P.R. Laws tit. 22, § 1054x-1
(a) For purposes of this section, the following terms shall have the meaning set forth in Chapter VI of the Electric Power Authority Revitalization Act: (i) Corporation; (ii) Transition Charges; (ii) Adjustment Mechanism; (iv) Restructuring Bond; (v) Restructuring Resolution; (vi) Financing Costs; (vii) Ongoing Financing Costs; (viii) Transition Charge Revenues; (ix) Servicer; (x) Servicing Agreement; (xi) Upfront Financing Costs; (xii) Customer; and (xiii) Restructuring Property.
(b) Prior to the issue of any Restructuring Bond, the Corporation shall submit a request to the Commission asking the latter to issue an order or resolution (Restructuring Order) whereby the Commission shall conclude and determine the following:
(1) That the clauses of the restructuring resolution, including the calculation methodology for the transition charges and the adjustment mechanism, are consistent with the criteria provided in subsection (d) of this section, and are sufficient and provide the proper protection for full and timely payment of restructuring bonds, in accordance with the terms thereof, and other ongoing financing costs;
(2) that the proposed upfront financial costs and the ongoing financial costs, to be recovered from the revenues of the Restructuring Bonds and from the revenues of the transition charge are consistent with this section and Chapter IV of the Electric Power Authority Revitalization Act, and
(3) that the proposed service charges, to be recovered by the Authority in its capacity as initial Servicer are necessary, reasonable, and sufficient to compensate the Authority for the incremental costs of discharging its functions as servicer.
(c) The request shall include a copy of the initial restructuring resolution proposed, which shall be consistent with the provisions of this section, section 34, and Chapter IV of the Electric Power Authority Revitalization Act, and shall include the documents listed in subsection (e) of this section. The request shall be deemed to be complete when filed with the Commission along with all of the corresponding complementary documents. If the Commission determines that the request is incomplete, the Commission shall notify said fact to the Corporation within five (5) days, counted from the filing date, and shall identify specifically which of the information required in subsection (e) of this section the Commission deems to be missing from the request filed by the Corporation. The “Corporation’s Request Date” shall be the latest of (1) the date of filing of the request, or (2) if the Commission notifies the Corporation within said five (5)-day term requiring the Corporation to furnish information that was not included in the request, seven (7) days after said request, even if the Commission requests additional information.
(d) The methodology to calculate the transition charges and the adjustment mechanism included in the restructuring resolution shall (i) be designed to provide for full and timely payment of restructuring bonds, in accordance with the terms thereof, and other ongoing financing costs, and (ii) satisfy the following criteria to allocate the financing costs among the customer classes and to calculate and adjust the transition charge:
(1) The portion of the financing costs to be recovered from each customer class shall be calculated based on the energy usage history (kWh) data for each class of customers during the twelve (12) most recent months for which such information is reasonably available, as such information is provided by the Authority to the Corporation and the Commission, and in a manner that is practical to administer and would ensure full and timely payment of the restructuring bonds, in accordance with the terms thereof, and other ongoing financing costs;
(2) Once the portion of the financing costs to be recovered from each customer class is calculated, the transition costs for customers shall be based on the energy usage history (kWh) data for each class of customers during the twelve (12) most recent months for which such information is reasonably available, as such information is provided by the Authority to the Corporation and the Commission; Provided, That the Corporation may choose to calculate the transition charges for residential customers based on service agreements, calculated in a manner that is practical to administer and would ensure full and timely payment of the restructuring bonds, in accordance with the terms thereof, and other ongoing financing costs; Provided, further, That the allocation of the responsibility of the transition charges among customer classes and customers does not impair the discretion of the Commission when evaluating the allocation of the responsibility with respect to revenue requirements of the Authority in any rate case.
(3) Delinquency of any class of customers, for any period, shall be added to the revenue requirement for the next period and shall be allocated among all customer classes, as provided in clauses (1) and (2) of this subsection. The Commission shall require the Authority (or any other servicer) to show that the Authority (or any other servicer) has been prudent in addressing late payment, overdue bills, and non-payment issues; provided, that it is determined that the finding of imprudence does not affect the first sentence of this clause.
(4) When calculating customer’s energy usage under clauses (1) and (2) of this subsection, the Corporation may choose to include the estimated load served by net metering or distributed generation (“behind the meter”), if the methodology for such an inclusion is practical to administer, and would ensure the full and timely payment of the restructuring bonds in accordance with the terms thereof and other ongoing financing costs.
