CONFIDENTIAL 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF PUERTO RICO 

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO 

RICO, 

as representative of 

THE COMMONWEALTH OF PUERTO RICO, 

et al. 

Debtors. 

PROMESA TITLE III 

Case No. 17-BK-3283-LTS 

(Jointly Administered)

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO 

RICO, 

as representative of 

THE PUERTO RICO ELECTRIC POWER 

AUTHORITY, 

Debtor. 

Case No. 17-BK-4780-LTS 

This Court Filing Relates Only to 

PREPA and Shall be Filed Only in Case 

No. 17-BK-4780-LTS and Main Docket 

17-BK-3283-LTS

EXPERT REBUTTAL REPORT OF MAUREEN M. CHAKRABORTY, PHD 

MAY 15, 2023 

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TABLE OF CONTENTS 

I. INTRODUCTION ..................................................................................................................1

A. Assignment ....................................................................................................................2

B. Qualifications, Compensation, and Information Considered .........................................2

C. Dr. George’s Assignment and Opinions ........................................................................3

II. SUMMARY OF OPINIONS ..................................................................................................4

III. DR. GEORGE OVERLOOKS MATERIAL ERRORS IN THE BOARD’S 

ESTIMATION OF ADDITIONAL NET REVENUES .........................................................5

A. Dr. George Fails to Identify and Address a Material Error in the 

Board’s Estimation of Electricity Consumption, Which Results in an 

Understatement of Additional Net Revenues of More Than $3 Billion ........................8

B. Dr. George Fails to Identify and Address a Material Omission in the 

Board’s Projections of Income, Which Results in an Understatement 

of Additional Net Revenues of Nearly $1 Billion .......................................................12

C. Dr. George Fails to Identify and Address the Board’s Arbitrary 

Method of Estimating Rates for Non-Residential Customers, Which 

Results in an Understatement of Additional Net Revenues of Up to $1 

Billion ..........................................................................................................................16

D. Dr. George Misunderstands the Implications of an Understated Load 

Forecast on the Revenue Envelope, Which Results in an 

Understatement of Additional Net Revenues of Up to $564 Million ..........................18

E. Dr. George Does Not Consider Alternative Price Elasticities, which 

Increase Additional Net Revenues by Nearly $300 Million ........................................20

IV. THE LEGACY CHARGE IS AFFORDABLE TO RESIDENTIAL 

CONSUMERS OF ELECTRICITY IN PUERTO RICO .....................................................21

A. Dr. George Gives the False Impression that the Board’s Electricity 

SOW Threshold Represents the Upper Bound of Affordability ..................................22

B. Most Households That Would Pay the Legacy Charge Would Not 

Approach the Board’s Electricity SOW Threshold .....................................................28

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I. INTRODUCTION 

1. I, Maureen M. Chakraborty, submitted an expert report in the above-captioned 

matter on April 28, 2023 (the “Chakraborty Confirmation Report”).1 In that report, I discussed the 

Board’s methodology for calculating the Revenue Envelope and Legacy Charge. I also presented 

an analysis of a reasonable range of Additional Net Revenues that PREPA is capable of collecting 

from customers to repay its creditors. This analysis incorporated the considerations identified by 

the Board, including that PREPA’s rates must, at all times, be affordable to its customers, enable 

PREPA’s long-term sustainability, and account for the impact that an additional increase in the 

price of electricity could have on the demand for electricity.2 To perform my calculations, I used 

the same general methodology used by the Board but corrected certain unsupportable assumptions. 

The effect of these corrections was to increase the Revenue Envelope and the Additional Net 

Revenues that PREPA is capable of collecting through 2058. Based on my analysis, I concluded 

that PREPA is capable of collecting a net present value (“NPV”) of $13.39 billion of Additional 

Net Revenues through 2058.3

1

 See Expert Report of Maureen M. Chakraborty, PhD, In re: The Financial Oversight and Management Board for 

Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 

17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a 

representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, April 

28, 2023 (“Chakraborty Confirmation Report”). 

2

 Disclosure Statement for Modified Second Amended Title III Plan of Adjustment of the Puerto Rico Electric 

Power Authority, Exhibit P: Legacy Charge Derivation, In re: The Financial Oversight and Management Board 

for Puerto Rico, as representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 

17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as representative 

of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS (Jointly 

Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, dated March 

1, 2023 (hereafter “Legacy Charge Derivation”), p. 2. 

3

 See Chakraborty Confirmation Report, ¶ 23 and Figure 1. 

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A. Assignment 

2. Counsel for the Ad Hoc Group of PREPA Bondholders, Assured Guaranty Corp., 

Assured Guaranty Municipal Corp., and Syncora Guarantee Inc. (the “Bondholders”) has asked 

me to review and respond to certain opinions set forth in the Expert Report of Glenn R. George, 

MBA, PE, PhD, which was submitted on behalf of the Financial Oversight and Management Board 

for Puerto Rico (the “Board”) on April 28, 2023 (the “George Confirmation Report”).4 At 

Counsel’s request, I have also reviewed the expert disclosure and deposition testimony of William 

P. Zarakas, of the Brattle Group, Inc. (the “Brattle Group”), concerning the Revenue Envelope and 

Legacy Charge Model that he and his team at the Brattle Group prepared at the Board’s direction.5

B. Qualifications, Compensation, and Information Considered 

3. My qualifications, including a list of all publications that I have authored and expert 

testimony that I have provided in the last four years, are as described in the Chakraborty 

Confirmation Report.6

4

 See Expert Report of Glenn R. George, MBA, PE, PhD, In re: The Financial Oversight and Management Board 

for Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III 

No. 17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a 

representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, April 

28, 2023 (“George Confirmation Report”). 

5

 See Debtor’s Opening Expert Report and Disclosures, In re: The Financial Oversight and Management Board 

for Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III 

No. 17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a 

representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, April 

28, 2023, ¶ 2(f); Transcript of Deposition of William Zarakas, In re: The Financial Oversight and Management 

Board for Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA 

Title III No. 17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as 

a representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, May 

4, 2023 (“Zarakas Transcript”). 

6

 See Chakraborty Confirmation Report, Section I.B, Appendix A, and Appendix B. 

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4. Analysis Group, Inc. (“Analysis Group”) bills on an hourly basis for my work in 

connection with this matter. My billing rate for time spent on this matter is $1,055 per hour. 

Employees of Analysis Group, working under my direction and supervision, have assisted me in 

this assignment at their standard hourly rates. Neither my compensation nor Analysis Group’s is 

contingent upon the opinions I form or the outcome of this case. 

5. In preparing this report, I, along with Analysis Group staff working under my 

direction, reviewed various documents and data sources. Appendix A to this report lists documents 

and data sources that I considered. 

C. Dr. George’s Assignment and Opinions 

6. Counsel for the Board asked Dr. George to: 

... provide [his] expert opinion on the methodology applied by the Brattle Group, 

Inc. ..., at the direction of the Oversight Board, in determining the Legacy Charge 

in the Plan of Adjustment. More specifically, [he has] been asked to opine on (i) 

whether the Legacy Charge provides PREPA’s creditors with reasonable recoveries 

on their claims given PREPA’s need to continue operations, as well as the burden 

on ratepayers and the Puerto Rico economy of increased rates; (ii) whether the 

methodology used by Brattle to determine the Legacy Charge is appropriate; and 

(iii) whether the design of the Legacy Charge is consistent with principles of just 

and reasonable rates.7

7. Dr. George’s primary opinions include that (i) he did not identify any “material 

calculation errors” or “divergences from practices generally applied in the field of utility 

ratemaking” in the course of reviewing the Revenue Envelope and Legacy Charge Model; (ii) the 

approach reflected in this model was “appropriate in reaching a rate that ensures PREPA’s 

continuing operations and attempts to limit its loss of customers and future revenue needed to 

7

 George Confirmation Report, ¶ 8. 

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service debt,” and (iii) the revenue generated from the Board’s estimated Legacy Charge 

“represents the upper bound of cash which can reasonably be made available for debt 

repayment....”8

II. SUMMARY OF OPINIONS 

8. My opinions in this report are summarized as follows. 

9. First, I conclude that Dr. George overlooked material errors in the Board’s Revenue 

Envelope and Legacy Charge Model that I identified in the Chakraborty Confirmation Report. The 

correction of each of these errors individually serves to increase Additional Net Revenues available 

for servicing the New Bonds by hundreds of millions, and even billions, of dollars, relative to the 

Board’s estimate of $5.68 billion. 

