The Puerto Rico Electric Power Authority anticipates an electricity rate increase by midyear, about four months earlier than previously indicated.
Also in a Tuesday
Under restructuring agreements with its creditors, PREPA must secure a rate increase to support bond payments and future borrowing. The utility has about $8.4 billion of bond debt.
In the restructuring support agreement signed with creditors March 14, PREPA committed to submitting a petition for a rate increase to the Energy Commission by April 22. Energy sector legislation passed in February – even as local politicians expressed concern that electric rate increases demanded by bondholders would hurt the economy -- requires the commission to reach a decision on the petition within 180 days.
This would leave the decision in mid- to late October.
The same RSA specifies that the agreement will terminate unless the Energy Commission approves a revised rate, which could include a provisional rate, by June 10. The Recovery Plan Term Sheet released Tuesday states that, "PREPA estimates the provisional rate could be implemented by July 1, 2016."
Asked about the date discrepancy, a source close to the forbearing bondholders said there was "no contradiction or problem. There may have to be additional RSA milestone dates that will be moved out in order to consummate the deal without the RSA terminating. Whether those future milestones will be moved will be addressed when we get closer to those dates."
The RSA and term sheets released Tuesday were the first approved editions of these documents to refer to a provisional rate increase.
According to the term sheet, PREPA will submit a request for the provisional rate increase at the same time it submits the petition for a permanent increase. PREPA promised to seek to amend the recently passed energy legislation so that if the Energy Commission approves the provisional rate increase, the new rate would be valid until PREPA implements the permanent rate increase.
According to the RSA and term sheet, the provisional rate should be designed to cover all operating costs, capital expenditures, and debt costs.
Another document released Tuesday moved the date the creditors were to purchase their first $55 million bond from PREPA to March 29 from March 25. GDB President Acosta Febo, named to head the PREPA Revitalization Corp. is also Puerto Rico's chief financial officer. She is the key figure in the commonwealth's efforts to restructure its $70 billion of public debt.