(e) The request shall include the following:
(1) A model restructuring resolution that includes:
(A) A description and documentation supporting the upfront financing costs and the proposed ongoing financing costs, to be recovered from the revenues of the restructuring bonds or the transition charges, as the case may be;
(B) The determination of customer classes among which the ongoing financing costs shall be allocated and the allocation of the ongoing financing costs among customer classes;
(C) the calculation of transition charges for customers (excluding residential customers) based on energy usage history (kWh) data along with sufficient information to allow the Commission to reproduce said charges;
(D) the calculation of transition charges for residential customers based on energy usage history (kWh) data, or at the discretion of the Corporation, based on the service agreements, along with sufficient information to allow the Commission to reproduce said charges;
(E) a provision that delinquencies of any customer class shall be allocated among all customer classes as provided in paragraph (B) of this clause and included in the adjustment mechanism;
(F) the Corporation’s determination of whether it shall include the estimated load served by net metering or estimated distributed generation (“behind the meter”) in determining energy usage in accordance with paragraphs (B), (C), and (D) of this clause and in the adjustment mechanism. If the Corporation determines to include the estimated net metering or estimated distributed generation in determining energy usage in accordance with paragraphs (B), (C), and (D) of this clause, an explanation of the reasons and the determination (with its corresponding justification) stating that the administration of the resulting transition charge shall be practicable and that the resulting transition charge shall ensure full and timely payment of the restructuring bonds in accordance with the terms thereof and other ongoing financing costs, during the effective term of the restructuring bonds;
(G) the Corporation’s determination, along with the corresponding explanations, regarding the practicality of the allocation or calculation (as the case may be) with respect to the provisions of paragraphs (B), (C), (D), (F), and (G), as the case may be, of this clause, to administer and ensure full and timely payment of the restructuring bonds in accordance with the terms thereof and all other ongoing financing costs, during the effective term of the restructuring bonds;
(H) a commitment, enforceable by the Corporation, establishing that not later than ten (10) days, counted from the date of issue of the restructuring bonds, the Corporation shall file, or ensure that the servicer files with the Commission, for information purposes only, a report stating in detail the final terms and conditions of the restructuring bonds, and establishing the final estimate of the upfront financing costs and the estimate of the ongoing financing costs during the effective term of the restructuring bonds;
(I) a commitment that (i) the Corporation shall provide the Commission with a copy of a successor servicing agreement, for information purposes only, and that (ii) the Corporation shall file or ensure that the servicer files with the Commission any report prepared by the servicer, including any notice of any proposed adjustment to the transition charges, on the same date that said notice is submitted to the Corporation (such report shall state in detail all the ongoing financing costs that are paid from the transition charges in a recurring manner);
(J) a commitment, enforceable by the Commission, that any report that must be filed with the Corporation by the Trustee of the restructuring bonds shall also be filed with the Commission on the same date such reports are filed with the Corporation;
(K) a commitment, enforceable by the Commission, that (i) the Corporation and the servicer shall file a joint report with the Commission, not later than March 1st of each year, stating, with respect to the previous calendar year, the balance of the principal of the restructuring bonds, any sum in connection with said bonds that was paid during said calendar year, and the remainder of ongoing financing costs payable during said calendar year; and (ii) after the final and full payment of the restructuring bonds and any financing costs, the revenues of the transition charges deposited in, or to be received in the future by the trustee, shall be credited and refunded to customers as prescribed by the Commission, and the Corporation shall furnish any final accounting reports requested by the Commission; and
(L) a commitment, enforceable by the Commission, that any notice of a proposed adjustment to the transition charges, including the data or any work product used to calculate the transition charge, shall be delivered by the Corporation or the servicer to the Commission at least thirty (30) days before the proposed effective date of the adjustment; provided, that (i) notwithstanding the thirty (30)-day term provided in this paragraph, any information related to the initial transition charge shall be submitted not later than three (3) business days after the valuation or award of the restructuring bonds and said initial transition charges shall take effect on the date of issue of the restructuring bonds; (ii) the Commission’s review of the initial transition charges or any adjustment to the transition charges shall be limited to the verification of the mathematical accuracy of the calculation methodology used for the initial transition charges or the adjustment mechanism (as the case may be); and (iii) if the Commission determines that the calculation methodology for the initial transition charges or any adjustment to the transition charges is mathematically inaccurate, any adjustment to correct the mathematical inaccuracy as directed by the Commission shall be made by the Corporation not later than the following application of the adjustment mechanism as provided in Chapter IV of the Electric Power Authority Revitalization Act.
(2) The energy usage history (kWh) data of each customer class that serves as the basis for the allocations set forth in paragraphs (B), (C), and (F) of subsection (e)(1), as the case may be, certified by an Authority’s officer.
