Increase in Electricity Rates Could Be Lower Than Requested

Yesterday, the Puerto Rico Energy Commission (PREC) approved a permanent increase in the electricity rate that was lower than the one proposed by the Puerto Rico Electric Power Authority (PREPA), and which will come into effect in March.

Specifically, the regulatory agency issued a final resolution and order, decreeing that the permanent increase will be 1.025 cents per kilowatt hour (kWh) in charges for energy consumption.

This means a reduction of 0.274 cents per kWh (21%), compared to the provisional rate the citizens have been paying since last August. The provisional rate of 1.299 cents per kWh was established to improve PREPA’s lack of liquidity, with the intention of making it permanent with no changes.

The PREC reported that, by virtue of Act no. 57 of 2014, the difference of 0.274 cents per kWh will be turned into a credit for PREPA’s clients. This credit will be applied to the monthly bill for a period equal to the time the provisional rate was in effect, namely, between seven and eight months.

“The Authority needs time to calculate the specific rates for each tariff class, and to receive the approval of the Commission on those calculations,” reads the final resolution and order, where the Commission states that the first bills under the new structure will be sent out “at some point” between March and April.

“If the current rates in the Authority remain unaltered, they would receive an income of $3,236,904,000, which would result in an annual deficit of $177,000,000. To eliminate this deficit, this order increases the Authority’s income requirement for the 2017 fiscal year by $177,000,000,” adds the document, to justify the permanent increase of 1.025 cents per kWh.

Last September, El Nuevo Día reported that the permanent increase would be lower than the provisional rate, due to the changes the PREC made to PREPA’s Integrated Resource Plan (IRP). The IRP is the guide for PREPA’s infrastructure projects, which are covered—in part—by the electricity rates. The public corporation had submitted a 20-year plan, but the one approved by the regulatory agency only spans five years. Therefore, the Modified IRP costs are lower.

Once the bond issue through which PREPA would restructure its debt is finalized, the public corporation will begin charging its clients the transition fee of 3.10 cents per kWh, which was approved by the PREC last June.

As such, the total rate increase would be 4.125 cents per kWh.

Requirement

In addition, the order issued by the PREC requires PREPA to remove unrelated costs from the adjustment items for fuel and energy purchases.

The PREC also noted that the approved rate structure will promote greater transparency and give consumers more information about PREPA’s costs.

PREPA Executive Director Javier Quintana was not available for an interview, since he had not received the PREC’s final resolution and order. According to his spokesperson, Bruni Torres, he promised to give his reaction after evaluating the documents.

Senator Eduardo Bhatia, who promoted Act no. 57 of 2014, said that “today (yesterday), for the first time in 27 years, and thanks to this Commission we created, a new rate was established after a transparent revision that was of benefit for Puerto Ricans.”