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The Fiscal Oversight Board asks the governor not to sign the project that seeks for public entities to settle their debts with PREPA

The Fiscal Oversight Board (JSF) requested the governor Peter Pierluisi not sign Senate Bill 728, which seeks to implement a program for the collection of delinquent debts that the instrumentalities of the state and federal government maintain with the Electric Power Authority (ESA).

In a letter sent Friday to both Pierluisi and legislative leaders Joseph Louis Dalmau Y Rafael “Tatito” Hernandezthe Board maintains that such project is inconsistent with the certified fiscal plans for the Commonwealth and PREPA, as well as with the PROMESA Law.

The federal entity also indicated that the execution of the measures established by the project regarding payments to PREPA through debt collection would not be possible without its prior approval, something that has not happened.

“Compliance with the obligations of the bill could require a budget reprogramming, since it would require the entities of the Commonwealth to spend funds not included in their certified budgets due to the agreements they have reached with PREPA,” the entity pointed out, stating that Section 204(c) of PROMESA prohibits rescheduling without the prior approval of the Board, which has not been requested or provided.

Said body also held that the bill conflicts with the Bankruptcy Code incorporated in Title III of PROMESA and that requiring payments “is an impermissible attempt by the Legislature to exercise control over the debtor’s property in violation of the automatic stay in the case of PREPA Title III”, which prohibits any act to obtain possession of the debtor’s assets or the debtor’s assets, or to exercise control over the debtor’s assets.

The Board argued that the Fiscal Plans of the covered government instrumentalities, with invoices owed to PREPA, already specify mechanisms for them to pay their pending obligations with PREPA. “Therefore, the bill is inconsistent with the fiscal plans to the extent that they require payments outside the processes and/or deadlines established in them,” stated the federal entity in its letter, which does not specify the details on those processes, terms or amounts that delinquent government entities must pay to PREPA.

After being approved in the Senate, Bill 728 was endorsed by the House of Representatives on September 2 with 40 votes in favor and two abstentions, and was sent to the governor on September 30.

“The measure has already been received in La Fortaleza and the governor has until October 12 to act on it. The governor is in consultation with AAFAF and OGP, among other agencies, which are evaluating the measure, in order to then make his recommendations. Once the chief executive has this input, he will be able to decide on Senate Bill 728 ″, expressed the press secretary of La Fortaleza, Sheila Angleró, in written statements to The new day.

In summary, Bill A requires all public agencies, corporations, municipalities, and entities to pay their debts within 30 days after the bill is enacted, although it allows PREPA and public entities to implement payment plans for debts in excess of $5 million.

Likewise, it orders the Department of the Treasury to create the Puerto Rico Electric System Stabilization Fund with special state and federal appropriations, as well as collections from non-current delinquent debt that agencies of the federal government, state government, public corporations and municipalities maintain with the ESA.

According to the explanatory statement of the project, the debt that federal and state agencies, public corporations and municipalities had with PREPA as of April 2021 amounted to $233,727,563.

The measure delegates authority over PREPA’s Stabilization Fund to the Energy Bureau (NEPR), another point that was pointed out by the Board.

“While PREPA’s fiscal plan maintains PREPA’s role as regulator of the energy sector, it does not extend PREPA’s authority to the administration of PREPA’s property, including accounts receivable.”said the body.

Among its arguments, the Board also stated that the project would allegedly place PREPA in danger of violating “federal financing requirements” by establishing that PREPA’s Stabilization Fund would receive federal funds from debt payments.

“Federal funds are earmarked for certain intended purposes, such as reimbursement for hurricane relief expenses and rebuilding the power grid. Requiring PREPA to allocate federal funds for uses not originally allocated would likely force PREPA to violate federal law and put future federal funds at risk,” the letter reads.

Similarly, the Board stated that the amendments to Law 57-2014 in section 2 of the Draft Law “are directly in conflict with PREPA’s Fiscal Plan”, by transferring to PREB responsibilities that the Authority must transfer to a private operator

“As part of the transformation, PREPA has transitioned its T&D (transmission and distribution) operations to LUMA Energy. In addition, PREPA will transition the operation and management of PREPA’s generation assets to a private operator to improve affordability, operational performance, and customer service.” defended the JSF.

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