Nearly half of Puerto Rico’s residents will be exempt from paying a proposed charge to support the restructured Puerto Rico Electric Power Authority bonds, the Puerto Rico Oversight Board said.

The amended proposed PREPA plan of adjustment, filed Thursday, calls for a monthly fixed $13 fee and a volume-based charge for use up to 500 kilowatt-hours per month, from which lower income residents would be exempt. They would still have to pay 1.5 cents per kWh for use above that level.

Users who do not qualify as low income would have to pay the $13 monthly fee, a 0.75-cent per kWh charge for use up to 500 kWh per month, and the same 1.5 cents per kWh charge for use above 500 kWh.

“The plan seems to cover all of the political bases, especially in terms of the exemption from the legacy charges,” said Joseph Krist, publisher of Muni Credit News. “It at least acknowledges the economic and political realities. Everyone needs to move on from the bankruptcy.”

Attention needs to focus on “the physical operation and status of the system,” Krist said. “Without real changes in the provision of electricity on the island (microgrids, renewables), the effort to raise the capital needed for development of the grid will come to naught. The process has already wasted too much time.”

Puerto Rico Gov. Pedro Pierluisi said the Puerto Rico Energy Bureau has the right to approve any changes in electric charges.

Pierluisi said due to the hiring of Genera PR to manage electric generation, “PREPA’s costs will be reduced, so this restructuring will not necessarily result in an increase in electricity costs,” a message he said he would deliver to the U.S. District Court for Puerto Rico, which is overseeing the bankruptcy.

The charges in the amended plan are provisional and may change when bankruptcy Judge Laura Taylor Swain rules on the lien challenge and the plan of adjustment, Puerto Rico Attorney John Mudd said.

Puerto Rico Clearinghouse Principal Cate Long said the current proposed plan of adjustment was “unconfirmable” because it is not in the best interest of the creditors.

“It’s very difficult to see how the Title III [bankruptcy] court can allow the board to prevail in argument that PREPA bonds are now unsecured by the revenues of the corporation which were properly pledged according to the requirements of the Uniform Commercial Code and the bankruptcy code,” Long said. “What is unclear is the remedy the court will impose on the board. Will the court just determine the disclosure statement is inadequate and tell the board to begin again?”

The average person not subsidized would see a $19 increase in their monthly charges, according to the board. The average user in the United States uses 886 kWh per month, according to the U.S. Energy Information Administration. Using that figure, average not subsidized residential users would pay $28.33 per month more.

The proposed plan also has varying connection charges and usage rates for businesses, depending on their size.

In determining the charges, the board considered how much residents pay for electricity as a share of their income, the risks PREPA faces from volatile fuel costs, the need for money to invest in upgrading PREPA’s infrastructure, and the potential for people to switch to alternative forms of energy, the board said.

“Customers are not to blame for PREPA’s bankruptcy,” said Board Chairman David Skeel.

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