PREPA’s rate case faces new wrinkle as legacy debt debate heats up

Scott Hempling, the hearing examiner in the Puerto Rico Electric Power Authority’s rate case (LinkedIn)

By THE STAR STAFF

The Puerto Rico Electric Power Authority’s (PREPA) ongoing rate case has taken an unexpected turn, with the utility moving to strike all discussion of legacy debt from the proceedings. The motion, filed last Monday evening, was accompanied by a document from the Financial Oversight and Management Board, signaling a coordinated effort to narrow the scope of debate.

But the timing raised eyebrows. Just hours earlier, Hearing Examiner Scott Hempling had issued an order imposing restrictions on how the legacy debt issue should be addressed during the hearings. In remarks following the filing, Hempling, in a motion filed Wednesday, suggested that neither PREPA nor the oversight board appeared aware of his directive when they prepared their materials.

“Without in any way intending to react substantively to PREPA’s motion, I ask PREPA to review that order,” Hempling wrote, underscoring that his comments were procedural rather than a judgment on the merits of the motion.

The question of legacy debt -- about $9 billion accumulated before PREPA’s bankruptcy -- has loomed large over the rate case. Regulators and stakeholders have debated whether, and to what extent, those costs should be reflected in electricity rates paid by consumers. Hempling’s order sought to manage that discussion within the Revenue Requirements panel, the portion of the hearing where the issue currently resides.

For now, the decision on PREPA’s motion rests with the Puerto Rico Energy Bureau’s commissioners, who will determine whether legacy debt remains part of the case. Hempling noted that the commissioners are expected to act “well before we get to the Revenue Requirements panel,” signaling that clarity could come soon.

The move adds another layer of complexity to a process already under intense scrutiny. PREPA’s rate case is seen as a critical step in stabilizing the utility’s finances and setting a path forward for Puerto Rico’s energy future. How regulators handle legacy debt could have far-reaching implications -- not only for PREPA’s restructuring but also for the island’s consumers, who face some of the highest electricity costs in the United States.

Meanwhile, the island House of Representatives unanimously approved Joint Resolution 243, introduced by Reps. Ángel “Tito” Fourquet Cordero and Víctor Parés Otero. The measure establishes a 24-month moratorium prohibiting the Puerto Rico Energy Bureau from considering or approving rate increases requested by LUMA Energy or any entity linked to the operation of the island’s electrical system. It also mandates an independent audit of the rate structure, focused on transparency, efficiency and consumer protection.

Fourquet Cordero said the initiative aims to halt unjustified hikes in electricity bills that have severely impacted both households and local businesses, driving up living costs and operational expenses. He emphasized that the moratorium does not prevent reviews that could lead to rate reductions and promotes energy decisions based on evidence, efficiency and transparency -- offering much-needed relief to the public from LUMA Energy’s abuses.