10. Second, I further disagree with Dr. George’s view that the proposed Legacy Charge 

represents an upper bound of affordability. Dr. George’s comparison of household expenditures 

on electricity in Puerto Rico with household expenditures on electricity in the South Atlantic 

region in the United States does not take into account the significantly lower shelter costs in Puerto 

Rico compared to the South Atlantic region in the United States. In addition, Dr. George’s 

suggestion that a large portion of households in Puerto Rico would spend more than six percent of 

their incomes on electricity is misleading, as the vast majority of consumers below the median 

income level would be exempt from the Legacy Charge altogether. Indeed, due to their higher 

income levels, most of PREPA’s residential customers who would pay the Legacy Charge would 

have a materially lower electricity share of wallet than the Board’s six percent threshold. 

8

 George Confirmation Report, ¶¶ 13-14. 

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III. DR. GEORGE OVERLOOKS MATERIAL ERRORS IN THE BOARD’S 

ESTIMATION OF ADDITIONAL NET REVENUES 

11. In the Chakraborty Confirmation Report, I discussed the Board’s Revenue 

Envelope and Legacy Charge Model, and the inputs assumed in this model to estimate the Revenue 

Envelope and Legacy Charge. I identified methodological flaws and unsupportable assumptions 

underlying the Board’s calculations that, when corrected, significantly increased the amount of 

Additional Net Revenues that PREPA can reasonably collect while remaining well within the 

Board’s own view of what is affordable for PREPA’s customers. Specifically: 

 The Board miscalculates electricity consumption for its Hypothetical Residential 

Customer, thereby causing an error in the calculation of the ceiling on the affordable rates 

that could be charged to the Hypothetical Residential Customer and PREPA customers 

more generally. Holding all else equal, correcting this error increases PREPA’s Additional 

Net Revenues available for servicing the New Bonds from $5.68 billion to as much as 

$8.96 billion, a difference of $3.28 billion.9

 The Board incorrectly assumes that median income in Puerto Rico will remain constant 

over a multi-decade period, contrary to the Board’s own assumptions of median income 

growth at the rate of inflation between 2021 and 2024. This leads the Board to understate 

the maximum affordable electricity rates for (i) the Hypothetical Residential Customer, (ii) 

all residential customers in the Hypothetical Residential Customer’s rate class, “GRS 112 

(General),” and (iii) all other customer rate classes, given that electricity rates for these 

classes are, in the Board’s model, a function of the electricity rates the Board determined 

9

 See Chakraborty Confirmation Report, ¶ 53 and Exhibit 10. This calculation is based on a 2024 median monthly 

consumption of 372 kWh. Assuming a 2024 median monthly consumption of 400 kWh, PREPA’s Additional Net 

Revenues available for servicing the New Bonds increase from $5.68 billion to $7.19 billion, a difference of $1.51 

billion. See id. 

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for the “GRS 112 (General)” residential rate class. Holding all else equal, correcting this 

error increases PREPA’s Additional Net Revenues available for servicing the New Bonds 

from $5.68 billion to $6.57 billion, a difference of $892 million.10

 The Board does not conduct an affordability analysis of the electricity rates that could be 

charged to higher-income residential customers or non-residential customers, comprising 

commercial, industrial, government, and municipal rate classes. Holding all else equal, an 

increase of 2.5 cents per kWh to the rates charged to non-residential customers increases 

PREPA’s Additional Net Revenues available for servicing the New Bonds from $5.68 

billion to as much as $6.75 billion, a difference of $1.07 billion.11

 The Board employs a load forecast that, in the opinion of Dr. Susan Tierney, was 

understated.12 Holding all else equal, Dr. Tierney’s revised load forecasts increase 

PREPA’s Additional Net Revenues available for servicing the New Bonds from $5.68 

billion to as much as $6.24 billion, a difference of $564 million.13

10 See Chakraborty Confirmation Report, ¶ 58 and Exhibit 11. 

11 See Chakraborty Confirmation Report, ¶ 71 and Exhibit 16. Excluding incremental Additional Net Revenues of 

$308 million pertaining to rate class GSS 211, Additional Net Revenues increase from $5.68 billion to $6.44 

billion, a difference of 13 percent. See id.

Holding all else equal, an increase of 1.0 cents per kWh to the rates charged to non-residential customers increases 

PREPA’s Additional Net Revenues available for servicing the New Bonds from $5.68 billion to $6.15 billion, a 

difference of $471 million. Excluding incremental Additional Net Revenues of $128 million pertaining to rate 

class GSS 211, Additional Net Revenues increase from $5.68 billion to $6.02 billion, a difference of six percent. 

See id.

12 See Expert Report of Susan Tierney, PhD, In re: The Financial Oversight and Management Board for Puerto 

Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 17-BK3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a representative of 

Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS (Jointly 

Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, April 28, 2023 

(“Tierney Confirmation Report”), Section V. 

13 See Chakraborty Confirmation Report, ¶ 78 and Exhibit 17. This calculation is based on Dr. Tierney’s Third 

Revised Net Load Forecast. Based on Dr. Tierney’s First Revised Net Load Forecast, PREPA’s Additional Net 

Revenues available for servicing the New Bonds increase from $5.68 billion to $5.75 billion, a difference of $70 

million. Based on Dr. Tierney’s Second Revised Net Load Forecast, PREPA’s Additional Net Revenues available 

for servicing the New Bonds increase from $5.68 billion to $5.93 billion, a difference of $246 million. See id.

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 The Board employs price elasticities that, in the opinion of Dr. Tierney, were overstated.14

Holding all else equal, correcting the elasticity rates increases PREPA’s Additional Net 

Revenues available for servicing the New Bonds from $5.68 billion to $5.97 billion, a 

difference of $290 million.15

12. Dr. George neither identifies these issues with the Board’s analysis nor provides a 

reasonable justification for the Board’s methods. I also reviewed Mr. Zarakas’s deposition 

testimony, in which he (i) acknowledged potential errors requiring correction in the Board’s 

calculation of the median-income household’s electricity consumption that the Board’s advisors 

are now reconsidering;16 (ii) explained that, at the express instruction and direction of the Board’s 

counsel, the Revenue Envelope and Legacy Charge Model does not account for income growth;17

and (iii) confirmed that no “affordability analysis” was performed to ascertain what PREPA’s nonresidential customer classes could pay to service the New Bonds, and that the Board instead 

determined a Legacy Charge for such classes through a set of highly subjective adjustments.18 I 

reserve the right to review and opine on any revised consumption estimate later offered by the 

14 See Tierney Confirmation Report, Section VII. 

15 See Chakraborty Confirmation Report, ¶ 85 and Exhibit 19. 

16 See Zarakas Transcript, pp. 96-98 (“Q. The fiscal year, PREPA’s fiscal year doesn’t match up with the calendar 

year; correct? A. That’s right. Q. ... In determining the average 2021 rate to use in Exhibit 42, did you consider 

using an average of the two fiscal year rates that would apply to Calendar Year 2021? A. At the time, no. Q. Have 

you considered doing an analysis like that since? A. Yes. Q. Have you performed such analysis? A. We are 

looking at the PRCS data in much greater detail. Q. How so? A. Looking at the data, there’s some data that might 

need to be excluded in coming up with the average consumption. ... Q. As you sit here today ... do you know if 

Brattle has concluded that the average 2021 rates should be something different than 18.76 cents a kilowatt hour? 

A. I don’t know at this time.”). 

17 See Zarakas Transcript, pp. 78-80 (“Q. Well, you chose not to conduct this analysis by increasing the median 

household income by inflation, correct? A. Correct. Q. Why did you make that choice? A. In collaboration with 

the board, we looked at future uncertainties, as well as overall policy target. ... Q. ... Were you instructed in 

calculating affordability for residential customers not to grow the median income by inflation? A. Yes. ... Q. ... 

You were instructed by the oversight board not to grow the median income by inflation for purposes of calculating 

residential affordability in the revenue envelope model? A. Yes.”). 

18 See Zarakas Transcript, p. 41 (“Q. And was there any corresponding affordability test applied to non-residential 

PREPA customers? A. No.”). 

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Board, and my criticisms of the Board’s approach to determining a Legacy Charge for nonresidential customer classes are unchanged after reviewing Mr. Zarakas’s explanation of that 

approach.

