WASHINGTON – Two Democrats are urging Puerto Rico’s oversight board to reject the Puerto Rico Electric Power Authority’s restructuring support agreement one day after the chair of the House Natural Resources Committee demanded the board approve it.
Reps. Raúl Grijalva, D-Ariz., and Nydia Velázquez, D-N.Y., made their request in a letter addressed to José Carrión, the board’s chair. The two representatives said that PREPA’s current RSA includes a securitization of electricity revenues for the benefit of PREPA’s creditors that will put a large burden on Puerto Rican ratepayers. Both House members said the agreement runs counter to the PROMESA law Congress passed last year to help Puerto Rico address its fiscal crisis.
“It would be irresponsible to acknowledge that the board needs to certify the PREPA RSA … without considering that such a certification would be directly inconsistent with PROMESA’s overarching purpose, namely to provide a mechanism for fiscal responsibility and access to the capital markets,” Grijalva and Velázquez wrote. “We therefore urge you not to certify PREPA’s RSA and instead work with creditors to find a sustainable solution, or if there is no appetite by creditors to do so, enter into [bankruptcy-like] restructuring.”
The letter comes a day after Rep. Rob Bishop, R-Utah, told Carrión and the board that some legislators saw the board’s failure to approve PREPA’s RSA as “very problematic” and as running “counter to the plain language of PROMESA.
PREPA and its creditors reached a revised agreement in early April, the most recent in nearly three years of restructuring talks. PREPA has been urging the oversight board to approve the $9 billion deal under Title VI of PROMESA since the authority and its creditors agreed to it. If the board approves the deal, Title VI mandates the agreement be put to a bondholder vote. If the vote is successful, the deal would be binding on all bondholders.
The board approved a fiscal plan for PREPA in late April, saying it wanted the authority to be in a position to complete the Title VI process by July 1.
Velázquez and Grijalva, who is the top Democrat on the Natural Resources Committee, argue that the intent of PROMESA was to ensure that any solution for Puerto Rico’s fiscal troubles include pro-growth reforms that will help the commonwealth’s economy. The high payments Puerto Ricans would have to pay for energy if the RSA is approved would not serve that purpose and cause even more of the commonwealth’s population to relocate to the mainland U.S., the representatives argued.
“While some of my colleagues in Congress believe that creditors’ concerns lie before the needs of the most vulnerable, PROMESA clearly stipulated that Congress’ intent was to provide Puerto Rico the tools to comprehensively restructure its debt and lay out a path forward,” they wrote.
Bishop, in his letter, said PROMESA was intended to include PREPA’s RSA as a consensually negotiated, voluntary agreement under PROMESA and that the intent “obviated the need for any substantive action or oversight of the RSA by the oversight board” and means that “ongoing actions taken by the oversight board toward the RSA … are outside the scope of the oversight board’s powers and a violation of PROMESA.”