Puerto Rico’s energy sector transformation rests partly on transitioning the management of PREPA’s existing power plants to a private operator, which will also assume responsibility for environmental compliance, safety, and decommissioning old plants.
The agreement with Genera PR LLC to operate and maintain legacy power plants is a key element of Puerto Rico’s energy transformation, ensuring reliable and cleaner sources of power while Puerto Rico moves towards the renewable energy goals defined by Act 17-2019.
Genera must recruit essential PREPA employees with the required technical expertise and knowledge to continue carrying out the operation and maintenance of the legacy generation units, particularly given the age of these assets.
PREPA’s Employee Retirement System, meanwhile, had been underfunded long before the debt restructuring process under Title III of PROMESA even began. As of May 2017, PREPA’s pension liability exceeded $4.3B, only about $700 million was funded. In other words, for every $1 owed to existing and future retirees, PREPA’s pension plan had less than 20 cents available to pay pensioners.
The Oversight Board has consistently sought to ensure the current and future payment of accrued benefits, as it did for participants in the Commonwealth’s retirement systems. Concerns of PREPA employees about losing their retirement benefits are unfounded. Assuming confirmation and consummation of the Plan, accrued pensions up to the date of consummation would be protected.
Once the Plan is confirmed and becomes effective, however, accrual of further pension benefits would be frozen, and no employees would be able to continue actively contributing to the ERS pension plan, regardless of whether they are employed by PREPA, Genera, or the Commonwealth.
Employees have substantially more incentives to accept an offer of employment with Genera rather than transferring to the Commonwealth. Under all scenarios, including in a mobility employment at the Commonwealth, the PREPA ERS pension plan is frozen, and the employee will only be eligible to collect their accrued benefit through the freeze date, and not a complete merit pension.
Employees should be aware of the true financial consequences of their decisions, including the fact that their pension treatment under a confirmed Plan of Adjustment will be the same regardless of who their employer is. The true differentiators of their options are clear – meaningful employment in their line of work, likely higher base salaries with better opportunities for overtime pay, and a PR state tax-free 6-month Voluntary Transition Program by accepting offers of employment with Genera.
PREPA employees should make the best decision possible with the best information available for the good of themselves, their families and hopefully for the good of Puerto Rico.
