Judge orders mediation to break impasse over Puerto Rico power company debt
A FEDERAL judge overseeing a drawn-out debt-restructuring process for Puerto Rico’s power company ordered all parties to mediation on Wednesday, in the latest attempt to break an impasse that has sparked widespread indignation.
The US territory’s Electric Power Authority holds more than US$10 billion in debt and other claims – the biggest of any of the island’s state agencies – and efforts to restructure it in recent years have failed, crippling the island’s ability to attract investors and leaving residents, who already pay some of the highest electric bills in a United States jurisdiction, in limbo.
“Movement is necessary to resolve this,” said District Judge Laura Taylor Swain during the two-hour hearing held in New York. “I need response with alacrity.”
Swain also imposed a two-month stay on litigation as she urged all sides to work in good faith, starting immediately, to reach a compromise.
“Please keep Puerto Rico’s people in mind as you go into this,” she said.
Swain’s decision comes nearly a month after a First Circuit appeals court in Boston restored US$9-billion worth in claims made by bondholders following the power company’s bankruptcy. But a federal control board that oversees Puerto Rico’s finances noted that the power company has no net income with which to pay bondholders.
As a result of the June ruling, Swain is tasked with determining how much bondholders would be able to collect. But first, the board and bondholders will go into mediation, with many doubtful of any result.
Shortly before Wednesday’s ruling, lead mediator Judge Shelley Chapman said it was impossible not to feel “immense frustration and disappointment” that a compromise has not been reached. She noted an ongoing lack of proposals or solutions as she urged all sides to make “modest moves”.
“The mediation team has been acutely aware of the suffering of the Puerto Rican people” as efforts to restructure the power company’s debt languish, she said.
The company’s infrastructure has continued to crumble, with chronic power outages affecting the island ever since Hurricane Maria razed the grid in September 2017 as a powerful Category 4 storm. A lack of investment and maintenance prior to the storm also has contributed to the grid’s decay.
“The electrical system urgently needs maintenance and billions of dollars of investment, beyond the federal funds available, just to provide adequate service. Diverting billions of dollars to pay bondholders will perpetuate a dysfunctional electrical system,” stated a letter from dozens of civil society groups in Puerto Rico issued on Tuesday to Swain.
The groups have rejected a proposed debt-restructuring plan that calls for yet another increase in power bills on an island whose 23.77 cents per kilowatt hours is 41 per cent higher than the average US electricity rate.
“The higher rates imposed to pay the debt, along with the unacceptably poor service, will drive business closures, lay-offs, and migration from Puerto Rico, undermining our island’s future,” the letter warned.
A spokeswoman for the board told The Associated Press that the board “will negotiate, as always, in good faith and in the interest of the people of Puerto Rico”.