A leading lawyer in Puerto Rico’s bankruptcy said the agreement restructuring the more than $8 billion of debt of the Puerto Rico Electric Power Authority may be in danger.
Unsecured Creditors Committee attorney Luc Despins made the comment Wednesday morning in the Title III bankruptcy hearing.
“Something is going on here that is quite bizarre,” Despins told Title III Judge Laura Taylor Swain.
Despins said he had come across press reports that quoted Puerto Rico Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero as saying that his authority was reviewing the PREPA Restructuring Support Agreement.
Most of the RSA was settled on and agreed to in April. Since then the Oversight Board agreed to changes to bring on board two bond insurers.
At Wednesday’s hearing Despins said Gov. Wanda Vázquez was quoted as saying on Tuesday that it was premature to say she had agreed to the RSA’s rate increases. Vázquez has been governor since early August. The RSA was negotiated under the tenure of Gov. Ricardo Rosselló.
Despins said that all the parties to the PREPA agreement are going “full steam ahead” to have an agreement considered in the January omnibus Title III hearing. He said the parties shouldn’t be spending substantial money on legal fees preparing for a hearing that won’t happen.
Puerto Rico Oversight Board attorney Martin Bienenstock said Despins’ concerns about the local government and legislature were valid. We live in a political world, Bienenstock said, so it wasn’t a surprise that some politicians were raising issues.
He said reforming PREPA was essential to the island’s long-term growth and any delay in getting to a sustainable economy would be a bigger cost than any PREPA litigation costs incurred from now until January.
FAFAA attorney Peter Friedman said he “echoed” the remarks of Bienenstock and that an improved electrical system was important.
It is FAFAA’s view that the PREPA litigants should continue moving forward in discussions and negotiations, Friedman said. He said that Despins’ “suspicions” weren’t a reason to stop progress.
On Oct. 23 Vázquez released a statement criticizing a rate increase that the Energy Bureau had just approved. The additions were in response to Puerto Rico laws saying that money needed to be set aside for a program for energy conservation. The bureau had approved additions that would amount to $0.64 per month for those who consumed 500 kilowatt hours per month and $1.79 per month for those who consumed 1,400 kWh.
According to the U.S. Energy Information Administration, the average U.S. household consumes 914 kWh per month.
Gov. Vázquez said raising rates should not be the first option and that other possible sources of income should be examined.
“Recognizing the independence of the Energy Bureau, I urged the bureau to review, within its autonomy, the resolution and explore other alternatives for the implementation of these programs, other than an increase in electricity service,” she said. “I will be waiting for this situation to be resolved, bearing in mind the interest of our people. That is my commitment.”
The bureau voted 3-1 last week to rescind the increase.
