Ten years after the Puerto Rico Electric Power Authority (PREPA) became the first government agency to default with its creditors, the most recent events within the Title III process should cause, at the very least, deep concern throughout the country.
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Lee este artículo en español.
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So far, the energy crisis we are experiencing - and which has undoubtedly worsened - has been relegated to the back burner of public discussion. The debate has been limited to the performance of private operators LUMA Energy and Genera PR, or has been reduced to citizen anger every time a blackout occurs or an adjustment in the electricity bill is announced.
However, the impasse between the Fiscal Oversight Board (FOMB) and PREPA’s principal bondholders, as noted in a devastating recent report by the Mediation Team to U.S. District Judge Laura Taylor Swain, leaves as a disturbing scenario, the financial and operational unviability of the electric system and with it, any possibility of stability and development now and in the future.
Although the search for judicial clarity to establish how much is owed and how much PREPA can pay is understandable, this has resulted in thousands of motions, transcripts, depositions, replies and appeals to the First Circuit in Boston that, after eight years and tens of millions of dollars in fees, keep the public and businesses operating in Puerto Rico immersed in uncertainty, subject to an inconsistent and costly service that has become simply unacceptable.
Now, the Title III impasse, which also keeps PREPA’s pensioners on edge, has been added to the stumbling blocks related to the reconstruction work and the use of federal funds; to the execution challenges experienced by LUMA Energy; and to the financial deterioration of New Fortress Energy, owner of Genera PR.
If not resolved in the near future, PREPA’s bankruptcy could derail efforts to manage critical infrastructure. The financial impasse in court and the poor operational performance on the ground jeopardize any strategy that can be devised, whether to provide for the good health and education of the population or to retain, create or attract business initiatives of any kind. That is what is at stake.
Regardless of the regulatory requirements that must be strictly followed, the two contracts of LUMA and Genera PR are interim and include, among their provisions, the possibility for both operators to consider terminating them if the bankruptcy process is not completed.
Given such ambivalence, it is likely that LUMA and Genera PR, which answer to their respective shareholders, are in an analytical process about their role on the island. Furthermore, it is unlikely that other companies will be interested in managing the electricity system if PREPA’s bankruptcy is not resolved promptly or if its outcome deprives the island of the appropriate resources to manage an infrastructure that responds to the energy sustainability policies we have outlined.
In that sense, the new government administration will not have the time or room for maneuver to deploy the alternatives it deems appropriate to consummate the most important structural reform of all: energy.
As Judge Swain said a few days ago, Puerto Rico deserves, as a Christmas gift, the opportunity to have a reliable and efficient electric system that does not cost the lives of its citizens or cause unnecessary interruptions to those who produce, but that present should only be the result of a profound exercise of introspection among those who must find a financial solution under Title III or assess the risks that a potential syndication would entail.
Now more than ever, the technical and legal complexity surrounding the electric system calls for urgent action, but never intemperate or uninformed, whether in the Title III court, in the state and federal regulatory spheres, within the Fiscal Oversight Board, and much less, at La Fortaleza.
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This content was translated from Spanish to English using artificial intelligence and was reviewed by an editor before being published.
