EXHIBIT 18 

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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 REPORT OF MAUREEN M. CHAKRABORTY, PHD 

APRIL 28, 2023 

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TABLE OF CONTENTS 

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

A. Summary of Dispute and Assignment ...........................................................................1

B. Qualifications .................................................................................................................3

C. Compensation ................................................................................................................3

D. Information Considered .................................................................................................4

E. Structure of This Report.................................................................................................4

II. SUMMARY OF OPINIONS ..................................................................................................5

III. SUMMARY OF THE BOARD’S CALCULATION OF THE LEGACY 

CHARGE AND FUTURE REVENUES AVAILABLE FOR DEBT 

SERVICE ..............................................................................................................................15

A. The Board’s Hypothetical Residential Customer, Share of Wallet 

Calculation, and Revenue Envelope ............................................................................18

B. Revenues Remaining After the Board’s Two Subtractions from 

PREPA’s Revenue Envelope .......................................................................................23

C. The Board’s Legacy Charge and Additional Net Revenues 

Calculations..................................................................................................................25

IV. THE BOARD MISAPPLIES ITS OWN SHARE OF WALLET 

AFFORDABILITY THRESHOLD ......................................................................................27

A. The Board Overstates Electricity Consumption for its Hypothetical 

Residential Customer and Thereby Creates an Artificially Low Ceiling 

on the Legacy Charge ..................................................................................................29

1. Corrections to the Board’s Analyses......................................................... 31

2. Additional Net Revenues After Correction ............................................... 33

B. The Board Incorrectly Ignores the Effects of Inflation Over a MultiDecade Period ..............................................................................................................34

1. Corrections to the Board’s Analysis ......................................................... 36

2. Additional Net Revenues after Correction ................................................ 37

C. The Board’s Method of Adjusting the Maximum Rates Deemed 

Affordable for the Hypothetical Residential Consumer to Determine 

the Maximum Rates for Higher Income Residential Households is Not 

a Reliable Measure of Affordability ............................................................................37

1. Corrections to the Board’s Analysis ......................................................... 40

2. Additional Net Revenues After Correction ............................................... 41

D. The Board’s Method of Adjusting the Maximum Rates Deemed 

Affordable for the Hypothetical Residential Consumer to Determine 

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the Maximum Rates for Commercial, Industrial, Government, and 

Municipal Customers is Not a Reliable Measure of Affordability ..............................41

1. Corrections to the Board’s Analysis ......................................................... 42

2. Additional Net Revenues After Correction ............................................... 44

V. MORE REALISTIC DEMAND FORECASTS INCREASE THE 

ADDITIONAL NET REVENUES .......................................................................................45

1. Corrections to the Board’s Analysis ......................................................... 46

2. Additional Net Revenues After Correction ............................................... 47

VI. THE BOARD UNDERSTATES ADDITIONAL NET REVENUES BY 

APPLYING ELECTRICITY ELASTICITY ASSUMPTIONS THAT ARE 

NOT SUPPORTED BY THE RELEVANT LITERATURE ...............................................48

1. Correction of the Board’s Analysis ........................................................... 50

2. Additional Net Revenues After Correction ............................................... 51

VII. THE BOARD UNDERSTATES ADDITIONAL NET REVENUES BY 

ADOPTING OVERSTATED AND OUTDATED ASSUMPTIONS FOR 

REQUIRED CAPITAL EXPENDITURES..........................................................................51

VIII. ADDITIONAL NET REVENUES PREPA CAN COLLECT TO PAY 

CREDITORS ........................................................................................................................52

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I. INTRODUCTION 

A. Summary of Dispute and Assignment 

1. The Modified Second Amended Title III Plan of Adjustment of the Puerto Rico 

Electric Power Authority (ECF No. 3296) and its corresponding Disclosure Statement (ECF No. 

3279) propose to restructure PREPA’s liabilities principally through an issuance of $5.68 billion 

of New Bonds to fund partial recoveries on creditors’ claims.1 In addition to $8.26 billion in 

outstanding PREPA revenue bonds, plus approximately $218 million in prepetition accrued 

interest on such bonds,2

 PREPA estimates $700.9 million in Fuel Line Loan Claims and projects 

between approximately $246 million and $4.9 billion (with an estimate of $800 million) in General 

Unsecured Claims.3

2. Under the proposed Plan of Adjustment, PREPA’s future payments of principal and 

interest on the New Bonds would be funded, over an expected 35-year period, by generating Net 

Revenues (“Additional Net Revenues”) through imposition of a charge to PREPA’s customers 

(called the “Legacy Charge”). That proposed Legacy Charge comprises (i) an additional monthly 

flat fee for customers’ connection to PREPA’s power grid and (ii) additional charges based on 

1

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

Power Authority, 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, March 1, 2023 (the “Disclosure Statement”), p. 36; 

Disclosure Statement Exhibit A: Modified Second Amended Title III Plan of Adjustment of the Puerto Rico 

Electric Power Authority (“Plan” or “Plan of Adjustment”), p. 42. 

2

 Disclosure Statement Exhibit H: Summary of Outstanding PREPA Bonds (“Summary of Outstanding PREPA 

Bonds”), p. 2. 

3

 Disclosure Statement Exhibit H: Summary of Outstanding PREPA Bonds (“Summary of Outstanding PREPA 

Bonds”), p. 2; Disclosure Statement, p. 28; Disclosure Statement Exhibit O: Estimation of General Unsecured 

Claims Pool (“Estimation of General Unsecured Claims Pool”). 

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electricity consumption on a per-kilowatt-hour (kWh) basis (a “volumetric charge”). The Financial 

Oversight and Management Board (the “Board”) determined the Legacy Charge by developing a 

view of what it deems affordable for PREPA’s customers. Based on that analysis, which I address 

in my Report, the Board says that an affordable and sustainable Legacy Charge will generate only 

$5.68 billion in Additional Net Revenues, measured as of the effective date of the Plan of 

Adjustment.4 In other words, the Board considers that the maximum amount of New Bonds that 

PREPA can afford to service (and thus make available to satisfy more than $10 billion in total 

liabilities under the Plan) is $5.68 billion. 

3. I have been asked by counsel for the Ad Hoc Group of PREPA Bondholders, 

Assured Guaranty Corp., Assured Guaranty Municipal Corp., and Syncora Guarantee Inc. (the 

“Bondholders”) to evaluate the Board’s proposed Legacy Charge. I have also been asked to 

perform an independent assessment and calculation of the reasonable range of Additional Net 

Revenues that PREPA is capable of collecting from customers to repay its creditors. In doing my 

own assessment, I subjected my calculations to the same 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 (an economic concept referred to as the 

4

 Note that the Plan of Adjustment contains many values that are expressed as the net present value of a series of 

cashflows. In this report when I refer to values for terms such as “Revenue Envelope,” “Revenues Remaining,” 

and “Additional Net Revenues,” I am referring to the net present value of the series of cashflows associated with 

these terms unless I explicitly note otherwise. For ease of comparison with the Board’s presentation, I adopt the 

same discount rate that the Board uses in arriving at their net present value estimates, which is six percent. My 

use of six percent does not constitute agreement on my part that this is the correct discount rate to use for these 

cashflows. See Plan of Adjustment, p. 29. 

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“elasticity of demand”5

), taking into account consumer behavior and the availability of alternative 

energy sources (such as solar power).6

B. Qualifications 

4. I am a Managing Principal at Analysis Group, Inc. (“Analysis Group”), and I earned 

my Ph.D. in Economics from the University of Notre Dame and my B.A. in Economics from Colby 

College. Analysis Group provides economic, financial, and business strategy consulting to its 

clients. It specializes in the interpretation of economic and financial data and the development of 

economic and financial models. I have an extensive background in economics, finance, 

accounting, and valuation. I have served both as an expert witness and as a consultant in matters 

involving valuation, solvency, fraudulent conveyance, creditor recovery, reinstatement of debt, 

successor liability, securities matters, and economic damages. 

5. My curriculum vitae, which includes a list of all publications I have authored, is 

attached as Appendix A to this report, and a list of cases in which I have provided expert testimony 

in the last four years is attached as Appendix B. 

C. Compensation 

6. Analysis Group bills on an hourly basis for my work in connection with this 

assignment. 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 

5

 Elasticity of demand is a measure of the responsiveness of quantity demand to changes in price. Hubbard, R. 

Glenn, and O’Brien, Anthony Patrick, “Microeconomics, Seventh Edition,” (New York, NY: Pearson, 2019), p. 

184. I describe this economic concept and its impact on PREPA’s ability to collect Additional Net Revenues in 

subsequent sections of this report. 

6

 Disclosure Statement Exhibit P: Legacy Charge Derivation (“Legacy Charge Derivation”), p. 2. 

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standard hourly rates. Neither my compensation nor Analysis Group’s is contingent upon the 

opinions I form or the outcome of this case. 

D. Information Considered 

7. In preparation of this expert report, I, along with Analysis Group staff working 

under my direction, have reviewed various documents and data sources. I attach a list of documents 

and sources which I have considered as Appendix C to this Report. 

E. Structure of This Report 

8. This Report is organized as follows: 

a. Part 1 consists of two sections: an introduction (Section I) and a summary of my 

opinions (Section II). 

b. Part 2 is one section, Section III, which describes the Board’s methodology for 

calculating the funds it expects PREPA to have available to repay creditors and the 

Board’s methodology for determining the Legacy Charge to collect those funds. 

c. Part 3 consists of three sections that set out flaws I have identified in the Board’s 

analyses. Section IV explains several problems with the Board’s affordability 

analysis and presents my calculation of Additional Net Revenues that PREPA is 

able to collect after correcting the Board’s affordability analysis. Section V

presents my calculation of Additional Net Revenues using the alternative load 

forecasts presented in the Expert Report of Dr. Susan Tierney. Section VI presents 

my calculation of Additional Net Revenues after replacing the Board’s inflated 

elasticity of demand assumptions with elasticity assumptions that are supported by 

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academic literature. Section VII discusses the capital expenditures assumed by the 

Board. 

d. Part 4 is one section, Section VIII, which summarizes my conclusions regarding 

the range of Additional Net Revenues that PREPA is capable of collecting from 

customers. 

II. SUMMARY OF OPINIONS 

9. I conclude that the Board’s methodology for calculating the Additional Net 

Revenues that PREPA is capable of collecting from customers to repay creditors is based on a 

number of inaccurate and unreasonable assumptions and calculations. Correcting for demonstrable 

problems in the Board’s calculations significantly increases 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. 

10. The Board determines Additional Net Revenues in three steps: 

a. First, the Board determines what it refers to as the “Revenue Envelope,” the 

maximum additional revenue that can be generated based upon a combination of 

fixed (flat fee) and volumetric (pay for what you use) rates that are affordable to 

PREPA customers. The Board determines these rates based on its view of how 

much a hypothetical residential customer, earning $24,000 annually in 2024, and 

using 425 kWh of electricity per month (the “Hypothetical Residential Customer”), 

could afford to pay for electricity.7

 Specifically, the Board’s “affordability” 

7

 The Board created this hypothetical customer based on the median income earning residential household in Puerto 

Rico, but not the median consumption of electricity. 

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threshold is that residential customers should not pay more than 6% of their 

monthly income for electricity, i.e., a 6% share of “wallet,” or in the case of the 

Board’s Hypothetical Residential Customer, no more than $120 per month 

($24,000 / 12 months = $2,000/month × 6% = $120/month). The Board calculates 

the maximum additional fixed and volumetric rates (incremental to the rates 

provided in PREPA’s Certified 2022 Fiscal Plan) that PREPA could charge this 

Hypothetical Residential Customer and remain below the 6% affordability 

threshold. These additional rates form the basis for determining the maximum 

additional fixed and volumetric rates the Board deems affordable for all PREPA’s 

residential, industrial, commercial, government, and municipal customers. The 

Board applies the additional rates it determines for all customer classes to its 

forecast of the demand for electricity through 2051 to estimate the Revenue 

Envelope, which it concludes is $6.38 billion. The Board represents that this is the 

maximum amount of additional revenues that PREPA is able to collect from its 

customers through 2051. 

b. Second, the Board calculates an amount it refers to as “Revenues Remaining” by 

subtracting two amounts from the Revenue Envelope: (i) an additional amount the 

Board now says is necessary to fund future capital expenses—over and above what 

was forecast in PREPA’s Certified 2022 Fiscal Plan; and (ii) an amount it claims 

will be necessary to pay a portion of PREPA’s fixed costs because the Board 

contends that the additional volumetric rates will result in lower electricity 

consumption (and a shortfall in revenues available to pay PREPA’s total fixed 

costs). After deducting these two claimed future expenses from the Revenue 

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Envelope, the Board calculates Revenues Remaining of $4.68 billion for the years 

2024–2051, which is the maximum amount the Board claims will be available to 

repay creditors. (As discussed next, the Board extends the period over which they 

would collect Additional Net Revenues from 2024–2051 to 2024–2058, which 

increases this amount to $$5.68 billion.) 

c. Third, the Board determines a combination of incremental fixed and volumetric 

rates that, based on the Board’s projections, over the years 2024–2051, will 

generate PREPA revenues that will generally equal the Board’s estimate of $4.68 

billion of Revenues Remaining. The Board labels this combination of rates the 

“Legacy Charge.” The Board then extends the Legacy Charge to 2058 and 

calculates a net present value of $5.68 billion in Additional Net Revenues, which 

are the total additional revenues the Board claims PREPA can collect via a Legacy 

Charge and make available to service the New Bonds issued under the Plan. 

11. I reviewed the Legacy Charge and the Board’s view of the Additional Net Revenues 

PREPA could collect. Based on my review of these calculations, I conclude that the Board makes 

several inaccurate and unreasonable assumptions and calculations that have the effect of reducing 

Additional Net Revenues. In other words, even accepting the Board’s 6% share of wallet solely 

for purposes of this Report,8

 I conclude that the Board understates the amount of revenues PREPA 

can generate to repay creditors. 

8

 The Board’s share of wallet analysis is based on the assumption that customers should not spend more than 6% 

of their income on electricity expenses. This threshold comes from a study that found that households should not 

spend more than 30% of their income on total shelter costs, and assuming that a household spends 30% of its 

income on shelter costs, it should not spend more than 20% of its total shelter spending on electricity (i.e., 20% 

of 30% equals 6%). The study on which the Board is relying for this metric was conducted for households areas 

such as New York, where shelter costs are significantly higher than in Puerto Rico. The significantly lower shelter 

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12. The Board Overstates Electricity Consumption for its Hypothetical 

Residential Customer and Thereby Creates an Artificially Low Ceiling on the Legacy 

Charge: The Board assumes the Hypothetical Residential Customer consumes 425 kWh of 

electricity monthly. But that level of consumption is unsupported by data from LUMA and the 

Puerto Rico Community Survey. The Board selected a household earning $24,000 in 2024 for its 

Hypothetical Residential Customer because it approximates the median household income in 2024, 

the initial year of the Legacy Charge. Data provided by LUMA and the Puerto Rico Community 

Survey demonstrate that a household earning $24,000 in Puerto Rico does not actually consume 

425 kWh of electricity monthly, but will instead consume 372 to 400 kWh monthly. By projecting 

a higher level of electricity consumption per month than consumers at the median income level 

actually use, the Board overstates their current spending for electricity and thereby creates too low 

a ceiling on the Legacy Charge rates that would keep the monthly electricity bill of the 

Hypothetical Residential Consumer below $120. This error has large implications for the 

calculation of Additional Net Revenues that PREPA could reasonably collect from customers to 

repay creditors. Correcting the consumption level of the Board’s Hypothetical Residential 

Customer to reflect the actual expected consumption of a household earning $24,000 results in 

Additional Net Revenues between $7.19 billion and $8.96 billion, an increase of $1.51 billion to 

$3.28 billion over the amount calculated by the Board. See Section IV.A. These corrections to 

reflect actual consumption levels are implemented keeping the Hypothetical Residential 

costs in Puerto Rico (households spend significantly less than 30% of income on shelter costs) implies an ability 

to spend somewhat more than 6% of income on electricity while still allowing Puerto Rico residents to remain 

well below 30% spending on total shelter costs. Moreover, the informal economy in Puerto Rico is far larger 

relative to the size of the local economy than in the mainland United States, implying that true income levels 

materially exceed reported income levels. Accordingly, for both of these reasons, share of wallet calculations that 

are based on reported income in Puerto Rico may overstate the actual share of wallet spent on electricity. That is, 

Puerto Rico residents likely are able to spend more than 6% of their reported income on electricity. 

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Customer’s monthly electricity bill at $120, which the Board deems is affordable for a household 

earning $2,000 per month (or $24,000 annually). 

13. The Board Incorrectly Fails To Incorporate the Effects of Inflation Over a 

Multi-Decade Period: Despite purporting to calculate rates that are affordable over a period 

extending 35 to 50 years into the future, the Board actually conducts its affordability analysis only 

for the first year of the Legacy Charge (2024) and then holds the estimated Legacy Charge’s fixed 

and volumetric rates constant for the duration of the period. In other words, the Board assumes 

that the amount of money the Hypothetical Residential Customer can spend on electricity per 

month in 2024 will continue to be the same amount ($120) for three and a half decades—even 

though the Board itself forecasts an inflation rate of 1.7% over that same period. This assumption 

effectively reduces the “real” cost of the charge in each year. This is not economically sensible. 

