Bonds

Puerto Rico board threatens suit over PREPA revenue issue

The Puerto Rico Oversight Board warned the government it will sue to stop a recently passed law that would reduce Puerto Rico Electric Power Authority revenues for the next 26 years by preventing a change in the net metering policy.

In a letter to Puerto Rico Gov. Pedro Pierluisi, Senate President José Dalmau Santiago, and House President Rafael Hernández Montañez, Board Executive Director Robert Mujica, Jr. asked for legislation to revoke the recently passed Act 10-2024 to be introduced by Tuesday and passed by June 30.

If Act 10-2024 is not repealed or amended, the board “will take such actions it considers necessary, including initiating litigation to have Act 10 nullified,” Mujica said in the letter.

Puerto Rico Oversight Board Executive Director Robert Mujica gave Puerto Rico’s leaders until Tuesday to amend or revoke a law undermining PREPA’s revenues.

Darren McGee, Office of Gov. Kathy Hochul

The Oversight Board-approved PREPA fiscal plan assumes reform of the authority’s current net metering policy, which allows customers to credit at full retail price any contributions of unused renewable energy they generate.

PREPA’s costs of generating its own or purchasing others’ electricity is a fraction of what it charges. Maintaining the current policy would force the authority pay more for electricity.

Act 10-2024 effectively bars the Puerto Rico Energy Bureau from altering the net metering policy until 2050.

Since solar panels are becoming more popular for residents and businesses on the island, continuing current policy would cost the authority increasing amounts in the future.

“Any tampering with the PREPA ability to raise funds will affect its ability to meet its fiscal responsibilities,” said University of Puerto Rico Professor José Garriga Picó.

“Act 10 reflects a concerning departure from the Puerto Rico government’s policy that Puerto Rico’s energy system be overseen by an independent regulator,” Mujica said, referring to the Energy Bureau. “The system has only just begun to recover from decades of political mismanagement that left the people of Puerto Rico with a failing electric grid.”

After a nearly seven-year bankruptcy process, U.S. District Court Judge Laura Taylor Swain is preparing to either approve or reject the board’s proposed plan of adjustment affecting $8.3 billion of bond debt and about $20.7 billion in liabilities.

Dalmau Santiago and spokespeople for Hernández Montañez and the Puerto Rico Fiscal Agency and Financial Advisory Authority did not immediately respond to a request for a comment. The governor’s spokesperson said the FAFAA was handling comments on this issue.

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