House passes bill setting conditions for PREPA debt restructuring
By The Star Staff
The island House of Representatives passed legislation late on Tuesday that would establish conditions for the restructuring of the Puerto Rico Electric Power Authority’s (PREPA) $9 billion debt.
Lawmakers passed House Bill (HB) 1429, penned by the Popular Democratic Party (PDP) delegation, and Senate Joint Resolutions 326 and 327, which also addressed problems with the energy sector.
HB 1429, approved with 30 votes in favor and 16 votes against, and one abstention, allows for the creation of the “Puerto Rico Electric Power Authority (PREPA) Debt Restructuring Act.”
The bill says that restructuring PREPA’s $9 billion debt and its bond issuances must follow the commonwealth’s debt management policy.
“This bill establishes the parameters that this House of Representatives and the Senate, if approved there, would be willing to accept in that restructuring plan,” said independent Rep. Luis Raúl Torres Cruz, who chairs the Energy Committee.
The Senate has yet to vote on the bill, which was one in a long list of bills that needed approval before the current session ends in two weeks.
Torres Cruz said witnesses who spoke at House hearings said that unsecured bonds with no guarantees comprise a large part of PREPA’s debt that the government seeks to restructure.
“So much of that debt should not be paid,” he said. “All the organizations of retired employees, UTIER [the Spanish acronym for the Electrical Industry and Irrigation Workers Union], community organizations, Sierra Club, Quiero Sol, and other institutions said they should not pay a penny of that debt.”
“House Bill 1429 establishes minimum conditions for debt restructuring that must go hand in hand with reforms that strengthen and guarantee Puerto Rico’s energy supply, follow a public policy of reasonable rates, and keep rates as close as possible to the aspirational goal of 20 cents per kilowatt hour,” Torres Cruz said.
The debt restructuring and bond issuance must respect payment priorities established in a trust agreement and significantly cut PREPA’s bond debt, but not allow bondholders to repay more than 30% of the debt. The restructuring must also provide adequate financing to the PREPA Employees Retirement System and guarantee the payment of employer contributions to the PREPA Employees Retirement System.
According to the approved bill, PREPA’s next bond issues must also comply with public energy policy and not undermine the current rights of employees who remain in PREPA.
“Both the Financial Oversight and Management Board and the United States Courts have recognized the exercise of legislative authority in debt restructuring …” HB 1429 states. “[The courts] have also validated the full authority of the Legislative Assembly to regulate public corporations.”
The bill notes that the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) acknowledges that debt adjustment plans must have legislative, regulatory or electoral authorization.
U.S. District Court Judge Laura Taylor Swain is currently keeping the negotiation on restructuring PREPA’s debt alive. The oversight board must submit a restructuring plan for PREPA’s debt to Judge Swain by Dec. 1.
“We have fulfilled the responsibility to legislate to guarantee that any debt restructuring promotes the stabilization of the public corporation, the fulfillment of its priority obligations, and the economic development of Puerto Rico,” HB 1429’s authors highlighted.
The House also passed Senate Joint Resolution 327 to order the Puerto Rico Energy Bureau to submit, within 20 calendar days, a detailed report on the metrics adopted to measure LUMA Energy’s compliance with its contract to operate PREPA’s transmission and distribution system.