House subcommittee examines progress of Puerto Rico’s restructuring agreement

The House Subcommittee on Indian, Insular and Alaska Native Affairs recently held an oversight hearing
on the status of the Puerto Rico Electric Power Authority (PREPA) Restructuring Support Agreement (RSA), which is set to expire soon.

PREPA is Puerto Rico’s sole public utility and provides power to 3.4 million Americans living on the island. The state-run, self-regulated utility is $8.9 billion in debt and faces significant structural and operational inefficiencies. The RSA, which provides a framework for ongoing voluntary restructuring negotiations of PREPA’s debt and related structural reforms, is set to expire on March 31. A major bond payment of $455 million is due on July 1.

During the hearing, Puerto Rico Resident Commissioner Jenniffer González pressed Gov. Ricardo Rosselló for an expected timeframe for the reaching of an agreement, but Rosselló’s technical advisor could not provide a concrete answer.

“In order to get PREPA back on track and stabilize the power generation for the residents and the businesses of the island, serious decisions need to be made by leaders in the Government of Puerto Rico, the Governing Board of PREPA and the various creditor communities,” Subcommittee Chairman Doug LaMalfa (R-CA) said. “The island cannot afford a delay any longer.”

Members also reviewed efforts of the Oversight Board, established under PROMESA, to support ongoing voluntary restructuring agreements and facilitate additional consensual negotiations.

“One of the most difficult issues the Oversight Board has had to tackle in advancing the PROMESA agenda has been determining as accurately as possible just what the Government of Puerto Rico’s revenues and expenses are,” Oversight Board Chairman José Carrión said.

Under PROMESA, the Oversight Board has subpoena power and other tools with which it can conduct an independent analysis of the financial condition of the Commonwealth and its covered instrumentalities.