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Senate OKs comprehensive energy subsidies reform

PREPA's finances are covering some $137 million in subsidies. (Credit: © Mauricio Pascual)

PREPA’s finances are covering some $137 million in subsidies. (Credit: © Mauricio Pascual)

The Senate approved Monday Bill 1256, which proposes overhauling energy subsidies and obliges the government to pay its debts to the Puerto Rico Electric Power Authority.

The “Law to reform electricity service subsidies and [establish] payments of arrears by Commonwealth agencies and public corporations” proposes a new legal framework for energy subsidies, so that they are on a par with the island’s economic and fiscal realities, said the bill’s author, Sen. Ramón Luis Nieves.

The measure amends and imposes oversight controls on current energy subsidies, and proposes that any subsidy approved prospectively for electricity and water services must have a source of repayment other than PREPA or its subscribers. It also creates mechanisms for the government and public corporations to start paying their debts, which stood at $270 million as of last year.

“Today is a historic day. The Senate began paving the way for the Legislature to take responsibility for energy subsidies that were created and have been mismanaged for decades,” Nieves said.

“After an intense yearlong legislative process, we approved a major step that addresses the precarious fiscal situation being experienced by PREPA, and in turn lifts the burden from unsubsidized customers to fund so-called legislated subsidies,” said Nieves, who chairs the Senate’s Committee on Energy and Water Resources.

“For decades, the Legislature approved subsidies to benefit sectors such as manufacturing, tourism, public housing, churches and nonprofit entities without establishing clear parameters in terms of duration, results and oversight, and above all, without considering their long-term effects on the finances of both PREPA and unsubsidized subscribers,” the lawmaker added.

The subsidies had a cost of nearly $82 million as of 2013, according to PREPA. This cost is coupled with the impact of industrial subsidies, which exceeds $30 million annually, and the $25 million debt public housing residents have with PREPA.

The senator from San Juan also said the bill reflects the proposals and agreements reached with affected sectors.

He also stressed the urgency of approving the bill in both legislative branches during this session, “so the savings this legislation proposes can be included in the tariff review that concludes this year, to protect the island from a rate hike.”

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This story was written by our staff based on a press release.

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