A Puerto Rico Electric Power Authority union has offered the appointment of an inspector general to the PREPA bankruptcy judge as an alternative to a bond insurer proposal for a receiver.
The union, Unión de Trabajadores de la Industria Eléctrica y Riego, filed the suggestion in the PREPA bankruptcy Friday morning. In the same document UTIER objected to National Public Finance Guarantee Corp., Assured Guaranty Corp., Assured Guaranty Municipal Corp., and Syncora Guarantee Inc.’s motion for relief from the bankruptcy’s automatic stay, which is a necessary step on the way to appointing a receiver.
The appointment of an independent private sector inspector general, as UTIER requested, would be a good idea, said Gustavo Vélez, chairman of Puerto Rico consulting firm Inteligencía Económica. However, Vélez said that appointing a receiver for PREPA would be even better.
Puerto Rico’s governor has too much influence on the authority and there is too much corruption in it, Vélez said. While the insurers have asked to be allowed to name the receiver, he said that decision should be made by Judge Laura Taylor Swain.
Under UTIER’s suggestion, the inspector general would monitor, audit, and investigate the authority’s activities. It would cover personnel practices and hiring regulations, procurements, fiscal and accounting issues, capital and energy planning, and regulatory oversight.
It would report its results to the Puerto Rico Oversight Board, Puerto Rico’s governor, the court, the United States Attorney’s Office for Puerto Rico, and other entities. Reports would be ongoing.
“PREPA has a compliance problem,” the union said in its motion. “PREPA does not need an entity that comes to enact new rules. It needs an entity that enforces them.”
Tom Sanzillo, PREPA analyst and director of finance at the Institute for Energy Economics and Financial Analysis, helped to write the union’s motion. He told The Bond Buyer, “I have seen many plans for PREPA, most well intended.
“What they all miss is this: no bondholder will be paid, no debt agreement honored, no contract fairly negotiated, no employee treated decently, no legal agreement binding, no law complied with, no budget initiative credible, no commitment to 100% renewable energy kept, and no privatization scheme successful so long as PREPA is driven by a culture of political expediency. This move by UTIER offers an opportunity to bring professional utility standards into the day-to-day operation of PREPA.”
Sanzillo has been advocating for a PREPA inspector general for several years. UTIER approached him and the institute about a year ago concerning the idea, he said.
In other news related to PREPA, Puerto Rico’s governor signed the Energy Public Policy Act (Bill 1121) on Tuesday. This includes mandates that Puerto Rico get 25% of its electricity from renewable sources by 2025 and 100% in 2050. The bill aims to promote the use of homeowner solar electric systems and thus make the electrical system more resilient to future hurricanes.
Moody’s Investors Service called the bill’s adoption credit neutral for AES Puerto Rico, L.P. — the most important private sector electrical supplier to PREPA.
In response to the bill, an Oversight Board spokesperson released a statement: “The Oversight Board is reviewing Bill 1121. Energy transformation is important for the future of Puerto Rico and the Oversight Board strongly supports reliable, affordable and cleaner power as outlined in the Certified Fiscal Plan.”