13. In the balance of this section, I discuss in more detail these significant issues with 

the Board’s analysis that Dr. George does not identify or adequately address. In my opinion, 

several of these issues would certainly qualify as “material calculation errors.”19

A. Dr. George Fails to Identify and Address a Material Error in the Board’s 

Estimation of Electricity Consumption, Which Results in an Understatement 

of Additional Net Revenues of More Than $3 Billion 

14. As I explained in the Chakraborty Confirmation Report, a key parameter of the 

Board’s estimation of the Legacy Charge is the assumption that the Hypothetical Residential 

Customer, with the median household income, consumes 425 kWh of electricity monthly.20 The 

Board uses that consumption estimate to determine the Hypothetical Residential Customer’s 

baseline electricity cost, in fiscal year 2024, using PREPA’s existing rates. An overestimation of 

the Hypothetical Residential Customer’s electricity consumption would overstate its baseline 

electricity cost, and thus understate the additional rates and charges that the Hypothetical 

Residential Customer can afford to pay under the Board’s six percent Electricity SOW threshold. 

15. To arrive at its 425 kWh monthly consumption estimate, the Board: 

(i) Calculated the median annual electricity bill among relevant households 

19 George Confirmation Report, ¶ 13 (“In my review of the Revenue Envelope Model and Legacy Charge Model, I 

identified no material calculational errors or divergence from practices generally applied in the field of utility 

ratemaking.”). 

20 See Chakraborty Confirmation Report, Section IV.A. 

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during the 2021 calendar year, which was $960.21

(ii) Divided $960 by PREPA’s average residential electricity rate of $0.1876 per 

kWh during the 2021 fiscal year, yielding an assumed median electricity 

consumption estimate of roughly 5,100 kWh per year and 425 kWh per 

month.22

(iii) Assumed that median electricity consumption in 2024 would also be roughly 

5,100 kWh per year and 425 kWh per month.23 

16. The Board’s arithmetic suffers from an “apples-to-oranges” error, which stems 

from the fact that PREPA’s fiscal year does not align with the calendar year. As I described above, 

the Board divided (i) the median annual electricity bill among relevant households from January 

2021 through December 2021 (i.e., the 2021 calendar year) of $960 by (ii) PREPA’s average 

residential electricity rate from July 2020 through June 2021 (i.e., PREPA’s 2021 fiscal year) of 

$0.1876 per kWh. At his deposition, Mr. Zarakas confirmed that the Board’s advisors misaligned 

calendar year billing data and fiscal year rate data in estimating median household electricity 

21 The Board excluded households that did not report an annual electricity bill, households with no charge or no 

electricity use, and households the electricity costs of which were included in their rent or condominium fees. See

Chakraborty Confirmation Report, ¶ 47, fn. 42. See also Chakraborty Confirmation Report, Exhibit 8. 

22 See Chakraborty Confirmation Report, ¶ 47 and Exhibit 8. 

23 See Chakraborty Confirmation Report, ¶ 47, fn. 43 (“The Board estimates that 2024 median residential 

consumption will be 430 kWh but ultimate assumes the 2024 median residential consumption will equal 425kWh. 

See KWh Consumption.xlsx, FOMB_PREPA00022592.”). 

See also George Confirmation Report, ¶ 56, fn. 67 (“I note that the 2024 monthly median consumption as 

calculated is 430 kWh. However, Brattle elected to use 425 kWh due in part because the load forecast data for 

2021-2024 in the 2022 Fiscal Plan only accounted for energy efficiency effects from residential lighting and no 

other sources such as air conditioning, for example. As such, it is possible that load will be lower than forecast 

because of this omission. Brattle accordingly reduced its 2024 median monthly volumetric consumption to 

account for this.”). 

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consumption.24

17. This is not a trivial error. PREPA’s average residential electricity rate in fiscal year 

2022 was $0.2464 per kWh—that is, it was more than 30 percent higher than PREPA’s average 

residential electricity rate in fiscal year 2021 of $0.1876 per kWh. Figure 1 below illustrates this 

difference. 

Figure 1 

PREPA’s Rates in Fiscal Year 2021 and Fiscal Year 2022

18. In the Chakraborty Confirmation Report, I accounted for the fact that PREPA’s rate 

was $0.1876 per kWh in fiscal year 2021, which covers the first six months of the 2021 calendar 

year, and was $0.2464 per kWh in fiscal year 2022, which covers the last six months of the 2021 

calendar year, by using the average of these two rates ($0.2170 per kWh) as an approximate 

24 See Zarakas Transcript, pp. 96-97 (“Q. The fiscal year, PREPA’s fiscal year doesn’t match up with the calendar 

year; correct? A. That’s right. Q. ... In determining the average 2021 rate to use in Exhibit 42, did you consider 

using an average of the two fiscal year rates that would apply to Calendar Year 2021? A. At the time, no. Q. Have 

you considered doing an analysis like that since? A. Yes. Q. Have you performed such analysis? A. We are 

looking at the PRCS data in much greater detail.”). 

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calendar year 2021 rate.25 Dividing the median 2021 calendar year electricity bill of $960 by this 

blended calendar year rate yields an estimate of median 2021 calendar year consumption of 

roughly 4,424 kWh, or 369 kWh per month.26

19. I corroborated this estimate in two ways. First, using data from the EIA, I estimated 

median 2021 calendar year consumption of 378 kWh per month.27 Second, using data from 

LUMA, I estimated median 2021 calendar year consumption of 386 kWh per month.28

20. I then accounted for changes in consumption levels between 2021 and 2024 using 

the Board’s method for doing so, which yielded an estimate of median monthly consumption in 

2024 of 372 kWh.29

21. The Board’s estimate of the Legacy Charge and resulting Additional Net Revenues 

is highly sensitive to this input. As I explained in the Chakraborty Confirmation Report, assuming 

median monthly consumption in 2024 of 372 kWh rather than the Board’s miscalculated estimate 

of 425 kWh increases Additional Net Revenues from $5.68 billion to $8.96 billion, a difference 

of nearly $3.28 billion.

30

22. While Dr. George appears to have examined the Brattle Group’s calculations 

25 See Chakraborty Confirmation Report, ¶ 49 and Exhibit 8. 

26 See Chakraborty Confirmation Report, ¶ 49 and Exhibit 8. 

27 See Chakraborty Confirmation Report, ¶ 50 and Exhibit 8. 

28 See Chakraborty Confirmation Report, ¶ 51 and Exhibit 9. 

29 See Chakraborty Confirmation Report, ¶ 52, fn. 45 (“I apply the Board’s approach to infer what median 2021 

consumption would be in 2024. In their approach, the Board uses data on residential gross consumption (less 

residential lighting savings) and the number of residential customers to calculate average consumption per 

customer each year 2021–2024; values from 2022–2024 are projections. The Board then calculates the year-toyear percentage changes in average consumption. To infer what median 2021 consumption would be in 2024, the 

Board then assumes that year-to-year percentage changes in median consumption will be the same as their 

calculated percentage changes in average consumption.”). 

30 See Chakraborty Confirmation Report, ¶ 53 and Exhibit 10. 

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regarding electricity consumption, he either did not realize that PREPA’s fiscal year does not align 

with the calendar year or he failed to appreciate the significance of this mismatch.31 In my opinion, 

this calculation error qualifies as material given its significant effect on PREPA’s Revenue 

Envelope and Additional Net Revenues available for servicing the New Bonds. 

B. Dr. George Fails to Identify and Address a Material Omission in the Board’s 

Projections of Income, Which Results in an Understatement of Additional 

Net Revenues of Nearly $1 Billion 

23. As I explained in the Chakraborty Confirmation Report and above, the Board’s 

estimate of the Legacy Charge and resulting Additional Net Revenues is based on, among other 

variables, an assumed median household income in 2021 of $21,967. The Board then increased 

this amount by projected inflation between 2021 and 2024 to estimate median household income 

in 2024 of $24,000.32 

24. Even though (i) the Board recognized the need to adjust assumed fiscal year 2021 

median income by inflation to determine fiscal year 2024 median income, and (ii) the Board’s own 

fiscal plans for the Commonwealth and PREPA reflected a projected annual inflation rate of 1.7 

percent, the Board made no corresponding adjustment to income over the subsequent 35 years of 

the projection period.33 Mr. Zarakas testified that this failure to account for future income growth 

31 See George Confirmation Report, ¶ 56 (“When setting the appropriate fixed and volumetric charges to generate 

the Revenue Envelope while staying within the 6% SOW affordability constraint, the Oversight Board first 

considered how much electricity the typical residential customer would consume per month (i.e., volumetric 

consumption) in FY 2024. Volumetric consumption for residential customers was estimated using annual median 

electricity cost in 2021 and the mean rate PREPA charged said customers in the same year. I find it appropriate 

to use an annual median electricity spend (in dollars) and an annual mean rate (in cents per kWh) to perform this 

calculation, because (among other reasons) there are relatively few extreme outliers in terms of spend. 

