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  • Writer's pictureThe San Juan Daily Star

Governor denies amendments to AES contract will increase energy rates

Gov. Pedro Pierluisi

By The Star Staff

Gov. Pedro Pierluisi Urrutia denied Wednesday that the proposed amendments to the power purchase and operating agreement (PPOA) contract between the Puerto Rico Electric Power Authority (PREPA) and AES Puerto Rico constitute a financial rescue of the firm or will lead to a hike in utility rates.

However, language contained in the 23-page amendment appears to contradict the governor’s remarks. As reported by the STAR, the amendments note that the certified fiscal plan contains baseline rate projections for PREPA. Those projections may be impacted by, among other things, PREPA’s ability to identify sources of funding to satisfy its cost share funding obligations and AES PR’s liquidity challenges.

“If PREPA cannot identify sources of funding to satisfy its cost share funding obligations relating to the cost of the Federal Emergency Management Agency’s federal funding programs, PREPA may have to raise its rates to satisfy its obligations,” the partially redacted document said. “Pursuant to a power purchase and operating agreement with AES Puerto Rico, PREPA receives a portion of its energy supply from AES Puerto Rico’s coal generation facility. AES Puerto Rico is currently experiencing liquidity challenges. If AES Puerto Rico is not able to cover its operating expenses, PREPA may have to accept amendments to this PPOA to ensure the continued production of energy from the AES coal facility, which is necessary for PREPA to meet all demands for power, and might need to raise rates to cover costs related to any such amendment.”

The amendments seek to replace the existing coal-fired facility in Guayama with a renewable energy facility because AES PR must stop using coal after Jan. 1, 2028 under a new energy policy.

AES also defaulted on paying its bonds per a 2000 trust agreement with the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority.

The governor insisted there is no such bailout. The amendments are under the review of the Puerto Rico Energy Bureau, which held a public hearing Monday on the subject.

“What is being done here is what was envisioned in Law 17 of 2019, which is the law that establishes the Public Energy Policy of Puerto Rico. That law requires that the AES plant cease operating, that is, be turned off, by the end of 2027. But that law also encourages AES to convert at least part of its generation to renewable energy,” the governor said. “In other words, stop burning coal by 2027 and use renewable energy instead of burning coal. The amendment is aimed at accelerating this process, for this transition to occur, this conversion of energy source, in the hands of AES. [...] It does not lead to an increase in the electricity bill. But the last word at this given moment belongs to the Energy Bureau.”

The goal of the PPOA is to maintain the “economic stability and environmental compliance” of the facility pending its retirement and expedite the removal of combustion waste byproducts, as well as accelerate Puerto Rico’s transition to renewables, the amendment notes.

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