PREPA has 2 days to submit status update to fiscal board
By The Star Staff
The bankrupt Puerto Rico Electric Power Authority (PREPA) has until Thursday to submit updated information on the status of its plans to eliminate its vertical monopoly to the Financial Oversight and Management Board, according to a letter.
The utility, which is in bankruptcy to restructure some $9 billion in debt, was also ordered in a second letter to submit certain fuel supply contracts.
The Sept. 17 letter sent by the oversight board’s executive director, Natalie Jaresko, to PREPA CEO Efran Paredes Maisonet notes that Act 17-2019 and PREPA’s 2021 fiscal plan mandate that PREPA disaggregate its current vertically integrated structure into three separate entities. These are generation, transmission and distribution (T&D) utility functions, and the PREPA successor into GenCo, GridCo and HoldCo, respectively.
As part of the fiscal plan measure, PREPA must develop and submit to the oversight board an initial reorganization plan with descriptions of milestones and dependencies based on input from PREPA, the Public-Private Partnership Authority (P3A), the Fiscal Agency and Financial Advisory Authority, LUMA Energy, the private consortium that operates the utility’s T&D system, and future P3 operators.
PREPA must present the reorganization plan by no later than Sept. 30, pursuant to the fiscal plan deadline. The oversight board also seeks a detailed update on the steps performed by PREPA to comply with the requirement to date, in anticipation of its filing at month’s end, by no later than Thursday, Sept. 23.
In a second Sept. 17 letter, the oversight board gave PREPA until Sept. 29 and Oct. 29 to submit two proposed fuel supply contracts that are in the process of being awarded through ongoing requests for proposals (RFPs).
The letter sent by General Counsel Jaime A. El Koury to PREPA General Counsel Astrid Rodríguez says the oversight board’s contract review policy requires board approval of all government contracts and amendments with an aggregate value of $10 million or more, to ensure that they promote market competition and are not inconsistent with applicable fiscal plans. In addition, the policy provides that the oversight board may select contracts below the $10 million threshold for such purposes, “on a random basis or otherwise in its sole discretion.”
The PREPA 2021 certified fiscal plan requires that PREPA run competitive procurement processes for its fuel supply, namely for the purchase of bunker fuel and diesel. To comply with this fiscal plan measure, “RFP bunker C fuel oil no. 6 117202” and “RFP light distillate no. 2 fuel oil 117081” (together, RFPs) were launched by PREPA in July 2021.
The fiscal plan deadline of Aug. 31 for finalizing and submitting these agreements to the oversight board has passed and the expiration dates for the existing fuel supply contracts are approaching, the letter said. To date, no contracts resulting from these RFPs have been submitted to the oversight board by PREPA.
The letter comes at a time when LUMA Energy is requesting that the Puerto Rico Energy Bureau approve higher electricity rates for the October-December period, according to a motion submitted last week.
Electricity rates for residential clients would increase to 23.88 cents/kWh in October-December, 11.7% more than the 21.38 cents for the July-September period, the document showed.
LUMA justified the hike citing fuel costs, even though PREPA is in charge of generation and would be the entity paying such costs.
LUMA said in the motion that for the month of June, the fuel costs and the prior period adjustments were $153.6 million and revenues totaled $127.8 million. There was a revenue insufficiency of $25.7 million, which is to be recovered from customers. Meanwhile, the purchased power costs and the prior period adjustments were $33.7 million and revenues totaled $39.6 million.
The proposed fuel charge adjustment for October to December is 13.63 cents, an increase of 3.01 cents, or 28.34% against the factor from July to September, and the power cost adjustment, or PCA, is 2.88 cents, a decrease of 0.52 cents, or 15.23%, for a net increase of 2.49 cents, or 16.14%.