March 7, 2018 Read More →

Keeping Puerto Rico on a Short Leash Until It Proves Accountability

The Hill:

Power outages that swept through the capital of San Juan last week serve as a sobering reminder of what Puerto Rico is up against as it struggles to rebuild its battered electricity grid.

Almost 1 million people live in the area affected by the blackout, which is just the latest symptom of an electricity system in crisis and a public utility that continues to be hobbled by fiscal challenges and policy problems.

Barely two weeks ago, a bankruptcy judge approved a $300 million loan to keep the Puerto Rico Electric Power Authority (PREPA) operational through March. U.S. District Court Judge Laura Taylor Swain allowed the loan to go forward because it is needed for day-to-day costs that include fuel, labor, insurance and maintenance.

PREPA’s larger looming expenses are related to the emergency rebuild the utility is undertaking after the devastation of Hurricane Maria. Those costs are covered by FEMA.

The short-term loan, which Swain approved after denying a $1 billion request because it lacked adequate documentation, exposes some core problems. PREPA remains unaudited. Its cash flow records are confusing and incomplete. And the loan comes from Puerto Rico’s government, which is bankrupt and obviously in no position to be lending out hundreds of millions of dollars every few months. Such central-government lending only perpetuates out-of-control practices that put Puerto Rico beyond the brink to begin with.

Swain has kept PREPA on a short leash, which is not a bad idea, because it means PREPA must come back for additional resources sooner rather than later, which means in turn that it must show some accountability — a standard it is perfectly capable of meeting.

Keeping Puerto Rico on a short leash until it proves accountability

Posted in: IEEFA In the News

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