There is no basis to keep the Legacy Charge constant over a 35 to 50 year period without making 

any adjustment for changes in purchasing power. For example, $1 in 1972 was equivalent in 

purchasing power to $7.09 in 2022. The Board nevertheless is assuming that its Hypothetical 

Residential Customer’s nominal annual income remains constant—and that its real income (which 

is adjusted for inflation) decreases—every year between 2024–2058. In reality, nominal median 

household income in Puerto Rico has been growing and was approximately $14,412 in 1999, 

$18,314 in 2009, and $20,269 in 2018. I show that if the Board were to conduct its affordability 

calculation each year through 2058 and properly take into account reasonable assumptions of wage 

growth just driven by inflation alone, then, Additional Net Revenues would be $6.59 billion, an 

increase of $910 million over the amount calculated by the Board. See Section IV.B. 

14. The Board’s Method of Adjusting the Maximum Rates Deemed Affordable for 

the Hypothetical Residential Consumer to Determine the Maximum Rates for Higher 

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Income Residential Households, Commercial, Industrial, Municipal, and Government 

Customers is Not a Reliable Measure of Affordability: The Board’s method of adjusting the 

maximum affordable rates it calculates for its Hypothetical Residential Customer to determine the 

maximum affordable rates for all other customers is unsupported and does not provide a reliable 

measure of affordability for these other customers. First, the Board assumes that the maximum 

affordable rates determined for its Hypothetical Residential Customer are the maximum affordable 

rates for all residential non-exempt customers, including customers with household incomes well 

above $24,000 per year. Approximately 46% of PREPA customers are residential customers with 

income higher than the Hypothetical Residential Customer and who therefore can afford to pay 

more for electricity, even under the Board’s share of wallet threshold. And the bulk of low-income 

residential customers would be exempt from paying some or all of the Legacy Charge. 

Accordingly, the Legacy Charge proposed by the Board leads to a wallet share below 6% for most 

residential customers who would actually pay it. However, the Board does not directly assess the 

affordable rate for households earning above $24,000. 

15. I correct the Board’s failure to address the fact that higher earning residential 

customers can afford to pay more than the Hypothetical Residential Customer by making modest 

changes to the relative proportion of the Board’s estimate of the Revenue Envelope that is collected 

from additional fixed versus volumetric rates. Specifically, additional revenues collected from the 

Board’s proposed maximum fixed rate represents about 87% of the total Revenue Envelope. I 

reduced the fixed charge proportion of the maximum affordable rate from 87% for the Hypothetical 

Residential Customer (the Board’s rate structure) to 80%, and 75%, which maintains the Board’s 

affordability threshold for the Hypothetical Residential Consumer, and demonstrate that this 

change increases Incremental Net Revenues by $70 million to $122 million. 

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16. Second, the Board purports to determine the maximum affordable additional 

volumetric rates for non-residential customer classes by identifying “adjustment factors” for each 

non-residential customer class and applying those adjustment factors to the maximum affordable 

additional volumetric rate that the Board determined for the Hypothetical Residential Customer. 

The application of an elasticity adjustment lacks any logical connection to considerations of 

affordability for those customer classes. It is also not consistent with the Board’s 6% share of 

wallet affordability framework. To calculate the additional fixed rate for non-residential customer 

classes, the Board calculates the percentage difference between the hypothetical residential 

customer’s additional fixed rate and the base fixed rate (under the 2022 PREPA Fiscal Plan) and 

assumes that the fixed rates for the non-residential customer classes should be adjusted using the 

same percentage difference. The Board thus assumes that the base fixed rates for each nonresidential class were as close to their corresponding maximum affordable fixed rates as the rates 

for the Hypothetical Residential Customer. The Board does not provide a basis for this assumption. 

17. These ad hoc assumptions, applied to determine the fixed and volumetric rates for 

non-residential customer classes for purposes of determining the size of the Revenue Envelope, do 

not constitute a plausible affordability analysis for those customers. This is particularly important 

given the large share of PREPA revenues that non-residential customers contribute to PREPA’s 

total revenues. 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 

PREPA’s total revenues.9

 For these customer classes, I assess affordability by reference to the size 

of electricity costs relative to total operating costs. I show that, based on electricity share of total 

operating costs, these customer classes can afford to pay a higher Legacy Charge than presented 

9

 Revenue Envelope and Legacy Charge Derivation Workbook. 

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by the Board. Specifically, I show that increasing the maximum volumetric rates for all industrial 

and commercial electricity by just one cent per kWh increases Additional Net Revenues by 

approximately $470 million and increasing the Board’s maximum volumetric rates by just 2.5 

cents per kWh increases Additional Net Revenues by approximately $1.068 billion. With these 

changes, the share of operating costs represented by electricity remains low for industrial 

customers in Puerto Rico. See Section IV.D. 

18. More Realistic Electricity Demand Forecasts Increase the Additional Net 

Revenues: In its Revenue Envelope calculation, the Board combines the additional fixed and 

volumetric rates it determines for each customer class with a forecast of PREPA electricity demand 

for each customer class. In her report (the “Tierney Report”), Dr. Susan Tierney discusses the 

flaws in the Board’s adjusted electricity demand forecasts and presents three revised net load 

forecasts that she concludes are more realistic. One revised net load forecast corrects the Board’s 

forecast using what Dr. Tierney describes as more reasonable assumptions related to the adoption 

of energy efficiency measures, distributed generation (principally, rooftop solar panels), and 

electric vehicles by PREPA customers over the forecast period. The other two build on the first 

revised net load forecast and further adjust the forecasted load for two different projections of 

future GNP growth underlying the Base Case PREPA load forecasts. 

19. I conduct three calculations of Additional Net Revenues based on each of the three 

revised net load forecasts contained in the Tierney Report. I find that Additional Net Revenues are 

$5.75 billion, 5.93 billion, and $6.24 billion, respectively, corresponding to increases of $70 

million, $250 million, and $560 million over the amount calculated by the Board. See Section V. 

20. The Board Understates Additional Net Revenues by Applying Electricity 

Elasticity Assumptions That Are Not Supported by the Relevant Literature: The Board uses 

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estimates of the elasticity of demand for electricity to adjust its net load forecast to account for a 

decrease in electricity consumption as rates are increased. Higher elasticities generally correspond 

with larger changes in electricity consumption and, in this case, a smaller Revenue Envelope and 

amount of Additional Net Revenues. The Board concludes that higher rates and corresponding 

lower consumption will reduce the revenues that PREPA will collect, creating a “shortfall” in 

revenues available to cover fixed costs (the “Elasticity Effect” or “Fixed Cost Under-Recovery”). 

Therefore, the Board reduces the Revenue Envelope by an amount it claims will be necessary to 

cover that shortfall. In her expert report, Dr. Tierney finds that the elasticity estimates used by the 

Board are higher than elasticity estimates from the academic literature. Using lower elasticity rates 

from the academic literature discussed in Dr. Tierney’s report, I show that Additional Net 

Revenues increase to $5.97 billion to $6.26 billion, an increase of $290 million to $580 million 

over the amount calculated by the Board. See Section VI. 

21. The Board Understates Additional Net Revenues by Adopting Unsupported 

Assumptions for Required Capital Expenditures: The Board also subtracts from the Revenue 

Envelope a sum that the Board now says reflects future capital expenses. These capital expenses 

are over and above the capital expenses included in the PREPA forecasts the Board has certified 

in the 2022 PREPA Fiscal Plan. This deduction from the Revenue Envelope reduces the Additional 

Net Revenues available to service the New Bonds by $887 million. In her expert report, Dr. 

Tierney explains that the additional capital expenses assumed by the Board are unsupported. 

Insofar as these additional capital expenses do not materialize, Additional Net Revenues could 

increase by an additional $887 million. See Section VII. 

22. As I describe in detail in this report, PREPA can afford to pay substantially more 

than what is proposed to be paid under the Plan even accepting its own affordability thresholds 

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and other considerations. I correct for a number of inaccurate and unreasonable assumptions and 

calculations in the Board’s estimate of the Revenue Envelope and Additional Net Revenues. The 

impact of each change in isolation is summarized in Table 1. 

23. I also consider and present various combinations of corrections to the Board’s 

estimates that demonstrate that PREPA can collect significantly more Additional Net Revenues to 

repay creditors’ claims. I note that the combinations of these corrections can have compound 

effects, such that the impact of two or more corrections can add to more than the arithmetic sum 

of the individual effects. For example, making only the first four of the corrections from Table 1 

to the Board’s calculations results in Additional Net Revenues of approximately $13.39 billion as 

shown in Figure 1. 

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III. SUMMARY OF THE BOARD’S CALCULATION OF THE LEGACY CHARGE 

AND FUTURE REVENUES AVAILABLE FOR DEBT SERVICE 

24. The Board proposes to add a temporary Legacy Charge to generate Additional Net 

Revenues to fund New Bonds to be issued under the Plan.10 The Board estimates that the proposed 

Legacy Charge would support PREPA’s issuance of New Bonds with a par value of no more than 

10 Disclosure Statement, pp. 39 (“PREPA’s current rates are insufficient to provide for the repayment of legacy or 

restructured debts after payment of PREPA’s operating expenses. Accordingly, to provide sufficient Net 

Revenues to provide a source of repayment of the New Bonds to be issued by PREPA under the Plan, the Plan 

requires the Debtor to implement the Legacy Charge, which will be an additional charge to PREPA’s current 

rates.”). 

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$5.68 billion to be distributed to certain creditors (including but not limited to bondholders) under 

the terms of the Plan of Adjustment.11 

25. The Board first determines what it calls PREPA’s “Revenue Envelope,” which it 

describes as the maximum additional revenues the Board believes PREPA could generate by 

charging “the total rate that PREPA customers can pay” and without threatening PREPA’s 

sustainability, undermining Puerto Rico’s economy, or causing undue hardship to customers.12

The Board determines the maximum fixed and volumetric charges that are affordable and 

sustainable based on how much a hypothetical residential household in 2024, with $24,000 annual 

income and using 425 kWh of electricity per month (the “Hypothetical Residential Customer”), 

could pay for electricity without the customer’s electricity bill exceeding $120 per month, or 6% 

of the customer’s monthly income.13 The Board does not conduct an affordability analysis for any 

residential customers other than the Hypothetical Residential Customer. The Board then uses the 

total affordable rate it determines for the Hypothetical Residential Customer as its basis for 

determining the total affordable rates for all of PREPA’s residential, industrial, commercial, and 

governmental customers. The Board’s resulting calculations of PREPA’s total affordable rates, 

less the base rates from PREPA’s 2022 Fiscal Plan, are then multiplied by a forecast of PREPA’s 

future electricity demand (also referred to as the system’s “load forecast”) to arrive at the Revenue 

Envelope. 

11 Disclosure Statement, p. 5 (“Based on electricity demand projections pursuant to PREPA’s 2022 certified fiscal 

plan (the “Certified Fiscal Plan”), the Legacy Charge is expected to generate sufficient revenue over the next 

thirty-five years to fully repay the approximately $5.68 billion of New Bonds being issued under the Plan...”). 

The Petition claim was approximately $8.3 billion plus $218 million in accrued interest. See Summary of 

Outstanding PREPA Bonds, p. 2. 

12 Legacy Charge Derivation, p. 4. 

13 Note that I discuss the selection of the $24,000 household income level, the level of electricity consumption 

associated with such a household, and the selection of the 6% affordability threshold below in Section IV. 

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26. The Board then subtracts two items from the total available funds in the Revenue 

Envelope. The Board subtracts an amount it contends is necessary to cover fixed costs in the event 

the higher rates result in lower kWh usage (and therefore lower revenues). The Board also subtracts 

an amount it asserts is necessary for future capital expenses over and above what PREPA had 

forecast and the Oversight Board certified in the 2022 PREPA Fiscal Plan. Subtracting these two 

items from its Revenue Envelope, the Board arrives at the “Revenues Remaining” to service New 

Bonds issued under the Plan. 

27. The Board then derives a new, lower, set of electricity rates (which it labels the 

“Legacy Charge”) that will generate a revenue stream that equals the Revenues Remaining on a 

net present value basis. The Legacy Charge has two components: 

a. Fixed Rate: This is a monthly fee paid by all customers connected to the PREPA 

grid unless the customer qualifies for an exemption from the fixed rate.14

b. Volumetric Rate: This is a charge per kilowatt hour (kWh) based on each 

customer’s consumption of electricity from the PREPA grid unless the customer 

qualifies for an exemption from the volumetric rate.15

The Board proposes that all general, non-subsidized residential customers would pay an additional 

$13 each month for the fixed rate component of the Legacy Charge, plus an additional volumetric 

14 Disclosure Statement, p. 40 (“First, PREPA will charge the Flat Fee to all customers each month unless the 

customer qualifies for an exemption from the Flat Fee. The amount paid for the Flat Fee portion of the Legacy 

Charge is a connection charge assessed on each non-exempt customer connected to PREPA’s electricity grid.”). 

15 Disclosure Statement, p. 40 (“PREPA will charge a Volumetric Charge based on each customer’s consumption 

of electricity supplied by PREPA. The Volumetric Charge will be assessed on a cents per-kilowatt hour basis, the 

amount of which will vary per customer class, for electricity consumed during each billing cycle... Customers 

eligible for an exemption from the Flat Fee will also be exempt from paying the Volumetric Charge up to 500 

kWh of monthly metered consumption. If an exempt customer’s utilization exceeds that threshold, that customer 

will be charged fifty percent of the Volumetric Charge applicable for such customer class for consumption above 

the threshold on a per-kilowatt hour basis.”). 

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rate of 0.75 cents per kWh up to 500 kWh per month and 3 cents for each kWh over 500 kWh per 

month. Residential customers enrolled in one of a number of subsidy programs, or otherwise 

subsidy-eligible, would be exempt from paying the additional fixed rate, would pay no additional 

volumetric rate for monthly usage less than or equal to 500 kWh per month, and a reduced 

volumetric rate of 1.5 cents per kWh over 500 kWh per month. Commercial, industrial, and 

governmental customers would pay additional fixed rates and volumetric rates scaled to the general 

residential rate in accordance with PREPA’s current rate design.16

A. The Board’s Hypothetical Residential Customer, Share of Wallet 

Calculation, and Revenue Envelope 

28. To calculate the difference between PREPA’s current revenues and its affordable 

higher revenues (i.e., the Revenue Envelope),17 the Board first determines the additional fixed and 

volumetric rates that the Hypothetical Residential Customer could afford to pay in 2024, the first 

year of the Plan’s implementation.18 As discussed below in Section IV.C, the Board assumes that 

the Hypothetical Residential Customer’s electricity rates are affordable if its electricity bill totals 

no more than 6%of its total income (i.e., a 6% “share of wallet”).19 In short, the Hypothetical 

16 Plan of Adjustment, Schedule B, Annex 1. 

17 Legacy Charge Derivation, p. 4 (“Any increase in PREPA’s rates, including the Legacy Charge, cannot exceed 

the conceptual upper bound of affordability: the total rate that PREPA customers can pay without (1) threatening 

the sustainability of PREPA as a functioning utility; (2) threatening the sustainability of the Puerto Rico economy; 

and/or (3) subjecting customers to undue hardship (i.e., making rates unaffordable to those customers). The 

Oversight Board has calculated the difference between the revenues from PREPA’s rates in its most recent Fiscal 

Plan and the revenues from the notional maximum PREPA’s rates could become without undermining these goals 

as the “Revenue Envelope.” (Emphasis in original.)). 

18 Legacy Charge Derivation, p. 5. 

19 Legacy Charge Derivation, p. 5 (“Affordability was set at 6% of total income, or 6% “wallet share,” because this 

6% energy burden threshold is currently used in several mainland U.S. States as a baseline for proving support to 

consumers.”). 

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Residential Customer, in the Board’s view, can affordably pay no more than about $120 a month 

for electricity (i.e., 6% of a $2,000 monthly income). 

29. The Board starts by determining the additional fixed rate the Hypothetical 

Residential Customer can pay, having concluded that fixed charges are “preferable as the primary 

instrument for raising additional revenues.”20 Specifically, the Board determines the Hypothetical 

Residential Customer’s maximum additional fixed rate to be $21 per month, based on what it 

describes as a survey of fixed charges imposed by electric utilities in the mainland United States.21

30. The additional volumetric rates are then calculated to be the per-kWh rate increase 

that, after existing charges and the additional fixed rate, would bring the Hypothetical Residential 

Customer’s total electricity bill to $120 per month in 2024. As shown in Exhibit 1, the Board 

calculates that the Hypothetical Residential Customer currently would expect to pay $96.81 per 

month for electricity in 2024 based on the rates in the 2022 PREPA Fiscal Plan. Adding the $21 

fixed rate would bring the expected monthly bill up to $117.81, which leaves $2.19 per month that 

the Hypothetical Residential Customer can pay for electricity without spending more than 6% of 

monthly income on it. The Board applies an 0.75 cents per kWh charge to the assumed monthly 

usage of 425 kWh. This results in an expected monthly bill close to the $120/month threshold that 

the Board imposes. 

