Rep. Rob Bishop (R-Utah), chairman of the House Natural Resources Committee, has abandoned the sound fiscal stewardship that once made him a leader on fiscal solvency and responsible economic recovery for Puerto Rico.
Instead, Bishop has succumbed to the special-interest quagmire in Washington and is now actively promoting unsustainable policies for the battered U.S. commonwealth. Specifically, Bishop is advocating a plan to create dependency on imported natural gas alongside Wall Street-friendly policies that would essentially leave the island suffocating under a mountain of debt.
The congressman, who has previously advocated for less political interference in Puerto Rico’s recovery, is now, ironically enough, creating more. Yesterday, he called for the island’s governor to testify at a hearing before his committee this week in Washington, an event that bears close public scrutiny.
Succumbing to the special-interest quagmire in Washington.
Two years ago, Bishop shepherded through his committee the controversial PROMESA statute (Puerto Rico Oversight, Management, and Economic Stability Act) that established the federal Financial Oversight and Management Board (FOMB), a body impaneled to forge a fiscally sound path out of bankruptcy. The board is an independent, extra-governmental institution that has imposed the typical trade-off of control boards: Some political power is given up by local elected leaders in order to create a broad consensus that replaces policies that led to bankruptcy. No government has ever liked having a control board imposed on it, but most astute political leaders learn how to use them in the best interest of their people.
After the enactment of PROMESA, the job of Congress was to merely step back as the resulting budget process unfolded and to support a transition to solvency.
Puerto Rico’s path under the PROMESA board’s guidance has been rough, to say the least, in part because of congressional meddling, especially by Bishop.
Gov. Ricardo Rosselló, the FOMB, and Puerto Rico’s power authority (PREPA) had decided that renewable energy must replace PREPA’s reliance on imported oil. Since renewable energy is now cheaper than oil, natural gas or coal, such a move makes complete sense and would help the island save from $400 to $500 million per year.
That fragile high-level consensus has been thrown into doubt now by a PREPA privatization strategy that would lead to more fossil fuel dependency rather than less, and that would discourage investment in renewable energy.
The Rosselló/FOMB/PREPA consensus also concluded that PREPA’s current onerous debt load, $8 billion to bondholders and $1 billion to other creditors, was unsustainable, which is why this year’s PREPA budget and its five-year fiscal plan calls for no debt service payments. Wall Street has pushed back aggressively on this tack.
BISHOP’S PART IN ALL THIS HAS BEEN TO TAKE THE SIDE OF OIL AND GAS INTERESTS, which want to keep their annual $2 billion hold on PREPA, and to work on behalf of bondholders rather than Puerto Ricans.
His intervention, if successful, will have but one outcome: Perpetual bankruptcy for Puerto Rico.
On the energy front, it would very likely lead to implementation of policies orchestrated by companies that have been the subject of scathing oversight reports and have even attracted consumer-led class action lawsuit.
Bishop’s support for Puerto Rico’s bondholders is equally misguided. He has recently filed a petition seeking to pressure a court to overrule the budget and fiscal plan agreed to by the governor, the FOMB and PREPA.
Bishop would be of more assistance to bondholders if he would prevail upon the Securities and Exchange Commission to investigate the bond issuances and the many well-heeled interests that arranged and benefited from the reckless borrowing that bankrupted Puerto Rico. That group includes bond underwriters, lawyers, accountants, credit agencies, financial advisors, Puerto Rico’s own political and governmental establishment, and oil companies. They should be responsible for paying back the bondholders who were fleeced.
Official Washington was complicit, too, in all the winking and nodding that created Puerto Rico’s fiscal mess. A recent GAO audit that focused on the debt problems of the island makes clear that federal policy has utterly failed Puerto Rico. Where was the Congressional oversight as the commonwealth’s situation deteriorated?
It’s not too cynical to assume that so long as fossil fuel interests collected their money and bondholders got paid, Washington’s power structure was content to ignore the festering problems that Puerto Rico is struggling with today (many members of Bishop’s committee have benefitted, incidentally, from substantial fossil fuel campaign contributions).
Bishop has railed rightly against on-island political interference in Puerto Rico’s fiscal reforms. But replacing local meddling with a Washington-based fossil fuel and Wall Street policy juggernaut will only make matters worse.
Tom Sanzillo is IEEFA’s director of finance. Cathy Kunkel is an IEEFA energy analyst. This column first appeared today in the Hill.
IEEFA report: Effects of long-running oil-purchase scandal undermine privatization and contract-reform initiatives at PREPA
IEEFA update: PREPA privatization law invites more contracting scandals
IEEFA op-ed: Why the SEC should conduct the investigation of Puerto Rico’s debt obligations