CNE – Centro Para Una Nueva Economía – Center for a New Economy
Non-profit, economic research and policy development organization
Good morning, Senator Lawrence Seilhamer RodrĂguez, Chairman of the Special Committee on Energy Affairs of the Senate of Puerto Rico, members of the committee, and everyone here with us today.
El 31 de julio el gobierno de Puerto Rico, la Autoridad de EnergĂa ElĂ©ctrica (“AEE”) y la Junta de Control Fiscal (“JCF”) anunciaron un acuerdo preliminar para apoyar la reestructuraciĂłn de una parte de la deuda de la AEE con un grupo de bonistas no-asegurados de dicha entidad.
Natural disasters mostly destroy, but they also generate new vocabularies that include an alphabet soup of acronyms and all sorts of technical concepts that we survivors have to quickly learn and assimilate—concepts, for instance, like “resilience.”
Hurricane Maria devastated Puerto Rico’s energy system. After the storm, the island essentially has had to re-activate its energy system from the equivalent of a system-wide “blackstart”, which is the technical term for restarting an energy system from a complete shutdown.
Recently, the Government Accountability Office (GAO) published a report on Puerto Rico’s debt. The report’s main findings should not be a surprise to anyone. The GAO finds that Puerto Rico’s fiscal crisis was caused by the government incurring significant annual deficits, especially after 2000, and that it used debt to finance them.
On April 19, six members of the Fiscal Control Board (FCB) approved the Fiscal Plan for the government of Puerto Rico. In conceptual terms, the Plan consists of implementation of (1) a program of structural reforms; (2) a fiscal consolidation program; and (3) a reconstruction program financed by the federal government.
The business model for electrical generation companies, including PREPA, traditionally known as “build and grow,” is based on (1) the construction of ever larger and more efficient generating plants using cheap fossil fuels and (2) a constant increase in electrical consumption.
On February 12, Governor Ricardo RosellĂł presented the third iteration of his Fiscal Plan for Puerto Rico. In general terms, this version of the Plan has three main components: (1) a revision of the base economic scenario taking into consideration the appropriation of federal funds for the reconstruction of the infrastructure destroyed by Hurricane Maria; (2) an austerity plan; and (3) a structural reform program.