31. However, because the Board assumes the Hypothetical Residential Customer 

consumes 425 kWh of electricity per month (which, as discussed below, is incorrect), the Board 

20 Legacy Charge Derivation, p. 4. 

21 Legacy Charge Derivation, p. 5 (“The fixed maximum monthly residential charge was developed using a 

benchmark surveying fixed charges imposed by electric utilities across the U.S. as an outer limit, among other 

considerations.”); “Revenue Envelope and Legacy Charge Derivation Workbook,” received March 11, 2023 

(“Revenue Envelope and Legacy Charge Derivation Workbook”). 

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does not derive an affordable additional volumetric rate for consumption over 500 kWh per month 

for the Hypothetical Residential Customer. Without any explanation or support, the Board assumes 

that the maximum additional volumetric rate for residential customers’ consumption more than 

500 kWh is 3 cents per kWh, or exactly four times the 0.75 cents the Board derives for residential 

customers’ consumption less than or equal to 500 kWh.22 In other words, the Board first uses an 

incorrect consumption amount to derive the affordable volumetric rate for the Hypothetical 

Residential Customer based on a 6% wallet share, and then does not calculate the affordable 

volumetric rate for higher consumption consumers. 

32. The Board makes the unsupported assumption that the maximum affordable rates 

determined for the Hypothetical Residential Customer are also the maximum affordable rates for 

all residential non-exempt customers. Therefore, the Board proposes the same $21 fixed rate and 

0.75 cents (≤ 500 kWh) and 3 cents (> 500 kWh) volumetric rates for all unsubsidized residential 

customers in PREPA’s General Residential Service 112 class (“GRS 112 (General)”) and General 

Residential Service 111 class (“GRS 111”)), regardless of their household income.23 The Board 

does not analyze the extent to which residential customers with annual household income over

$24,000 can afford to pay a higher fixed or volumetric rate without spending more than 6% of their 

(higher) income on electricity. Put differently, the Board assumes that a residential customer who 

makes $240,000 a year can only afford the same $21 fixed rate and 0.75 cents (≤ 500 kWh) and 3 

22 As I discuss below, most lower income customers are exempt from portions of the Legacy Charge, and for 

consumption more than 500 kWh/month these customers pay half the rate of non-subsidized customers. See 

Section IV. 

23 Revenue Envelope and Legacy Charge Derivation Workbook. General Residential Service customers correspond 

to residential customers using electricity “for domestic uses for a residence or apartment.” The class may also 

correspond to those in houses, apartments, and other structures “primarily intended for residential purposes, where 

no more than two rooms in which the total connected load does not exceed 500 watts are used by [the] tenant for 

business or professional purposes.” See Disclosure Statement, p. 42. 

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cents (> 500 kWh) volumetric rates as the Hypothetical Residential Customer, who makes $24,000

a year.24 

33. Next, the Board applies a series of adjustments and assumptions to the maximum 

additional fixed and volumetric rates that it calculates for the Hypothetical Residential Customer 

to derive the maximum additional rates for customers in all other rate classes.25 In particular: 

a. Additional fixed rates for the other customer classes were determined by using the 

same ratio between the additional fixed rate (derived for the Revenue Envelope) 

and the base fixed rate (from the 2022 PREPA Fiscal Plan) set for the Hypothetical 

Residential Customer and other members of the GRS 112 (General) rate class. 

b. The maximum additional volumetric rates for commercial, industrial, municipal, 

and government rate class customers that use more than 500 kWh were calculated 

by multiplying the additional volumetric rate for GRS 112 (General) customers that 

use more than 500 kWh by an adjustment factor for each class. The adjustment 

factors for customer classes whose consumption is expected to be less sensitive to 

changes in rates (i.e., customers with inelastic demand) are higher than the 

24 I note that the variable portion of the Board’s maximum rate for the Hypothetical Residential Customer on 

consumption more than 500 kWh will lead higher income households, who generally consume more electricity 

than lower income households, to pay a higher legacy charge than lower consuming customers. However, the 

Board never tests how this portion of the charge impacts affordability for those customers. I discuss the 

affordability of the Board’s proposed rates in more detail in Section IV. 

25 Revenue Envelope and Legacy Charge Derivation Workbook; Legacy Charge Derivation, pp. 5-6 (“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 (non-exempt) Residential customers was then scaled 

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

into account.”). 

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adjustment factors for customer classes whose consumption is expected to be more 

sensitive to changes in rates (i.e., customers with elastic demand).26

c. The maximum additional volumetric rates for commercial, industrial, municipal, 

and government rate class customers that use less than or equal to 500 kWh is the 

same.27

See Exhibit 2 and Exhibit 3. 

34. Having determined the maximum affordable additional fixed and volumetric rates 

for all PREPA customers, the Board then multiplies these additional rates by PREPA’s net load 

forecast by rate class to determine the Revenue Envelope that would result from selling electricity 

at the higher rates. 

35. The Board adjusts PREPA’s net load forecast downward based on an assumption 

that the additional volumetric rates will cause customers to decrease their electricity consumption. 

The degree to which the quantity demanded for a good declines in response to an increase in price 

is a concept in economics referred to as the “price elasticity of demand” and is measured by an 

26 The adjustment factor derivation involves a series of steps. First, the Board calculates the average incremental 

Volumetric Charge for GRS 112 (General) customers based on their observed average consumption in 2021. The 

average incremental Volumetric Charge was $0.0105. Second, for other classes, the Board divides the GRS 112 

(General) incremental Volumetric Charge by the class’s long-run elasticity factor. For example, since the Board 

determines that the long run elasticity of Commercial GSP 212 customers would be 70% of the assumed long run 

elasticity of Residential customers, the Board calculates $0.0105 / 0.7 = $0.015. (In this way, lower elasticity will 

translate to a greater increase in the Volumetric Charge.) Third, the Board divides the result of the second step by 

the incremental Volumetric Charge for GRS 112 (General) customers to arrive at an adjustment factor. For GSP 

212 customers, this is $0.015 / $0.03 = 0.5. Fourth, the Board calculates the adjustment factor by rounding the 

result of the third step to the nearest value in the set {25%, 33%, 50%, 67%, 75%, 100%}. For example, 0.5 is 

closest to 50%, and therefore the adjustment factor for the GSP 212 class is 50% and their maximum incremental 

Volumetric Charge for consumption > 500 kWh is $0.015 (= $0.03 × 0.50). See Revenue Envelope and Legacy 

Charge Derivation Workbook. 

27 The Board hard codes a few exceptions to this equality. The adjustment factors for ≤ 500 kWh customers from 

the Commercial GSS 211, Government GSS 211, and Municipalities GSS 211 class were assumed to be 50% of 

the Volumetric Charge rather than 100%. See Revenue Envelope and Legacy Charge Derivation Workbook. 

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“elasticity rate.”28 The Board determines a short-run demand elasticity of −0.2 and a long-run 

demand elasticity of −1.7 for residential GRS 112 (General) customers—the rate class for the 

Hypothetical Residential Customer—and uses those elasticities as a basis for determining the 

elasticities of other rate classes. To calculate the maximum revenues PREPA could collect from 

customers in different rate classes, the Board first estimates the decrease in electricity consumption 

for each rate class caused by the additional volumetric rates by reference to the elasticity rate, 

multiplies the additional volumetric rates by the elasticity adjusted load forecast, and adds the 

additional fixed rate. Summing these revenues from each rate class, the Board estimates a Revenue 

Envelope from 2024 to 2051 that has a net present value of $6.383 billion as of 2022.29 Exhibit 4

illustrates the Revenue Envelope on an annual basis, extended through 2058. 

B. Revenues Remaining After the Board’s Two Subtractions from PREPA’s 

Revenue Envelope 

36. According to the Board, not all of its calculated Revenue Envelope is available to 

service New Bonds to fund recoveries on creditors’ claims. Rather, the Board determines that 

$1.699 billion (in net present value) must be deducted from the Revenue Envelope and instead be 

used for two other purposes: 

a. Fixed Cost Under-Recovery: As described above, the Board claims that additional 

volumetric rates would, by increasing rates above those contemplated by the 2022 

28 The elasticity of demand measures the percentage change in quantity demanded for a product due to a one percent 

change in its price. In this case, elasticities measure the percentage change in load in response to an increase in 

electricity rates. An elasticity of −0.9, for example, indicates that the quantity demanded for a product decreases 

by 0.9 percent in response to a one percent increase in price. Consumer demand is typically more elastic in the 

long term, as consumers have more time to respond to price increases. The Board uses short run elasticities to 

adjust the load in 2024, and adjusts the load in subsequent years by assuming the elasticities increase linearly, 

year over year until they reach their long-run values in 2034. See Revenue Envelope and Legacy Charge 

Derivation Workbook. 

29 Estimating the net present value of the Revenue Envelope as of 2024, it would be $7.171 billion. 

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PREPA Fiscal Plan, decrease future electricity consumption below PREPA’s 2022 

load forecast. According to the Board, this loss of electricity sales between 2024 

and 2051 would result in a revenue shortfall such that PREPA would not be able to 

pay all of its fixed costs, such as necessary maintenance. The Board thus proposes 

to use a portion of the Revenue Envelope to pay the portion of PREPA’s ongoing 

fixed costs that it says would otherwise be unfunded because of the Elasticity 

Effect. The Board estimates Fixed Cost Under-Recovery to be $0.812 billion in net 

present value. 30

b. Additional Capital Expense: The Board states that additional capital expense, not 

contemplated by the 2022 PREPA Fiscal Plan, and which the Board does not 

identify, will also need to be funded from a portion of the Revenue Envelope. The 

Board estimates these expenditures to be $0.887 billion in net present value.31 The 

Board implies that, if necessary, PREPA could increase rates in the future to collect 

these amounts (the “Fixed Cost Under-Recovery” and the Additional Capital 

Expense),32 but neither the Plan nor the Disclosure Statement reveal any actual 

30 Legacy Charge Derivation, p. 6 (“Applying price elasticity of demand means that, with the Legacy Charge 

included, PREPA’s sales will trend lower than the sales projections included in the Fiscal Plan. As a consequence, 

the revenue PREPA earns from the remainder of its rates (other than the Legacy Charge) will be lower than those 

projected in the Fiscal Plan, and those lower revenues will not be sufficient to cover all of PREPA’s fixed costs. 

Therefore, a portion of the Revenue envelope—a portion of the hypothetical additional revenues associated with 

the increased rates—must be allocated to general PREPA operating costs to cover lost revenue. This means that 

any initial estimate of the gross amount (i.e., the Revenue Envelope) available for the Legacy Charge (the “outer 

bound” referenced above), must be reduced to allow PREPA to pay for the expected shortfall in fixed cost 

recovery.”); Revenue Envelope and Legacy Charge Derivation Workbook. 

31 Legacy Charge Derivation, p. 7 (“A second set of reductions is related to necessary costs not currently accounted 

for in PREPA’s Fiscal Plan. Notably, the Fiscal Plan does not include capital expenditures (and matches to federal 

funding) PREPA will likely need to make to remain a viable operating entity. During the Fiscal Plan term, those 

expenditures are estimated to total $2.425 (on an undiscounted basis).”); Revenue Envelope and Legacy Charge 

Derivation Workbook. 

32 Legacy Charge Derivation, pp. 3, 6. 

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plans to do so (or the conditions on which hypothetical rate increases to reach the 

extent of the Revenue Envelope might take place). 

After deducting these two estimated costs from the Revenue Envelope, the Board then calculates 

the net present value of Revenues Remaining (from the Revenue Envelope) to be $4.684 billion 

for the period 2024–2051.33 Exhibit 5 illustrates the Revenues Remaining on an annual basis, 

extended through 2058. 

37. These two deductions from the Revenue Envelope reflect an NPV of $1.699 billion. 

To the extent that these costs are not actually incurred—either because the posited Elasticity Effect 

is overstated, or because PREPA does not increase electricity rates later to pay for additional 

capital expenditures—then PREPA will not have collected revenues up to the extent of the 

Revenue Envelope. In that event money that could be used to repay PREPA’s creditors will simply 

never be collected by PREPA at all. 

C. The Board’s Legacy Charge and Additional Net Revenues Calculations 

38. As discussed, the Board proposes the Legacy Charge as a combination of additional 

fixed and volumetric rates that would provide PREPA with additional revenues that will generally 

equal the Board’s estimate of $4.68 billion of Revenues Remaining over 2024–2051. The Board 

extends the estimated revenue collected from the Legacy Charge in 2051 to 2052–2058 to arrive 

at Additional Net Revenues over 35 years that have a net present value of $5.68 billion. Since the 

Legacy Charge is not designed to generate revenues equal to the Revenue Envelope, the Legacy 

Charge is substantially lower than what even the Board believes to be the maximum fixed and 

33 Revenue Envelope and Legacy Charge Derivation Workbook. 

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volumetric rates that PREPA can affordably and sustainably collect from its customers. Exhibit 6

illustrates the Revenues resulting from the Legacy charge on an annual basis through 2058. 

39. More specifically, the Board calculates the Legacy Charge as follows: 

a. For all non-subsidized Residential class customers (in rate classes GRS 111/112), 

the Board derives a Legacy Charge fixed rate of $13 per month (compared to the 

$21 per month deemed affordable by its share of wallet calculation for the 

Hypothetical Residential Customer) and Legacy Charge volumetric rates of 0.75 

cents per kWh up to 500 kWh a month and 3 cents per kWh for incremental 

consumption over 500 kWh per month. The Board assumes the same Legacy 

Charge volumetric rates for Commercial GSS 211 customers (with a slightly higher 

fixed rate portion of $16.25). 

b. The Legacy Charge volumetric rates for other customer classes (i.e., other than the 

Residential classes and Commercial GSS 211 customers) are calculated based on a 

“volumetric rate key” for consumption > 500 kWh.34 That is, the volumetric rates 

for commercial, industrial, municipal, and government rate classes are calculated 

by multiplying the volumetric rate key by class-specific adjustment factors. 

c. The Legacy Charge fixed rates are lower than the theoretical maximum additional 

fixed rates determined for the Revenue Envelope.35 For residential customers and 

34 The volumetric rate key is solved for as the value that, when multiplied by the relevant adjustment factors for 

other rate classes to determine their volumetric rates, yields a rate design such that total resulting revenues cover 

the Revenues Remaining. This methodology contrasts with the Revenue Envelope, in which additional volumetric 

rates for GRS 112 (General) were the key for other classes. See Revenue Envelope and Legacy Charge Derivation 

Workbook. 

35 In the Revenue Envelope calculation, the incremental Flat Fees are all scaled by the same 5.25x proportion as the 

incremental Flat Fee for GRS 112 (General) customers relative to their current rates. See Revenue Envelope and 

Legacy Charge Derivation Workbook. 

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commercial GSS 211 customers, the Board assumes, without a supporting 

rationale, that their Legacy Charge fixed rates are 3.25 times their base fixed rates 

in the 2022 PREPA Fiscal Plan. For example, for GRS 112 (General) customers 

this is $4 × 3.25 = $13 and for GSS 211 customers, this is $5 × 3.25 = $16.25. For 

all other customers, the Board assumes, again without support, that their Legacy 

Charge fixed rates are 4 times their base fixed rates in the 2022 PREPA Fiscal Plan. 

d. After determining Legacy Charge fixed and volumetric rates for 2024–2051, the 

Board extends the revenues over 2052–2058.36 The Board assumes that the amount 

of revenue generated by the Legacy Charge each year from 2052–2058 is the same 

as that generated in 2051.37

See Exhibit 7. 

IV. THE BOARD MISAPPLIES ITS OWN SHARE OF WALLET AFFORDABILITY 

THRESHOLD 

40. In its determination of the Revenue Envelope and Legacy Charge, the Board 

emphasizes that rates must remain affordable, such that (1) PREPA’s residential customers do not 

have to spend more than 6% of their monthly income on electricity, (2) higher rates do not cause 

36 In its calculation of Additional Net Revenues, the Board also changes the “current” year in its present value 

calculations to be 2024 instead of the 2022 used in the Revenue Envelope and Revenues Remaining calculations. 

See Revenue Envelope and Legacy Charge Derivation Workbook. 

37 Note that in the Board’s Legacy Charge rate derivation, it makes an error by failing to carry-over the elasticity 

effect they estimated as a result of the Revenue Envelope calculations. This has the effect that the Board has 

underestimated the fixed and volumetric rates required to generate a net present value of $5.68 billion. Therefore, 

the proposed Legacy Charge will not be able to generate enough revenue to pay the New Bonds 

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harm to the Puerto Rico economy, (3) higher rates do not cause potential outmigration, and (4) 

PREPA is able to cover its costs and necessary capital expenditures.38

41. However, the Board does not undertake an analysis of rates that are affordable to 

customers other than the Hypothetical Residential Customer in 2024. As I discuss in Section III.A, 

the Board’s affordability analysis starts with the assumption that the monthly electricity bill of the 

Hypothetical Residential Customer is affordable only if it does not exceed 6% of monthly 

income.39 The Hypothetical Residential Customer posited by the Board is a non-exempt household 

that earns a median household income of $24,000 in 2024, and (according to the Board) can 

therefore afford to pay up to $120 per month for electricity.40 The Board does not directly assess 

the affordability or ability to pay for any other residential customer earning above the median 

income, nor does the Board assess the affordability or ability to pay for any other rate class. 

