PREPA retirement system asks bankruptcy court to keep pension charge in place, block local court suit to repeal it.

In a filing submitted to the federal Title III bankruptcy court this week, the Puerto Rico Electric Power Authority Employees Retirement System argued that allowing a local court case that seeks to invalidate the island energy regulator’s provisional “Pension Charge” -- a fee added to electricity bills to pay for authority retirees’ pensions -- to proceed would jeopardize crucial pension funding and disrupt the authority’s ongoing restructuring. (Facebook via Autoridad de Energía Eléctrica)

By THE STAR STAFF

The retirement system for employees of the Puerto Rico Electric Power Authority (PREPA) is urging the federal Title III bankruptcy court to block an attempt by consumers to restart a class-action lawsuit that seeks to invalidate the energy regulator’s provisional “Pension Charge,” a fee added to electricity bills to pay for PREPA retirees’ pensions.

In a filing submitted Tuesday, the PREPA Employees Retirement System (SREAEE by its initials in Spanish) argued that allowing the local court case to proceed would jeopardize crucial pension funding and disrupt PREPA’s ongoing restructuring under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), the federal law governing Puerto Rico’s bankruptcy-like process.

The underlying lawsuit — filed in the Puerto Rico Court of First Instance — asks a judge to declare the pension charge illegal, stop its collection, and order refunds, interest, penalties and attorneys’ fees.

Petitioners said that 100% of the money collected from the charge flows directly to SREAEE. The charge was approved by the Puerto Rico Energy Bureau (PREB) as a temporary rider on electricity bills while the regulator completes a long-term rate-setting process.

The SREAEE says that because the charge funds retiree pensions, any order halting or nullifying it would cause “immediate, irreparable harm” to thousands of former PREPA workers who depend on monthly pension checks.

The case moved toward a class certification hearing in 2025, but defendants — including the SREAEE — asked to dismiss it, arguing that PREPA and other parties were missing. The plaintiffs then amended their complaint to add PREPA.

Once PREPA was named as a defendant, the Financial Oversight and Management Board invoked PROMESA’s automatic stay, which halts litigation that could affect PREPA’s restructuring. The local court subsequently froze the case.

Petitioners then filed an “urgent motion” in federal court asking for a carveout from the automatic stay so the class action could resume.

In its opposition, the SREAEE says the request has no legal basis. It argues that the lawsuit directly targets a PREPA-related revenue mechanism, making it inseparably linked to the Title III case; that any injunction or refund order would disrupt PREPA’s finances during a delicate restructuring process; that rate-setting and pension-funding issues fall first within the PREB’s jurisdiction, not the court’s; that the lawsuit is premature, because the pension charge is part of a provisional fee and the agency has not issued a final rate order and that the case may ultimately be dismissed, making it inefficient and inappropriate to lift the stay.

The filing emphasizes that the pension charge exists to stabilize funding for retiree pensions — one of the central challenges in PREPA’s bankruptcy, now in its ninth year.

Consumers argue that the charge has produced more than $180 million in collections and constitutes an unconstitutional taking. They say the federal court should act quickly so the state court can rule on their claims.

But the SREAEE counters that consumers’ alleged economic harm is reversible, while pensioners would face catastrophic and immediate consequences if the revenue stream were halted.

They also challenged plaintiffs’ reliance on a 2019 First Circuit case, arguing the pension charge is part of PREPA’s rate structure — not a separate trust — and therefore falls squarely within the Title III court’s jurisdiction.

The Title III court will decide whether to modify the automatic stay, a rare step reserved for situations where outside litigation would not interfere with the restructuring. The SREAEE maintains that the case at hand does the opposite.

If the court denies the motion, the local class action will remain frozen unless and until PREPA’s Title III process concludes or the PREB issues a final rate ruling that changes the legal landscape.