PREPA should use all of pension fee to augment system reserves, retirees’ leader says

Johnny Rodríguez Ortiz, president of the PREPA Retirees Association

By THE STAR STAFF

The Puerto Rico Electric Power Authority (PREPA) charges customers $1.92 per kilowatt-hour (kWh) to fund its Employees Retirement System. However, PREPA only pays out the amount needed each month for its 12,000 pension beneficiaries and keeps the rest, according to Johnny Rodríguez Ortiz, president of PREPA’s Retirees Association.

If PREPA contributed the full amount collected, the retirement system could build up its reserves and reinvest the surplus. Over time, this would strengthen the fund, ensure timely pension payments, and eliminate the constant worry retirees face about receiving the money they need for essentials, Rodríguez said.

He went on to note that PREPA serves 1.4 million customers. “Suppose customers use 1,000 kilowatt-hours; that would generate about $30 million, but on average, we paid out only $24 million in pensions,” he said. “Where is the rest of the money?”

The pension system covers 12,000 beneficiaries, including 2,000 former PREPA employees who now work for other agencies but still contribute to the plan. Currently, PREPA has just 117 active employees, and no new participants are entering the system.

The $1.92 per kWh fee was imposed on all power customers in October as there was no money to pay pensions.

PREPA did not answer requests for comment. Nonetheless, the utility has acknowledged that it uses the fee to cover operational costs.

In the petition PREPA filed before the Puerto Rico Energy Bureau to suspend proceedings aimed at revising basic rates pending the resolution of cases to end the LUMA Energy contract, the utility warned that dismissal of the current case, coupled with the reversion to the prior baseline rate, would result in a  discreet and immediate financial triggering event with consequences for the pensions.

“PREPA would experience an immediate and material reduction in available operating liquidity,” the document notes, adding that an “imminent” crisis in funding would be caused by “[t]hat reversion, not the historic pension deficit itself …”  

In its request to suspend the rate case, PREPA emphasized the need to safeguard pension payments by implementing a temporary rate while the courts rule on two lawsuits challenging the LUMA contract as void.

PREPA added that if the rates revert to the pre-provisional baseline rate, it would immediately file a petition for relief under Article 6.25 of the Puerto Rico Energy Transformation and Relief Act of 2014, specifically seeking an emergency temporary rate adjustment, since the situation cannot wait for an ordinary process.

Last year, Rodríguez said the Retirees Association proposed having PREPA pay $500 million, divided into annual payments to revitalize the retirement system’s investment plan. He said that would solve two problems: first, the public would not have to keep paying for something they already paid for, and second, “our members would not have to worry about whether they would get paid.”