42. As also discussed in Section III.A, the Board determines the maximum affordable 

rates of all PREPA customers from the rates the Board deems affordable for the Hypothetical 

38 Disclosure Statement Hearing, 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, February 28, 2023 (“Disclosure 

Statement Hearing”), p. 31–32, 35 (“[T]he Oversight Board has continuously emphasized it has to take into 

account everything to come up with what it believes is a plausible range of electric rates that people can afford 

and will leave room for capital expenses, avoid undue conversion to solar, make Puerto Rico competitive, and 

there are other factors as well I won’t belabor the record with at the moment... So one difference between their 

use of the word “affordability” and maybe ours, we don’t use it for this reason, that it’s not just what certain 

people can afford, although that’s very important. It’s also all these other considerations that we have to take into 

account so that the Plan will be feasible and the economy will be sustainable going forward.”); Legacy Charge 

Derivation, p. 4 (“Any increase in PREPA’s rates, including the Legacy Charge, cannot exceed the conceptual 

upper bound of affordability: the total rate that PREPA customers can pay without (1) threatening the 

sustainability of PREPA as a functioning utility; (2) threatening the sustainability of the Puerto Rico economy; 

and/or (3) subjecting customers to undue hardship (i.e., making rates unaffordable to those customers).”). 

39 As discussed in Section IV.C this limit is of questionable validity in Puerto Rico. While I am not endorsing it, I 

use it in my analysis here for consistency with the Board’s approach. 

40 Legacy Charge Derivation, p. 5 (“Pursuant to Fiscal Plan inflation assumptions, such median household income 

in 2024 is estimated to be approximately $23,824.”); Revenue Envelope and Legacy Charge Derivation 

Workbook. 

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Residential Customer who consumes 425 kWh of electricity per month. First, the Board’s ad hoc 

adjustments to the rates the Board deems affordable for the Hypothetical Residential Customer 

make little economic sense and do not provide a reasonable framework to assess affordability for 

all other customers. Second, even if one accepts the Board’s ad hoc adjustments, if the Board is 

incorrect in its conclusions about what is affordable for the median income-earning household in 

Puerto Rico in 2024, then the Board is also incorrect in its conclusions about what is affordable 

for all PREPA customers in 2024. 

43. In this section, I discuss the reasons why the Board is incorrect in their conclusions 

about the rates that are affordable for the Hypothetical Residential Customer. I show that the Board 

made inaccurate and unreasonable assumptions and calculations that understate the incremental 

rates that are affordable to the median income earning household in Puerto Rico in 2024, which, 

by extension, understates the rates that are affordable for all other PREPA customers. I also show 

that correcting the Board’s assumptions, and otherwise adopting the Board’s questionable 6% 

share of wallet threshold, results in a conclusion that PREPA can collect higher Additional Net 

Revenues, and supports a substantially higher par value of New Bonds, than the Board has 

proposed in the Plan. 

A. The Board Overstates Electricity Consumption for its Hypothetical 

Residential Customer and Thereby Creates an Artificially Low Ceiling on 

the Legacy Charge 

44. As I explain in Section III.A, the Board bases the maximum rates that can be 

charged to each customer class on the rates it deems affordable for a Hypothetical Residential 

Customer with an annual income of $24,000 and monthly consumption of 425 kWh. As discussed, 

the income of the Hypothetical Residential Consumer reflects the expected median household 

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income in Puerto Rico in 2024. However, the Board’s assumed consumption for this median 

income-earning consumer is substantially overstated and is not representative of the expected 

actual consumption of a typical PREPA residential customer at that income level. This is a 

demonstrable error. The data shows that a household in Puerto Rico that earns $24,000 per year 

does not consume as much electricity as the Board claims. This error has substantial implications 

on the amount of Additional Net Revenues. 

45. The Board’s use of an inflated consumption amount has the effect of lowering the 

maximum rate that the Board determines PREPA could charge the Hypothetical Residential 

Consumer and lowering the Legacy Charge that PREPA can charge to all customers. This is 

because the maximum rates and the Legacy Charge are constrained by the Board’s 6% share of 

wallet affordability assumption, which implies a maximum monthly bill of $120 for the 

Hypothetical Residential Customer. Therefore, if assumed consumption is overstated, the 

maximum rate to yield a monthly charge of $120 will be understated. And, since the maximum 

rates for the Hypothetical Residential Customer form the basis for the rates for all other PREPA 

customers, the rates for all other PREPA customers will also be understated. Correcting for the 

Board’s miscalculation of the expected 2024 consumption of the Hypothetical Residential 

Customer increases the amount of Additional Net Revenues that PREPA can collect and use to 

repay creditor claims. 

46. I explain my correction of the Board’s error in the rest of this section. In Section 

IV.C.1, I explain the methodology the Board uses to determine the consumption level for the 

Hypothetical Residential Customer and explain the methodological mistakes in the Board’s 

calculations. Correcting for the Board’s mistakes, I find that the expected level of consumption of 

the Hypothetical Residential Customer in 2024 is 372 kWh, which is 12.5% lower than the level 

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of consumption calculated by the Board. Using the lower, more accurate consumption level, 

increases the Legacy Charge and the increases Additional Net Revenues that PREPA can collect 

to $8.96 billion. As a conservative alternative, I also estimate Additional Net Revenues to be $7.19 

billion, assuming a median level of consumption in 2024 of 400 kWh. My calculations are 

described in Section IV.A.2. 

1. Corrections to the Board’s Analyses 

47. The Board performed a calculation of the 2024 median monthly consumption of 

residential customers based on data provided in the 2021 Puerto Rico Community Survey 

(“PRCS”) which corresponds to the Board’s assumption of the consumption level of the 

Hypothetical Residential Customer (earning the median household income).41 The PRCS reports 

an estimate of residential customers’ total annual electricity bill and household income. The Board 

first calculates monthly electricity consumption of the median income earning household (earning 

24,000 in 2024) as follows: (i) calculate the 2021 median annual electricity bill across households 

after excluding households that did not report a positive annual electricity bill;42 (ii) divide the 

median annual residential electricity bill by PREPA’s 2021 fiscal year electricity rates to estimate 

median annual residential consumption; (iii) divide the estimated annual median consumption by 

12 to obtain the median monthly residential consumption in 2021, which the Board concludes was 

425 kWh, and (iv) estimates the median monthly residential consumption in 2024 by reference to 

41 The Board asserts that it uses LUMA data to calculate median income. See Legacy Charge Derivation, p. 5. 

However, based on its produced workpapers, the Board relies on the PRCS data as described here. 

42 Households that did not report a bill, households with no charge or no electricity use, and households whose 

electricity is included in their rent or condo fee were excluded. See KWh Consumption.xlsx, 

FOMB_PREPA00022592. 

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the 2021 median monthly residential consumption.43 The Board ultimately concludes that the 2024 

median consumption is 425 kWh. I replicate the Board’s calculation in Exhibit 8. 

48. However, as I will show, when the Board estimates median annual residential 

consumption, it divides the median annual residential electricity bill by the incorrect electricity 

rates in 2021. Specifically, the Board derives a median consumption figure by dividing 2021 

calendar year electricity bills by PREPA’s 2021 fiscal year rates, which were in effect only until 

June 30, 2021. Since electricity rates were increased in fiscal year 2022, the Board should have 

incorporated into its calculation the higher electricity rates that were in place between July 1, 2021 

and December 31, 2021. 

49. To correct for the Board’s error, I use the Board’s methodology and recalculate 

2021 median residential consumption using the average blended rate from fiscal years 2021 and 

2022, rather than only the fiscal year 2021 rate. Correcting for this mistake results in a lower 

median residential consumption of 369 kWh in 2021. In other words, I find that the Board’s 

estimated median consumption of 425 kWh in 2021 is overstated by 15%. My calculations are 

shown in Exhibit 8. 

50. I check the robustness of my calculation in two ways. First, I repeat the calculation 

using the 2021 residential rates reported by the Energy Information Administration (“EIA”). The 

EIA reports the average annual electricity rate that residential, commercial, and industrial 

customers were actually charged in 2021.44 Using the 2021 EIA rates, I find that the median 

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. 

44 See 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 EIA collects monthly revenue and sales data for 

residential, commercial, and industrial customers in Puerto Rico. They calculate average annual electricity rates 

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monthly consumption in 2021 for households with income between $20,000–$30,000 was 378 

kWh (see Exhibit 8). This finding is 11% lower than the Board’s calculation of median 

consumption of 425 kWh. 

51. Second, in Exhibit 9, I present the median monthly electricity consumption based 

on 2021 LUMA consumption data. My findings confirm that the Board’s calculation of median 

household consumption of 425 kWh in 2021 overstates the consumption of the median income 

earning residential customer. For example, after excluding observations with 0 kWh monthly 

consumption, I find median residential consumption in 2021 was 386 kWh in 2021. 

2. Additional Net Revenues After Correction 

52. As discussed above, using PRCS data, I estimate median monthly consumption in 

2021 to be 369 kWh instead of the 425 kWh assumed by the Board. To estimate median monthly 

consumption in 2024, I account for changes in consumption levels over time using the Board’s 

methodology which I show in Exhibit 9.

45 For example, my estimate of median consumption for 

the median household in 2021 based on PRCS data of 369 kWh grows to 372 kWh by 2024. The 

median monthly consumption using the full LUMA dataset of 356 kWh grows to 359 kWh. I use 

this revised monthly consumption level to re-estimate Additional Net Revenues. I also perform an 

alternative calculation, conservatively assuming that median consumption is 400 kWh.46

for Residential customers by dividing total revenue from Residential customers by total sales Residential 

customers. 

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-to-year 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. 

46 This level is above all of my alternative estimates of 2024 consumption by the Hypothetical Residential Customer. 

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53. Using the corrected median consumption level for the Hypothetical Residential 

Customer implies that PREPA can charge the Hypothetical Residential Customer a higher Legacy 

Charge rate than the Board estimates and not exceed a monthly electricity bill of $120, which the 

Board maintains is affordable. All else equal, this correction results in Additional Net Revenues 

of $8.96 billion, based on a 2024 median monthly consumption of 372 kWh; and Additional Net 

Revenues of $7.19 billion based on a median monthly consumption of 400 kWh. My findings 

show PREPA can collect an additional $1.51 to $3.28 billion over the amount calculated by the 

Board. My results are shown in Exhibit 10. 

B. The Board Incorrectly Ignores the Effects of Inflation Over a Multi-Decade 

Period 

54. As I explain in Section III.A, the Board performs a share of wallet affordability 

calculation based on a Hypothetical Residential Customer with annual income of $24,000 in 2024. 

The maximum additional fixed and volumetric rates that the Board determines are affordable in 

2024 are applied for the entire 35-year projection period. The Board effectively assumes that rates 

that are affordable in 2024 remain the rates that are affordable for the duration of the New Bonds. 

This assumption is nonsensical, however, because it does not account for the effects of income 

growth over time. In other words, although the Board acknowledges that median income will 

increase by the rate of inflation between 2021 and 2024, the Board nevertheless assumes that the 

median income will remain constant at 2024 levels despite the Board’s projection of a 1.7% annual 

increase in inflation over this same period. 

55. The Board bases the $24,000 income level of the Hypothetical Residential 

Customer on an estimate of median household income in 2021, $21,967. To estimate median 

income in 2024, the Board adjusts the 2021 median income for inflation: “Pursuant to Fiscal Plan 

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inflation assumptions, such median household income in 2024 is estimated to be approximately 

$23,924.”47 Therefore, while the Board assumes that the income of the Hypothetical Residential 

Customer will grow over the 2021 to 2024 period due to inflation, the Board assumes no growth 

in the income of the Hypothetical Residential Customer thereafter (due to inflation or real growth). 

In other words, the Board assumes the median nominal income in Puerto Rico will remain constant

at 2024 levels for 35 years—i.e., that the median household will still earn $24,000 in 2058. For 

context, median household income in Puerto Rico was approximately $14,412 in 1999, $18,314 in 

2009, and $20,269 in 2018, and has never been constant over long periods of time.48 An assumption 

of constant income (no growth) over 35 years is the same as forecasting a year over year decline

in real income, which is income after adjusting for inflation. 

56. Ignoring growth in wages over the term of the New Bonds has significant 

implications for the Board’s calculation of Additional Net Revenue. The maximum affordable 

rates for the Hypothetical Residential Customer under the Revenue Envelope are determined by 

assuming that the Hypothetical Residential Customer can afford a $120 maximum monthly 

electricity bill in every year for 35 years, irrespective of inflation. All else equal, had the Board 

instead allowed the income of the Hypothetical Residential Customer to increase over that 35-year 

period, the Hypothetical Residential Customer could afford to pay more than $120 per month for 

electricity while staying under the Board’s 6% share of wallet threshold, and thus could afford to 

pay higher rates over time. And since the Board determines the rates for all other customers based 

on the rates that are affordable to the Hypothetical Residential Customer, all other customers would 

47 Legacy Charge Derivation, p. 5. 

48 U.S. Department of Housing and Urban Development, “Comprehensive Housing Market Analysis Puerto Rico,” 

July 2019, https://www.huduser.gov/portal/publications/pdf/CMARtables_PuertoRico_19.pdf; U.S. Bureau of 

Labor Statistics, “Occupational Employment and Wage Statistics,” July 19, 2022, 

https://www.bls.gov/oes/tables.htm. 

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likewise be able to afford higher electricity rates also. Therefore, a reasonable increase in the 

income of the Hypothetical Residential Customer will increase Additional Net Revenues that 

PREPA can collect to service New Bonds. 

1. Corrections to the Board’s Analysis 

57. As discussed above, the Board’s assumption that there would be no growth in 

nominal income for 35 years is unreasonable (and contradicted by the Board’s own forecasts for 

the period from 2021–2024 and the Board’s own forecasts for the Puerto Rico economy at large 

in the Commonwealth Fiscal Plan). Therefore, I adjust the Board’s calculations to allow the 

income of the Hypothetical Residential Customer to grow at the rate of inflation each year from 

2024 to 2051 using the projected inflation rate from the 2022 PREPA Fiscal Plan.49 I do this by 

recalculating the maximum affordable monthly bill of the Hypothetical Residential Customer, 

assuming median income grows by inflation between 2024 to 2051. Mathematically, this is 

equivalent to increasing the Board’s estimate of the 2024 affordable monthly bill of $120 by 

inflation in each year. I also calculate the projected monthly bill (before Legacy Charge) for the 

Hypothetical Residential Customer in each year from 2024 to 2051 using the base rates and 

expected charges projected in the 2022 PREPA Fiscal Plan. I then calculate the additional fixed 

and volumetric charges that could be charged in each year from 2024 to 2051 such that the inflation 

49 The 2022 PREPA Fiscal Plan takes its measure of inflation from the 2022 Commonwealth Fiscal Plan. The 

Commonwealth Fiscal Plan calculates inflation as a weighted average of 50% of the U.S. inflation rate a 50% of 

a predicted increment. The result is an inflation rate that on average is, on approximately, −0.6% lower than the 

U.S. inflation rate. “2022 Certified Fiscal Plan for the Puerto Rico Electric Power Authority,” June 28, 2022, 

FOMB_PREPA 00000699 – FOMB_PREPA 00000882, (“2022 PREPA Fiscal Plan”); Financial Oversight & 

Management Board for Puerto Rico, “2022 PREPA Fiscal Plan,” January 27, 2022, 

https://drive.google.com/file/d/1STrf0ksj1Sqc54UkABGcjyrbIZvc_JEm/view (“2022 Commonwealth Fiscal 

Plan”), p.33; January 2022 Fiscal Plan Model Certified (Dataroom).xlsx, FOMB_PREPA00020359. 

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adjusted monthly electricity bill of the Hypothetical Residential Customer meets the Board’s 6% 

Share of Wallet threshold. 

2. Additional Net Revenues after Correction 

58. Exhibit 11 presents my calculation of the Additional Net Revenues that PREPA 

could collect simply by assuming that the income of the Hypothetical Residential Customer 

increases by the rate of inflation and otherwise leaving the Board’s methodology unchanged. 

Assuming all else equal, Additional Net Revenues increase by $910 million, or 16% over what the 

Board calculates, to $6.57 billion. 

C. The Board’s Method of Adjusting the Maximum Rates Deemed Affordable 

for the Hypothetical Residential Consumer to Determine the Maximum 

Rates for Higher Income Residential Households is Not a Reliable Measure 

of Affordability 

59. A 30% share of wallet for shelter costs (which includes rent or mortgage payments, 

insurance, and utilities) has historically been viewed as a rule of thumb threshold for housing 

affordability.50 Intuitively, the threshold is intended to reflect the amount a household can spend 

on shelter while still being able to meet its basic non-shelter expenditures.51 The Board’s 

conclusion that monthly electricity costs that exceed 6% of monthly income are unaffordable is 

50 Linneman, Peter D. and Isaac F. Megbolugbe, “Housing Affordability: Myth or Reality?” Urban Studies 29, nos. 

3/4 (1992): 369–92; Schwartz, Mary and Ellen Wilson, “Who Can Afford To Live in a Home?: A Look at Data 

From the 2006 American Community Survey,” Unpublished Working Paper (2008), https://acash.org.pk/wpcontent/uploads/2018/09/who-can-afford.pdf for a discussion of the housing threshold (“Housing expenditures 

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

affordability problem.”). 

