Puerto Rico Electric Power Authority Rate Restructuring Expert Witness Services

The Puerto Rico Electric Power Authority (“PREPA”), an electric service provider to 1.5 million customers in Puerto Rico, has not had a rate increase in over twenty-five years.  PREPA’s financial position has been eroded through legislated subsidies and tariffs, as well as a declining economy and load profile (due to the additions of renewable energy resources). PREPA has been operating under a forbearance agreement since 2014 under which its creditors have agreed not to force it into bankruptcy while it explores ways to pay its overdue debt.   The company’s balance sheet has eroded to the point that it currently has negative equity.

Concentric Vice President, Ralph Zarumba, and his former consulting firm are assisting PREPA in their first rate case filed under an independent regulator, the Puerto Rico Energy Commission (“PREC”).  Mr. Zarumba’s team is responsible for the determination of PREPA’s revenue requirements, conducting embedded and marginal cost of service studies, and a redesign and restructuring of PREPA’s rates including the development of a proposal for a Formula Rate Mechanism.

In a separate proceeding, Mr. Zarumba also supported the development of a Transition Charge that will fund a Special Purpose Vehicle corporation which is proposed to assume the majority of PREPA’s debt in a restructuring arrangement.

Mr. Zarumba has sponsored testimony on behalf of PREPA related to the Transition Charge associated with the Special Purpose Vehicle corporation, pricing design, marginal cost of service, embedded cost of service, and the provisional interim rate increase. To date, Mr. Zarumba and his former firm have been successful in making two rate filings, one for a Special Purpose Vehicle transition charge, and one for a full rate case.

At this point in the regulatory process, the Commission has approved a provisional interim rate increase. The full rate case will be heard in late November through December of this year, and issuance of a Final Order on the rate case in January, 2017.

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