Most customers to see an average 5% increase in electricity bills
By The Star Staff
The Puerto Rico Electric Power Authority’s (PREPA) latest debt adjustment plan, which was announced late last week, would result in an average rate hike of about $8.71 per month for customers, representing a 5% increase in the total electricity bill.
The Financial Oversight and Management Board, which submitted the third amended adjustment plan on Friday, said the plan would reduce PREPA’s $10 billion in total claims by various creditors by almost 80% to the equivalent of $2.5 billion, excluding pension obligations.
PREPA’s estimated legacy fee for customers not currently benefiting from subsidized electricity rates would now average about $8.71 per month, based on updated data from the PREPA fiscal plan.
PREPA’s legacy fee would exclude low-income residential customers who meet connection fee and volume-charging requirements of up to 425 kilowatt-hours (kWh) per month, which is equivalent to the consumption of middle-income homes in Puerto Rico, according to LUMA Energy and others. Around half of PREPA’s some 1.4 million private customers would not pay any old fees to PREPA if their consumption remained below 425 kWh per month.
For non-subsidized retail customers, the proposed legacy fee would consist of a flat connection fee of $1 per month; $0.007 per kWh for up to 425 kWh per month of electricity supplied by PREPA and $0.027 per kWh for consumption greater than 425 kWh per month.
Commercial, industrial and government customers would pay a legacy fee consisting of a connection fee of $1.25 per month for small business and small industrial customers and up to $112.50 per month for large businesses.
Regarding the bondholders, the amended adjustment plan issued Friday offers significantly more of the original value of outstanding bonds to those who agree to the plan than to those who do not.
BlackRock Financial Management, Nuveen Asset Management, Franklin Advisers, Whitebox Advisors and Taconic Capital Advisors agreed to the adjustment plan, which would give them 12.5% of original par. In exchange, those firms agreed to support the terms and to not file an appeal of the plan if the U.S. District Court approves it.
The firms and people who do not agree to the settlement, including Assured Guaranty, Syncora Guarantee and GoldenTree Asset Management, would receive new bonds with a par value of 3.5% of the original claim.
Under the amended agreement with National, the bond insurer would recover a base amount of 68.4% of its share of the allowed bond claim, or 19.27% of its asserted claim.
The plan includes two contingent value instruments (CVIs). Bondholders would receive the revenue from the fixed fee element of the PREPA legacy debt charge if PREPA repays its new bonds sooner than the expected 35 years and electricity demand exceeds the PREPA fiscal plan projections.
Bondholders would also receive a share of the savings in the cost of fuel generated by the operator of PREPA’s power plants for the term of the operator’s agreement. General unsecured creditors would recover some 13.5% of their claims, which was unaffected by the U.S. District Court’s ruling on bondholder claims.
The prior plan support agreement with PREPA’s Fuel Line Lenders to receive new Series A bonds, a settlement agreement with holders of some $75 million in uninsured PREPA bonds, and a plan support commitment from Vitol Inc. remain in place.