51 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,” Unpublished Working Paper (2008), https://acash.org.pk/wpcontent/uploads/2018/09/who-can-afford.pdf for a discussion of the housing threshold (“Because the 30 percent 

rule was deemed a rule of thumb for the amount of income that a family could spend and still have enough left 

over for other nondiscretionary spending...”). 

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based on papers that assume that household utility costs should not exceed 20% of shelter costs 

(20% of 30% is 6%).52 However, these studies were based on residents in cities in the mainland 

US, such as New York, where housing costs are particularly high. In Puerto Rico, housing costs 

are significantly lower than in the mainland US (let alone New York), implying that a higher 

energy share of wallet is affordable in Puerto Rico (i.e., there is more room for electricity costs 

given the significantly lower mortgage, rent, and other shelter costs).53 Indeed, Puerto Rico, like 

virtually all islands, has long had higher electricity prices than in the mainland United States due 

to the unique attributes of providing electricity to an island. These costs, however, are more than 

offset by lower total shelter costs. Accordingly, the foundation of the Board’s entire affordability 

analysis, the 6% electricity share of wallet threshold, is not supported by the literature from which 

it was derived and cannot serve as the basis for a properly conducted affordability analysis. 

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.54 

This compares to an estimated informal economy in the mainland United States of 8% of GDP.55

The understatement of true income in reported data implies that even the Board’s Hypothetical 

52 Colton, Roger D., “Home Energy Affordability in New York: The Affordability Gap (2008–2010),” Working 

Paper (2011), https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/EDPPP/LIFE/Resources/2008-2010-

affordability-gap.pdf (“The 6% is a calculated figure. It is based on the premise that utility costs should not exceed 

20% of shelter costs.”). 

53 2019 Puerto Rico Community Survey and American Community Survey. 

54 Bond, Craig A. et al., “Challenges and Opportunities for the Puerto Rico Economy: A Review of Evidence and 

Options Following Hurricanes Irma and Maria in 2017,” Rand Corporation, 2020, 

https://www.rand.org/pubs/research_reports/RR2600.html, pp. 108-109. 

55 Elgin, C. et al., “Understanding Informality,” Centre for Economic Policy Research, 2021, C.E.P.R. Discussion 

Paper 16497. 

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Residential Customer may be able to afford more than 6% of its measured income. Despite these 

issues with the Board’s 6% share of wallet threshold, I nevertheless adopt it for most of my 

analyses described and presented in this report. That is, even if one conservatively assumes that 

6% of measured income is the right threshold for the Hypothetical Residential Customer, I 

demonstrate that the Hypothetical Residential Customer and other PREPA customers can afford 

to pay more while remaining below 6% share of wallet. 

61. While the Hypothetical Residential Customer is constructed as a median residential 

customer, it is not representative of the residential customers who will actually pay the Legacy 

Charge. The Hypothetical Residential Customer’s annual income of $24,000 is the Board’s 

estimate of the median household income in Puerto Rico in 2024. Therefore, based on the 

definition of the “median,” approximately 50% of residential customers (or 46% of all PREPA 

customers56) will have incomes higher than $24,000. It is logical that customers with higher 

incomes can afford to pay more, yet the Board does not assess the affordable rate for households 

earning above $24,000 and rather proposes that all residential customers pay the same rates the 

Board deems are affordable to the Hypothetical Residential Customer. For example, 

notwithstanding the fact that higher income customers would be more likely to pay the higher 

volumetric rate for consumption over 500 kWh/month, these customers are paying much less than 

6% of income for electricity. Exhibit 12 uses the PRCS to estimate share of wallet for customer 

groups starting at the median income level. Exhibit 12 clearly demonstrates that higher income 

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

56 Residential customers are approximately 92% of PREPA customers. See Revenue Envelope and Legacy Charge 

Derivation Workbook. 

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Residential Customer, even taking into consideration the Board’s estimation of the maximum 

rate.57 

1. Corrections to the Board’s Analysis 

62. One way to address the above affordability disparity between the Hypothetical 

Residential Consumer and higher income earning residential customers is to adjust the ratio of the 

fixed and volumetric portions of the maximum affordable rate that the Board estimated. The 

Board’s selection of $21 for the fixed portion of the maximum rate results in approximately 87% 

of the Revenue Envelope being collected through the additional fixed charges. While the Board 

argues that a high fixed proportion of the rate is somehow optimal, they provide no analysis that 

supports this assertion beyond benchmarking the maximum fixed rates charged by other utilities. 

63. To illustrate the sensitivity of the amount of Additional Net Revenues to the 

Board’s precise chosen mix of fixed versus volumetric charges, I have adjusted that ratio and 

estimated the impact of such a change on Additional Net Revenues. I test two alternatives of fixed 

rate to volumetric rate ratios. In the first, I reduced the fixed charge proportion of the maximum 

affordable rate from 87% for the Hypothetical Residential Customer (the Board’s rate structure) 

to 80%, and in the second I further reduce the fixed charge proportion to 75%. These correspond 

to a fixed monthly charge for residential customers of $19.35 and $18.14 respectively. In each 

scenario, I then set the volumetric rates for other residential customers using the same methodology 

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. 

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as the Board, and also adjust fixed and volumetric rates for other customers using the Board’s 

methodology. 

2. Additional Net Revenues After Correction 

64. Exhibit 13 presents the results of my calculations assuming alternative fixed and 

volumetric proportions. I find that, all else equal, decreasing the fixed charge proportion for the 

Hypothetical Residential Customer to 80% leads to Additional Net Revenues of $5.75, and 

decreasing the fixed charge proportion for the Hypothetical Residential Customer to 75% leads to 

Additional Net Revenues $5.80 billion. This represents an increase of $70 to $120 million over 

the Boards estimate of $5.68 billion. 

D. The Board’s Method of Adjusting the Maximum Rates Deemed Affordable 

for the Hypothetical Residential Consumer to Determine the Maximum 

Rates for Commercial, Industrial, Government, and Municipal Customers is 

Not a Reliable Measure of Affordability 

65. As discussed, the Board makes adjustments to the rates it deems affordable for the 

Hypothetical Residential Customer to determine the rates for all other customer classes. However, 

the Board’s determination of rates based on a 6% share of wallet calculation for the Hypothetical 

Residential Customer has no logical connection to what commercial, industrial, government, and 

municipal customers can afford to pay for electricity. While these customer classes make up only 

8.3% of PREPA’s total customer base, they consume approximately 56.3% of the electricity 

supplied by the PREPA grid.58 Determining the maximum affordable rates for these customer 

classes by way of a residential share of wallet calculation is illogical and has no support in the 

58 Revenue Envelope and Legacy Charge Derivation Workbook. 

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literature. As I show below, commercial and industrial customers likely can afford to pay much 

more than what the Board has proposed. 

1. Corrections to the Board’s Analysis 

66. In this section, I use financial data to evaluate the additional fixed and volumetric 

rates that commercial and industrial customers could reasonably afford to pay. Specifically, I 

obtain data from the US Census Bureau (“USCB”) and estimate the ratio of electricity costs to 

total operating costs for manufacturing firms in Puerto Rico as of 2017. I use this information to 

evaluate the proposed increase in electricity costs for non-residential customers from the Board’s 

proposed Legacy Charge and maximum charges under the Revenue Envelope relative to firm total 

operating costs. 

67. Exhibit 14 shows my calculations of the estimated monthly consumption and 

electricity costs for commercial, industrial, government, and municipal customers as of 2024. For 

example, I show the 2024 median monthly electricity consumption of customers in commercial 

class GST 21359 is expected to be 225,000 kWh.60 I then multiply the median level of consumption 

by the base rates forecasted in the 2022 Fiscal Plan (i.e., rates before the addition of the Legacy 

Charge), which yields a median monthly base level cost of electricity for class GST 213 of 

$45,995.51 in 2024.61 I similarly calculate the median monthly cost of electricity using the Board’s 

59 GST 213 rate class: connected to the transmission system that have a demand of 250 kVA or greater, for general 

uses, e.g., motive power, heating, refrigeration, and incidental lighting of industries, hotels, and any other 

establishment. Puerto Rico Electric Power Authority, “Electric Service rates and Riders,” available at: 

https://lumapr.com/wp-content/uploads/2023/02/Tariff-Book-Electric-Service-Rates-and-Riders-Revised-byOrder-05172019-Approved-by-Order-05282019.pdf. 

60 I calculate the 2024 median consumption as follows: I start with the 2021 median consumption of each rate class 

based on LUMA data and grow consumption to 2024 using the same methodology as the Board uses to grow 

residential consumption from 2021 to 2024. 

61 See Column A, Exhibit 14. 

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estimate of the maximum affordable rates that class GST 213 could be charged, which is 

$50,608.00.62 Lastly, I calculate the median monthly cost of electricity based on the additional 

Legacy Charge that the Board estimated for class GST 213, which is $49,978.01.63 Although the 

percent increases in the monthly bill after adding the Legacy Charge appear large, the relative cost 

of electricity for these rate classes is only a small percentage of total operating costs. Therefore, 

the Legacy Charge increases total operating costs by a very small amount, as I explain below. 

68. Exhibit 15 shows that electricity costs for manufacturing firms in Puerto Rico as 

a percentage of total operating costs is approximately 2.47%. Manufacturing is an important 

contributor to the Puerto Rico economy as it constitutes 49% of its GDP.64 In Exhibit 15, I 

estimate the increase in operating costs of manufacturing companies from an increase in the 

monthly cost of electricity based on the maximum rates estimated by the Board, and separately the 

increase in the monthly cost of electricity assuming the Board’s Legacy Charge. I find that the 

relative size of energy costs compared to operating costs in the manufacturing industry increases 

by only 0.62 percentage points if the Board’s maximum rates are charged and by 0.48 percentage 

points with the Board’s proposed Legacy Charge. 

69. Taken together, the change in electricity costs associated with the Board’s 

maximum affordable rates and Legacy Charge rates is very small. Therefore, it is likely that nonresidential customers can afford to pay more for electricity, and that increasing electricity rates for 

these customers could generate greater Additional Net Revenues for debt service. Below I 

62 See Column B, Exhibit 14. 

63 See Column C, Exhibit 14. 

64 Commonwealth of Puerto Rico Office of the Governor Planning Board, “Statistical Appendix of the Economic 

Report to the Governor and to the Legislative Assembly,” 2021. 

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calculate the Additional Net Revenues associated with hypothetical increases in the Legacy Rates 

charged to non-residential customers. 

2. Additional Net Revenues After Correction 

70. I estimate the increase in Net Additional Revenues that would result from a 

hypothetical increase of one cent and 2.5 cents to the maximum rate that could be charged to nonresidential customers. I find that an increase of up to 2.5 cents has a small effect on customer’s 

operating costs. Exhibit 15 shows electricity costs relative to operating costs, when a one cent per 

kWh charge is added to the Board’s maximum volumetric rates for industrial, commercial, 

municipal, and government customers, is approximately 3.21% for manufacturing companies. 

When 2.5 cents per kWh is added to the Board’s maximum volumetric rates, the results are similar, 

with electricity costs at 3.35% of operating costs for the manufacturing sector in Puerto Rico. 

71. Exhibit 16 presents Additional Net Revenues from adding one cent and 2.5 cents 

to the Board’s maximum volumetric rate. Adding one cent per kWh to the Board’s maximum 

volumetric rates for all commercial, industrial, municipal, and government rate classes results in 

an approximately $471 million increase in Additional Net Revenues; adding 2.5 cents to the 

Board’s maximum volumetric rates results in an approximately $1.068 billion increase in 

Additional Net Revenues. 

72. These results suggest that PREPA can affordably collect more in Additional Net 

Revenues by increasing rates for non-residential customers, over and above the maximum rates 

the Board claims can theoretically be charged under the Revenue Envelope. These additional rates 

would not affect the affordability calculation for residential customers, as the rates for those 

customers are assumed unchanged. 

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V. MORE REALISTIC DEMAND FORECASTS INCREASE THE ADDITIONAL 

NET REVENUES 

73. To determine the Revenue Envelope, the Board multiplies the additional fixed and 

volumetric rates it determines are affordable for each customer rate class by the forecast of PREPA 

electricity demand for each customer rate class. The forecasts used by the Board reflect a decline 

in the future demand for electricity, which means that electricity bills become more affordable in 

the future (that is, since the Board’s Legacy Charge is constant over time, as the amount of 

electricity consumed declines, electricity costs as a share of wallet also decline and are therefore 

more affordable to PREPA’s customers). A forecast of electricity consumption that is overly 

pessimistic or understated will reduce the amount of Additional Net Revenues PREPA will be able 

to collect even though monthly bills are lower than the Board’s purported thresholds of 

affordability. 

74. In her expert report, Dr. Tierney discusses the flaws in the demand forecasts used 

by the Board and concludes that those forecasts understate the demand for electricity in future 

years. According to Dr. Tierney, the forecasts are based on unfounded and unreasonable 

assumptions related to the adoption of energy efficiency measures, distributed generation 

(principally, rooftop solar panels), and electric vehicles by PREPA customers over the forecast 

period which collectively “greatly underestimate[] PREPA’s future sales of electricity.”65 Further, 

Dr. Edwards discusses other overly pessimistic inputs used to create the 2022 Certified PREPA 

Fiscal Plan forecast. For example, Dr. Edwards opines that PREPA’s load forecasts are based on 

65 Expert Report of Susan Tierney, April 28, 2023 (hereafter “Tierney Report”), Section V.B. 

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forecasts of future growth in Puerto Rico’s GNP that use an inappropriate methodology and 

implausibly predict a multi-decade economic recession in Puerto Rico.66

75. Dr. Tierney discusses three revised net load forecasts that correct for some of the 

flaws that understate the future demand for electricity that the Board relies on to calculate the 

Revenue Envelope.67 In this section, I use the revised net load and base rate projections presented 

in the Tierney Report to recalculate Additional Net Revenues, all else equal.68 These revised 

forecasts are discussed in the expert report of Dr. Tierney and in more detail below.69 My analysis 

using all three of these revised net load forecasts meet the threshold of the Board’s standard of 

affordability for PREPA’s customers. 

1. Corrections to the Board’s Analysis 

76. The first revised net load forecast from Dr. Tierney’s report uses more realistic 

assumptions regarding expectations (1) of the rate of customer adoption of energy efficient 

technologies that lower electricity consumption from PREPA; (2) of the rate of customer adoption 

of distributed generation technology, primarily rooftop solar; and (3) of the rate of customer 

adoption of electric vehicles.70 While the 2022 Certified PREPA Fiscal Plan includes two 

forecasts, the Base Case and the Alternative Forecast, for each of these three categories of 

technology, the Board only considers the Base Case in its calculation of the Revenue Envelope 

66 Tierney Report, Section V.A; Expert Report of Sebastian Edwards, April 28, 2023 (hereafter “Edwards Report”), 

Section IV.B. 

67 Tierney Report, Section V.C. 

68 Tierney Report, Section V.C, Appendix D, and Appendix E. 

69 Tierney Report, Section V.C. 

70 Tierney Report, Section V.B. 

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and Legacy Charge.71 Dr. Tierney’s first revised net load forecast is based on PREPA’s Alternative 

Forecast, which Dr. Tierney opines is based on more realistic assumptions regarding the adoption 

of efficient energy, solar, and electric vehicles by PREPA customers. Dr. Tierney also uses the 

load resulting from her revised net load forecast to adjust the 2022 PREPA Fiscal Plan base rates.72

I then use these adjusted base rates to re-calculate Additional Net Revenues while maintaining all 

other assumptions in the Board’s methodology. 

77. The second and third revised net load forecast from Dr. Tierney’s report build on 

the first revised net load forecast and additionally adjusts PREPA’s forecasted gross load for two 

different projections of future GNP growth that are discussed in the expert report of Sebastian 

Edwards.73 Dr. Edwards’s two projections include one higher forecast produced by the Board and 

one forecast produced by his own model.74 Once again, Dr. Tierney uses the revised net load 

forecasts from the second and third alternatives to adjust the 2022 PREPA Fiscal Plan base rates.75

I then use these adjusted base rates to re-calculate Additional Net Revenues, all else equal. 

2. Additional Net Revenues After Correction 

78. Exhibit 17 presents my calculation of the Additional Net Revenues based on the 

three revised net load forecasts discussed in the Tierney Report that revise assumptions underlying 

the understated Base Case forecasts of future electricity consumption. The Additional Net 

71 Tierney Report, Sections IV.B and V.B. 

72 Tierney Report, Section V.C, Appendix D, and Appendix E. 

73 Tierney Report, Sections V.A and V.C; Edwards Report, Sections IV.F and V.B.3. 

74 Edwards Report, Sections IV.F and V.B.3. 

75 Tierney Report, Section V.C, Appendix D, and Appendix E. 

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Revenues range from $5.75 billion to $6.24 billion, an increase of approximately $70 million to 

500 million over the amount calculated by the Board. 

