Puerto Rico officially exited bankruptcy in the last year. However, the debt of nearly $10 billion owed by the island’s electricity company is still unresolved.
According to a release on Friday, the federal oversight board that manages Puerto Rico’s financial affairs has reached an agreement with a number of bondholders who hold 80% of the debt. This will reduce the amount due by 80%.
The Financial Oversight and Management Board is making its latest effort to resolve the long-running restructuring of the Electric Power Authority debt. This was the largest amount of debt of any U.S. publicly traded corporation at the time of bankruptcy in 2017.
After months of negotiation, the board filed a third plan for debt restructuring that would reduce the debt of the power company to $2.5 billion excluding pension obligations.
David Skeel said that the plan “provides a fair recovery” to creditors without “overburdening” the people of Puerto Rico financially.
Skeel stated in a press release that the proposed plan was necessary to ensure the company’s “sustainability, continued critical investments and completed transformation of Puerto Rico’s energy system” to support Puerto Rico’s economic growth, fiscal stability and reliable energy.
Before the plan can be implemented, it must first be approved by an federal bankruptcy judge.
If approved, this could also lead to an increase in electricity bills for Puerto Ricans who pay nearly twice the amount of mainland U.S. customers for unreliable electric power.
The plan for debt restructuring includes a legacy charge that will be passed on to the consumers.
The board announced that if the “legacy fee” is approved by Puerto Rico Energy Bureau – the independent agency responsible for regulating energy policy – power customers would face a 5% rise in their total electricity bill.
Residential bills will increase on average by $9 per month, and commercial bills by about $35.
The board stated that 1.4 million customers could not be charged the new fee if they consumed less than 425 Kilowatt-hours per month.
The average family in Puerto Rico is estimated to consume about 200 kilowatt hours each month. According to the U.S. Energy Information Administration, the average residential power consumption in the U.S. is 886 kilowatt hours per month.
In the past year, power customers in the island have seen at least seven increases in their electric rates.
The Electric Power Authority of Puerto Rico, a public company, filed for bankruptcy in 2017, along with more than a dozen other local government entities and the public employee pension system, under the Promesa law, which was passed during the Obama administration to compensate for Puerto Rico’s exclusion from the federal bankruptcy law. The Federal Financial Oversight Board was created to help restructure debts in federal court.
The largest municipal bankruptcy in U.S. History resulted from this.
Hurricane Maria devastated Puerto Rico months later. destroyed its electric grid. triggered the second-longest power outage in history.
The majority of the approximately 3,000 people that died after Maria died due to a absence of electricity, and the interruptions of medical and other services.
Grid hasn’t been rebuilt permanently, so it still behaves badly, causing brownouts and blackouts at times when people are least expecting them.
Most of Puerto Rico’s debt has been restructured except for the power company.
Robert Mujica said, “We hope to close not only the chapter, but the majority of the book, on the largest bankruptcy in the public sector in the United States.” Robert Mujica was the executive director of the board in a press conference.
