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  HOME | Caribbean

Puerto Rican Electric Utility’s Fuel Oil Purchases under Investigation

SAN JUAN – The Senate of Puerto Rico on Monday began a series of public hearings into potential graft connected with the electric monopoly’s fuel oil purchases.

A special committee of that legislative body will hold hearings throughout the rest of January and much of February.

During the hearings, executive directors of the Puerto Rico Electric Power Authority under different administrations, former company CEOs and erstwhile members of its board of directors, as well as executives of fuel oil suppliers and others, will be called to testify.

“It’s important for all Puerto Ricans to see how different schemes and the absence of formalities and transparency in the systems for purchasing and managing petroleum by PREPA have affected electricity costs and led to the squandering of millions in public funds,” Sen. Anibal Jose Torres, the committee’s chairman, said.

PREPA charges electricity rates that are double the average on the U.S. mainland, hurting the competitiveness of companies that do business on the island. The utility’s service also is clearly deficient, with blackouts commonplace.

The troubled monopoly pays $3 billion a year for imported fuel oil, the source of 70 percent of the electricity it generates.

Among other things, PREPA has been accused by local residents and businesses of accepting kickbacks or commissions from international suppliers of fuel oil that did not meet contractual or U.S. Environmental Protection Agency specifications.

In a class-action complaint filed last February, the plaintiffs accused the company of overpaying its fuel suppliers for fuel oil and passing the cost on to customers on their regular monthly electricity bills.

The defendants included Brazilian state-controlled oil company Petrobras and a unit of Royal Dutch Shell.

The U.S. Justice Department also is conducting it own investigation into the fuel oil-purchase process within PREPA, which is on the verge of bankruptcy with a crippling debt load of some $9 billion.

The hearings come as PREPA is trying to win approval for a restructuring deal it reached last year with 70 percent of its creditors.

For the deal to be approved, Puerto Rican lawmakers must pass enabling legislation that, among other things, would allow an unpopular hike in electricity rates on the island.

 

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