VI. THE BOARD UNDERSTATES ADDITIONAL NET REVENUES BY APPLYING 

ELECTRICITY ELASTICITY ASSUMPTIONS THAT ARE NOT SUPPORTED 

BY THE RELEVANT LITERATURE 

79. The impact of a rate increase on PREPA sales was “[a]n important consideration”76

for the Board.77 The Board claims that “the higher PREPA’s rates are, the more PREPA’s rates 

incentivize customers to choose alternatives.”78 The Board asserts higher rates may reduce 

customer loads in three ways: 

a. Customers who stay on the PREPA grid may reduce their energy consumption, by, 

for example, increasing their energy efficiency or using electricity generated by 

solar PV; 

b. Customers may leave the PREPA grid by taking complete responsibility for their 

own electricity generation; or 

c. Customers may leave the PREPA grid by leaving Puerto Rico.79

76 Legacy Charge Derivation, p. 3 (“An important consideration for the Oversight Board in designing the Legacy 

Charge was the impact that increasing PREPA’s rates would have on PREPA’s sales.”). 

77 Disclosure Statement, pp. 345–46 (“The Debtor believes that the Plan is “fair and equitable” because the creditor 

recoveries proposed therein have been calculated ... to reasonably compensate Holders of Claims while enabling 

the Debtor to, among other things, ... avoid driving customers from the grid.”). 

78 Legacy Charge Derivation, p. 3; Disclosure Statement, p. 369 (“Moreover, the increase in rates due to the Legacy 

Charge may also reduce demand, which in turn will reduce Net Revenues and the ability to make payments on 

the New Bonds.”). 

79 Legacy Charge Derivation, p. 2 (“[H]igher rates, and the resulting higher bills for customers, ultimately induce 

customers to reduce their consumption of electricity from PREPA (including notably by reducing electricity 

generated by solar PV installed at their premise), “cut the cord” from the grid entirely either through taking full 

responsibility for their electricity generation or even out-migrating from Puerto Rico.”). 

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The Board also cautions that higher electricity rates could result in an outcome where residential 

and commercial customers are “unable to pay all or part their electricity bills.”80

80. The Board incorporates customer consumption responses to higher electricity rates 

into its Revenue Envelope calculation by downwardly adjusting load based on assumptions about 

price elasticities of demand. As I explain in Section III.A, the price elasticity of demand is the 

percentage change in customers’ quantity demanded due to a one percent increase in electricity 

rates. The Board asserts that lower consumption (and thus lower sales and revenues collected by 

PREPA) due to higher electricity rates will “[cause] a shortfall in the (non-Legacy Charge) 

revenues available to cover fixed costs,”81 i.e., Elasticity Effect, or Fixed Cost Under-Recovery. 

On a net present value basis, the Board claims the revenue shortfall is $812 million, which the 

Board subtracts from the Revenue Envelope. However, Dr. Tierney explains that the Board 

overestimates the demand response to increases in electricity rates, and therefore overestimates the 

impact of an increase in volumetric rates on load and Fixed Cost Under-Recovery.82 She also 

shows that the Board’s assumed electricity elasticity rates are above the rates cited in academic 

literature.83

81. The Board assumes a short run elasticity of −0.2 and a long-run elasticity of −1.7 

for the general residential customer class (GRS 112). Exhibit 18 presents the elasticities report in 

the Tierney Report from the academic literature, which are much smaller than those assumed by 

80 Disclosure Statement, p. 361 (“High electricity rates may lead residential and commercial customers to use less 

electricity or to be unable to pay all or part of their electricity bills.”). 

81 Legacy Charge Derivation, p. 6 (“The effect of price elasticity resulting from the Legacy Charge is expected to 

reduce kWh sales otherwise projected in the Fiscal Plan, causing a shortfall in the (non-Legacy Charge) revenues 

available to cover fixed costs.”). 

82 Tierney Report, Section VII. 

83 Tierney Report, Section VII.B and Appendix F. 

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the Board.84 The effect of a higher elasticity assumption is a smaller Revenue Envelope and less 

Additional Net Revenues for serving New Bonds.

82. In this section, I correct the Board’s elasticity assumption with a long-run price 

elasticity estimate that is consistent with findings in the academic literature as reported by Dr. 

Tierney.

1. Correction of the Board’s Analysis 

83. The Board assumes that each rate class, including the rate sub-classes, has its own 

elasticity. For example, the Board assumes that commercial customers GSP 212 have a long run 

elasticity of –1.19 and commercial customers GST 213 have a long run elasticity of −1.7. Based 

on the Burke and Abayasekara (2018) elasticities reported in Exhibit 18, I recalculate Additional 

Net Revenues assuming that all residential customers have a long run price elasticity of –1.0, that 

all commercial customers have a long run elasticity of −0.6, and all industrial customers have an 

elasticity of −1.2; further, I assume that all customers have a short run elasticity of −0.10. I also 

recalculate Additional Net Revenues based on the residential estimates from Zhu et al. (2018). In 

particular, I assume that residential customers have a short run elasticity of −0.228 and a long run 

elasticity of −0.577. I then assume that the other customer classes have price elasticities relative to 

the residential class consistent with the ratios derived by the Board in their Revenue Envelope 

elasticity calculations.85

84. The Board also uses its assumed elasticities in an unsupported way: the Board’s 

elasticities are the “scales” it uses to adjust its claimed affordable additional maximum volumetric 

84 Tierney Report, Appendix F. 

85 Revenue Envelope and Legacy Charge Derivation Workbook. 

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rate PREPA could charge the Hypothetical Residential Consumer to derive the affordable 

volumetric rate for all other rate classes. Although I find no logic in the Board’s application of 

elasticities in this way, I nevertheless follow the Board’s unsound method for purposes of reestimating the Additional Net Revenues. See Section III. 

2. Additional Net Revenues After Correction 

85. Exhibit 19 presents my calculations of the Additional Net Revenues using the 

elasticity estimates in the academic literature and discussed by Dr. Tierney in her expert report. 

Specifically, I find that Additional Net Revenues increase to 5.97 billion, an increase of 

approximately $290 million over the amount calculated by the Board. 

VII. THE BOARD UNDERSTATES ADDITIONAL NET REVENUES BY ADOPTING 

OVERSTATED AND OUTDATED ASSUMPTIONS FOR REQUIRED CAPITAL 

EXPENDITURES 

86. The forecasts contained in PREPA’s Fiscal Plans, including the 2022 PREPA Fiscal 

Plan, include future capital expenditures necessary for the continued operation of PREPA.86 To 

the extent these capital expenditures are to be funded by revenue from PREPA’s customers, the 

cost of these capital expenditures is reflected in the base electricity rates projected in the 2022 

PREPA Fiscal Plan.87 While the Board states that the Revenue Envelope is calculated “based on 

the sales projections contained in the [2022 PREPA Fiscal Plan] for the next 35 years,”88 the Board 

also claims that the 2022 PREPA Fiscal Plan does not include all of the capital expenditures that 

86 2022 PREPA Fiscal Plan, pp. 81–82; 95–96. 

87 2022 PREPA Fiscal Plan, pp. 85–87; 93; 159. (Federal funding has been identified as playing a “critical role in 

mitigating the burden of [capital] costs on ratepayers.”) 

88 Legacy Charge Derivation, p. 6. 

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PREPA will likely need to make to remain operational.89 The Board further claims that “the need 

to leave room in the rates to raise money for capital expenses is critical.”90 The Board therefore 

subtracts $887 million in net present value from its estimate of the Revenue Envelope, to allow 

room to raise rates in the future, if necessary, to pay for these additional capital expenses. These 

expenditures directly reduce the Board’s estimate of Revenues Remaining and Additional Net 

Revenues.91

87. In her report, Dr. Tierney discusses the additional capital expenditures that the 

Board asserts are necessary.92 Dr. Tierney concludes that these additional capital expenditures are 

not documented or explained and are therefore unreasonable.93

VIII. ADDITIONAL NET REVENUES PREPA CAN COLLECT TO PAY CREDITORS 

88. In this section, I summarize my calculations of Additional Net Revenues based on 

the individual changes discussed above, and in combination with each other. To summarize, I 

made seven primary corrections: 

A. Correcting the consumption level of the Hypothetical Residential Customer; 

B. Correcting the Board’s failure to consider affordability in future years beyond 2024; 

89 Legacy Charge Derivation, p. 3 (“The Oversight Board considered future rate increases that would need to be 

made to fund anticipated capital expenditures, operating expenses, funding of pensions and other costs (such as 

federal funds matching) necessary to keep PREPA operational.”). 

90 Disclosure Statement Hearing, p. 31. 

91 Legacy Charge Derivation, p. 7; Revenue Envelope and Legacy Charge Derivation Workbook. 

92 Tierney Report, Section VIII. 

93 In addition, Dr. Tierney also reviewed the capital expenditures contained in the 2022 PREPA Fiscal Plan. Dr. 

Tierney explains that the capital expenditures included in the 2022 PREPA Fiscal Plan rely on an outdated forecast 

that has since been updated by LUMA. I have not quantified the effect of this outdated forecast. See Tierney 

Report, Section VIII.A. 

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C. Correcting the Board’s unsupported elasticity assumptions; 

D. Correcting the Board’s failure to capture more revenue from higher earning 

residential customers; 

E. Correcting the Board’s ad hoc approach for estimating affordable rates for 

Commercial and Industrial customers 

F. Correcting the Board’s unsupported capital expenditure estimates; and 

G. Correcting the Board’s overly pessimistic load projections. 

89. In Table 1, which I also provided above, I summarize the individual impact of each 

of the above corrections. 

90. In Figure 1, repeated here, I illustrate the effect of combining the first four of these 

corrections on Additional Net Revenues. As noted above, the combinations of these corrections 

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can have compound effects, such that impact of two or more corrections can add to more than the 

arithmetic sum of the individual effects. Starting with the correction to the consumption level of 

the Hypothetical Residential Customer, shown in the first bar, I then add the impact of accounting 

for the Board’s failure to consider affordability over the next 35 years, which is shown in the 

second bar. In the third bar, I add the impact of correcting for the Board’s unsupported elasticity 

estimates. Lastly, I add the effect of changing the proportion of the rates collected through fixed 

and volumetric charges. The final bar demonstrates that the impact of these four corrections more 

than doubles the amount of Additional Net Revenue that was calculated by the Board. 

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91. Based on these four corrections alone, I conclude that the Board has significantly 

understated the Additional Net Revenues that PREPA can reasonably collect from the 

implementation of an affordable Legacy Charge, as defined by the Board. 

Dated: April 28, 2023 

__________________________________________ 

Maureen M. Chakraborty, PhD 

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APPENDIX A

A-1

MAUREEN M. CHAKRABORTY, PH.D.

Managing Principal

Phone: 212 492 8105 151 West 42nd Street

Fax: 212 492 8188 23rd Floor

maureen.chakraborty@analysisgroup.com New York, NY 10036

Dr. Chakraborty is an economist with an extensive background in economics, finance, accounting, and valuation. 

She has been retained both as an expert witness and as a consultant in a number of matters involving equity and 

fixed income securities, valuation, solvency, fraudulent conveyance, and economic damages. Dr. Chakraborty has 

conducted analyses in matters involving bankruptcy, mergers and acquisitions (M&A), tax and transfer pricing, 

international arbitrations, fraud, and theft of trade secrets and misappropriation. Her work has involved the 

development of financial and economic models, the evaluation of large datasets, and the application of statistical 

methods to a variety of complex problems. She has worked on matters involving companies in many industries, 

including financial services, energy, retail, and pharmaceuticals. 

EDUCATION

Ph.D. Economics, University of Notre Dame, Notre Dame, IN

B.A. Economics, Colby College, Waterville, ME

PROFESSIONAL EXPERIENCE

2003–Present Analysis Group, Inc., New York, NY

1995–2003 PricewaterhouseCoopers LLP, Dallas, TX

Dispute Analysis & Investigations (1997–2003) 

Dispute Analysis & Corporate Recovery Group (1995–1997) 

SELECTED CONSULTING EXPERIENCE

Valuation / Mergers & Acquisitions

 Valued numerous privately held companies using discounted cash flow and market multiple approaches

in a variety of industries including energy, telecom, pharmaceutical, retail, and banks and other financial

institutions.

 Developed models to assess forecasting uncertainty, majority and minority holding positions, illiquidity,

and blockage discounts.

 Evaluated the reasonableness of financial projections and cash flows prepared for purposes of assessing

value.

 Evaluated the economic fairness of deal terms in the contexts of acquisitions and hostile bids, including

disputes in the Delaware Court of Chancery.

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APPENDIX A

A-2 

 Assisted a special committee with topics related to valuation for purposes of evaluating a proposed 

acquisition offer. 

 Assessed the reasonableness of the defensive measures taken by a board of directors in a hostile bid. 

 Analyzed the economic circumstances and valuation implications arising from material adverse change 

(MAC) and material adverse events (MAE). 

 Analyzed the financial implications of a proposed merger on a company’s creditworthiness, liquidity, and 

ability to raise capital.

Bankruptcy and Solvency Analysis

 Assessed the solvency of numerous companies based on a comparison of the fair market value of assets 

and liabilities, ability to pay debts as they come due, and capital adequacy.

 Assessed companies’ access to liquidity and capital, their ability to monetize or sell assets, and their 

ability to restructure debt. 

 Analyzed the reasonable equivalent value of assets disposed in periods leading up to an event of 

insolvency or bankruptcy. 

 Evaluated the price impact of asset sales in distressed situations.

 Prepared oil price forecasts and evaluated conditions affecting the supply and demand for oil and gas for 

purposes of evaluating corporate restructuring plans. 

 Developed an economic framework and models to forecast the economic growth of Puerto Rico for 

purposes of assessing fiscal surplus and ability to repay creditors in connection with the restructuring 

proceedings of the Commonwealth and related entities. 

 Developed a “liquidation comparator” to evaluate potential shareholder claimant and creditor recoveries 

in a hypothetical liquidation of Steinhoff International Holdings N.V. Valued Steinhoff’s assets and 

liabilities and modeled intercompany flows of value between the Steinhoff corporate entities. 

 Provided financial analysis to evaluate the reinstatement of senior debt proposed in the Joint Plan of 

Reorganization of Spectrum Jungle Labs Corporation, et al., Debtors (the Plan). Provided analysis 

demonstrating that the Plan would violate certain provisions of the Senior Secured Lenders’ Credit 

Agreement. 

Securities

 Evaluated issues related to loss causation, market efficiency, class certification, and damages in a number 

of securities litigation cases involving both equity and fixed income securities. Provided assistance with 

settlement discussions and mediations, as well as filed expert reports and provided testimony.

 Constructed a stream of counterfactual share prices based on counterfactual market disclosures. 

 Examined trading strategies, statistical patterns in trading activities, the timing of information disclosure 

(public and non-public) relative to trading patterns and securities prices, and the impact of large volume 

trades on securities prices.

 Assessed the market efficiency for traded securities.

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APPENDIX A

A-3 

 Valued a number of complex securities, including tranches of collateralized loan obligations, executive 

stock options, mortgage-backed and other asset-backed structured securities, auction rate securities, credit 

linked notes, and sovereign debt.

 Analyzed and valued derivative securities including futures, forwards, options, and swaps. 

 Evaluated the risk of auction rate failure, the liquidity of auction rate securities, and the ultimate collapse 

of the auction rate securities market.

 Investigated and analyzed many economic issues arising from the 2008 financial crisis, including the 

causes and foreseeability of the severity of the economic crisis, the effect of the crisis on hedge fund 

strategy and performance, and the impact of the crisis on repo financing, leverage, margin, and asset 

values. 

Tax and Transfer Pricing

 Assessed an arm’s length royalty rate using the comparable profits method and the comparable 

uncontrolled transaction method to inform the economic reasonableness of a profit split between 

corporate functions for tax purposes.

 Valued the outbound transfer of a customer relationship intangible from a large global securities custody 

business to a foreign subsidiary following the merger of two financial companies. 

 Valued the transfer of intangible property associated with a foreign owned branch of a global custody and 

collateral management business to a newly established foreign bank subsidiary. 

 Assessed the fair market value of Class A common units in a partnership for trust administration and tax 

compliance purposes. 

 Provided economic and financial analysis on behalf of GlaxoSmithKline in a long-running transfer 

pricing dispute with the Internal Revenue Service (IRS). Supported experts in the valuation of 

pharmaceutical drugs at various stages of development and sales cycles, the valuation of a sales and 

marketing team, and a study of M&A activity in the pharmaceutical industry.

 Quantified the expected tax benefits relating to various research and development (R&D) activities on 

behalf of a large airline.

Economic Damages 

 Provided analysis and testimony on damages in matters involving theft of trade secrets and 

misappropriation, as well as in claims related to violations of non-compete and non-solicitation 

agreements.

 Quantified economic damages in a variety of disputes arising from defamation and reputational harm, 

employment disputes, contract disputes, investment allegations, and fraud claims.

 Evaluated alleged economic harm from a failed merger. 

