of a lengthy study that would be subject to public comment and would consider several key factors and implications of the program, including costs.
Under Act 10, the government has “abruptly decided, without public hearings or the benefit of any study, to mandate [that] the current net metering program remain in place until at least 2031,” the board said.
“This type of interference in the management of PREPA is one of the root causes of its current challenges, which is precisely why the Government created PREB and why the Fiscal Plans mandate PREPA be regulated by an independent regulator,” the oversight board said.