House leaders present 5 points for negotiating PREPA restructuring
By The Star Staff
Majority lawmakers in the island House of Representatives on Sunday presented five points they want to negotiate as part of the Puerto Rico Electric Power Authority’s (PREPA) restructuring of its $10 billion debt, citing that the current deal contains gaps and would be detrimental to consumers.
However, House Speaker Rafael Hernández Montañez said the House will act only in approving legislation that would defend the five points in the debt negotiation and stop the current PREPA debt restructuring agreement if the Senate agrees to also act. In the past, the Senate rejected House legislation containing budget amendments that would have enabled the debt deal for the central government, Hernández Montañez said.
“If the Senate is not here, we are not going to file it, because it would be a futile exercise,” he said. “There has to be an agreement. We all have to sit down at the table and count the votes.”
Hernández Montañez insisted that the Legislature should be allowed to negotiate PREPA’s debt, rejecting attempts by certain PREPA creditors in a court document to seek a mediator to attempt to craft a restructuring support agreement (RSA) that does not require enabling legislation and to impose deadlines for approving the RSA.
PREPA creditors seek to use mediation as a means to extricate the Legislature from exercising its role in enacting legislation to enable the creation of a confirmable plan, the House speaker said.
“The judge can’t hinder the House’s will to legislate and force creditors to sit with us,” he said.
Popular Democratic Party (PDP) Rep. Luis Raúl Torres said the five points include the renegotiation of the debt to cut it further. Under the current RSA, PREPA’s debt was cut by about 30% but lawmakers want to cut it further.
Lawmakers also want to establish a transition in the debt deal to a cheaper and cleaner fuel, eliminate the proposed Sun Tax, or a charge for consumers who use renewable sources to generate energy, and put in writing in the debt deal that jobs as well as PREPA’s retirement system will be protected. The RSA does not make provisions for pensions.
Lawmakers said they want to find ways to cut the power rates that would result if the RSA becomes law.
The RSA is a proposal to settle with the owners of $9 billion in face value of bonds issued by PREPA. Besides containing a bond exchange, the RSA would add a “transition charge” on PREPA customers’ bills of at least 2.8 cents/kilowatt-hour (kWh), rising through 2044 to 4.6 cents/kWh.
The RSA has a provision that consumers who produce any of their own electricity from solar panels would be required to pay the new charge not only on power purchased from the grid, but also on their own self-generated power. The sun tax could go from 2.7 cents/kWh to 5.3 cents/kWh. Photovoltaic systems that were installed by September 2020 would be exempted but could lose the exemption under certain conditions. The Financial Oversight and Management Board has said there is no sun tax in the RSA.
The lawmakers said consumers will end up paying 51 cents/kWh under the RSA when other costs such as fuel, subsidies and the CELI, or contribution in lieu of taxes, are added up. While the RSA does not contain provisions on pensions, Torres said PREPA’s fiscal plan sets aside two cents to pay for it.
He said the Legislature wants to eliminate the sun tax, renegotiate the transition charge, renegotiate fuel costs and ensure there is a contribution to PREPA’s pension system.
Asked about the oversight board’s refusal to renegotiate the RSA with the Legislature, Hernández Montañez insisted that lawmakers will not be taken out of any negotiation. While the lawmakers believe the board can approve the RSA without legislative approval, having the Legislature’s green light provides for more certainty, he said.
Meanwhile, PDP Rep. José “Cheito” Rivera Madera announced that the House of Representatives will start public hearings on March 3 to investigate PREPA’s bond issues and determine the manner in which PREPA has used the money and find out if any of the debt is illegal.