Antitrust

 In a high-profile debate over the effects of market power in the online advertising market, provided 

analytical and empirical support to academic affiliate Susan Athey in an examination of the ways in 

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APPENDIX A

A-4 

which online search platforms compete for advertising; an analysis of the online advertising auction 

pricing mechanism and the ability to exert monopoly power over pricing in the relevant market; and the 

development of a framework to assess the effects of monopoly power on consumer surplus, output, and 

quality. Professor Athey testified before the Department of Justice (DOJ) on issues relating to competition 

among search advertising platforms. 

 Evaluated a damages claim from alleged price discrimination in a major pharmaceutical industry 

Robinson-Patman Act litigation matter. Analysis involved a critique of a theoretical economic model and 

the damage model used to quantify the alleged damages. Other tasks involved researching market trends, 

defining and calculating the incremental costs of operating chain store and grocery store pharmacies, and 

analyzing non-discriminatory prices for the industry.

PUBLICATIONS

“Calculating Damages in Broker Raiding Cases,” with John D. Finnerty and Michael J. McAlister, Stanford 

Journal of Law, Business & Finance, Vol. 11, No. 2, 261–297 (Spring 2006)

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APPENDIX B

B-1

MAUREEN M. CHAKRABORTY, PH.D.

Managing Principal

Expert Testimony Given 

As of April 28, 2023 

DEPOSITION TESTIMONY

 In re: LATAM Airlines Group S.A., et al.

US Bankruptcy Court, Southern District of New York (2022)

 BDO USA, LLP v. Everglade Global, Inc.

Court of Chancery of the State of Delaware (2022)

 NMR E-Tailing LLC v. Oak Investment Partners, et al.

Supreme Court of the State of New York, New York County (2020)

TRIAL / ARBITRATION TESTIMONY

 In re: Purdue Pharma L.P., et al.

US Bankruptcy Court, Southern District of New York (2021)

 Confidential arbitration

Provided testimony regarding damages arising from a sale of a large block of publicly traded stock.

Utilized an options-based approach to estimate the price risk associated with the sale of the block of

equity units. (2020)

 Confidential arbitration

Provided written direct testimony regarding the solvency of a real estate holding company (2019)

 Confidential JAMS arbitration

Assessed a bargaining framework used to assess allegations of fraud (2019)

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APPENDIX C

Materials Considered

Legal Documents

Annex 1 to Modified Second Amended Title III Plan of Adjustment of the Puerto Rico Electric Power Authority Schedule B, 

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, March 1, 2023.

“Revenue Envelope and Legacy Charge Derivation Workbook,” received March 11, 2023.

Disclosure Statement Exhibit A: Modified Second Amended Title III Plan of Adjustment of the Puerto Rico Electric Power 

Authority.

Disclosure Statement Exhibit H: Summary of Outstanding PREPA Bonds.

Disclosure Statement Exhibit O: Estimation of General Unsecured Claims Pool.

Disclosure Statement Exhibit P: Legacy Charge Derivation.

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

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, March 1, 2023.

Disclosure Statement Hearing, 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, February 28, 2023.

Expert Reports

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

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

Bates-Stamped Documents

“kWh Consumption.xlsx,” FOMB_PREPA 00022591.

“2022 Certified Fiscal Plan for the Puerto Rico Electric Power Authority,” June 28, 2022, FOMB_PREPA 00000699 – 

“January 2022 Fiscal Plan Model Certified (Dataroom).xlsx,” FOMB_PREPA00020359.

Luma Consumption Data ("1.4_Commercial, Industrial and Government.xlsx"), FOMB_PREPA 00001475.

Academic Literature

Winkler, Harry et al., “Access and Affordability of Electricity in Developing Countries,” World Development 39, no. 6 (2011) 

1037–1050. 

Borenstein, Severin and Lucas W. Davis, “The Equity and Efficiency of Two-Part Tariffs in U.S. Natural Gas Markets,” The 

Journal of Law & Economics 55, no. 1 (February 2012) 75–128.

Brown, Marilyn, et al., “High Energy Burden and Low-Income Energy Affordability: Conclusions from a Literature Review,” 

Progress in Energy 2, (2022): 1–35, October 27, 2020.

Burke, Paul J. and Ashani Abayasekara, “The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional 

Analysis,” The Energy Journal 39, no. 2 (2018): 126−46.

Colton, Roger D. “Home Energy Affordability in New York: The Affordability Gap (2008–2010),” Working Paper (2011), 

https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/EDPPP/LIFE/Resources/2008-2010-affordability-gap.pdf.

Deller, David, “Energy Affordability in the EU: The Risks of Metric Driven Policies,” December 12, 2017. 

C-1

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APPENDIX C

Materials Considered

Academic Literature

Elgin, C. et al., “Understanding Informality,” Centre for Economic Policy Research, 2021, C.E.P.R. Discussion Paper 16497.

Hernandez, Diana et al., “Housing Hardship and Energy Insecurity Among Native-Born and Immigrant Low-Income Families 

with Children in the United States,” Journal of Child Poverty 22, no. 2 (2016): 77–92.

Hubbard, Glenn, and Anthony Patrick O’Brien, “Microeconomics, Seventh Edition,” (New York, NY: Pearson, 2019).

Linneman, Peter D. and Isaac F. Megbolugbe, “Housing Affordability: Myth or Reality?” Urban Studies 29, nos. 3/4 (1992): 

369–92.

Miniaci, Raffaele et al., “Energy affordability and the benefits system in Italy,” Energy Policy , (2014).

Ramcharran, Harri, “The Pharmaceutical Industry of Puerto Rico: Ramifications of Global Competition,” Journal of Policy 

Modeling 33, (2011): 395–406.

Schwartz, Mary and Ellen Wilson, “Who Can Afford To Live in a Home?: A Look at Data From the 2006 American 

Community Survey,” Unpublished Working Paper (2008), https://acash.org.pk/wp-content/uploads/2018/09/who-can-afford.pdf.

Stone, Michael E., “What is Housing Affordability? The Case for the Residual Income Approach,” Housing Policy Debate , 

17:1 (2006) 151–184. 

Winkler, Harry et al., “Access and Affordability of Electricity in Developing Countries,” World Development 39, no. 6 (2011) 

1037–1050. 

Zhu, Xing et al., “A meta-analysis on the price elasticity and income elasticity of residential electricity demand,” Journal of 

Cleaner Production, no. 201, (2018): 169-177.

Other Publicly Available Sources

Banco de Desarrollo Economico Para Puerto Rico, “Puerto Rico Economic Data,” https://www.bde.pr.gov/BDE/PRED.html.

Becker, Randy A. et al., “NBER-CES Manufacturing Industry Database (1958-2018, version 2021a),” National Bureau of 

Economic Research, 2021, https://www.nber.org/research/data/nber-ces-manufacturing-industry-database.

Bond, Craig A. et al., “Challenges and Opportunities for the Puerto Rico Economy: A Review of Evidence and Options 

Following Hurricanes Irma and Maria in 2017,” Rand Corporation, 2020, 

https://www.rand.org/pubs/research_reports/RR2600.html.

Commonwealth of Puerto Rico Office of the Governor Planning Board, “Statistical Appendix of the Economic Report to the 

Governor and to the Legislative Assembly,” 2021. 

Drehobl, Ariel et al., “How High Are Household Energy Burdens? An Assessment of National and Metropolitan Energy 

Financial Oversight & Management Board for Puerto Rico, “2022 Fiscal Plan for Puerto Rico,” January 27, 2022, 

Herbert, Christopher, et al., “Measuring Housing Affordability: Assessing the 30 Percent of Income Standard,” Joint Center for 

Housing Studies of Harvard University, September 2018, 

https://www.jchs.harvard.edu/sites/default/files/media/imp/Harvard_JCHS_Herbert_Hermann_McCue_measuring_housing_affo

rdability.pdf

Hills, John, “Getting the measure of fuel poverty: final report of the Fuel Poverty Review,” Centre for Analysis of Social 

Exclusion, May 2012. 

Invest Puerto Rico, “Benchmarking Puerto Rico’s Pharma Sector: An Analysis of the Island’s Sector Competitiveness and 

Recommendations for Driving Economic Transformation,” July 1, 2021, https://www.investpr.org/wpcontent/uploads/2022/02/Benchmarking-PuertoRicos-Pharma-Sector-PIA-InvestPR.pdf.

IPUMS, 2019 American Community Survey, https://usa.ipums.org/usa/index.shtml.

IPUMS, 2019 Puerto Rico Community Survey, https://usa.ipums.org/usa/index.shtml.

IPUMS, 2021 Puerto Rico Community Survey, https://usa.ipums.org/usa/index.shtml.

Ma, Ookie et al., “Low-Income Energy Affordability Data (LEAD) Tool Methodology,” National Renewable Energy 

Laboratory, July 2019. 

Pelletiere, Danilo, “Getting to the Heart of Housing’s Fundamental Question: How Much Can a Family Afford,” National Low 

Income Housing Coalition, February 2008, https://nlihc.org/sites/default/files/affordabilityresearchnote2-19-08.pdf.

C-2

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APPENDIX C

Materials Considered

Other Publicly Available Sources

Puerto Rico Electric Power Authority, “Electric Service rates and Riders,” available at: https://lumapr.com/wpcontent/uploads/2023/02/Tariff-Book-Electric-Service-Rates-and-Riders-Revised-by-Order-05172019-Approved-by-Order05282019.pdf.

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

Survey,” 2007. 

Siemens Industry, “Puerto Rico Integrated Resource Plan 2018 - 2019,” June 7, 2019. 

Thema, Johannes and Floring Vondung, “EU Energy Poverty Observatory: EPOV Indicator Dashboard Methodology 

Guidebook,” EU Energy Poverty Observatory, May 2020. 

Trinomics, “Selecting Indicators to Measure Energy Poverty,” May 18, 2016. 

U.S. Bureau of Economic Analysis, "The Domestic Supply of Commodities by Industries - Summary" 

https://apps.bea.gov/iTable/?reqid=150&step=3&isuri=1&table_list=6006&categories=io

U.S. Bureau of Labor Statistics, “Occupational Employment and Wage Statistics,” July 19, 2022, 

https://www.bls.gov/oes/tables.htm.

U.S. Census Bureau. (n.d.). US Census Bureau “Island Areas: Cost of Materials by Manufacturing Industry for Puerto Rico: 

2017” . Retrieved April 28, 2023, from https://data.census.gov/

U.S. Department of Housing and Urban Development, “Comprehensive Housing Market Analysis Puerto Rico,” July 2019, 

https://www.huduser.gov/portal/publications/pdf/CMARtables_PuertoRico_19.pdf.

U.S. Energy Information Administration, “Electricity”, available at: https://www.eia.gov/electricity/data.php

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

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

UK Department for Business, Energy & Industrial Strategy, “Fuel Poverty Methodology Handbook (Low Income High 

Costs),” April 30, 2020. 

UK Department for Business, Energy & Industrial Strategy, “Fuel Poverty Methodology Handbook (Low Income High Energy 

Efficiency),” February 24, 2022. 

C-3

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 66 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 67 of 91
Fixed Rate $4.0000

Volumetric Charge ( ≤ 425 kWh) $0.0494

Volumetric Charge ( > 425 kWh) $0.0556

Fuel & Purchased Power ($/kWh) $0.1224

CILT ($/kWh) $0.0071

Subsidies ($/kWh) $0.0155

ERS Pension Projections ($/kWh) $0.0240

Total Bill (No Debt Repayment) $96.8124

(b) Revenue Envelope Charges

Incremental Fixed Rate $21.0000

Incremental Volumetric Charge ( ≤ 500 kWh) $0.0075

Incremental Volumetric Charge ( > 500 kWh) $0.0300

Bill Impact of Revenue Envelope Charges $24.1875

(c) Results

Total Fixed Rate $25.0000

Total Volumetric Charges $95.9999

Total Monthly Bill $120.9999

Resulting Percent of Income 6%

EXHIBIT 1

THE BOARD'S FIXED AND VOLUMETRIC CHARGES ARE 

SET BASED ON THE MONTHLY ELECTRICITY BILL OF 

THE HYPOTHETICAL RESIDENTIAL CUSTOMER THAT 

DOES NOT EXCEED 6% OF THE HYPOTHETICAL 

RESIDENTIAL CUSTOMER'S 2024 MONTHLY INCOME

Source: Revenue Envelope and Legacy Charge Derivation 

Workbook.

(a) Expected Charges using 2022 Fiscal Plan Base Rates

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 67 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 68 of 91
2024 Base Fixed Rate

From 2022 Fiscal Plan

Additional Fixed Rate

From Revenue Envelope

(a) Residential Customer Classes

RH3, LRS, RFR $2.00 $0.00

GRS 111 $4.00 $21.00

GRS 112 (LC Subsidy eligible) $4.00 $0.00

GRS 112 (General) $4.00 $21.00

(b) Commercial Customer Classes

GSS 211 $5.00 $26.25

GSP 212 $200.00 $1,050.00

GST 213 $450.00 $2,362.50

(c) Government Customer Classes

GSS 211 $5.00 $26.25

GSP 212 $200.00 $1,050.00

GST 213 $450.00 $2,362.50

(d) Municipalities Customer Classes

GSS 211 $5.00 $26.25

GSP 212 $200.00 $1,050.00

GST 213 $450.00 $2,362.50

(e) Industrial Customer Classes

GSS 311 $5.00 $26.25

GSP 312 $200.00 $1,050.00

GST 313 $450.00 $2,362.50

TOU-T 363 $450.00 $2,362.50

LIS 333 $450.00 $2,362.50

TOU-T 963 $450.00 $2,362.50

EXHIBIT 2

REVENUE ENVELOPE FIXED RATES BY CUSTOMER CLASS

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 68 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 69 of 91
EXHIBIT 2

REVENUE ENVELOPE FIXED RATES BY CUSTOMER CLASS

[1] Base Fixed Rates are from the 2022 PREPA Fiscal Plan.

[1] Revenue Envelope and Legacy Charge Derivation Workbook.

[2] Disclosure Statement.

Sources: 

Notes: 

[3] The Non-Residential PREPA rate classes are defined as follows: General Service at Secondary 

Distribution Voltage (GSS) rates apply to any non-residential service with a load lower than 

50kVA. They also apply to temporary electric power service for limited use in streets, carnivals, 

and others. General Service at Primary Distribution Voltage (GSP) rates apply to industrial 

customers and commercial customers for which service is rendered through a single point of 

connection and a single meter. General Service at Transmission Voltage (GST) rates apply to 

commercial and industrial customers connected to the transmission system that have a demand of 

250 kVA or greater, for general uses, e.g., motive power, heating, refrigeration, and incidental 

lighting of industries, hotels, and any other establishment. Time of Use at Transmission Voltage 

(TOU-T) rates apply to commercial and industrial customers with a demand of 1,000 kVA or 

greater that (i) transfer load from the on-peak period to the off-peak period; (2) add load during the 

off-peak period; and (3) remove load from the on-peak period. Large Industrial Service -115 kV 

(LIS) rates apply exclusively for industries with a demand equal to 12,000 kW or higher, with a 

load factor equal to 80% or higher, and a monthly average power factor equal to 95% or higher.

[2] The Residential PREPA rate classes are defined as follows: General Residential Servise (GRS) 

rates apply to to residential customers for domestic uses for a residence or apartment unless they fit 

into one of the following classes. GRS rates may also apply to houses, apartments, and other 

structures which are primarily intended for residential purposes, where no more than two rooms in 

which the total connected load does not exceed 500 watts are used by tenant for business or 

professional purposes. Lifeline Residential Service (LRS) rates apply to residential customers, who 

fulfill the Nutritional Assistance Program criteria, for all domestic uses for a residence or 

apartment. Residential Service for Public Housing Projects (RH3) rates apply to residential 

customers of Public Housing Projects supported or subsidized in whole or in part by loans, grants, 

contributions or appropriations of the federal, state, or municipal governments. Residential Fixed 

Rate for Public Housing Under Ownership of the Public Housing Administration (RFR) rates apply 

to customers residing in a housing unit physically located within a public housing project owned 

by the Public Housing Administration for all domestic uses.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 69 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 70 of 91
Volumetric 

Charge 

Adjustment 

Factor

Incremental 

Volumetric 

Charge

Volumetric 

Charge 

Adjustment 

Factor

Incremental 

Volumetric 

Charge

(a) Residential Customer Classes

RH3, LRS, RFR 0% $0.0000 50% $0.0150

GRS 111 25% $0.0075 100% $0.0300

GRS 112 (LC Subsidy eligible) 0% $0.0000 50% $0.0150

GRS 112 (General) 25% $0.0075 --- $0.0300

(b) Commercial Customer Classes

GSS 211 50% $0.0150 100% $0.0300

GSP 212 50% $0.0150 50% $0.0150

GST 213 33% $0.0100 33% $0.0100

(c) Government Customer Classes

GSS 211 50% $0.0150 100% $0.0300

GSP 212 50% $0.0150 50% $0.0150

GST 213 33% $0.0100 33% $0.0100

(d) Municipalities Customer Classes

GSS 211 50% $0.0150 100% $0.0300

GSP 212 50% $0.0150 50% $0.0150

GST 213 33% $0.0100 33% $0.0100

(e) Industrial Customer Classes

GSS 311 75% $0.0225 75% $0.0225

GSP 312 75% $0.0225 75% $0.0225

GST 313 50% $0.0150 50% $0.0150

TOU-T 363 50% $0.0150 50% $0.0150

LIS 333 50% $0.0150 50% $0.0150

TOU-T 963 50% $0.0150 50% $0.0150

EXHIBIT 3

REVENUE ENVELOPE ADDITIONAL VOLUMETRIC RATES

Load ≤ 500 kWh Load > 500 kWh

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 70 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 71 of 91
EXHIBIT 3

REVENUE ENVELOPE ADDITIONAL VOLUMETRIC RATES

[1] Revenue Envelope and Legacy Charge Derivation Workbook.

