BOSTON, MA, February 12, 2020 – London Economics International LLC (“LEI”) has authored a report which closely reviews the Government Parties’ proposals regarding Puerto Rico Electric Power Authority (“PREPA”)’s debt settlement and the tenuous position in which this puts customers.
The report notes the “difficult financial and operational situation” which PREPA is trying to emerge from, with current rates being comparatively high compared to utility rates across mainland US jurisdictions.
As of the last audited financial statement available as of the end of 2019, PREPA had amassed a debt of $15.6 billion while its assets were valued at only $9.6 billion. In an attempt to eradicate this debt, PREPA has proposed a non-bypassable charge to be added to all consumers’ bills, known as the “Transition Charge,” which would be shouldered by PREPA’s customers for the next 47 years. This fee is proposed to start at 2.77 cents/kWh before ultimately increasing by over 60% – a fee which may prove too much for some consumers in a region already battling with significant rates, LEI notes.
“This debt clearly needs to be addressed, but the Transition Charge proposes shifting the burden of the debt to PREPA’s customers, many of whom can ill-afford this extra charge and may face the choice of having to cut down energy consumption or leave the PREPA system entirely,” Ms. Frayer added.
Although LEI’s report notes that rate increases are likely inevitable, the Transition Charge will be too much of a burden and risks forcing some customers out of the system.
The LEI report, Critique of Government Parties’ Assertions that the 9019 Settlement Will Not Affect Non-settling Creditors and Will Avoid a Subsequent Title III Filing by PREPA, is available online through the Official Committee of Unsecured Creditors of the Puerto Rico Electric Power Authority’s website at https://creditorspr.com/wp-content/uploads/2020/02/Redacted-LEI-Report-filed-version.pdf.
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Julia Frayer is a Managing Director with London Economics International LLC, specializing in economic analysis and evaluation of infrastructure assets as well as market design and expert economic advisory in deregulated power markets.
London Economics International LLC (“LEI”) is a global economic, financial, and strategic advisory professional services firm specializing in energy and infrastructure. For further information on LEI, please contact Kathryn Evans by phone at (416) 643-6622 or by e-mail at firstname.lastname@example.org or visit www.londoneconomics.com.