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Fiddler González & Rodríguez, P.S.C., P.O. Box 363507, San Juan, PR 00936-3507. Our fax (787) 759-3108.
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Eduardo Negrón Navas
Juan Carlos Gómez Escarce
María L. González Hernández
Pedro J. Reyes Bibiloni
On October 4, 2013, Bill 1456 was introduced in the House of Representatives to create the Puerto Rico Power Corporation (the Corporation), and to transfer the assets and liabilities of the Puerto Rico Electric Power Authority (PREPA) to said Corporation. Among PREPA’s assets to be transferred are the electric power generation, transmission, distribution and electricity sales infrastructure. The Corporation will be a public corporation and a governmental entity autonomous from the Commonwealth of Puerto Rico, controlled by its Governing Board. Bill 1456 has provisions for the organization and composition of the Corporation’s Governing Board, which is required to hold a public meeting once a year to address questions from citizens and clients. Bill 1456 requires the Corporation to develop a public policy that: (1) eliminates the dependency on fossil fuels; (2) encourages the use of natural gas and renewable energy sources (such as hydroelectric, eolic, solar, biomass, and marine sources); and (3) reduces electric power costs to Puerto Rico inhabitants.
Bill 1456 introduces the figure of the Generator, defined as the owner of a power plant acquired or installed (pursuant to this law, if enacted), who delivers all or part of the electricity it produces to the Commonwealth of Puerto Rico transmission and/or distribution networks. Generators could directly negotiate and execute power purchase agreements with “distributors” and “large users”. The construction of power plants and their integration to the interconnection and transmission networks will be allowed. Generators shall comply with the technical requirements adopted by the Corporation and conduct the works necessary to connect their installations to the interconnection grid. The Bill proposes two forms of interconnection: the free mode (the Generator is not limited to a fixed energy supply, and is subject to the market demand), and the regulated mode (theGenerator enters into agreements with companies or non-regulated users for a fixed energy supply, during a fixed period of time and a fixed hourly schedule).
The Bill introduces the concept of resale of electricity, and defines terms such as tariff and wholesale tariff. Theresale of electricity occurs when a client of the Corporation sells all or part of the power the client purchased from the Corporation.
Tariff is the price structure for electric power services adopted through regulation by the Corporation after itstariff proposal is evaluated and approved by the Public Utilities Regulatory Board (the PURB), a governmental entity proposed under House of Representatives Bill 1457, discussed below. Tariffs will be based on the type of client, the connected load and the voltage at the point of delivery. Tariffs will not include any subsidies granted by law, costs not related to the production, transmission and distribution of electricity, and costs associated to subsidiaries, other companies or entities. Wholesale tariffs are the tariffs imposed to non-residential clients for a connected load equal to or higher than 50 kVA, which voltage at the delivery point is for primary distribution, sub-transmission or transmission.
Bill 1456 proposes that the Corporation’s Improvements Plan be approved by the PURB. The Bill proposes to eliminate the current practice of reporting clients to the Credit Bureau for failure to pay the bills unless failure to pay shows a pattern to defraud the Corporation. Bill 1456 incorporates provisions for bidding procedures, bidders’ registration, emergency purchases, issuance of bonds, and syndication procedures and other provisions in case the Corporation fails to pay bonds’ principal and interests.
PUBLIC UTILITIES REGULATORY BOARD BILL FILED
On October 4, 2013, Bill No. 1457 was introduced in the House of Representatives to create the PURB, and to repeal Act 213-1996 which created the Puerto Rico Telecommunications Regulatory Board. The PURB will be a specialized government entity created to oversee public utilities. The PURB will exert jurisdiction over telecommunications, cable TV and electric power generation operations in Puerto Rico. The Bill states that the PURB jurisdiction could be extended to other public utilities in the future. Bill No. 1457 empowers the PURB to promulgate regulations to guarantee access to public utility services and their efficient operation; promote competition; promote a cost-based pricing approach; eliminate subsidies; protect the public interest; and promote and allow access to the energy system.
The PURB will have the authority to evaluate and approve proposals presented by the Energy Resources Corporation (the successor of PREPA as proposed by Bill No. 1456), to establish, modify, impose and charge tariffs, and those related to the interconnection and access to the transmission and distribution electric systems. Also, the Board is empowered to impose fines up to $25,000 per day per violation, issue information requests, serve as the administrative review Board for controversies between energy generators and the Energy Resources Corporation, and to impose an annual charge of not more than 0.25% of a regulated entity gross annual income, among other powers.
The Board will be comprised of five commissioners appointed by the Governor, and subject to senate confirmation, with initial terms ranging from one to ten years, and their successors for terms of six years.
PROPOSAL TO CREATE ENERGY REFORM SPECIAL COMMISSION
On October 4, 2013, Resolution 720 was introduced in the House of Representatives to create the Puerto Rico Energy Reform Special Commission (the Special Commission). Its members would include the President of the House of Representatives and five Representatives appointed by the President. The Special Commission shall study, analyze, prepare and report any investigation, resolution or project of law related to the supply of electric energy at the most economic cost. The Special Commission will have the authority and prerogatives allowed by the House of Representatives’ regulations governing permanent commissions. The Resolution was sent to the House of Representatives Internal Affairs Commission.
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