Our entire island has one need in common: affordable and reliable energy. Whoever wants to debate this premise must remember the months without power after Hurricane Maria. Those of us who for decades have run businesses besieged by the burden of high energy costs, know that our government’s third attempt to restructure the electrical system’s bad debt with a costly Wall Street scheme known as the Restructuring Support Agreement (RSA), will make us plummet into a bottomless abyss.
The complexity of the RSA can make our heads spin. To begin to understand the intricacies of the pact we must mention that for decades the Puerto Rico Electric Power Authority (PREPA) and other agencies issued billions of dollars in bonds impossible to repay. The magnitude of this debt is like an anchor, weighing us down to the point of immobility, giving way to unsound agreements, like the RSA structure, which has proven to be extemely costly in addition to legally and economically unsustainable.
When we untangle this intricate agreement, it is clear that the priority is not the island’s public interest. The deal includes PREPA; Bondholders; the two-year-old Federal Oversight and Management Board (FOMB) and a new Puerto Rico government agency. The new and longstanding obscure economic and political interests must restructure a massive $10 billion PREPA legacy debt with a bankruptcy reorganization agreement that federal Judge Taylor Swain must confirm. It is clear that 90 percent of the hedge fund and bond insurance companies that own the debt have proposed an average 25 percent cut on the debt, which must have been a difficult task. Yet, what is the cost of the terms this RSA will need to prove it is sustainable?
The RSA structure is so complicated and unsubstantiated that Judge Swain has objected to this attempt to reorganize the debt. In hearings scheduled for Jan. 2020, she has advised she will only hear arguments about the proposed average adjustment to the debt being minimally reasonable or not. The Puerto Rico Institute for Competitiveness and Sustainable Economy (ICSE-PR) has been a sound voice against this poor deal that puts the entire burden on impoverished people, working class families and businesses that struggle to pay uncompetitive energy tariffs.
The entire industry and private sector oppose the RSA deal structure because sound analysis by renowned economists in Puerto Rico and abroad confirm that if the agreement goes into effect we will live an economic and social catastrophe. Incredibly, the proponents of the RSA object this economic analysis yet neither have proposed or conducted an alternative evaluation of this deal.
The alternatives to the debt and PREPA reorganization must include immediate professional governance and management oversight of PREPA, which currently hinders progress inside and outside of the bankruptcy court. Furthermore, there is no ongoing consumer interest and tariff cost oversight of the uncontrolled consulting and legal fees around the RSA structure.
The reasons as to why this agreement is unsustainable against Puerto Rico’s government debt repayment are endless. However, we must understand what is at stake, because the ultimate result of the approval of this flawed reorganization would be crippling uncompetitive electrical tariffs of around $.30kwh, which would trigger the loss of thousands of jobs.
The RSA also seeks to eliminate local laws and policy established prior to PROMESA in support of competitive, independently regulated private generation. It will also deregulate charges to a generation class and market that existed prior to bankruptcy and this is illegal and immoral. After the hurricane, it is obvious that PREPA’s centralized system was unable to provide security and life after the devastation. Beyond the illegality and unsustainability of this agreement, we know as a fact that there is an urgent need for resilient and sustainable power at a reasonable cost. For U.S. citizen taxpayer dollars, it still is a dozens of billions of dollars natural disaster mitigation liability cost to be resolved.