The San Juan Daily Star
Lawmakers demand to see audit results before further action on amended PREPA debt plan
By The Star Staff
Following the presentation of the first amended debt adjustment plan for the Puerto Rico Electric Power Authority (PREPA), several island lawmakers are demanding to see the results of a debt audit of the energy utility.
Citizen Victory Movement (MVC by its Spanish initials) Reps. José Bernardo Márquez Reyes and Mariana Nogales Molinelli, and Independent Rep. Luis Raúl Torres Cruz filed a measure requiring the commonwealth comptroller to report to the Legislative Assembly on the audit that it performs on PREPA’s debt. House Concurrent Resolution (HCR) 65 would require the comptroller to submit special reports to two legislative committees, including summaries, findings, and periodic updates of the ongoing audit of PREPA’s bond issuances.
“At the end of last year, we learned that the comptroller began an audit of several PREPA debt issuances following a budget that the governor had designated for those purposes,” the legislators said. “It is urgent and fundamental that we are made aware of any finding of that audit before the Debt Adjustment Plan advances in federal court.”
This is particularly true, they said, when the Financial Oversight and Management Board in its reports has called attention to possible illegality regarding specific issues.
They were talking about allegations made in 2019 by the oversight board stating that PREPA was insolvent in 2011. Two debt issuances occurred after 2011, suggesting a likelihood that the municipal market was misled. In addition, a lawsuit brought by two bond insurers challenged the legality of an additional $3.7 billion in PREPA debt issued between 2002 and 2007.
“Are we going to commit again to the payment of unaudited debt?” asked Márquez Reyes, the House spokesman for the MVC, referring to the debt adjustment plan. “Are we going to accept another abusive increase in the electricity rate without answering the most basic questions about this debt to the people of Puerto Rico?”
Added Nogales Molinelli, the alternate spokesperson for the MVC: “Again, it seems incomprehensible to us that we pay the bill before requesting the receipt of expenses.”
‘That is why we filed this resolution requiring the Office of the Comptroller to render urgent and periodic accounts to the Legislative Assembly on the audit they are conducting. Was illegal debt issued? Was debt issued to pay contractors and consultants for projects that didn’t have the necessary permits and didn’t even come to fruition? Were there conflicts of interest in the advice of outside consultants who recommended many of these transactions? The country deserves answers to questions before any adjustment plan.”
HCR 65 is currently before the consideration of the House Internal Affairs Committee, chaired by Rep. Roberto Rivera Ruiz de Porras. Both the lower chamber and the Senate would have to approve it.
“We have to know if that process was carried out following the law before taking any step toward a possible negotiation, especially when some in the private sector are alerting us about the possible consequences of rate increases for both residential and commercial customers,” Torres Cruz said. “We ask both bodies’ presidencies to promote this measure’s approval with the speed it deserves. We cannot allow the [Financial Oversight and Management] Board to dictate how we will pay a debt with public funds when we still do not have clear accounts.”
Since the end of 2021, Comptroller Yesmín Valdivieso has reported the allocation of a budget of $1 million to audit Puerto Rico’s debt. However, after waiting for the Legislative Assembly to approve the legislation, the comptroller began the audit last year using her extant legal powers.
PREPA has been in bankruptcy since 2017 to restructure some $9 billion in debt. On Feb. 9, the oversight board filed an amended debt deal and disclosure statement.
The new plan proposes to cut PREPA’s more than $10 billion of debt and other claims by almost half, to some $5.68 billion. A legacy charge for certain customers not currently benefiting from subsidized electricity rates would be, on average, about $19 a month. The PREPA legacy charge, which will be used to pay bondholders, would exclude qualifying low-income residential customers from a connection fee and kilowatt-hour (kWh) charge for up to 500 kWh per month. For non-subsidized residential customers, the proposed PREPA legacy charge would be: a flat $13 per month connection fee; and 75 cents per kWh for up to 500 kWh per month of electricity provided by PREPA, and 3 cents per kWh for electricity above 500 kWh per month.
For commercial, industrial and government customers, the PREPA legacy proposed charge would entail a connection fee of between $16.25 for small business customers, $20 per month for smaller industrial companies, and $1,800 per month for large businesses proportional to their current rate. They would pay between 3 cents and 97 cents per kWh per month for electricity provided by PREPA.
The new plan and amended disclosure statement also reflect the terms of the oversight board’s settlement with National Public Finance Guarantee Corp., which added two new classes of claims, and incorporated a number of new or revised exhibits regarding PREPA’s proposed legacy charge and other components of its plan.