The finances and operations of the Puerto Rico Electric Power Authority (PREPA)—a public power utility owned by the Commonwealth of Puerto Rico—have attracted serious concern for many years. High electricity prices and the unreliability of the electricity grid resulting from underinvestment in and poor maintenance of the island’s generation, transmission, and distribution infrastructure have hindered the island’s economy and the well-being of its residents. Public corporations have been central to Puerto Rico’s economic development and have issued most of Puerto Rico’s public debt. In 2014, frustration with PREPA led Puerto Rico to enact an energy policy reform (ALIVIO; Act 57-2014). At the time, PREPA was struggling to pay its fuel costs. In August 2014, it reached an agreement with creditors to maintain its access to fuel and accepted an outside manager. Federal courts struck down a 2014 local bankruptcy law that sought to reduce PREPA’s debts. In 2015, the Puerto Rican governor stated that its debts were “unpayable.” In 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187) established a Financial Oversight and Management Board (FOMB or Oversight Board) and two processes (Titles III and VI) to restructure Puerto Rico’s public debts, including the $9 billion PREPA owed. The Title III process draws on the U.S. Bankruptcy Code. The Title VI process resembles sovereign debt workouts. In July 2017, the Oversight Board rejected the existing agreement with creditors and initiated a Title III debt restructuring process. While major portions of the island’s debts have been restructured, PREPA’s debt restructuring process continues. In September 2017, Hurricanes Irma and María hit Puerto Rico and exposed widespread weaknesses in PREPA’s operations. Most of the island remained without electric power for months afterward. In 2020, earthquakes and the COVID-19 pandemic created new challenges and delayed the debt restructuring process. Congress provided substantial funding for PREPA’s recovery and rebuilding. The recovery and rebuilding effort of the island’s energy infrastructure have involved many Puerto Rican public entities and several federal agencies. In 2018, Puerto Rico enacted a measure to privatize PREPA’s grid and its power generation assets. LUMA, a U.S.-Canadian joint venture, took over the grid in June 2020. In July 2023, Genera PR, a unit of New Fortress Energy, began operating PREPA’s non-hydropower generation plants. Jenniffer González Colón, Puerto Rico’s governor since her January 2025 inauguration, has sought to end LUMA’s contract, which engendered several lawsuits. LUMA claims it has made progress, but blackouts remain frequent. In July 2025, LUMA petitioned the Puerto Rican Energy Board (PREB) to conduct a new rate review. PREB issued a new rate tariff in April 2026. In 2019, the Oversight Board negotiated a third proposed agreement within the Title III process with creditors and Puerto Rican officials, which envisioned swapping old PREPA debt for two sets of new bonds, special treatment for certain insured bonds, and a transition charge applied to all electricity consumers. In 2022, however, negotiations stalled. In December 2022, the Oversight Board proposed a plan offering $2.6 billion to creditors. In March 2023, the Title III district court held that creditors’ claims were severely limited. In June 2024, a federal appeals court held that creditors had a secured interest in PREPA’s net revenues. In March 2025, the Oversight Board issued a new proposal. Creditors asked to file an administrative expense claim that was denied, but has been appealed. In April 2026, the Title III court allowed a narrow claim to proceed to determine what net revenues PREPA had earned. In June 2026, the Oversight Board proposed another plan, which creditors rejected. In August 2025, the President attempted to dismiss six of the seven Oversight Board members. A federal judge issued a restraining order, holding that the board members “have never been properly removed from office.”
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