By The Star Staff
The Institute for Competitiveness and Economic Sustainability of Puerto Rico (ICSE) is urging the Financial Oversight and Management Board (FOMB) to clarify before the bankruptcy court if its remarks on the subject of preemption made in a recent press release prevail over the real intentions of the island power utility’s plan of adjustment (POA) for its debt.
The oversight board “should formally recognize before the court that any inconsistency between the filed POA and the February 6 press release should be understood that the press release prevails given that it is its latest expression and interpretation regarding its own actions,” the ICSE recently told the Title III bankruptcy court overseeing the Puerto Rico Electric Power Authority’s (PREPA) debt restructuring. “If not, the FOMB should disavow the press release for not stating FOMB’s true legal position.”
Last year, the oversight board filed an amended fourth version of PREPA’s debt adjustment plan and its supplemental disclosure statement, which explains it in layman’s language.
Among the issues raised in the POA and the disclosure statement are the impact on the Puerto Rico Energy Bureau’s powers, particularly ratemaking, and the effect of claimed preemption on Act 57-2014 and Act 17-2019, which form Puerto Rico’s public policy on energy.
Last Tuesday, the oversight board issued a press release regarding the POA to reduce over $10 billion of total asserted claims against PREPA by about 80%, identifying specific laws, rules, and regulations preempted by the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).
“Preemption does not mean those laws, rules, or regulations would be entirely invalidated or changed,” the oversight board said in the press release. “Preemption means that to the extent that certain laws, rules, and regulations of the Commonwealth of Puerto Rico, or portions thereof, are inconsistent with PREPA’s obligations under the debt restructuring, and thus inconsistent with PROMESA, the plan shall prevail. The preemption is limited to what is sufficient for implementation of the plan of adjustment.”
According to the oversight board, the POA does not nullify Act 17-2019, does not impede the transition of PREPA’s power generation to renewable-energy sources as defined by Act 17, and does not seek to preempt the rate-setting authority of the PREB.
“The plan specifically states that PREB must approve the Legacy Charge in accordance with Act 17. Under existing Puerto Rico law PREPA’s electricity rates must be sufficient to allow PREPA to meet its obligations, including the significantly reduced debt payments,” the oversight board said.
Certain provisions of Act 101-2020, the Puerto Rico Debt Responsibility Act, are preempted to the extent that they subject PREPA’s issuance of bonds under the plan to the approval of entities other than the oversight board as the representative of PREPA in the proceedings under Title III of PROMESA, the board said.
Certain provisions of Act 4-2016, the Act to Revitalize PREPA, are preempted to the extent that they related to restructuring agreements between PREPA and certain creditors before PREPA filed for proceedings under Title III of PROMESA, the oversight board said.
Also, certain provisions of Act 106-2017, the “Law to Guarantee Payment to Our Pensioners and Establish a New Defined Contribution Plan for Public Servants,” are preempted to the extent that they adversely affect PREPA’s retirement system.
The ICSE said the language included in the Feb. 6 press release is clearer and more absolute than other statements made by the board.
“Legally, the POA and Disclosure Statement are formal legal documents while the press release is not,” the ICSE said. “These discrepancies mislead creditors and other interested parties. Therefore, the board must ensure that all information it releases -- be it legal or public statements -- is consistent.”