Witnesses Announced for March 22 Hearing on PREPA

The Subcommittee on Indian, Insular and Alaska Native Affairs of the U.S. House of Representatives has released its list of witnesses for its oversight hearing, “The Status of the Puerto Rico Electric Power Authority (PREPA) Restructuring Support Agreement,” which will be held at 10:00 am tomorrow.

Puerto Rico Gov. Ricardo Rosselló will appear on the first panel, accompanied by Gerardo Portela-Franco, Executive Director of the Puerto Rico Fiscal Agency and Financial Advisory Authority.  The second panel will have six witnesses:

•  Jose Carrion III, the chair of the Puerto Rico Oversight Management and Economic Stability Act (PROMESA) oversight board,
•  Board member Ana Matosantos, former chief budget adviser to California Governor Jerry Brown,
•  Luis Benítez Hernández, Chairman, PREPA Governing Board,
•  Stephen Spencer, Managing Director, Houlihan Lokey, Minneapolis, Minnesota, on behalf of Franklin Advisers, Inc. and Oppenheimer Funds Inc.,
•  Adam Bergonzi, Managing Director & Chief Risk Officer, National Public Finance Guarantee Corporation, Purchase, New York,
•  Rob Bryngelson, President & CEO, Excelerate Energy L.P., The Woodlands, Texas.

PREPA is the primary power utility operating in the territory, providing power generation to the 3.4 million Americans residing on the island. Formed in 1941, PREPA is a public corporation with approximately 9,550 employees, 33 customer service offices, 29 technical service offices, and 38 local offices serving seven regions encompassing the island. In its hearing memo, the Subcommittee notes that among the structure of PREPA there are anywhere from 150-300 “confidence employees” that are direct political appointments made by the Governor. These coveted patronage jobs are often held by individuals who are unqualified in the areas of expertise required to hold these positions, contributing to the inefficiency of operations within PREPA.

PREPA’s current debt amounts to roughly $8.9 billion spread across four classes: uninsured legacy bonds ($5.6 billion), insured legacy bonds ($2.1 billion), relending bonds ($0.4 billion), and bank debt ($0.7 billion). The current PREPA Restructuring Support Agreement (RSA) is set to expire on March 31, 2017. It has been extended 15 times since terms were first agreed to in December 2015.

The House Subcommittee’s position is that the PREPA RSA will help address how the utility will be able to meet its debt obligations by lowering the overall debt burden, lowering total debt service, providing a 5-year period of principal relief, and allowing for reinvestment in PREPA’s aging infrastructure.  The Subcommittee also believes that the PREPA RSA requires certain structural reforms within PREPA that are vital for the utility to begin de-politicizing rate structures in order to operate efficiently and provide stable, consistent and affordable power generation. PREPA has a major bond payment of roughly $455 million

El Nuevo Dia reported that Governor Rossello wants an extension of the debt moratorium, and that Congressman Raul Grijalva (D-AZ) is open to the discussion. However, Grijalva is said to have expressed a conviction that PROMESA will not be significantly changed. The same article quoted Congresswoman Nydia Velázquez (D-NY) saying that Rossello should request an 80% cutback on the public debt, while Rep. Darren Soto (D-FL) is reported as saying that “the restructuring of the debt should be promoted, and focus should be given to economic development programs, including parity in healthcare funds and tax credits that would directly help the people of Puerto Rico.”

Rep. Douglas LaMalfa (R-CA) is expected to chair the hearing. He is quoted by El Nuevo Dia as saying that “he is still becoming familiar with the status debate, and he remarked that he understands there are people who favor statehood, independence, and ‘to continue as a territory’. Compared to PROMESA, he stated that the status debate ‘is an even larger hot potato.’” LaMalfa also said that the hearing will provide an opportunity to review the performance of the fiscal oversight board.

Hearings are generally livestreamed on the committee’s website.