WASHINGTON – Six Senate and House Democrats introduced legislation Wednesday to provide $7.5 billion in debt relief to pay the Puerto Rico’s creditors while a House committee considered options for the future of the Puerto Rico Electric Power Authority at a hearing.

The U.S. Territorial Relief Act of 2018 would give territories the option to terminate their unsecured, public debt obligations while authorizing $7.5 billion in federal funds to compensate mainland creditors who are individual investors, trade unions, pension plans, and open-end mutual funds.

The bill’s authors, Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., would not provide compensation to hedge funds and their investors, bond insurers, many financial firms with consolidated assets greater than $2 billion, and repo or swaps investors.

The Warren-Sanders bill is co-sponsored by Sens. Kirsten Gillibrand, D-N.Y., Edward Markey, D-Mass., and Kamala Harris, D-Calif. Rep. Nydia Velázquez, D-N.Y., plans to introduce companion legislation in the House.

House Natural Resources Committee Chairman Rob Bishop, R-Utah
House Natural Resources Committee Chairman Rob Bishop, R-Utah Brian Tumulty, The Bond Buyer

The bill in the Senate faces an uphill battle but could become be considered in conjunction with congressional efforts to accelerate privatization of the financially-troubled PREPA, which is in federal bankruptcy proceedings.

House Natural Resources Committee Chairman Rob Bishop, R-Utah, opened Wednesday’s hearing by rejecting rumors that Congress is considering selling assets of PREPA or making Puerto Rico “a fossil fuel island.”

Bishop said he thinks there’s widespread agreement on the key objectives that have been outlined by Puerto Rico Gov. Ricardo Rosselló Nevares.

Bishop referred to them as: low cost, reliable power; energy resilience; deployment of new technology; right sized capital investment; operational excellence; and financial stability.

Rosselló, who was supposed to testify but boycotted the hearing, said in a letter that he was concerned “my attendance would legitimize a political exercise that was organized for the sole purpose of promoting flawed legislation that would severely hamper our reconstruction.”

Eduardo Bhatia, minority leader of the Puerto Rico Senate
Eduardo Bhatia, minority leader of the Puerto Rico Senate Brian Tumulty, The Bond Buyer

Puerto Rico Senate Minority Leader Eduardo Bhatia testified that Rosselló has “re-politicized” PREPA by making his campaign manager the head of its board.

Testimony from a panel of witnesses confirmed the governor has the power to appoint all five members of the PREPA oversight board and PREPA’s own seven-member board.

An official from the U.S. Department of Energy denied claims that the delay in restoring electrical power was compounded by the layers of federal bureaucracy, pointing instead to the failure of PREPA to quickly request mutual aid assistance from mainland utilities.

Bishop said the goal should be to provide a reliable source of energy that is non-politicized, explaining to reporters after the hearing that all options are under consideration.

“Nothing is on or off the table,” Bishop said. “Nothing is a prerequisite for anything else taking place. We’ve heard the problems. We’ll see now what we can do to address those problems in conjunction with working with Puerto Rico to ensure we do what is best for the citizens.”

Bhatia said during the hearing that the commonwealth’s legislature is working on legislation that will outline a path for energy independence.

Bhatia said he supports privatization of PREPA if it’s also linked to opening up the power grid to competition and using Hawaii as a model, setting a mandate for renewable energy that that would be similar to Hawaii’s goal to have 100% renewable power by 2045.

Bruce Walker, assistant secretary in DOE's Office of Electricity, said the Trump administration is providing technical advice but isn’t considering a takeover of the commonwealth’s bankrupt utility.

“We do not want to federalize PREPA,” Walker said in response to a question from Rep. Velázquez.

“We’ve talked about lots of different solutions,” Walker explained, adding that the priority for the utility should be to end political appointments. “Solve the politics and take it away from the politicians,” he said.

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