Oversight board: PREPA pensions must be paid through rates

By THE STAR STAFF

Pensions for employees of the Puerto Rico Electric Power Authority (PREPA) will continue to be funded through electricity rates, since no alternative source of funding has been found, Robert Mujica, executive director of Financial Oversight and Management Board for Puerto Rico, said Wednesday.

Mujica said using the island’s General Fund to pay for the pensions is not an option.

PREPA’s revenues are declining year after year. The options are: not funding the pensions, funding them through the electricity rate, or finding another source of funding. Currently, they are funded through the rate, Mujica said at a press conference.

Johnny Rodriguez, president of PREPA’s Retirement Association, said the association last year proposed PREPA pay $500 million, split over several years, to revitalize the pension system’s investment plan. He said the proposal would address two issues: the public would not have to continue paying for something they had already funded, and retirees would not have to worry about whether their benefits would be paid.

Mujica also noted that if the island government opted to cover PREPA’s pensions, it would leave no additional resources for other priorities, including tax relief.

“If pensions are removed from the electricity rate, they would either go unfunded or require another funding source. For the commonwealth to cover them, it would need to provide $300 million a year. The total obligation is $4 billion, which would compete with tax cuts, other priorities and reserves,” he said. “This is not the commonwealth’s responsibility, it’s PREPA’s. No other workable proposal has been presented to finance it.”

PREPA has asked the Puerto Rico Energy Bureau to maintain the provisional rate of 1.92 cents per kilowatt-hour on electricity bills, but to suspend any further rate hike reviews until legal proceedings against operator LUMA Energy are resolved.