Accordingly, the median monthly volumetric consumption for residential customers in 2024 was estimated to be 

425 kWh using this methodology.”) (emphasis added). 

32 See Chakraborty Confirmation Report, ¶ 55. 

33 See Legacy Charge Derivation, p. 5, fn. 3 (“Pursuant to the U.S. Census, median 2021 household income was 

estimated to be $21,967 for the period 2017-2021, expressed in 2021 dollars. See 

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was at the explicit direction of the Board.34 Neither Dr. George nor Mr. Zarakas have cited to any 

data or support, from academic literature or otherwise, for the notion that nominal incomes are 

expected to remain constant over a multi-decade period. 

25. Dr. George acknowledges and agrees with the Board’s adjustment of 2021 median 

income to account for inflation between 2021 and 2024, stating that he “reviewed the methodology 

described [in the Legacy Charge Derivation exhibit to the Disclosure Statement] and find it to be 

sound and reasonable.”35 Moreover, Dr. George recognizes that income growth is a key driver of 

whether the Legacy Charge will prove to be affordable to residential consumers.36 Nevertheless, 

Dr. George either did not identify the Board’s implausible assumption of no nominal growth in 

median income over a decades-long period, or does not view this no-growth assumption as a 

“material calculation error.” 

26. As I discussed in the Chakraborty Confirmation Report, the Board’s no-growth 

assumption is implausible, and very material.37 Figure 2 below compares (i) median income under 

https://data.census.gov/table?q=Insurance,+Utilities,+and+Other+Fees&g=0400000US72&tid=ACSST5Y2021.

S2503. Pursuant to Fiscal Plan inflation assumptions, such median household income in 2024 is estimated to be 

approximately $23,824.”); Chakraborty Confirmation Report, ¶¶ 54-55. 

34 See Zarakas Transcript, pp. 78-80 (“Q. Well, you chose not to conduct this analysis by increasing the median 

household income by inflation, correct? A. Correct. Q. Why did you make that choice? A. In collaboration with 

the board, we looked at future uncertainties, as well as overall policy target. ... Q. ... Were you in calculating 

affordability for residential customers not to grow the median income by inflation? A. Yes. ... Q. ... You were 

instructed by the oversight board not to grow the median income by inflation for purposes of calculating 

residential affordability in the revenue envelope model? A. Yes.”). 

35 George Confirmation Report, ¶ 37. See also id., fn. 32 (“The median 2021 household income—estimated to be 

$21,967 in 2021 dollars—was adjusted for inflation pursuant to the 2022 Fiscal Plan assumptions to arrive at 

the estimated 2024 median household income of $23,824. This amount was rounded up to the nearest thousand 

dollars to arrive at $24,000. This estimate is reported in 2024 dollars because the Legacy Charge is expected 

to be implemented in 2024.”) (emphasis added). 

36 See George Confirmation Report, ¶ 42 (“The actual SOW for electricity for residential customers in Puerto Rico 

may of course fluctuate over time. Aside from the fact that approximately half of households in Puerto Rico could 

spend more than 6% of their household income on electricity in 2024 and beyond, there are other uncertainties 

which could make the actual SOW higher or lower than 6% (e.g., income growth, fuel prices).”). (emphasis 

added) 

37 See Chakraborty Confirmation Report, ¶¶ 54-55. 

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the Board’s analysis with (ii) median income adjusted for inflation when using the Board’s own 

inflation forecast per PREPA’s certified 2022 Fiscal Plan.38

Figure 2 

The Effect of Inflation on Income 

27. From 2021 through 2024, the heights of the two columns are identical given that 

the Board’s analysis did account for inflation during these years. 

28. By fiscal year 2034, however, median income adjusted for inflation is $27,938, 16 

percent greater than 2024 median income. And, by fiscal year 2051, median income adjusted for 

inflation is $37,941, 58 percent greater than 2024 median income. In other words, electricity costs 

38 Median income adjusted for inflation in 2024 was $23,824, which the Board rounded up to $24,000. See Legacy 

Charge Derivation, p. 5, fn. 3; George Confirmation Report, ¶ 37, fn. 32. 

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that would equal 6.0 percent of a median-income household’s monthly income in fiscal year 2024 

will equal 3.8 percent of a median-income household’s monthly income in fiscal year 2051. 

29. Unsurprisingly, accounting for reasonable growth in income levels over a long time 

period has significant implications for the amount of Additional Net Revenues that PREPA is 

capable of collecting. As I demonstrate in the Chakraborty Confirmation Report, applying the 

certified 2022 Fiscal Plan’s inflation forecast to 2024 median income over the forecast period of 

the Board’s Revenue Envelope and Legacy Charge Model increases Additional Net Revenues 

from $5.68 billion to $6.57 billion, a difference of $892 million.

39

30. Lastly, I note my disagreement with Dr. George’s view that 2021 median income 

of $21,967 may have been overstated. Advancing an argument that also appears in the Legacy 

Charge Derivation exhibit to the Disclosure Statement, Dr. George contends that household 

income reporting may have been “inflated” due to non-recurring federal income support pertaining 

to COVID relief and stimulus payments.40 Such funds, however, were designed to replace income 

39 See Chakraborty Confirmation Report, ¶¶ 57-58 and Exhibit 11. 

40 See George Confirmation Report, ¶ 37, fn. 32 (“The median 2021 household income—estimated to be $21,967 

in 2021 dollars—was adjusted for inflation pursuant to the 2022 Fiscal Plan assumptions to arrive at the estimated 

2024 median household income of $23,824. This amount was rounded up to the nearest thousand dollars to arrive 

at $24,000. The estimate is reported in 2024 dollars because the Legacy Charge is expected to be implemented in 

2024. Moreover, the Census Bureau noted that household income reporting in the 2020 Survey may include nonrecurring federal income support (e.g., COVID relief and stimulus payments), which would tend to inflate 

household incomes.”). (emphasis added) 

See also Legacy Charge Derivation, p. 5, fn. 3 (“Pursuant to the U.S. Census, median 2021 household income 

was estimated to be $21,967 for the period 2017-2021, expressed in 2021 dollars.... Pursuant to Fiscal Plan 

inflation assumptions, such median household income in 2024 is estimated to be approximately $23,824. Notably, 

however, the U.S. Department of Commerce suggests caution when using income estimates for 2020 and 2021. 

The 2020 Survey did not meet the quality requirements of the U.S. Census due to COVID and therefore was not 

released. The 2021 survey has inconsistent reporting of transfer payments due to inclusion of non-recurring 

federal income support such as COVID relief and stimulus payments, supplemental unemployment insurance 

benefits and advance child tax credit payments.”). 

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that was lost as a result of COVID, rather than to increase income to be consistent with pre-COVID 

income levels.41 

C. Dr. George Fails to Identify and Address the Board’s Arbitrary Method of 

Estimating Rates for Non-Residential Customers, Which Results in an 

Understatement of Additional Net Revenues of Up to $1 Billion 

31. As I discussed in the Chakraborty Confirmation Report, the Board derives 

maximum rates for commercial, industrial, government, and municipal customers by making 

highly subjective adjustments to the rates it deems affordable for the Hypothetical Residential 

Customer.42 There is, however, no logical connection between (i) the rates that might be affordable 

for non-residential classes of customers and (ii) the rates deemed affordable for the Hypothetical 

Residential Customer based on an assumed six percent SOW threshold. The affordability 

considerations of non-residential customers differ considerably from those of a residential 

household, and yet the Board did not conduct any analysis of affordability thresholds for any 

customer class other than the residential class. As such, the Board does not offer a supportable 

basis for determining the rates applicable to customer classes that together consume the majority 

of the electricity that PREPA supplies.43

41 In addition, as I discuss in the Chakraborty Confirmation Report and further below, the Board’s median income 

assumptions also ignore the large informal economy that exists in Puerto Rico. See Chakraborty Confirmation 

Report, ¶ 11, fn. 8; infra, Section IV.A. 

