Puerto Rico Gov. Alejandro García Padilla proposed a regulatory board and a rate reduction for the island’s electric utility Wednesday morning.

Island residents and politicians have complained about the authority’s high electricity rates. Puerto Rico rates are now at 30 cents per kilowatt hour.

In a speech to a forum on Puerto Rico’s energy future, García Padilla said in his plan the Puerto Rico Electric Power Authority would reduce the price of electricity by 20% by 2015 from rates before he took office this year.

PREPA cut rates by 17% in May. García Padilla proposed that those with unsubsidized rates see an additional 3% cut in rates in 2015, according to a spokeswoman for the governor. The governor also promised that the implementation of his agenda would reduce energy costs by 50% in 12 years.

García Padilla said a regulatory board should be set up to oversee PREPA, and also said PREPA should branch out to provide other services besides electricity. The governor mentioned fiber optics as one possible example.

The governor also called for the introduction of renewable energy sources so that they would serve 6% of the island’s needs by the end of 2014. Energy conservation and efficiency should be encouraged, he said. Finally, he called for the promotion of public transportation.

PREPA has about $9.5 billion in debt outstanding, of which $8.7 billion is long-term debt. It is rated BBB by Standard & Poor’s, BBB-minus by Fitch Ratings and Baa3 by Moody’s Investors Service.

Prominent members of Puerto Rico’s House and Senate have advanced ideas for reform of PREPA recently. Members of the primary opposition party have suggested privatizing PREPA.

The fact that the governor is not suggesting privatization or making the electrical market more “competitive” is a credit positive, said Triet Nguyen, managing partner of Axios Advisors.

If García Padilla is truly calling for a 3% rate reduction than this would reduce revenues and would be bad for bondholders, said Janney Capital Markets managing director Alan Schankel.

Schankel said he would also be cautious about expanding PREPA’s services.

The regulatory board idea is probably a good one, he said.

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