(3) A report prepared by an independent financial consultant with recognized expertise in public electric utility corporations financing, whose representative shall testify before the Commission to support said report, in accordance with clause (9) of this subsection, stating the energy usage history (kWh) data, the projections of ongoing financing costs and transition charges during the effective term of the restructuring bonds, and any material assumption used in the report, and concluding that such transition charges have been calculated as provided in paragraphs (B), (C), (D), and (F) of subsection (e)(1), as the case may be, and in accordance with the assumptions included in such report, which shall ensure full and timely payment of restructuring bonds, in accordance with the terms thereof, and all other ongoing financing costs, during the effective term of the restructuring bonds.
(4) A breakdown of the estimates of (A) the upfront financing costs related to the issuance of the restructuring bonds, and (B) the estimate of the ongoing financing costs to be incurred during the effective term of the restructuring bonds, along with any estimate of the resulting transition charges and the estimated proportion that the total transition charges bear to the total customer charges.
(5) An exercise showing that the proposed transaction is expected to comply with the savings requirements set forth in Section 35 and Chapter IV of the Electric Power Authority Revitalization Act.
(6) A duly grounded determination that the proposed servicing costs, to be recovered by the Authority as servicer, shall be sufficient to compensate the Authority for the incremental costs reasonably associated with its functions as servicer, including a copy of the proposed servicing agreement.
(7) All the projections and scenarios of resistance tests provided by the Authority or the Corporation to credit rating agencies in connection with the transition charges;
(8) To the extent that the following have not been included:
(A) Supporting documents, and non-binding estimates of:
(i) Payments of the principal of and interest on the restructuring bonds and the date of such payments;
(ii) debt service coverage requirement, if any;
(iii) issuance costs (including attorney fees, placement fees, cancelation fees, servicing fees, and any other costs or expenses);
(iv) any payment made to the United States of America to maintain or protect the tax exemption of the debt obligations of the Authority pending payment or the restructuring bonds;
(v) account deposits (including amounts deposited in connection with capitalized interest or debt service fund or reserve account, operating expenses, fund or reserve account, and deposits to PREPA’s Self-Insurance Fund; and
[(vi) any other costs not included in the above subparagraphs, related to obtaining a restructuring order, to the protection of the status of the restructured property, to the payment of transition charges, and the administration costs; and]
(B) the identification of the one-time costs (different from the ongoing costs) and an explanation of how said one-time costs shall be included in the transition charges (e.g. amortization v. one-time recovery).
(9) A written testimony, based on sworn statements (which shall include attachments and the request, or any other document furnished therewith), of one or more employees of the Corporation, or the Authority, or any agent or consultant of the Corporation or the Authority, attesting to the conclusions of fact of the request and the determinations required to be made in the documents to be filed along with the request. Such testimony shall:
(A) Describe the adjustment mechanism and the calculation methodology thereof; describe each upfront financing cost and the ongoing financing cost that are expected to be incurred;
(B) furnish an estimate, along with the corresponding explanation, of how the transition charges shall change during the effective term of the transition charge;
(C) describe the estimated proportion that total transition charges bear to total customer charges;
(D) compare the debt service and other ongoing financing costs associated with the restructuring bonds, the debt service, and other ongoing financing costs of the outstanding debt of the Authority to be financed with the restructuring bonds, and
(E) explain the projections and the scenarios of the resistance tests provided by the Authority or the Corporation to credit rating agencies in connection with the transition charge.
(10) It shall not be necessary that the draft of the restructuring resolution to be filed with the Commission includes models of any other financial document referred to in the resolution, except for the proposed model for the servicing agreement and any other document supporting the required information under this section, as required by the Commission, within a term of five (5) days after the filing of the request.
(f) The process to review a request of the Corporation shall be the following:
(1) Within one (1) business day after the request is received by the Commission, the Commission, the Authority, and the Corporation shall publish on their respective websites a summary of the Corporation’s request to the Commission drafted by the former. The Commission shall notify the public of the upcoming public hearing or hearings to evaluate the request of the Corporation at least fifteen (15) days prior to the holding of such hearings. Said notice shall include the matters to be discussed, as well as the time, date, and place of the hearing. The notice shall also comply with the following: (A) said notice shall be published in two (2) newspapers of general circulation in the Commonwealth at least twice (2) during such fifteen (15)-day period, (B) said notice shall be exhibited during such fifteen (15)-day period in the main offices of the Commission, the Corporation, and the Authority in a conspicuous place accessible to the public during regular business hours, and (C) a copy of such notice along with copies of the request, including the form of the initial restructuring resolution, and all supporting documents required to be filed along with the request shall be posted on the websites of the Commission, the Corporation, the Authority, and the Government Development Bank for Puerto Rico, safeguarding any confidential or privileged information included therein, if any.
