Fiscal board urges rate hike to fund PREPA pensions

Robert Mujica, executive director of the Financial Oversight and Management Board for Puerto Rico

By The Star Staff

In a concerted effort to address the pressing pension funding issue for the Puerto Rico Electric Power Authority (PREPA), the Financial Oversight and Management Board for Puerto Rico has asked the government to raise power rates.

The collaborative measure will temporarily allow PREPA to fund pension benefits for April 2025 with a $25 million loan from the Commonwealth of Puerto Rico.

Gov. Jenniffer González Colón was expected on Tuesday to submit a proposed second revised fiscal year (FY) 2025 budget for PREPA, along with supporting documentation. Should any amendments be needed, the governor will submit an amended proposed second revised FY 2025 budget for PREPA today. The oversight board plans to certify a second revised FY 2025 PREPA budget by Friday.

While the proposed $25 million loan offers a temporary solution, PREPA must still take decisive action to establish an electricity rate that can sustainably fund pension obligations in the long term, the oversight board said.

To achieve this, the Puerto Rico Energy Bureau (PREB) has advised PREPA and its operators to seek relief through an emergency rate petition and provide revenue requirements for monthly pension funding in the pending rate review, covering FY 2026 through FY 2028. The oversight board requests that the governor’s proposed second revised FY2025 PREPA budget include supporting information for funding pensions for the remainder of FY 2025, as well as supporting documentation and analysis regarding PREPA HoldCo revenue requirements.

The collaborative effort between the governor and the oversight board aims to ensure the financial stability of PREPA while upholding its pension obligations for the benefit of retirees and beneficiaries.

PREPA has been in bankruptcy since 2017 to restructure a $9 billion debt.

The PREPA Retirees Association expressed its objections on Monday regarding the treatment of pensions outlined in the latest debt adjustment plan for PREPA.

According to the plan, Class 3 claims, which pertain to retirement benefits for participants in the PREPA Employees Retirement System (ERS), will be paid on a “Pay as You Go” basis. A PREPA PayGo Trust will be established to facilitate payments to PREPA ERS to cover specific expenses and benefits. PREPA currently has a debt of some $4 billion with the ERS.

The governor said later on Wednesday in reaction to the oversight board’s request that “I have to look for other alternatives.”

“I mean, if they think it’s an increase in electricity rates … what happens when the potential cost increases?” she said at a press conference in Manatí. “How do people, people who are barely able to pay their mortgage, medicine, food, electricity, water? … It’s very hard. So you have to put yourself in the people’s shoes. And the government of Puerto Rico has to look out for those pockets.”

“So we’re in that communication. I’m directly calling the [oversight board] executive director [Robert Mujica], which is what I’m going to do as soon as I leave here,” González Colón added. “I don’t have to wait for a letter. I don’t believe in letters. You call people, sit down, work, and discuss those options. And that’s what I’m going to do.”

The governor said that before meeting with the board, she will do the same with PREPA pensioners, who have proposed being included in the pension trust (see related story on page 5).