42 See Chakraborty Confirmation Report, ¶ 65. See also Legacy Charge Derivation, pp. 5-6, fn. 6 (“To estimate the 

Revenue Envelope the combination of additional fixed and volumetric charges estimated to result in the maximum 

additional revenue that could be generated from (nonexempt) Residential customers was then scaled to 

Commercial and Industrial customers, with differences in elasticities appropriate for those customer classes being 

taken into account. Specifically, the ratio of total fixed monthly fee (current plus Legacy Charge fixed fee) to the 

current fixed monthly fee was applied to determine fixed fee increases for other customer classes. For volumetric 

rates, a combination of assumed elasticities for non-Residential customer classes and the range of average 

volumetric charge increases across the range of residential customers was used to develop multipliers between 

25% and 100% for non-Residential classes.”). 

43 See Chakraborty Confirmation Report, ¶ 17 (“While only approximately 8.3% of PREPA’s customers are 

industrial and commercial customers, their aggregate consumption is high and they contribute 56.3% to 

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32. Regarding the Board’s method of deriving rates for non-residential classes of 

customers, Dr. George states only the following: 

Different price elasticities are applied to each residential and non-residential 

customer class. Adjustments were made for certain customer classes based on 

expert judgment of likely switching behavior for that customer class.44

33. Mr. Zarakas confirmed at his deposition that the Board’s determination of rates for 

non-residential customers was not based on any assessment of the rates that those customers could 

actually afford: 

Q. When you say the affordability is primarily for residential customers, what do 

you mean by that? 

A. The affordability test, some called it wallet [share], or it’s a percentage of 

spending on electricity. I should say it’s the amount spent on electricity as a 

percentage of income -- in this case median income -- was the test that we 

applied for affordability. 

Q. And was there any corresponding affordability test applied to non-residential 

PREPA customers? 

A. No.45

34. In the Chakraborty Confirmation Report, I determined that the increase in nonresidential customers’ electricity costs implied by the Board’s analysis would be very small, such 

that these customers could likely afford to pay more for electricity.46 

35. Increasing the maximum rates applicable to non-residential customers by one cent 

PREPA’s total revenues.”); U.S. Energy Information Administration, “Puerto Rico Territory Energy Profile,” 

last updated January 19, 2023, https://www.eia.gov/state/print.php?sid=RQ# (“The commercial sector consumes 

about 45% of Puerto Rico’s electricity, the residential sector accounts for 43%, and the industrial sector makes 

up about 11%.”). 

44 George Confirmation Report, ¶ 49. 

45 See Zarakas Transcript, pp. 40-41. 

46 See Chakraborty Confirmation Report, ¶¶ 66-69. 

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in the Board’s model, I found that Additional Net Revenues increased from $5.68 billion to $6.15 

billion, a difference of eight percent.47 Increasing the maximum rates applicable to non-residential 

customers by 2.5 cents in the Board’s model, I found that Additional Net Revenues increased 

from $5.68 billion to as much as $6.75 billion, a difference of 1.07 billion.

48

D. Dr. George Misunderstands the Implications of an Understated Load 

Forecast on the Revenue Envelope, Which Results in an Understatement of 

Additional Net Revenues of Up to $564 Million 

36. Dr. Tierney addresses the George Confirmation Report with respect to PREPA’s 

forecasts of customer loads.49 Dr. Tierney references Dr. George’s claim that PREPA’s forecasts 

for fiscal years 2017 through 2022 “on average [...] overestimated load by about 2%.”50 Dr. 

Tierney explains that Dr. George misinterprets PREPA’s forecasts, that those forecasts actually 

underestimate net load by an average of 5.42 percent, and that the Board has underestimated load 

in virtually every year since it began forecasting electricity consumption.51

37. Dr. George asserts that “the primary risk [he] considered was the situation where 

47 See Chakraborty Confirmation Report, ¶¶ 70-72 and Exhibit 16. 

48 See Chakraborty Confirmation Report, ¶¶ 70-72 and Exhibit 16. Excluding incremental Additional Net Revenues 

of $308 million pertaining to rate class GSS 211, Additional Net Revenues increased from $5.68 billion to $6.44 

billion, a difference of 13 percent. See id.

 Increasing the maximum rates applicable to non-residential customers by 1.0 cents in the Board’s model, I found 

that Additional Net Revenues increased from $5.68 billion to $6.15 billion, a difference of eight percent. 

Excluding incremental Additional Net Revenues of $128 million pertaining to rate class GSS 211, Additional Net 

Revenues increased from $5.68 billion to $6.02 billion, a difference of six percent. See id.

49 See Expert Rebuttal Report of Susan Tierney, PhD, In re: The Financial Oversight and Management Board for 

Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 

17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a 

representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, May 

15, 2023 (“Tierney Confirmation Rebuttal Report”), Section V. 

50 George Confirmation Report, ¶ 101 (emphasis added). 

51 See Tierney Confirmation Rebuttal Report, Section V, Table 1; Tierney Confirmation Report, Section VI. 

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PREPA’s forecasts had overestimated load.”52 He focused on this scenario because: 

The situation in which load is underestimated is not a significant source of financial 

risk, because greater load than has been modeled would lead to increased revenue 

and an enhanced ability to service and pay off PREPA’s debt more quickly.53 

38. Dr. George misunderstands how the Board’s Revenue Envelope and Legacy 

Charge Model works. The recovery is set based on the load forecast. Specifically, a forecast of 

total electricity demand (i.e., load) that is overly pessimistic or understated will reduce, not 

increase, the projected amount of Additional Net Revenues PREPA will collect, all else equal.54

A lower estimated NPV of future Additional Net Revenues will lead to a lower determination of 

the recovery that is made available to Bondholders and other creditors. 

39. In the Chakraborty Confirmation Report, I calculated Additional Net Revenues 

based on three revised net load forecasts loads that, in Dr. Tierney’s opinion, are grounded in more 

realistic assumptions than the load forecasts included in PREPA’s 2022 Fiscal Plan.55 Future load 

in all three of Dr. Tierney’s revised net load forecasts is higher than the load forecasts in the 2022 

52 George Confirmation Report, ¶ 100 (emphasis added). 

53 George Confirmation Report, ¶ 100. 

 I understand that there is a Contingent Value Instrument (“CVI”) that is being issued in addition to the New 

Bonds. I also understand that the terms of the CVI differ from those of the New Bonds, and that they mature 15 

years earlier than the New Bonds. Thus, it is not clear that the CVI could compensate for an underestimated load 

forecast. See Expert Report of Gary Strumeyer, In re: The Financial Oversight and Management Board for Puerto 

Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 17-BK3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a representative of 

Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS (Jointly 

Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, April 28, 2022, 

¶¶ 112-118. 

54 See Chakraborty Confirmation Report, ¶¶ 73-78 and Exhibit 17. 

55 See Chakraborty Confirmation Report, ¶¶ 73-78 and Exhibit 17. 

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Fiscal Plan. Holding all else equal, I found that Additional Net Revenues increased from $5.68 

billion to as much as $6.24 billion, a difference of $564 million.

56

E. Dr. George Does Not Consider Alternative Price Elasticities, which Increase 

Additional Net Revenues by Nearly $300 Million 

40. Dr. Tierney addresses the George Confirmation Report with respect to the price 

elasticities that the Board employed in its Revenue Envelope and Legacy Charge Model.57 Dr. 

Tierney previously found that the Board overestimates the demand response to increases in 

electricity rates, thereby overstating the impact of an increase in volumetric rates on load and Fixed 

Cost Under-Recovery.58

41. As I described in the Chakraborty Confirmation Report, when adopting the price 

elasticity estimates that Dr. Tierney identified, I found that Additional Net Revenues increased 

from $5.68 billion to $5.97 billion, a difference of $290 million.

