Spotlight on Puerto Rico: PREPA Chief Skips Congressional Hearing; Committee opens door for PROMESA revisions

By Jennice Fuentes / Fuentes Strategies

Electric Power Authority (PREPA) Executive Director Ricardo Ramos was scheduled to testify before the House Natural Resources Committee on Tuesday. However, late Monday night Ramos sent a letter to Chairman Rob Bishop (R-UT) notifying him that he would not be in attendance, citing the need to help PREPA rebuild the Island’s electricity system. San Juan Mayor Carmen Yulín Cruz also declined to testify. Cruz had traveled to Washington, D.C. last week to testify before the House Homeland Security Committee, only to have the hearing canceled; that was the second time that a Congressional Committee has canceled a hearing where the Mayor was to testify.

During his opening statement, Bishop lamented the absence of PREPA chief Ramos and indicated that there would be a follow-up hearing next week with the Governors of Puerto Rico and the U.S. Virgin Islands as the key witnesses. Bishop also said that the relationship between the Federal Emergency Management Agency (FEMA), the Army Corps. of Engineers, the Fiscal Oversight Board (FOB), and the Government of the Commonwealth could not be adversarial. He said that the Board “isn’t going anywhere until their job is done” and that the parties needed to work together for the benefit of the Island. Chairman Bishop and Ranking Member Raúl Grijalva (D-AZ) also expressed concerns about the controversial Whitefish Energy company’s $300 million contract, which was recently canceled by PREPA.

FOB: Puerto Rico could need up to $21 billion in new liquidity to avoid government shutdown

The House Resources Committee hearing also featured testimony from FOB Executive Director Natalie Jaresko, Revitalization Coordinator and designated PREPA Chief Transformation Officer Noel Zamot, and New Progressive Party (NPP) Guaynabo Mayor Ángel Pérez. Jaresko testified that contrary to the original Fiscal Plan approved earlier this year by the Board, where no new federal cash infusion was contemplated, the new plan will need to consider federal disaster relief funding transfers, the recent $4.7 billion FEMA loan for the Commonwealth, and additional liquidity assistance that she requested from the federal government. Jaresko said that without federal grants or loans of approximately $13-21 billion, between now and 2019, Puerto Rico might not have enough money to operate its government.

Zamot and Jaresko both hinted that new powers would be necessary for the FOB to do a more efficient job, although it remained unclear exactly what those new powers would be. Jaresko also said that it was very difficult for Puerto Rico to be able to pay its debts in full before the Hurricane and that is only more difficult now that the economy has been severely battered by the storm, with businesses unable to operate and workers migrating to the U.S. mainland as a result of conditions on the Island.

Puerto Rico Senate rejects Zamot appointment

The Senate of Puerto Rico approved a resolution rejecting the appointment of Noel Zamot as Chief Transformation Officer of PREPA. Zamot is currently the Revitalization Coordinator, a position created by the PROMESA federal law to fast-track “priority” infrastructure projects. The NPP majority, along with Puerto Rican Independence Party (PIP) Senator Juan Dalmau and Independent Senator José Vargas Vidot, all voted for the resolution. Popular Democratic Party (PDP) minority senators voted against the measure. The NPP stated that the FOB’s installment of Zamot as the de facto head of PREPA is an overreach of their powers. Federal Judge Laura Taylor Swain, who was appointed by Supreme Court Chief Justice John Roberts to preside over Title III restructuring cases, still needs to approve the appointment. PDP Minority Leader, and former Senate President, Eduardo Bhatia, stated that he voted against the measure because, even though the appointment of Zamot was a “colonial” move, he believes it is a necessary step to restore the Commonwealth’s credibility.