Puerto Rico water rates expected to increase in January 2018

http://www.elnuevodia.com/english/english/nota/waterhikemustgenerate1020million-2320291

Water hike must generate $1,020 million

The AAA is developing several rate models it will submit to the Oversight Board

Friday, May 12, 2017 – 9:39 AM

By Gerardo E. Alvarado León

Water hike must generate $1,020 million (horizontal-x3)
The original AAA fiscal plan established the rate increase would only affect non-residential customers. (Archivo / GFR Media)

The water rate increase slated for January –the first to be considered by the committee created by the Law on Compliance with the Fiscal Plan,– will be sufficiently high to ensure  additional income of $1,020 million for the Aqueducts and Sewage Authority (AAA, by its Spanish acronym).

That was the collections goal the Oversight Board (OB) set for the AAA as a rate increase, which adds to another $1,128 million that the public corporation will have to produce as a result of the debt restructuring process.

“To the extend that we can improve on the numbers in the renegotiation, we will lessen the rate hike. We are going to try and maximize the restructuring,” said AAA executive president, Elí Díaz Atienza.

Last April 28, when the OB certified the AAA’s fiscal plan, a 30 days period began for the public corporation to submit to the entity controlling the Country’s finances various enhanced rate models that customers will start seeing on their bills come next (fiscal) year.

Díaz Atienza hinted they’ll request an extension from the OB, as they are currently “discussing the numbers” with bondholders –both senior and junior- included in the AAA’s fiscal plan.

“This is the first step, talking to our creditors, to be sure of how much we can cover in the renegotiation of the debt. Once we have that, a sense of where the restructuring is going, the balance, we’ll then be able to model the rate schedule,” he told El Nuevo Día.

Everyone

The original AAA fiscal plan established the rate increase would only affect non-residential customers.

But, the OB determined the rate hike would apply to the 1.3 million customers of the utility.

“What the OB has asked us is to submit different rate schedules, to be applicable to every sector (residential, commercial, and industrial). They want to see the modeling of how much we are talking about in terms of the hike’s impact. We might furnish them with five or six different options for rates, depending on where we get to with the debt renegotiation,” Díaz Atienza pointed out.

Who will finally decide on the increase? this daily asked, to what the official responded that –“perhaps”– it will be the Rates and Transfers Adjustments Committee created by Law 26-2017.

It’s a committee made up of the executive director of the Fiscal Agency and Financial Advisory Authority (FAFAA), Gerardo Portela; the secretary of the Treasury, Raúl Maldonado, and the executive director of the Office of Management and Budget (OGP, by its Spanish acronym), José Iván Marrero, among whose powers include to adjust, increase or lower rates, “for the purpose o meeting the metrics established in the Fiscal Plan of the Government of Puerto Rico”.

“We are now investigating what the role of the new committee will be. In the meantime, I keep my Governing Board informed at all times, so its members are fully aware of what is on the table. The important thing now is to establish what the final figures will be, to then know what the options will be in terms of rates,” Díaz Atienza reiterated.

In terms of the options under evaluation to “mitigate” the rate hike, he mentioned the development of projects –unspecified– through public-private alliances and the implementation of energy-efficient measures. The latter being one of the main expenditures of the AAA, aside from payroll.

Forecasted

The last time the AAA increased its rates was in July 2013. Back then, the next revision was forecasted to take effect in 2018.

In 2013, the base rate rose $4, from $19.71 to $23.71. However, some customers experienced hikes of as much as $63.85 per month in addition for the same consumption.

In addition to the base rate and the water and sewage consumption blocks, the AAA launched the Regulatory and Environmental Compliance Charge (CCAR, by its Spanish acronym) –charged according to the use– and two fixed special charges –of $1 each– for “sustainability projects,” including maintenance to community systems (Non-PRASA).

The 2013 rate increase was supposed to be the source to pay for the bonds issue the AAA would use to fund its capital improvements projects. Because of the central government’s fiscal and economic crisis, the AAA never went ahead with the transaction.

Consequently, the AAA used and depleted its operating funds to cover its infrastructure projects, many of which are now paused.

 

 

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