Facing rising costs, PREPA budget gives more money for fuel

BY SourceMedia | MUNICIPAL | 07/06/22 03:18 PM EDT By Robert Slavin

The Puerto Rico Electric Power Authority budget for the current fiscal year has about $1.5 billion more for fuel and power purchase costs but cuts $33 million for other expenses, compared to the fiscal 2022 budget.

The Puerto Rico Oversight Board approved the budget on Friday and approved the related revised fiscal plan on June 28. Fiscal 2023 began Friday.

Board Infrastructure Director Alejandro Figueroa said the current year budget reflects the constrained operating environment due to increased fuel costs. The budget anticipates fuel costs will go from $1.968 billion in the last fiscal year to $3.461 billion in the current fiscal year.

Guayanilla power plant of PREPAFigueroa said the budget has lower "non-operating expenditures" and lower "rate-funded maintenance expenditures" as part of the $33 million in cuts. To compensate for the decline of the latter the budget is expecting to gain more federal funds toward maintenance in the current fiscal year.

He also said the budget is also allocating more money for labor costs to attract certain high skilled workers, like power plant operators.

In recent years Puerto Rico?s electrical system has had problems with excessive outages, partly due to a lack of maintenance of its power plants. Figueroa said the current budget approves all the ?rate-funded? maintenance for these plants that PREPA requested and the board anticipates being able to use federal aid to do help pay for the work.

Figueroa said he anticipates revenues to go from $2.76 billion in fiscal 2022 to $4.54 billion in the current fiscal year. Most of the increase is due to already enacted, as well as anticipated, increases in electrical rates, to reflect fuel costs.

Expenditures are expected to increase from $3.13 billion to $4.57 billion in the same periods, he said.

According to the board?s fiscal plan, the authority?s key upcoming initiatives are:

Improving transmission and distribution and generation operations; modernizing and reconstructing the transmission and distribution system; contracting new generation to meet Renewable Portfolio Standard targets; effectively and efficiently deploying federal funding; Puerto Rico Public Private Partnership Authority completion of the competitive procurement process for one or more operators for the PREPA legacy generation assets; and, restructuring legacy debt obligations.

The board, PREPA bondholders, PREPA fuel line lenders, and other affected parties are currently negotiating a restructuring of the authority's obligations. Last week bankruptcy Judge Laura Taylor Swain extended the deadline for the bankruptcy mediation talks to Aug. 1 from July 1.

PREPA is like the U.S. Virgin Islands Water and Power Authority in having to struggle with rising fuel costs.

?The central elements for a balanced fiscal plan are lower fuel costs, substantial investments in renewable energy, and well-managed use of federal resources," said Institute for Energy Economics and Financial Analysis Director of Finance Tom Sanzillo. "Right now, rates are dangerously high.

PREPA declined to comment for this story.

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