(2) Within seventy-five (75) days after the Corporation’s Request Date, the Commission shall issue a restructuring order stating the findings and determinations related to the Corporation’s request, filed in accordance with subsection (b) of this section or as otherwise required by this section, or shall adopt a resolution rejecting the request and stating the grounds therefor. The Commission shall not limit, qualify, amend, or otherwise modify the restructuring resolution.
(3) The evaluation process to be conducted by the Commission shall be a transparent, swift, and flexible process, so that the citizens may express their opinions in writing during a specific period of time to be determined by the Commission following the process established herein. The evidence file of this procedure shall consist of the request and the documents submitted therewith, including the enclosed testimony and any other documents that the Commission deems to be relevant for this procedure. Any witnesses who have submitted testimonies shall be available to be examined by the Commission under oath on matters related to their testimony. The transcript of said examination shall be included in the evidence file.
(4) The approval by the Commission of the Corporation’s request shall be final and irrevocable on the earliest of the following: (A) the express approval by the Commission, in accordance with clause (2), above, or (B) the date on which the Commission has lost jurisdiction for failure to approve or reject the Corporation’s request, as described below. If within seventy-five (75) days after the Corporation’s request date the Commission has failed to adopt the restructuring order or has failed to adopt a resolution rejecting the request, such request shall be deemed to be approved as a matter of law, the Commission shall lose any jurisdiction over the request, and the Corporation may adopt the restructuring resolution as proposed in the request. Any party wishing to contest the restructuring order of the Commission or the Corporation’s request deemed to be approved, may do so following the process established in section 35 and Chapter IV of the Electric Power Authority Revitalization Act. In any procedure for such purposes, the court shall evaluate, taking into account the administrative file as a whole, whether the substantial evidence supports the restructuring order or the request deemed to be approved, as the case may be, and if so, the court shall uphold the restructuring order or the request deemed to be approved.
(5) Except as provided in subsection (e)(1)(L)(ii) with respect to the mathematical accuracy of the transition charges, none of the provisions of this subchapter shall authorize the Commission to approve, modify, or alter any transition payment[sic], or to approve, reduce, or alter any upfront financing costs or ongoing financing costs or to interfere with the payment thereof.
(g) In both instances, when the Commission issues a restructuring order or when a request is deemed to be approved, the Commission shall ensure that the Corporation and the Authority fulfill their obligations under the servicing agreement, including the obligation to collect carefully and diligently all late fees and charges. The Commission shall be empowered to direct the Corporation to replace the Authority as servicer, motu proprio, through an order based on substantial evidence, or at the request of the trustee of the bonds or the bondholders, if the Authority fails to comply with its obligations under the servicing agreement; provided, that the appointment of the substitute servicer meets the requirements and other conditions of the servicing agreement. None of the provisions herein shall impair the rights of the bond trustee, the bondholders, or any credit enhancement provider of the restructuring bonds to replace the servicer under the terms of any trust agreement or any other financing document related to the restructuring bonds.
(h) Costs related to the Aguirre Offshore Gasport may be financed with the Restructuring Bonds only if the Commission determines that (1) the project in question and the costs associated therewith are consistent with the integrated resource plan of the Authority, and (2) the securitization of said costs is adequate.
(i) The Corporation shall contract an independent auditor, subject to the approval of the Commission. Said auditor shall file with the Corporation and the Commission, not later than August 15th of each year, a report including a verification that the upfront financing costs and the ongoing financing costs paid from the revenues of the transition charges during the calendar preceding the report date, are consistent with the financing documents related to the restructuring bonds. Likewise, at the discretion of the Commission, the Corporation shall enter into contract with an independent entity (which could be the same auditor), subject to the approval of the Commission, which shall file with the Corporation and the Commission, not later than August 15th of each year, a reasonability assessment of costs defined as “financing costs” in Section 31 of Chapter IV of the Electric Power Authority Revitalization Act, which have been incurred in the previous year.
(j) Beginning in 2017, on April 15th of each year, the Commission shall file with the Legislative Assembly a report whereby it shall evaluate the Authority and the Corporation’s compliance with their respective obligations under this section. The Commission shall have investigative powers to fulfill its obligation to ascertain compliance by the Corporation and the Authority with the referred to obligations during the previous calendar year.
History —May 27, 2014, No. 57, added as § 6.25A on Feb. 16, 2016, No. 4, § 20.