Puerto Rico’s Board and Utility Creditors Question Energy Tariffs in the Island

An “impasse” over energy tariffs is responsible for a recent collapse in negotiations to restructure Puerto Rico Electric Power Authority’s debt

Utility poles in the La Perla neighborhood of San Juan, Puerto Rico.
By Jim Wyss
October 18, 2022 | 09:01 AM

Bloomberg — Puerto Rico’s financial oversight board says it’s still at odds with creditors of the island’s bankrupt power company over how much businesses and residents can afford to pay for electricity.

An “impasse” over energy tariffs is responsible for a recent collapse in negotiations to restructure Puerto Rico Electric Power Authority’s $9 billion in debt, said David Skeel, chairman of the federally appointed Financial Oversight and Management Board.

“The oversight board has been carefully, carefully analyzing what residents and businesses can afford to pay for electricity,” Skeel said at a public meeting Friday. “Any restructuring is going to be based on that analysis.”

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The company, called Prepa, and a group of ad hoc bondholders have been locked in court-ordered mediation to reduce debt while also litigating to how much of the utility’s revenue bondholders are entitled.

The oversight board, which is managing Prepa’s bankruptcy, has until Dec. 1 to file a new debt restructuring proposal to the court.

Skeel called on Friday for a “responsible restructuring” that also addresses the rights of both Puerto Rico’s residents and creditors.

Puerto Rico has some of the most expensive and least reliable energy of any US jurisdiction. When Hurricane Fiona clipped the western edge of the island as a Category 1 hurricane last month, it knocked out power to the entire island.

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Puerto Rico’s private grid operator says it has restored power to 99% of clients -- a figure that has been disputed by some mayors and community groups.

Fiona’s outsized impact on the fragile grid “illustrates just how important it is to complete the transformation of Puerto Rico’s energy system,” Skeel said.

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