This column was originally published in Spanish by Primera Hora on February 21, 2025
In 2013, the consulting engineer who bondholders required to assess the Puerto Rico Electric Power Authority’s state every year since 1974 concluded the public-utility was in “good repair and sound operating condition.” They said PREPA could pay its debts.
One year later, bondholders agreed to a forbearance agreement because PREPA did not have sufficient money to pay the debt in full. Four years later, when assessing electricity rates for the first time in nearly 30 years, PREPA and the government acknowledged that the system was in disrepair. But the regulator added: “To try to make up for years of under-spending would be too harsh for customers.” That same year, 2017, PREPA started bankruptcy proceedings under Title III of PROMESA.
The Financial Oversight and Management Board is determined to prevent the same mistake from happening again. Puerto Ricans deserve to know the real state of their energy system’s disrepair – without rose-colored glasses. The New 2025 Fiscal Plan the members of the Oversight Board certified this month is such an X-Ray of a system that has been failing Puerto Rico’s families and businesses for too long.
The new PREPA Fiscal Plan is not a political document. It is not a negotiated compromise between the Oversight Board, the government, PREPA, and the private operators. Rather, it is a straightforward book of data and facts that PREPA and its partners took considerable time and care to compile. In the coming months, we will continue to further assess and pressure-test the operators’ projections of the system’s needs.
The data PREPA provided to previous fiscal plans was built on how much PREPA can spend to run and upkeep the system based on the revenue it generates from the electricity rates that were set in 2017 by the Puerto Rico Energy Commission, the predecessor of today’s Energy Bureau. In other words, PREPA’s budget was built around how much money PREPA took in rather than how much money PREPA would need to fix the system.
But we believe Puerto Ricans deserve to know the real financial need to fully restore the system badly damaged not only by hurricanes and earthquakes, but by decades of neglect, mismanagement, and political influence. That is what we asked PREPA and the operators to assess.
The new unconstrained projections reflect the outlook for Puerto Rico’s economy, a declining population, energy demand, and other assumptions. By 2040, the operators project expenses of running Puerto Rico’s energy system to be more than 60% higher than in the Fiscal Plan certified in 2023. In addition, the system needs federal funding through fiscal year 2034 to fully rebuild, maintain, and operate a clean, reliable, and resilient grid. The Fiscal Plan also concludes that the state of disrepair and maintenance expenses leaves no room to add legacy debt payments to the electricity rates.
The reality is that the cost of operating the energy system only accounts for around 20% of our energy bills. The largest share of the bill is related to fuel costs. The Fiscal Plan does not determine electricity rates. The independent Energy Bureau is right now doing its own analysis and will reach its own conclusions. That is how it should be.
Years of political maneuvering obfuscated PREPA’s real financial needs. The cost of oil rose, hitting energy bills. The Oversight Board proposed to manage PREPA’s finances, the Government refused to allow it. The energy system continued to deteriorate.
We must prioritize the needs of the energy grid above all else, while holding all parties accountable. We must do so based on data, not political considerations. Our goal is to strengthen the grid, complete the energy transformation, and lift PREPA out of bankruptcy so the energy system can serve Puerto Rico tomorrow better than it does today.
