PREPA retirees object to proposed treatment of pensions in debt adjustment plan

Johnny Rodríguez Ortiz, president of the Puerto Rico Electric Power Authority Retirees Association

By The Star Staff

The Puerto Rico Electric Power Authority (PREPA) Retirees Association expressed its objections on Monday regarding the treatment of pensions outlined in the latest debt adjustment plan for the bankrupt power utility.

According to the plan, Class 3 claims, which pertain to retirement benefits for participants in the PREPA Employees Retirement System (ERS), will be paid on a “Pay as You Go” basis. A PREPA PayGo Trust will be established to facilitate payments to PREPA ERS to cover specific expenses and benefits. PREPA currently has a debt of some $4 billion with the ERS. The proposal is part of a broader plan to resolve PREPA’s $10 billion debt with its creditors that was submitted in court last week.

PREPA Retirees Association (AJAEE by its initials in Spanish) President Johnny Rodríguez Ortiz indicated that the settlement mirrors one proposed years ago, which would lead to a reduction in benefits. He asserted that there is no need to create a PREPA PayGo Trust since the ERS already functions as a trust.

“What we want is a portion of the money owed to us so we can re-enter the markets when they are favorable, allowing us to finance cost of living expenses every three years,” Rodríguez Ortiz told the STAR. “The current proposal prevents us from doing this, resulting in lost benefits.”

Rodríguez Ortiz further noted that their proposal involves establishing a trust to deposit the money into bank accounts, which would not yield the same returns as strategic investments. He noted that prior to PREPA ceasing its pension contributions in 2013, the ERS was generating $1.20 for every dollar PREPA spent, yielding about 15%.

He said that when the ERS discussed the issue with the Financial Oversight and Management Board, which oversees PREPA’s bankruptcy process, “the information I have indicates that they did not have major objections.”

Rodríguez Ortiz added that the AJAEE plans to engage the oversight board to amend the debt adjustment plan before considering legal action to contest the document. The board as of press time Monday had not responded to inquiries for comment.

The AJAEE president went on to say that “the treatment we have received from the five previous administrations has been unjust and lacks a clear solution for our Retirement System.”

“This situation is unsustainable,” he said. “We contribute between 9.06% and 11% of our salaries toward our pensions. We will not back down; we will continue to fight for our rights.”

Rodríguez Ortiz asserted that Gov. Jenniffer González Colón “bears the responsibility of ensuring the future of our pensions without increasing energy bills.” He questioned why the governor has not fulfilled commitments to cancel the contracts with private operators that are draining PREPA’s budget.

According to a STAR report, the debt adjustment plan makes it more complicated to terminate those contracts because of language requiring that the utility keep its contracts with the private grid operators.

“It’s important to remember that before privatization, PREPA’s savings directly benefited public services. Now, the situation is dramatically different: 97% of the funding intended for public service is diverted to the private companies, LUMA Energy and Genera PR, which continue to charge high rates without providing tangible improvements,” Rodríguez Ortiz said. “Meanwhile, our pensions seem to be a low priority for the government.”

“We demand a clear and concrete response, not further delays,” he emphasized, noting that he has yet to receive a response to two letters sent to the governor requesting a meeting to propose viable solutions. “The FOMB [oversight board], the government, and the privatizers continue to use empty rhetoric while pensions are in serious jeopardy.”