Proposed Adjustment in Electricity Rate to Cause Closure of Over 100 Businesses in Puerto Rico, Study Finds
A recent study conducted by economist José Caraballo Cueto has concluded that the proposed adjustment in the electricity rate to cover the payment of the restructured debt of the Electric Power Authority (PREPA) in Puerto Rico will have dire consequences for the business sector. The study, commissioned by the Select Supermarket chain, reveals that the current cost of energy in Puerto Rico’s businesses is five times higher than that of the United States.
According to the study, if the adjustment in the rate is approved to cover the proposed payment to PREPA bondholders, there will likely be more increases in food prices, significant job losses, and a potential bankruptcy of 180 businesses. This adjustment in the electricity rate will particularly impact supermarkets, as it will reduce sales of food and other products while increasing operational costs.
Puerto Rico currently ranks as the second most expensive place for businesses in terms of energy costs, surpassed only by Hawaii. However, when taking into account that the household income in Puerto Rico is less than half that of the United States, the cost of energy actually becomes five times more expensive.
Caraballo Cueto estimates that the legacy cost proposed by PREPA’s Debt Adjustment Plan (PAD) would increase supermarkets’ monthly electricity bills by $1,700 to $2,300. This additional charge on the electricity bill for 35 years to pay off the debt could have a substantial impact on the ability of Puerto Rican households to afford essential food items and maintain food security.
The study highlights the significance of the commercial sector in Puerto Rico’s economy, with 24% of employees working in this sector. Therefore, the closure of businesses as a result of the proposed adjustment in the electricity rate would reverberate throughout the economy.
Caraballo Cueto recommends that the Fiscal Oversight Board eliminate the legacy charge, even if it means extending the expiration of the Debt Adjustment Plan or providing a greater prompt. The Select Supermarket chain presented this study before the Bankruptcy Court to substantiate their objection to the approval of the Debt Adjustment Plan.
Ariel Torres, President of the Board of Directors of Supermercados Selectos, expressed concern over the implications of the proposed payment to bondholders, stating that it would jeopardize businesses, employment, and access to food. Mayreg Rodríguez, the Executive Director of the supermarket chain, stressed the importance of analyzing the findings of the study before approving a plan that could have a lasting impact on Puerto Rico for 35 years.
The study was presented during a convention held by Supermercados Selectos and included a forum to discuss the results with the participation of Dr. David Sotomayor, an academic from the University of Puerto Rico, and representatives from various organizations.
This latest study sheds light on the potential negative consequences of the proposed adjustment in the electricity rate, highlighting the urgent need for viable solutions that prioritize the economic well-being and food security of Puerto Rico.