Bond insurers call on Puerto Rico Board to protect Energy Commission

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Bond insurers Assured Guaranty and National Public Finance Guarantee called on the Puerto Rico Oversight Board to block a move by Gov. Ricardo Rosselló that they said would undermine the Puerto Rico Energy Commission.

In a letter Sunday, the insurers said the governor may enact a measure by Wednesday to make the commission subservient to a wider Public Service Commission, covering telecommunications, energy and other public services.

The letter asks the board to “take immediate action to ensure that Puerto Rico Electric Power Authority continues to have independent and professional regulatory oversight that is essential to Puerto Rico’s economic revitalization and access to the capital markets.”

PREPA, with $8.2 billion of bond debt, was placed in bankruptcy last year under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act.

For more than 70 years PREPA was an unregulated monopoly and “was plagued by mismanagement, corruption, and lack of transparency,” bond insurer lawyers wrote. To remedy these problems the commonwealth government enacted a law in 2014 to create a commission with political independence and scientific expertise.

On Jan. 29 Rosselló’s Secretary of Public Affairs and Public Policy Ramón Rosario Cortés said creation of a broad Public Service Reorganization Board “will save the taxpayer $14.5 million in the first year and $74 million in the first five years. The Energy Commission has spent $30 million in three years and has produced very little.”

According to Sunday’s letter from the bond insurers, PREPA’s replacement would be a “powerless ‘bureau’ overseen by political appointees without the requisite knowledge, experience, expertise, or political independence to competently oversee PREPA.” The insurers point out that the Puerto Rico Oversight, Management, and Economic Stability Act urged “independent oversight” of Puerto Rico’s institutions.

They call for the board to block any steps by Puerto Rico’s government to undermine the Energy Commission.

After the governor called for the privatization of PREPA in late January, the Ad Hoc Group of PREPA bondholders said they supported privatization, but that the operation should be under Energy Commission oversight.

In other Energy Commission news Sunday, the commission filed an adversary complaint in the Title III bankruptcy process against the board. The commission asked Judge Laura Taylor Swain to declare that the commission has significant power vis-à-vis the board and prohibit the board from taking significant actions with regards to PREPA without the commission’s approval.

Over the last several months the commission and the board have discussed energy policy and the commission’s role. While it has supported a continued independent commission, the board has made clear that it saw the commission as fully subservient.

This winter the commission released a policy statement outlining what it saw as its significant powers over PREPA regardless of the board’s directions.

On Feb. 3 board general counsel Jaime El Koury sent a letter to Energy Commission Interim President José Román saying, “the Oversight Board rejects the policy statement’s ‘legal principals’ that the Oversight Board’s powers are only fiscal, not substantive, and that the Oversight Board cannot act without [the Energy Commission’s] consent. To the contrary, PROMESA makes clear that many of the Oversight Board’s powers are substantive and that PROMESA, as a federal law, preempts conflicting commonwealth law.”

El Koury continued, “the Oversight Board vehemently disagrees with the policy statement’s ultimate conclusion that ‘[t]he fiscal plan that the [Oversight Board] considers must be the one that [the Energy Commission] has approved first.”

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PROMESA Utilities Commonwealth of Puerto Rico Puerto Rico Electric Power Authority Puerto Rico Aqueduct & Sewer Authority Puerto Rico