Prepa chief doesn’t rule out rate hikes
“We can’t discard rate hikes in light of the fiscal situation we are facing,” Prepa Executive Director Juan Alicea Flores said in a radio interview on Wednesday. “We have to look at all options.”
Alicea appeared to close the door on the possibility of rolling brownouts to cut back on fuel usage.
“We aren’t considering that,” the Prepa chief said.
Alicea’s comments came a day after Gov. Alejandro García Padilla signed energy reform legislation to revamp Prepa amid complaints of corruption and costly bills.
The law calls on Prepa to review its rates within six months, a measure applauded by many in Puerto Rico, where power bills average more than twice those on the U.S. mainland and are generally cited among the key obstacles to doing business on the island.
The reform also seeks to increase the use of natural gas and renewable energy sources, with Puerto Rico currently depending on oil to generate nearly 70 percent of its electricity.
Alicea pledged last month to lower the current charge of 27 cents per kilowatt hour to 16 cents by 2019.
A new commission also will be established to oversee the state power agency, which has long been criticized for operating without any type of oversight.
Officials with Puerto Rico’s Justice Department recently raided the agency’s offices and seized documents and computers as part of an investigation into fuel purchases in recent years.
Alicea acknowledged Tuesday that the loss of the government’s investment-grade credit rating has impacted the public corporation’s finances, but said there are alternatives being pursued to assure the continued purchase of the fuel needed to produce electricity.
He said that Prepa, with the assistance of the Government Development Bank, is currently negotiating a renewal of its credit lines, and using internal resources to buy oil without impacting ongoing projects while negotiations are underway.
Last Friday, the Prepa board of directors approved transferring up to $100 million from its capital works fund for the purchase of oil pending the completion of the negotiations.
Alicea also said Prepa was increasing efforts to attack electricity theft and collect back debts.
“It’s true that the island’s credit downgrade affected us, but it is also true that we can guarantee that the fuel supply contracts are current and we have the necessary fuel to continuing meeting electricity demand,” Alicea said.
While Prepa has traditionally relied on credit lines to purchase oil, the downgrade of the Puerto Rico government’s ratings downgrade into junk territory enabled lenders to revise the terms and conditions of loans.
Prepa has two current credit lines worth $750 million, with $550 million coming due in August and the additional $200 million coming due in October.
Prepa also has a payment plan with one of its top suppliers, Petrobras, which guarantees that the public corporation will continue to buy fuel, Alicea said.
Earlier Tuesday, García Padilla justified the funds transfer saying “Prepa’s finances are very fragile. This is one of the transactions that Prepa has been obliged to make to continue providing service. Of course, this has prompted the central government to more closely attend to Prepa’s finances,” he told reporters.
CARIBBEAN BUSINESS senior reporter John Marino and the Associated Press contributed to this report.