By The Star Staff
House Minority Leader Carlos “Johnny” Méndez Nuñez and New Progressive Party (NPP) Rep. Víctor Parés Otero (San Juan) on Tuesday rejected the latest version of the debt adjustment plan for the Puerto Rico Electric Power Authority (PREPA) filed in court by the Financial Oversight and Management Board.
“This fourth version of PREPA’s Debt Adjustment Plan was presented on a Saturday, just hours before the end of the year. In addition to lacking transparency, the Plan is totally arbitrary, unnecessarily impacting residential consumers and our small and medium-sized businesses (SMEs),” Méndez Nuñez said in a written statement. “We reject this proposed increase of 4.4 cents per kilowatt-hour for residential customers and a higher one for SMEs.”
“It is important to emphasize that the increase in the cost of electricity affects not only residential customers, but also SMEs and industries, for which it would be tough not to pass this increase on to consumers,” the former House speaker added. “That’s not what we’re looking for. We also highlight that the payment of pensions, approximately $300 million annually, has not been considered in that Plan. This is a strong blow that should not be approved.”
The oversight board, which represents PREPA in its bankruptcy, filed yet another Fourth Amended Plan of Adjustment last week to include the debt settlement reached with the Official Committee of Unsecured Creditors on Dec. 18. Like previous PREPA debt deals, the plan of adjustment contains 18 classes of debtors.
The plan includes provisions creating a GUC Trust Board comprising three members to be appointed to manage all matters related to unsecured creditors, including a GUC Trust created to distribute proceeds of the settlement.
The Unsecured Creditors Committee (UCC) and the oversight board reached a settlement on PREPA payments on Dec. 18 that would give the UCC a fixed payment of $335 million, the avoidance action proceeds, up to another $300 million if the court reduces bondholder claims, as well as other considerations. In exchange the UCC agreed to support the plan and drop an adversary proceeding arguing that its claims were superior to those of bondholders, which U.S. District Judge Laura Taylor Swain, who is overseeing Puerto Rico’s bankruptcy cases, ruled have only a $2.4 billion unsecured claim on their $8.3 billion in outstanding debt.
The oversight board has said it does not need to re-solicit votes on the plan because the settlement will harm no creditor group. The extra money to pay the UCC will come from a recent increase of the oversight board’s estimate of how much debt PREPA can sustain.
From and after the effective date, reorganized PREPA will provide a single recovery in the form of payment to the PREPA PayGo Trust sufficient to satisfy participants’ claims against the PREPA Employees Retirement System (ERS) to the extent described in Article XIII of the plan.
Regarding pensions, the plan says benefit payments for which the PREPA ERS is entitled will be limited to benefits payable to any participant who is a retiree as of the effective date of the plan without any further cost of living adjustments from and benefits payable to participants who are active PREPA ERS participants with benefit accruals frozen as of the effective date.
The contractual obligations of PREPA to PREPA ERS including, without limitation, the obligation to pay employer contributions sufficient to fund benefits in the PREPA ERS Regulations and any obligations PREPA is required to pay on account of participants who moved to employment with the commonwealth or its agencies, will be rescinded under the plan.
PREPA will also charge a “legacy charge” consisting of all applicable customer charges and volumetric charges set at the levels for each customer class. The legacy charge is collected to ensure sufficient cash flow required for PREPA’s debt service on certain new bonds to be issued under the plan.