Procedural dispute emerges in rate case with bondholders.

Scott Hempling, the hearing examiner overseeing the Puerto Rico Electric Power Authority rate case before the Puerto Rico Energy Bureau (LinkedIn)

By THE STAR STAFF

A procedural dispute has emerged in the Puerto Rico Electric Power Authority (PREPA) rate case before the Puerto Rico Energy Bureau (PREB) after bondholders objected to a Feb. 23 filing by the utility, alleging that the submission improperly included advocacy despite a prior order prohibiting it.

In response, hearing examiner Scott Hempling, who is overseeing the rate case, has granted both sides limited opportunities to clarify and contest the disputed material.

The controversy stems from a Feb. 12 order directing PREPA to supply a concise summary of its proposed annual revenue requirement (ARR), complete with citations to the evidentiary record. Hempling emphasized that PREPA’s filing could contain no advocacy, as the deadline for initial ARR briefs had already passed.

PREPA submitted the required material on Feb. 23. However, on March 26 PREPA bondholders filed an objection asserting that PREPA’s submission included argumentative content and should either be disregarded or opened to rebuttal.

After receiving the objection, the hearing examiner informed all parties by email that an order granting the bondholders’ request would be forthcoming and asked for input on deadlines. The bondholders proposed April 7.

PREPA quickly pushed back. In an email response, counsel for the utility argued that issuing an order within 24 hours of the bondholders’ filing would deprive PREPA of due process. PREPA also called the bondholders’ objection untimely, noting that it challenged a Feb. 12 order more than six weeks after issuance and a Feb. 23 filing more than a month after it was made.

PREPA further disputed the factual basis of the bondholders’ motion, stating that the bondholders incorrectly claimed the utility missed the Jan. 23 initial-brief deadline without seeking an extension. PREPA insisted it had requested a five‑day extension on Jan. 21 -- an extension the hearing examiner denied.

According to PREPA, its disputed Febr. 23 filing “contained the information ordered … supported by citations without advocacy,” and it is the bondholders who “are in fact, advocating their position.”

Despite the disagreement, the hearing examiner issued an order providing a narrow path forward. Parties now have until this Friday, April 3 at 5 p.m. Puerto Rico time to identify any PREPA statements they believe constitute advocacy and to explain why. PREPA will then have until the following Friday, April 10 at 5 p.m. to respond solely on the question of whether those statements are, in fact, advocacy.

Hempling underscored that no further argument will be entertained. The PREB will consider only whether any impermissible advocacy occurred and, if so, disregard it entirely, as the advocacy phase of the case closed with the initial briefs.

With a statutory deadline requiring a final order by April 16, and the PREB in the midst of drafting a complex resolution based on thousands of pages of filings, the examiner made clear that the agency has no bandwidth for extended disputes.

“The far better course would be for Bondholders and PREPA to meet and make this problem go away,” the hearing examiner wrote, adding that the PREB “needs this dispute like it needs a hole in the head.”

The bondholders in PREPA’s $9 billion bankruptcy, which began in 2017, had sought to intervene in the rate case to ensure their debt is paid. They have also sought intervention in the case to draft a new integrated resource plan for Puerto Rico’s energy needs.