Gov’t officials say a proposed sun tax does not exist
By The Star Staff
The proposed sun tax does not exist and has been confused with the transition charge contained in the Puerto Rico Electric Power Authority’s (PREPA) restructuring support agreement (RSA) that will start at 2.7 cents per kilowatt-hour (kWh) and go to 4.5 cents per kWh after 24 years, officials said Thursday in a Senate hearing.
Nelson Pérez, deputy director of the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials), said that “in consideration for assuming the risk of a decrease in demand, the bondholders demanded certain guarantees, commonly known as ‘Demand Protections,’ to protect against a scenario in which general consumption does not decrease, but customers consume less than the Electric Power Authority.”
“These additional protections are what have led to the Transition Charge being erroneously labeled as the Sun Tax,” the AAFAF official said.
Pérez acknowledged that “finalizing and implementing the RSA will allow PREPA to more easily adjust to the needs of its clients and provide the service they deserve.”
“Failure to do so exposes the individuals and companies that use our electrical system to paying a very high price for electrical energy, which is estimated to be as high as 30 cents per kilowatt-hour, according to estimates by the fiscal control board in the PREPA fiscal plan if the debt is not restructured and PREPA’s retirement system is reformed,” he said.
Critics of the PREPA RSA have pointed to a provision in the RSA that consumers who produce any of their own electricity from a new photovoltaic (PV) system would be required to pay the new charge not only on power purchased from the grid, but also on their own self-generated power. PV systems that were installed by September 2020 would be exempted, but could lose the exemption under certain conditions. They said the debt deal RSA goes against Section 3.4 of the Puerto Rico Energy Public Policy Act (Act 17-2019) that bans charges on solar energy.
The Senate Committee on Strategic Projects and Energy, chaired by Sen. Javier Aponte Dalmau, resumed legislative work to continue with the evaluation of the RSA, a plan to restructure PREPA’s $9 billion debt. The committee cited the utility and AAFAF.
The public hearing was the result of Senate Resolution 270, which seeks to identify mechanisms for the repayment of PREPA’s debt that do not cause energy rate increases.
PREPA Executive Director Josué Colón noted in his presentation that “restructuring under Title III will not result in the cancellation of PREPA debt services, regardless of the restructuring mode.”
“We would like to emphasize that PREPA needs to exist apart from Title III,” he said. “Exiting Title III will improve the authority’s risk profile before counterparties in contractual agreements and will improve payment terms with its suppliers.”