59

42. Lastly, I note that the Board and its advisors have proposed in different settings 

three rate structures that differ in whether the rate charged to customers has a fixed component, a 

volumetric component, or a combination of both. First, the Board assumes a rate comprising both 

a fixed component and a volumetric component in its Revenue Envelope and Legacy Charge 

Model.60 Second, in relation to the estimation of the Unsecured Net Revenue Claim, David Plastino 

of the Brattle Group has offered a model in which he assumes that any electricity rate increase for 

56 See Chakraborty Confirmation Report, ¶ 78 and Exhibit 17. 

57 See Tierney Confirmation Rebuttal Report, Section IV. 

58 See Chakraborty Confirmation Report, ¶ 80, citing Tierney Confirmation Report, Section VII. 

59 See Chakraborty Confirmation Report, ¶¶ 83-85 and Exhibit 19. 

60 See Chakraborty Confirmation Report, ¶ 27. 

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the purpose of collecting additional revenue would be applied solely through a fixed charge (i.e., 

he assumes no additional volumetric charge).61 Third, McKinsey, another advisor to the Board, 

developed a “best interest test” model in which they assume that any electricity rate increase for 

the purpose of collecting Additional Net Revenues would be applied solely through a volumetric 

charge.62 As I discussed in the Chakraborty Confirmation Report, the composition of the rate has 

significant implications in the estimation of Additional Net Revenues.63

IV. THE LEGACY CHARGE IS AFFORDABLE TO RESIDENTIAL CONSUMERS 

OF ELECTRICITY IN PUERTO RICO 

43. In this Section, I first address Dr. George’s suggestion that the Board’s Electricity 

SOW threshold of six percent is the ceiling of what is affordable. I then describe how the 

imposition of the Legacy Charge would not cause most households in Puerto Rico to have an 

Electricity SOW that approaches this threshold. 

61 See Expert Report of David Plastino, In re: The Financial Oversight and Management Board for Puerto Rico, as 

a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 17-BK-3283-

LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a representative of Puerto 

Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS (Jointly Administered), 

United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, May 5, 2023, ¶ 37 (“The 

approach used in the POA estimated detailed rate structure for different customer classes and electricity 

consumption levels and forecasts incremental revenue using a blend of fixed charges and volumetric rates. 

However, the 2017 Plan does not provide the same detailed, customer-level information as the 2022 Fiscal Plan 

(on which the POA analysis is based). Therefore, my model assumes that PREPA would raise incremental 

revenue through an incremental fixed charge although, in reality, a fixed charge, volumetric charge, or 

some combination of the two might be applied. The use of a fixed charge likely results in higher levels of 

incremental revenue than would be the case if an incremental volumetric charge was used. This is because higher 

volumetric rates would result in the loss of sales as some customers would choose to consume less electricity by 

conserving energy or using substitutes, such as rooftop photovoltaics.”) (emphasis added). 

62 See “Model – Recovery Analysis PREPA Title III Dismissed.xlsx.xlsx,” FOMB_PREPA 00003017. 

63 See Chakraborty Confirmation Report, ¶ 63. 

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A. Dr. George Gives the False Impression that the Board’s Electricity SOW 

Threshold Represents the Upper Bound of Affordability 

44. As I explained in the Chakraborty Confirmation Report, a key parameter of the 

Board’s estimation of the Legacy Charge is the assumption that residential consumers of electricity 

should not pay more than six percent of their monthly income on electricity.64 This six percent 

electricity share of wallet (“Electricity SOW”) is, in turn, derived in the relevant literature from 

two underlying assumptions regarding affordability: 

 First, that a shelter cost share of wallet (“Shelter SOW”) of no more than 30 percent is 

affordable. Shelter costs include both electricity costs and non-electricity costs such as 

mortgage payments, real estate taxes, and property insurance.65

 Second, that an electricity cost of no more than 20 percent of total shelter costs is 

affordable.66

45. Taken together, these two assumptions imply that an Electricity SOW of no more 

than 30 percent × 20 percent = 6 percent is affordable. 

64 See Chakraborty Confirmation Report, pp. 5-6. 

65 See, e.g., Schwartz, Mary and Ellen Wilson, “Who Can Afford to Live in a Home? A Look at Data from the 2006 

American Community Survey,” U.S. Census Bureau, 2006, p. 1 (“The conventional public policy indicator of 

housing affordability in the United States is the percent of income spent on housing. Housing expenditures that 

exceed 30 percent of household income have historically been viewed as an indicator of a housing affordability 

problem. The conventional 30 percent of household income that a household can devote to housing costs before 

the household is said to be ‘burdened’ evolved from the United States National Housing Act of 1937.”); Fisher, 

Sheehan & Colton, “Home Energy Affordability in New York: The Affordability Gap (2008 – 2010),” Prepared 

for New York State Energy Research Development Authority, June 2011, p. 2, fn. 1 (“It is universally accepted 

that total shelter costs are “unaffordable” if they exceed 30% of income.”). 

66 See Fisher, Sheehan & Colton, “Home Energy Affordability in New York: The Affordability Gap (2008 – 2010),” 

Prepared for New York State Energy Research Development Authority, June 2011, p. 2, fn. 1 (“The 6% is a 

calculated figure. It is based on the premise that utility costs should not exceed 20% of shelter costs. Moreover, 

it is based on the premise that total shelter costs should not exceed 30% of income.”). 

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46. It is commonly accepted that a Shelter SOW of no more than 30 percent is 

affordable.67 In contrast, there does not appear to be consensus regarding the maximum affordable 

Electricity SOW. For example, while some studies suggest that the maximum affordable 

Electricity SOW is six percent, others suggest that this threshold is 10 percent.68 

47. In my opinion, and consistent with the literature on this subject, households’ overall 

spending on total shelter costs—including but not limited to electricity—is also relevant in 

evaluating affordability considerations. Consider the following illustrative example. 

48. Household A has an income of $100, of which it spends $6 on electricity and $24 

on non-electricity shelter costs. Thus, Household A’s Electricity SOW is equal to $6 ÷ $100 = 6 

percent, and its Shelter SOW is equal to ($24 + $6) ÷ $100 = 30 percent. 

49. Household B has the same income of $100, of which it spends $10 on electricity 

and $20 on non-electricity shelter costs. Thus, Household B’s Electricity SOW is equal to $10 ÷ 

$100 = 10 percent, and its Shelter SOW is equal to ($20 + $10) ÷ $100 = 30 percent. 

50. While Household B spends relatively more of its income (10 percent) on electricity 

than does Household A (6 percent), Household B spends relatively less of its income on nonelectricity shelter costs than does Household A. Correspondingly, while the two households’ 

Electricity SOWs differ, their Shelter SOWs are the same, as is the $70 of income that each 

67 See supra, fn. 65. 

68 See supra, fn. 66; Hernandez, Diana and Daniel Carrion, “Housing Hardship and Energy Insecurity Among 

Native-Born and Immigrant Low-Income Families with Children in the United States,” Journal of Children and 

Poverty, March 2016, p. 3 (“Economic energy insecurity is defined in this study as spending greater than 10% of 

household income on utility expenses.”); Hernandez, Diana, et al., “Energy Insecurity among families with 

Children,” National Center for Children in Poverty – Mailman School of Public Health, Columbia University, 

January 2014, p. 4 (“We ... refer to households with more than 10 percent of energy burden as ‘energy insecure.’ 

This measure is based on the Department of Energy’s annual estimates of homes that experience an energy 

affordability gap.”). 

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household has remaining. Thus, whether a given amount of electricity cost is deemed affordable 

for a household depends on, among other things, the amount of that household’s non-electricity 

shelter costs. 

51. Dr. George suggests that the Board’s Electricity SOW threshold of six percent for 

purposes of estimating the Legacy Charge represents an “upper bound” on available revenue. 

Specifically, he states: 

[A] a 6% SOW is often defined as a high energy burden. As of 2017, more than 

25% of US households (30.6 million) faced a ‘high energy burden’ (i.e., SOW of 

more than 6%). In the ‘South Atlantic’ region (essentially the Middle Atlantic and 

Southeastern states), the median energy burden is 3.2%. By comparison, because 

the SOW calculation is based on median household income, this suggests that 

around half of households in Puerto Rico would spend more than 6% of their 

household income on electricity. In other words, about half of Puerto Rico residents 

would face a ‘high energy burden’ as a result of the Legacy Charge, further 

suggesting that the 6% SOW constraint for determining the Legacy Charge 

represents an upper bound on revenue available to service the New Bonds.69 

52. There are multiple problems with Dr. George’s above assertions. As an initial 

matter, Dr. George is mistaken that, “as a result of the Legacy Charge,” roughly half of households 

in Puerto Rico would spend more than six percent of their incomes on electricity and thus face a 

“high energy burden.” Dr. George bases that opinion on the fact that the Board performs its 

affordability calculations on a hypothetical median-income household making $24,000 a year in 

fiscal year 2024, and that (by definition) half of households make less than the median income. 

