By The Star Staff
U.S. District Judge Laura Taylor Swain on Tuesday heard the testimonies of citizens, most of them Puerto Rico Electric Power Authority (PREPA) retirees, opposing the utility’s debt adjustment plan, which will cut the utility’s $9 billion debt to about $2.5 billion but would impose a legacy charge that opponents say will make it difficult for them to make ends meet.
According to the Financial Oversight and Management Board, the legacy charge imposed on PREPA customers to pay the utility’s debt was significantly reduced from 2022. The median bill for a residential household not currently benefiting from subsidized electricity would increase by $8.71 per month, or 5%. For Puerto Rico’s roughly 97,000 small businesses, the increase would be $35.53 per month, an 8% increase. Roughly 620,000 of PREPA’s 1.35 million residential customers will not pay the fixed connectivity charge or a volumetric charge for up to 425 kilowatt-hours of monthly consumption. The legacy charge will be paid over the next 35 years.
The plan will preempt certain provisions of Act 106-2017, the “Law to Guarantee the Payment to Our Pensioners and Establish a Defined Contribution Plan for Our Public Servants,” to the extent that they affect PREPA’s retirement system. Under the plan, PREPA will provide funding to pay retirees all pension benefits earned through the debt adjustment plan’s effective date, and active employees will be moved into defined contribution accounts. PREPA’s defined benefit pension system will be frozen and cost of living adjustments will be eliminated.
Freddyson Martínez Esteves, an Aguada resident and former PREPA employee, said the plan is very bad for poor people. He said he lives under the uncertainty of whether he will have a pension in the future, and questioned why residents must pay for the historic poor management that led PREPA to bankruptcy.
Roberto Pérez, a PREPA retiree with health situations, also expressed concern about the fate of his pension and noted that while PREPA issued about $4 billion in bonds under the past administration of Gov. Luis Fortuño, only $800 million reached the public corporation. He noted that the salary of the president & CEO of LUMA Energy is higher than the salary of President Joe Biden or Russian President Vladimir Putin.
Ramón Luis Ortiz Erazo, president of the Gasoline Retailers Association, said the sector has already been impacted negatively by external forces, such as inflation. He called for Swain, the judge overseeing PREPA’s Title III bankruptcy process, to reject the debt adjustment plan. He said gas stations will see energy bills increase to up to $5,000 a year under the plan, making it very difficult for consumers to pay for gasoline.
The United Retailers Association, which groups small businesses on the island, expressed concern that the plan will make it difficult for small businesses to pay their utility bills. The owner of a cannabis dispensary said the legacy charge will increase her monthly bill by $4,000 and force her to increase prices.
Sharon Rodríguez, president of the Condominiums Association, said most condominium residents are elderly individuals living on a fixed income who pay for power usage in common areas through their utility bills, and expressed concern about the impact of the new charge.
University of Puerto Rico-Mayagüez professor Juan Carlos Martínez Cruzado said constant power interruptions are making it difficult for the university to do research work.
Former PREPA board member Juan Rosario said that since 2015, PREPA bondholders knew about the utility’s difficulties and said he did not understand the reasons why the bondholders have more rights than the public, while Cathy Kunkel, an analyst at the Institute for Energy Economics and Financial Analysis, said the funds that will be used to pay bondholders should be devoted to making improvements to the energy infrastructure, which she said has not shown any improvements since the 2017 hurricanes hit the island.
GoldenTree Asset Management LP, Syncora Guarantee Inc. and holders and insurers of 40% of the estimated $8.29 billion in outstanding PREPA bonds oppose the plan and, recently, renewed a petition to seek a receiver to take control of the utility.
In June of last year, the oversight board announced that it would amend PREPA’S Plan of Adjustment to reduce the debt to some $2.5 billion, following a ruling by the U.S. District Court to reduce bondholders’ claims and updated projections for PREPA’s expenses in the revised PREPA Fiscal Plan.