On October 17, Senate Vice President Larry Seilhamer and Minority Leader Eduardo Bhatia introduced Senate Bill 1121, The Puerto Rico Energy Public Policy Act, which would bring widespread change to the state’s electric utility industry. The most notable provision of SB1121 is the elimination of monopoly status for the island’s electric utility, Puerto Rico Electric Power Authority (PREPA). PREPA is a government run agency that is responsible for the generation, transmission, and distribution of electricity for the vast majority of Puerto Rico’s population. The utility, which is currently $9 billion in debt, filed for bankruptcy in 2017 and is in the midst of a multi-year effort to rebuild the island’s electric grid which was severely damaged last year by Hurricanes Irma and Maria.
According to Seilhammer, “The purpose [of SB1121] is to have a Puerto Rico with a robust, resilient, affordable, and reliable system. To this end, we are promoting the reconstruction, modernization, and updating of the transmission and distribution system of the network. The monopoly is put to an end as we know it today to give way to competition in power generation and fuel diversity.”
Highlights of The Puerto Rico Energy Public Policy Act are outlined below:
Though SB1121 received its first public hearing on October 26, the bill is still in draft form, and it is unknown what changes will be made as it moves through the legislative process or even if it will move through the process. Beyond the “sausage making” that will undoubtedly occur in the Puerto Rico legislature, there is also an effort by some of PREPA’s creditors to transfer regulatory oversight of the utility to the Federal Electric Regulatory Commission (FERC), as they believe the PREB has not provided the “required meaningful reforms” demanded by creditors as conditions for entering into restricting support agreements for PREPA’s outstanding debt. If these creditors are successful, SB1121 may become moot, as the FERC would replace PREB as the entity regulating PREPA.
This report is part of ScottMadden’s Regulatory Minute series. To view all featured Regulatory Minutes, please click here.
Additional Contributing Author: Eric Hanson
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.