But Dr. George fails to appreciate that, under the Board’s plan, households with incomes lower 

69 George Confirmation Report, ¶ 40. See also id., ¶ 18 (“PREPA’s 2022 Fiscal Plan ... states that the SOW of 

electricity costs for residential customers in Puerto Rico was about 5.6% in 2021, whereas in the southeastern US 

the SOW was about 3.2% in 2019.”). 

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than the median income will largely be exempt from paying the Legacy Charge.70 Accordingly, 

the median-income household is close to the lowest-income household that will actually pay the 

full Legacy Charge. 

53. With respect to Electricity SOW, Dr. George’s comparison of Puerto Rico to states 

in the “South Atlantic” region of the United States is inapt for several reasons. First, as I mentioned 

in the Chakraborty Confirmation Report, electricity prices in Puerto Rico have historically been 

higher than in the mainland United States due to the challenges of providing electricity to an 

island.71 Second, such a comparison disregards that non-electricity shelter costs are considerably 

lower in Puerto Rico than in the mainland United States.72 

54. For instance, Figure 3 below compares the Shelter SOW of households in Puerto 

Rico to the Shelter SOW of households in the South Atlantic. Specifically, Figure 3 divides 

70 See Chakraborty Confirmation Report, ¶ 61, fn. 57 (“The approximately 50% of residential customers who earn 

less than $24,000 per year are largely exempt from paying any Legacy Charge (except for consumption over 500 

kWh per month, at half the rate other residential customers would be charged for such consumption). Residential 

customers in the RH3, LRS, RFR, and GRS 112 (LC Subsidy Eligible) classes are exempt from the Incremental 

Flat Fee and the Incremental Volumetric Charge for consumption ≤ 500 kWh. These customer classes are assumed 

to have an Incremental Volumetric Charge (half that of GRS 112 (General) customers) for additional consumption 

> 500 kWh. See Revenue Envelope and Legacy Charge Derivation Workbook.”). 

See also Transcript of Deposition of David Skeel, In re: The Financial Oversight and Management Board for 

Puerto Rico, as a representative of the Commonwealth of Puerto Rico, et al., Debtors, PROMESA Title III No. 

17-BK-3283-LTS, and In re: The Financial Oversight and Management Board for Puerto Rico, as a 

representative of Puerto Rico Electric Power Authority, Debtor, PROMESA Title III No. 17-BK-4780-LTS 

(Jointly Administered), United States District Court for the District of Puerto Rico, San Juan, Puerto Rico, May 

2, 2023, pp. 91-92 (“Q. Mr. Skeel, was that a true statement at the time you made it, namely that under the 

February 9th plan, almost half of PREPA’s residential customers wouldn’t pay any legacy charge? A. I believe 

that was true, yes. Q. Do you believe that to remain true under the March 1st plan of adjustment? A. I think that 

is still true, yes.”). 

71 See Chakraborty Confirmation Report, ¶ 59. See also U.S. Energy Information Administration, “Puerto Rico 

Territory Energy Profile,” last updated January 19, 2023, https://www.eia.gov/state/print.php?sid=RQ# (“Puerto 

Rico consumes almost 70 times more energy than it produces .... Puerto Rico’s reliance on petroleum as a fuel 

for electricity generation contributes to the island having a higher average electricity price than any U.S. state, 

except for Hawaii.... The Commonwealth has some renewable resources in the form of solar, wind, hydropower, 

and biomass, but relies primarily on imported fossil fuels to meet its energy needs .... Petroleum accounts for 

about three-fifths of the energy consumed in Puerto Rico. The island imports all of its petroleum products ....”). 

72 See Chakraborty Confirmation Report, ¶ 59. 

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households in Puerto Rico and in the South Atlantic into deciles (i.e., groups that each include 10 

percent of households) that are ranked based on 2021 income levels. For example, 40 percent of 

households have lower income than the 5th decile, 10 percent of households have income within

the 5th decile, and 50 percent of households have higher income than the 5th decile. The heights of 

the columns reflect the median Shelter SOW for households in Puerto Rico and in the South 

Atlantic, respectively, within the corresponding decile. I present the 5th through 10th deciles of 

households in Figure 3 because these are the households that pay the vast majority of the Legacy 

Charge under the Board’s analysis. 

55. Across all income groups, the median Shelter SOW among households in Puerto 

Rico is lower than the median Shelter SOW among households in the South Atlantic. For example, 

for households in decile 5, which includes the median-income households in both Puerto Rico and 

in the South Atlantic region, the median Shelter SOW in Puerto Rico is 14 percent and the median 

Shelter SOW in the South Atlantic is 22 percent—that is, 57 percent higher than in Puerto Rico. 

Dr. George does not appear to have taken this into consideration when suggesting that the Board’s 

Electricity SOW of six percent represents an upper bound. 

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Figure 3 

Median Shelter Share of Wallet by 2021 Income Decile 

56. Dr. George’s comparison also disregards the large informal economy in Puerto 

Rico, the presence of which means that true income levels may materially exceed reported income 

levels (and much more so than in mainland U.S. jurisdictions).73 For instance, in a post-PROMESA 

submission to the United States Senate Committee on Finance, the authors stated: 

73 See Chakraborty Confirmation Report, ¶ 60 (“Moreover, the use of a share of wallet threshold to assess 

affordability (no matter what threshold is used) assumes that one can determine all of a household’s income based 

on the measurements in reported data, an assumption that is particularly problematic in Puerto Rico where the 

size of the informal (i.e., unmeasured) economy is often estimated to be over 20% of GNP. This compares to an 

estimated informal economy in the mainland United States of 8% of GDP. The understatement of true income in 

reported data implies that even the Board’s Hypothetical Residential Customer may be able to afford more than 

6% of its measured income.”). 

0%

5%

10%

15%

20%

25%

30%

5 (41% to 50%) 6 (51% to 60%) 7 (61% to 70%) 8 (71% to 80%) 9 (81% to 90%) 10 (91% to 100%)

Median Shelter Share of Wallet

Income Decile

Puerto Rico

US South Atlantic

Notes:

[1] Shelter SOW is calculated using the variables “OWNCOST” with respect to homeowners and “RENTGRS” with respect to renters.

[2] The South Atlantic region of the United States is defined to include the District of Columbia, Delaware, Florida, Georgia, Maryland, North Carolina,

South Carolina, Virginia, and West Virginia, which mirrors the definition of this region employed by the authors of the study on which Dr. George

relies.

Sources:

[1] 2021 Puerto Rico Community Survey.

[2] 2021 American Community Survey.

[3] George Confirmation Report, ¶ 40.

[4] Drehobl, Ariel, et al., “How High Are Household Energy Burdens?,” American Council for an Energy-Efficient Economy, September 2020, 

pp. 13-14.

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Puerto Rican official economic data are seriously deficient. The inflation adjusted 

aggregate data—figures on GNP, GDP, Personal Consumption, etc.—are so poor 

as to be virtually meaningless. Reliable data on the large informal economy are 

non-existent. The data problem makes it difficult to gain knowledge of the 

condition of the economy, undermines the formulation of policy, and creates a 

degree of uncertainty that inhibits private investment.... Data collection and 

reporting requirements for Puerto Rico should be the same as for the fifty states.... 

An additional, but somewhat separate issue concerning data problems in Puerto 

Rico is the lack of systematic examination of the so-called “informal” sector.... It 

is widely assumed that at least 25% of economic activity in Puerto Rico is “off 

the books” and is not measured by official data.

74

57. Thus, estimates of Electricity SOW that are based on reported incomes in Puerto 

Rico may overstate the proportion of total income (i.e., both reported income and unreported 

income) that households actually spend on electricity by a far greater degree than is the case in the 

South Atlantic region (and other regions) of the United States.75

58. For these reasons, Dr. George’s comparison of Electricity SOW in Puerto Rico to 

Electricity SOW in the South Atlantic region gives a false impression that the Board’s proposed 

Legacy Charge exceeds an affordable rate, even based on its six percent Electricity SOW threshold. 

