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PREC Denies National Public Finance Guarantee Corporation Petition

San Juan, Puerto Rico- The Puerto Rico Energy Commission (PREC) issued a resolution today denying a petition for rate review and establishment of temporary electricity rate filed on September 17, 2015 by the National Public Finance Guarantee Corporation (National), the successor in interest to MBIA Insurance Corporation and insurer of payment of principal and interest of nearly $1.4 billion dollars of bonds issued by the Puerto Rico Electric Authority (PREPA), said PREC.

National requested the PREC to order the consolidation of its Petition with the matter of the rate review of the Puerto Rico Electric Authority to establish a temporary base rate increase of at least 4.2 cents per kilowatt hour over PREPA’s existing rates while the Commission’s rate review is pending; to order PREPA to respond to the Petition within fourteen days of service, and to complete the consolidated rate review proceeding within four months of the filing of National’s Petition.

On May 29, 2015 the PREC issued a First Order on Rate Case Proceeding (First Order) stating, among other things, that the Commission will issue a regulation on rate filing requirements to insure it has the information needed to establish just and reasonable rates. On July 24, 2015 the PREC enacted Regulation 8620, known as Regulation on Rate Filing Requirements for PREPA. Its purpose is to establish the information PREPA must include in its formal application proposing new rates to ensure that the Commission has all the elements it needs to fulfill its statutory mandate to approve just and reasonable rates.

Any rate review by the PREC, including a temporary rate, must be based on sufficient substantial evidence assessed in an adjudicatory proceeding. In its rate review process, the Commission must thoroughly evaluate PREPA’s entire financial and operational condition in order to be in a position to approve rates. This must include detailed information related to PREPA’s plant investment, income statements, financial statements, projections and forecasts, and the cost of service, among other things.

The information submitted as part of National’s Petition does not meet the standards and submission requirements set forth on Regulation 8620. As a consequence, it does not constitute sufficient evidence to substantiate National’s request for a temporary base rate increase. The information provided by National is mostly focused on PREPA’s obligations to its bondholders and creditors, which does not represent PREPA’s entire financial condition. Furthermore, the provided information is not final nor it is necessarily representative to the costs PREPA will face in the “rate year”, the first year in which PREPA’s new rates will go into effect, as defined on Regulation 8620. Therefore, National’s request for a temporary base rate increase was denied.

In relationship with National’s request to set a completion date for the rate review proceeding, the PREC will not establish such date at this time. As stated in the First Order, the Commission will establish procedural dates, including the dates for technical and public hearings, after it has received PREPA’s formal application and has determined that it is complete. Once this is determined, the PREC will issue an order inviting organizations and individuals wishing to participate in the technical hearings, to submit a petition to intervene by a specified date. The PREC encouraged National to use this mechanism in order to have an active participation in the rate review process as an intervening part. Petitions to intervene must comply with the Uniform Administrative Procedure Act.

On the other hand, in terms of National’s request to order PREPA to respond to the Petition within fourteen days of service, in light of PREC’s determination in the present Resolution, is unnecessary to require PREPA to respond to each point in National’s Petition. Moreover, National’s notice of service to PREPA about the filing of the Petition is contrary to the provisions of PREC’s regulations and, therefore, null and void.

And finally, since the Commission has denied each of National’s requests, there is no remaining issue to consolidate with the existing rate review procedure. If National is not satisfied with the PREC determination, it may file a motion for reconsideration before the Commission.

The Resolution is available on the website of the PREC. You can access it by visiting the following link: National Public Finance Guarantee Corp. (Petitioner) v. Puerto Rico Electric Power Authority (Respondent).

As the PREC is currently working on the rate review case, for ethical reasons and to maintain the impartiality and purity of this adjudicative process, its members –President, Agustín Carbó Lugo, Esq., and its two Associate Commissioners, Ángel Rivera de la Cruz, PE and Edison Aviles-Deliz, PE, Esq., PE– will not be making any public statements, judgments or opinions other than those stated on this Press Release.

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The Puerto Rico Energy Commission (PREC) was created by Act 57, also known as: “Act for the Transformation and Energy Relief of Puerto Rico. The Commission will have the power, among other issues, to: regulate energy companies and approve and revise rates or charges charged by such companies for any matter directly or indirectly related to the rendering of electrical services; ensure prices in power purchase agreements, wheeling rates and interconnection charges are fair and reasonable; regulate wheeling of energy; revise and approve minimum technical requirements and additional technical requirements for the interconnection of distributed generators and oversee compliance with the same; and set standards for facilities or plants of generating electric companies to guarantee efficiency and reliability of electric service in accordance with industry best practices and oversee compliance with such standards.

The Commission is integrated by a president and two associate commissioners. It is located in the World Plaza Building, Muñoz Rivera Ave. 7th Floor, Ste. 702, Hato Rey. The Commission’s website is: www.energia.pr.gov.

Contact for the press:

Marilyn Vicens

Communications and Press Office Director

PREC

787-297-4762

mvicens@energia.pr.gov