By The Star Staff
Experts from different organizations objected to the Puerto Rico Electric Power Authority’s (PREPA) debt adjustment plan during the second week of confirmation hearings.
The experts agreed the debt adjustment plan (PAD by its Spanish acronym) is unconfirmable because of its negative effect on the island economy.
The proposed plan would reduce PREPA’s debt to $2.5 billion from the current $9 billion but would add a legacy charge to customers’ bills to pay off the debt. The plan also proposes to create a pay-as-you-go pension plan for current retirees and create a defined contribution pension system for active workers.
Agustín Irizarry, a former consumer representative on the PREPA board of directors and an expert representing environmental groups such as the Environmental Dialogue Committee, the Southeast Environmental Community Alliance, the Sierra Club Puerto Rico and the Coalition of Anti-Incineration Organizations, highlighted that the Financial Oversight and Management Board is already underestimating the pace at which Puerto Rico residents are moving to solar energy.
“The electricity increases proposed by the PAD are going to cause even more people to abandon the network, which implies that PREPA will not receive the necessary income to pay the bonds, making the PAD unviable,” he said at a hearing earlier this week.
Tom Sanzillo, director of financial analysis of the Institute of Energy Economics and Financial Analysis and an expert for the Electrical Industry and Irrigation Workers Union, emphasized that the failure, on the part of the oversight board and PREPA, to achieve balanced budgets and the continuous cash flow issues are a significant red flag regarding a possible new bond issuance, as contemplated by the PAD.
“In fact, without the contributions from the government of Puerto Rico to PREPA in recent years, it seems that PREPA would have run out of cash,” Sanzillo said. “PREPA cannot afford to pay the inherited debt without harming its ability to provide an essential service.”
José Alameda, an expert on the PREPA Employee Retirement System, detailed in his presentation that the electricity rate increases will harm Puerto Rico’s economy, even interfering with the government’s ability to comply with other obligations under already approved fiscal plans.
“Puerto Rico’s economy is already in a prolonged period of stagnation and further increases in [the cost of electricity], as proposed by the PREPA Debt Adjustment Plan, will undermine the possibilities of future economic development,” Alameda said.
Experts from the group of bondholders who oppose the PAD argued meanwhile that the people of Puerto Rico can afford even more through the electricity rate than what the current plan proposes. The oversight board has said power rates should not be more than 6% of a household’s budget.