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On Wednesday, the Puerto Rico Electric Power Authority (PREPA) informed the Puerto Rico Energy Bureau (PREB) that it was unable to redirect funds from a specific budget item to resolve the pension funding issue.
PREPA asserted that it could not present a proposal to the PREB for reallocating the funds due to the restricted size and inflexible format of the HoldCo budget and the utility’s substantial operational obligations.
This statement was a response to a PREB inquiry about submitting a proposal for reallocating funds after PREPA had informed the PREB on Nov. 15 that it lacked the resources to meet pension payments.
The utility is in need of around $24 million each month to compensate roughly 10,098 retirees and 2,438 spouses. PREPA revealed that the total HoldCo budget for fiscal year 2025 stands at $34.217 million, representing only 3.29% of the total budgets of HoldCo, GridCo, GenCo, and HydroCo. PREPA indicated that this amount would only just cover a month’s pension commitment.
This topic surfaced during a hearing regarding potential rate increases for Puerto Rico consumers. Earlier this month, the PREB initiated an investigation into the liquidity crisis confronting Puerto Rico’s electric system, considering the potential for an emergency rate hike—while PREPA continues in bankruptcy and struggles with insufficient cash flow.
The investigation was prompted by a filing from private grid operator LUMA Energy in October, which stated that PREPA had not fully funded certain operational accounts for LUMA, providing only two-thirds of the required amounts.
Not funding any of these accounts to at least two-thirds of the necessary levels constitutes a default under LUMA’s contract and grants LUMA the authority to terminate the agreement—a power LUMA has yet to exercise.
In response, PREPA stated that options are limited. They underscored the need to increase revenue collection and obtain outstanding payments from the U.S. Federal Emergency Management Agency (FEMA), which LUMA is tasked with collecting.