B. Most Households That Would Pay the Legacy Charge Would Not Approach 

the Board’s Electricity SOW Threshold 

59. The corrections to the Board’s analysis that I explained and implemented in the 

74 MacEwan, Arthur, and J. Tomas Hexner, “Establishing Reliable Economic Data for Puerto Rico,” available at

https://www.finance.senate.gov/imo/media/doc/Arthur%20MacEwan%20and%20J.%20Tomas%20

Hexner%20(Submission%201).pdf, pp. 1-2. See also Lopez, Luciana, “Desperate for Taxes, Puerto Rico Tries to 

Get Grip on Underground Economy,” Reuters, April 9, 2014, available at https://www.reuters.com/article/ususa-puertorico-economy-insight/desperate-for-taxes-puerto-rico-tries-to-get-grip-on-underground-economyidUSBREA380BS20140409 (“More than a quarter of the island’s economy is informal, some studies say, from 

large companies evading taxes to individuals selling items for cash at roadside stands. But estimates vary widely 

because the activity can be so hard to track.”). There is some evidence (including increased labor force 

participation rates) to suggest that the size of Puerto Rico’s informal economic sector may be diminishing 

somewhat, but nothing suggests that it has reached levels comparable to mainland U.S. jurisdictions. 

75 See Chakraborty Confirmation Report, ¶ 11, fn. 8. 

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Chakraborty Confirmation Report more than doubled the amount of Additional Net Revenues that 

PREPA could collect from customers, from $5.68 billion to $13.39 billion.76 I thus disagree with 

the Board’s advisors, and with Dr. George, that $5.68 billion reflects the outer limit of what 

PREPA can afford to collect through a Legacy Charge to fund debt service payments to pay its 

creditors.77

60. In response to the George Confirmation Report, it is worth reiterating two points. 

First, very few residential households with 2024 incomes of less than $24,000 would be required 

to pay any Legacy Charge.78 As I discussed above, Dr. George therefore is wrong to suggest that, 

“as a result of the Legacy Charge,” roughly half of households in Puerto Rico would spend more 

than six percent of their incomes on electricity and thus face a “high energy burden.”79

61. Second, as I explained in the Chakraborty Confirmation Report, the Board’s 

Hypothetical Residential Customer is not representative of the residential consumers who will 

actually pay the Legacy Charge.80 As Figure 4 below shows, higher-income households would 

76 See Chakraborty Confirmation Report, ¶ 23 and Figure 1. 

77 See, e.g., George Confirmation Report, ¶ 14 (“In my opinion, revenue generated from the Legacy Charge 

represents the upper bound of cash which can reasonably be made available for debt repayment, given the already 

high burden on PREPA’s ratepayers and PREPA’s need to continue operations and modernize its system, among 

other requirements.”). 

78 See Chakraborty Confirmation Report, ¶ 61, fn. 57 (“The approximately 50% of residential customers who earn 

less than $24,000 per year are largely exempt from paying any Legacy Charge (except for consumption over 500 

kWh per month, at half the rate other residential customers would be charged for such consumption). Residential 

customers in the RH3, LRS, RFR, and GRS 112 (LC Subsidy Eligible) classes are exempt from the Incremental 

Flat Fee and the Incremental Volumetric Charge for consumption ≤ 500 kWh. These customer classes are assumed 

to have an Incremental Volumetric Charge (half that of GRS 112 (General) customers) for additional consumption 

> 500 kWh. See Revenue Envelope and Legacy Charge Derivation Workbook.”). 

79 George Confirmation Report, ¶ 40 (“... because the SOW calculation is based on median household income, this 

suggests that around half of households in Puerto Rico would spend more than 6% of their household income on 

electricity. In other words, about half of Puerto Rico residents would face a ‘high energy burden’ as a result of 

the Legacy Charge, further suggesting that the 6% SOW constraint for determining the Legacy Charge represents 

an upper bound on revenue available to service the New Bonds.”). 

80 See Chakraborty Confirmation Report, ¶ 61. 

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continue to have Electricity SOWs of materially less than the Board’s six percent threshold when 

paying the Legacy Charge.81

Figure 4 

Electricity SOW in 2024 Under the Board’s Legacy Charge 

Relative to the Board’s Threshold 

81 Figure 4 charts the same data shown in Exhibit 12 to the Chakraborty Confirmation Report, which uses the PRCS 

to estimate share of wallet for customer groups starting at the median income level and demonstrates that higher 

income customers continue to spend a much lower share of income on electricity than the Hypothetical Residential 

Customer, even taking into consideration the Board’s estimation of the maximum rate. See Chakraborty 

Confirmation Report, ¶ 61 and Exhibit 12. 

 Median monthly consumption in 2021 was extrapolated to 2024 based on the Board’s methodology—specifically, 

the Board extrapolates the 2021 load to 2024 by using the same percent change in the average annual load 

(adjusted for lighting savings) per customer between the two years. The lighting savings adjusted gross load and 

the number of customers are taken from the 2022 PREPA Fiscal Plan. Fixed and volumetric base rates and Legacy 

Charge rates were taken from the Board’s Revenue Envelope and Legacy Charge Workbook. Fiscal year 

electricity rates were taken from the 2022 PREPA Fiscal Plan. See Chakraborty Confirmation Report, Exhibit 12. 

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62. Notably, Figure 4 is specific to 2024. As such, the figure does not reflect that the 

Electricity SOW of both the Hypothetical Residential Customer and higher-income households 

will decline over time due to the effect of income growth as well as the corresponding to the decline 

in PREPA’s anticipated load. 

Dated: May 15, 2023 

 ______________________________________________________________ 

 Maureen M. Chakraborty, PhD 

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Appendix A

Materials Considered

Legal Documents

Disclosure Statement Exhibit P: Legacy Charge Derivation.

Expert Reports

Debtor’s Opening Expert Report and Disclosures, April 28, 2023.

Expert Report of David Plastino, May 5, 2023, and associated Exhibits and Backup Materials.

Expert Report of Gary Strumeyer, April 28, 2023, and associated Exhibits and Backup Materials.

Expert Report of Glenn R. George, MBA, PE, PhD, April 28, 2023, and associated Exhibits and Backup Materials.

Expert Report of Maureen M. Chakraborty, PhD, April 28, 2023, and associated Exhibits and Backup Materials.

Expert Report of Sebastian Edwards, April 28, 2023, and associated Exhibits and Backup Materials.

Expert Rebuttal Report of Susan Tierney, PhD., May 15, 2023, and associated Exhibits and Backup Materials.

Expert Report of Susan Tierney, PhD., April 28, 2023, and associated Exhibits and Backup Materials.

Bates-Stamped Documents

“Model – Recovery Analysis PREPA Title III Dismissed.xlsx.xlsx,” FOMB_PREPA 00003017.

“PREPA 2022 Fiscal Plan Model.xlsx,” FOMB_PREPA 00003018.

Academic Literature

Fisher, Sheehan & Colton, “Home Energy Affordability in New York: The Affordability Gap (2008 – 2010),” Prepared for 

New York State Energy Research Development Authority, June 2011.

Hernandez, Diana and Daniel Carrion, “Housing Hardship and Energy Insecurity Among Native-Born and Immigrant LowIncome Families with Children in the United States,” Journal of Children and Poverty , March 2016.

Hernandez, Diana, et al., “Energy Insecurity among families with Children,” National Center for Children in Poverty – 

Mailman School of Public Health, Columbia University , January 2014.

Schwartz, Mary and Ellen Wilson, “Who Can Afford to Live in a Home? A Look at Data from the 2006 American Community 

Survey,” U.S. Census Bureau , 2006.

Deposition Transcripts

Deposition of William Zarakas, May 4, 2023.

Deposition of David Skeel, May 2, 2023.

Other Publicly Available Sources

Lopez, Luciana, “Desperate for Taxes, Puerto Rico Tries to Get Grip on Underground Economy,” Reuters, April 9, 2014, 

available at https://www.reuters.com/article/us-usa-puertorico-economy-insight/desperate-for-taxes-puerto-rico-tries-to-get-gripon-underground-economy-idUSBREA380BS20140409.

MacEwan, Arthur, and J. Tomas Hexner, “Establishing Reliable Economic Data for Puerto Rico,” available at 

https://www.finance.senate.gov/imo/media/doc/Arthur%20MacEwan%20and%20J.%20Tomas%20Hexner%20(Submission%2

01).pdf.

U.S. Energy Information Administration, “Puerto Rico Territory Energy Profile,” last updated January 19, 2023, 

https://www.eia.gov/state/print.php?sid=RQ#.

A-1

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