Puerto Rico legislators seek to freeze increases on electric, water and highway tolls

The leading party in the Puerto Rico House of Representatives is sponsoring a bill to freeze electric and water rate increases as well as highway tolls on the island for 12 months.

The Popular Democratic Party announced its bill, House Joint Resolution 249, on Sunday. The freeze would affect the ability for the Puerto Rico Aqueduct and Sewer Authority, the Puerto Rico Electric Power Authority, LUMA Energy, and the Puerto Rico Highways and Transportation Authority to raise rates.

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“Despite the economic crisis in which we find ourselves, LUMA and the Electric Power Authority have requested an increase in the electricity rate that is beyond 16%. According to reports, the Puerto Rico Aqueduct and Sewer Authority is following the same path and will soon announce a potential increase in its rate as well,” said Jessie Cortés Ramos, president of the Small and Medium Business and Permitting Committee.

"Puerto Rico’s infrastructure has been deteriorating for years because government agencies did not make the necessary investments in maintenance and improvements," the Puerto Rico Oversight Board said. "The fiscal plans for the commonwealth and its agencies clearly outline a path to put the instrumentalities on a healthy fiscal foundation and improve the service they provide to the people of Puerto Rico.

"The Oversight Board understands residents’ frustration during these challenging times," the board continued. "But years of underfunding and financial instability have left Puerto Rico’s water system, roads, and energy system in abysmal condition. The necessary investments to improve Puerto Rico’s infrastructure must be made, and must be made in a fiscally responsible way."

The Oversight Board said it will work with the government to achieve that goal and will use all means available to carry out its mandate under the Puerto Rico Oversight, Management, and Economic Stability Act.

“This type of moratorium, allegedly until measures can be discovered to stop the increases, will not be successful," Puerto Rico attorney John Mudd said. "As to the tolls, it violates both federal and commonwealth constitutional guarantees as to impairment of contractual obligations. As to electricity and water, the board will stop the legislation, if approved.”

Puerto Rico Clearinghouse Principal Cate Long said, “PREPA is operating with net negative cash flow as of Jan. 7, 2022, but had $1.18 billion in cash in various reserves and PRASA is operating with a tiny surplus but had $844 million of cash as of Sept. 30, 2021. PRASA’s and PREPA's cash is debt reserve funds, operating, maintenance and capital funds.

“I think Puerto Rico politicians see this cash and believe it is unnecessary to allow rate increases,” Long said. “For decades the Puerto Rico Legislature has blocked rate increases for political reasons and this is what led to the bankruptcy. Additionally, blocking PREPA's rate increases gives the Legislature a bargaining chip in the struggle to enact enabling legislation to complete PREPA's deal restructuring.”

In the House of Representatives 26 of 51 legislators are members of the Popular Democratic Party. In the Senate, 12 of 27 senators are members of the party, and is the party with the most members in the body.

To become law, the bill would have to pass the House of Representatives and Senate, gain the governor's signature, and avoid potential lawsuits by the Puerto Rico Oversight Board and others.