[2] Disclosure Statement.

Notes: 

Sources: 

[1] The Residential PREPA rate classes are defined as follows: General Residential Servise (GRS) rates

apply to to residential customers for domestic uses for a residence or apartment unless they fit into one of

the following classes. GRS rates may also apply to houses, apartments, and other structures which are

primarily intended for residential purposes, where no more than two rooms in which the total connected

load does not exceed 500 watts are used by tenant for business or professional purposes. Lifeline

Residential Service (LRS) rates apply to residential customers, who fulfill the Nutritional Assistance

Program criteria, for all domestic uses for a residence or apartment. Residential Service for Public Housing

Projects (RH3) rates apply to residential customers of Public Housing Projects supported or subsidized in

whole or in part by loans, grants, contributions or appropriations of the federal, state, or municipal

governments. Residential Fixed Rate for Public Housing Under Ownership of the Public Housing

Administration (RFR) rates apply to customers residing in a housing unit physically located within a public

housing project owned by the Public Housing Administration for all domestic uses.

[2] The Non-Residential PREPA rate classes are defined as follows: General Service at Secondary

Distribution Voltage (GSS) rates apply to any non-residential service with a load lower than 50kVA. They

also apply to temporary electric power service for limited use in streets, carnivals, and others. General

Service at Primary Distribution Voltage (GSP) rates apply to industrial customers and commercial

customers for which service is rendered through a single point of connection and a single meter. General

Service at Transmission Voltage (GST) rates apply to commercial and industrial customers connected to

the transmission system that have a demand of 250 kVA or greater, for general uses, e.g., motive power,

heating, refrigeration, and incidental lighting of industries, hotels, and any other establishment. Time of

Use at Transmission Voltage (TOU-T) rates apply to commercial and industrial customers with a demand

of 1,000 kVA or greater that (i) transfer load from the on-peak period to the off-peak period; (2) add load

during the off-peak period; and (3) remove load from the on-peak period. Large Industrial Service -115 kV

(LIS) rates apply exclusively for industries with a demand equal to 12,000 kW or higher, with a load factor

equal to 80% or higher, and a monthly average power factor equal to 95% or higher.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 71 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 72 of 91
0

100200300400500600700

2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 205

$US Millions

EXHIBIT 4

REVENUE ENVELOPE OVER TIME

2024–2058

Revenue Envelope (2024–2051, 28 years)

Source: Revenue Envelope and Legacy Charge Derivation Workbook.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 72 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 73 of 91
0

100200300400500600700

2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 205

$US Millions

EXHIBIT 5

REVENUE ENVELOPE AND REVENUES REMAINING OVER TIME

2024–2058

Revenue Envelope (2024–2051, 28 years)Revenues Remaining (2024–2051, 28 years)

Source: Revenue Envelope and Legacy Charge Derivation Workbook.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 73 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 74 of 91
0

100200300400500600700

2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 205

$US Millions

EXHIBIT 6

REVENUE ENVELOPE, REVENUES REMAINING AND LEGACY CHARGE REVENUES 

TIME

2024–2058

Revenue Envelope (2024–2051, 28 years)Revenues Remaining (2024–2051, 28 years)Legacy Charge Revenues (2024–2058, 35 years)

Source: Revenue Envelope and Legacy Charge Derivation Workbook.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 74 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 75 of 91
2024 Base Fixed Rate

From 2022 Fiscal Plan

Fixed Rate 

Multiplier

Additional 

Fixed Rate

Volumetric 

Rate 

Adjustment 

Factor

Additional 

Volumetric 

Rate

Volumetric 

Rate 

Adjustment 

Factor

Additional 

Volumetric 

Rate

(a) Residential

RH3, LRS, RFR $2.00 $0.00 0% $0.0000 50% $0.0150

GRS 111 $4.00 3.25 $13.00 25% $0.0075 100% $0.0300

GRS 112 (LC Subsidy eligible) $4.00 $0.00 0% $0.0000 50% $0.0150

GRS 112 (General) $4.00 3.25 $13.00 25% $0.0075 100% $0.0300

(b) Commercial

GSS 211 $5.00 3.25 $16.25 50% $0.0150 100% $0.0300

GSP 212 $200.00 4 $800.00 50% $0.0145 50% $0.0145

GST 213 $450.00 4 $1,800.00 33% $0.0097 33% $0.0097

(c) Government

GSS 211 $5.00 4 $20.00 50% $0.0145 100% $0.0290

GSP 212 $200.00 4 $800.00 50% $0.0145 50% $0.0145

GST 213 $450.00 4 $1,800.00 33% $0.0097 33% $0.0097

(d) Industrial

GSS 311 $5.00 4 $20.00 75% $0.0218 75% $0.0218

GSP 312 $200.00 4 $800.00 75% $0.0218 75% $0.0218

GST 313 $450.00 4 $1,800.00 50% $0.0145 50% $0.0145

TOU-T 363 $450.00 4 $1,800.00 50% $0.0145 50% $0.0145

LIS 333 $450.00 4 $1,800.00 50% $0.0145 50% $0.0145

TOU-T 963 $450.00 4 $1,800.00 50% $0.0145 50% $0.0145

EXHIBIT 7

THE BOARD'S LEGACY CHARGE FIXED AND VOLUMETRIC RATES

Load ≤ 500 kWh Load > 500 kWh

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 75 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 76 of 91
EXHIBIT 7

THE BOARD'S LEGACY CHARGE FIXED AND VOLUMETRIC RATES

[1] Base Fixed Rates are from the 2022 PREPA Fiscal Plan.

[1] Revenue Envelope and Legacy Charge Derivation Workbook.

[2] Disclosure Statement.

Sources: 

[2] The Residential PREPA rate classes are defined as follows: General Residential Servise (GRS) rates apply to to residential customers for domestic uses 

for a residence or apartment unless they fit into one of the following classes. GRS rates may also apply to houses, apartments, and other structures which are 

primarily intended for residential purposes, where no more than two rooms in which the total connected load does not exceed 500 watts are used by tenant for 

business or professional purposes. Lifeline Residential Service (LRS) rates apply to residential customers, who fulfill the Nutritional Assistance Program 

criteria, for all domestic uses for a residence or apartment. Residential Service for Public Housing Projects (RH3) rates apply to residential customers of 

Public Housing Projects supported or subsidized in whole or in part by loans, grants, contributions or appropriations of the federal, state, or municipal 

governments. Residential Fixed Rate for Public Housing Under Ownership of the Public Housing Administration (RFR) rates apply to customers residing in a 

housing unit physically located within a public housing project owned by the Public Housing Administration for all domestic uses.

[3] The Non-Residential PREPA rate classes are defined as follows: General Service at Secondary Distribution Voltage (GSS) rates apply to any nonresidential service with a load lower than 50kVA. They also apply to temporary electric power service for limited use in streets, carnivals, and others. General 

Service at Primary Distribution Voltage (GSP) rates apply to industrial customers and commercial customers for which service is rendered through a single 

point of connection and a single meter. General Service at Transmission Voltage (GST) rates apply to commercial and industrial customers connected to the 

transmission system that have a demand of 250 kVA or greater, for general uses, e.g., motive power, heating, refrigeration, and incidental lighting of 

industries, hotels, and any other establishment. Time of Use at Transmission Voltage (TOU-T) rates apply to commercial and industrial customers with a 

demand of 1,000 kVA or greater that (i) transfer load from the on-peak period to the off-peak period; (2) add load during the off-peak period; and (3) remove 

load from the on-peak period. Large Industrial Service -115 kV (LIS) rates apply exclusively for industries with a demand equal to 12,000 kW or higher, with 

a load factor equal to 80% or higher, and a monthly average power factor equal to 95% or higher.

Notes: 

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 76 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 77 of 91
Income Band

[A]

Monthly Bill

[B]

Load Based on FY 2021 Rate

[A] / $0.1876/kWh

[C]

Load Based on FY 2022 Rate

[A] / $0.2464kWh

[D]

Load Based on EIA 2021 Rate

[A] / $0.2116/kWh

[E]

Load Based on Average of FYs 

2021 and 2022 Rates

[A] / $0.2170/kWh

<$10k $50 266 kWh 203 kWh 236 kWh 230 kWh

$10k-20k $70 373 kWh 284 kWh 331 kWh 323 kWh

$20k-30k $80 426 kWh 325 kWh 378 kWh 369 kWh

$30k-40k $90 480 kWh 365 kWh 425 kWh 415 kWh

$40k-50k $100 533 kWh 406 kWh 473 kWh 461 kWh

$50k-60k $120 640 kWh 487 kWh 567 kWh 553 kWh

$60k-70k $120 640 kWh 487 kWh 567 kWh 553 kWh

$70k-80k $150 799 kWh 609 kWh 709 kWh 691 kWh

$80k-90k $140 746 kWh 568 kWh 662 kWh 645 kWh

$90k-100k $150 799 kWh 609 kWh 709 kWh 691 kWh

$100k+ $170 906 kWh 690 kWh 803 kWh 783 kWh

No income bands 

(Board's Calculation) $80 426 kWh 325 kWh 378 kWh 369 kWh

[1]

[2]

[1]

[2]

[3]

U.S. Energy Information Administration. 2023. "Puerto Rico Territory Profile." https://www.eia.gov/state/print.php?sid=RQ#.

2021 Puerto Rico Community Survey.

EXHIBIT 8

MEDIAN MONTHLY HOUSEHOLD LOAD CALCULATED FROM PUERTO RICO COMMUNIT SURVEY BY INCOME BAND

Notes:

Sources:

The (Fiscal Year) FY 2021 Rate and FY 2022 Rate refer to rates for Residential customers from the 2022 Fiscal Plan Financial Model. They are $0.1876/kWh and $0.2464/kWh, respectively.

Energy Information Administration (EIA) 2021 Rate is the average price of electricity for the ultimate residential customer: $0.2116/kWh.

2022 PREPA Fiscal Plan.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 77 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 78 of 91
Data and Methods

[A]

Median Monthly Electricity 

Consumption in 2021

[B]

 Median Monthly 

Consumption in 2

Board's Metho

Board's median consumption calculation usingFiscal Year 2021 Rates 426 kWh 430 kWh

Calculation using average of Fiscal Year 2021 andFiscal Year 2022 rates 369 kWh 372 kWhCalculation using Energy Information Administration2021 electricity rate 378 kWh 382 kWh

Calculation using full dataset 356 kWh 359 kWhCalculation excluding customers with 0 kWh monthly consumption 386 kWh 389 kWh

[1][1][2][3][4]

Sources:2022 PREPA Fiscal Plan.LUMA Consumption Data

EXHIBIT 9

CALCULATION OF 2024 ELECTRICITY CONSUMPTION BASED ON 

2021 ELECTRICITY CONSUMPTION

Notes:I calculate median load in 2024 using the Board's methodolgy. The Board infers median consumption in 2024 bassuming median consumption changes year to year by the same percentages as year-to-year changes in averag(forecasted) electricity consumption.

(b) 2021 Luma Electricity Consumption Data for Residential GRS 112 Customers(a) 2021 Puerto Rico Community Survey DataU.S. Energy Information Administration. 2023. "Puerto Rico Territory Profile." https://www.eia.gov/state/print.php?sid=RQ#.Board Income Extrapolation Workbook ("kWh Consumption.xlsx").

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 78 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 79 of 91
Scenarios

“Additional Net 

Revenues”

($ Billion)

Board’s Proposal: 

Hypothetical Residential Customer Consumption 425 kWh $5.68

400 kWh $7.19

372 kWh $8.96

[1]

[2]

[1]

[2]

[3]

Sources:

Revenue Envelope and Legacy Charge Derivation Workbook.

Puerto Rico Community Survey.

Disclosure Statement.

EXHIBIT 10

“ADDITIONAL NET REVENUES” USING MORE REPRESENTATIVE 

CONSUMPTION ASSUMPTIONS FOR THE HYPOTHETICAL RESIDENTIAL 

CUSTOMER

Notes:

The Plan of Adjustment and Disclosure Statement describe a proposal to restructure PREPA’s 

debt principally through an issuance of $5.68 billion of New Bonds to fund partial recoveries 

on creditors’ claims.

The scenarios with monthly consumption of 400 kWh and 372 kWh adjust monthly 

consumption in the affordability calculation. In these scenarios, I apportion the incremental 

amount charged in the Revenue Envelope between fixed and volumetric rates using the same 

ratio assumed in the Board’s affordability calculations. The remaining calculations to arrive at 

“Additional Net Revenues” are performed using the same methodology as the Board.

More Representative Assumptions on Consumption of Hypothetical Residential Customer

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 79 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 80 of 91
Scenarios

“Additional Net 

Revenues”

($ Billion)

Board’s Proposal: $24,000 Nominal Income, 2024–2058 $5.68Adjust Nominal Income for Inflation Growth, 2024–2058 $6.57

[1]

[2][1][2][3] Disclosure Statement.

EXHIBIT 11

“ADDITIONAL NET REVENUES” ADJUSTING THE HYPOTHETICAL 

RESIDENTIAL CUSTOMER’S INCOME FOR INFLATION OVER TIME

Sources:Revenue Envelope and Legacy Charge Derivation Workbook.2022 PREPA Fiscal Plan.Notes:The Plan of Adjustment and Disclosure Statement describe a proposal to restructure PREPA’s debt principally through an issuance of $5.68 billion of New Bonds to fund partial recoveries on creditors' claims.The nominal income growth scenario grows the Hypothetical Residential Customer’s $24,000 income for inflation using inflation projections over 2024–2058 from the 2022 PREPA Fiscal Plan. I repeat the Board’s affordability methodology each year using this income series and projected revenue requirement rates from the 2022 PREPA Fiscal Plan. In keeping with the Board’s calculations, to estimate the monthly bill I use tariff schedule rates and fiscal plan projected rates. The remaining calculations to arrive at “Additional Net Revenues” are performed using the same methodology as the Board. 

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 80 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 81 of 91
Annual Income Band

[A]

Median Monthly Electricity 

Consumption in 2024 

Extrapolated from 2021 Based on 

Board's Methodology

[B]

Monthly Electricity Bill

Calculated by Applying 2024 Base 

Rates from 2022 Fiscal Plan to 2024 

Median Consumption

[C]

Monthly Electricity Bill 

Including Legacy Charge

[D]

Electricity Bill 

Including Legacy Charge 

Share of Wallet

= ([C] / Monthly Income)

Hypothetical Residential 

Customer 425 kWh $96.81 $113.00 5.6%

$20k-30k 430 kWh $98.00 $114.22 5.5%

$30k-40k 484 kWh $110.08 $126.71 4.3%

$40k-50k 538 kWh $122.16 $140.04 3.7%

$50k-60k 645 kWh $146.31 $167.43 3.7%

$60k-70k 645 kWh $146.31 $167.43 3.1%

$70k-80k 807 kWh $182.55 $208.50 3.3%

$80k-90k 753 kWh $170.47 $194.81 2.8%

$90k-100k 807 kWh $182.55 $208.50 2.6%

[1]

[2]

[3]

[4]

[1]

[2]

[3]

[4]

[5]

Fiscal Year (FY) electricity rates were taken from the 2022 PREPA Fiscal Plan.

EXHIBIT 12

SHARE OF WALLET OF MONTHLY ELECTRICITY BILL INCLUDING LEGACY CHARGE

Notes:

Median monthly consumption in 2021 was extrapolated to 2024 based on the Board's methodolgy. 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.

The midpoint of each income band was used as the representative income. For the Hypothetical Residential Customer, $24,000 was used for annual household income. 

Annual income's were divided by 12 to arrive at monthly income.

Fixed and volumetric base rates and Legacy Charge rates were taken from the Board's Revenue Envelope and Legacy Charge Workbook.

2021 Puerto Rico Community Survey.

U.S. Energy Information Administration. 2023. "Puerto Rico Territory Profile." https://www.eia.gov/state/print.php?sid=RQ#.

Sources:

2022 PREPA Fiscal Plan.

Revenue Envelope and Legacy Charge Workbook.

Board Consumption Extrapolation Workbook ("kWh Consumption.xlsx").

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 81 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 82 of 91
Scenarios

“Additional Net 

Revenues”

($ Billion)

Board’s Proposal: 87% of Hypothetical Customer’s Revenue Envelope Collected Through Fixed Charges

$5.68

80% $5.7575% $5.80

[1][2][1][2]

EXHIBIT 13

“ADDITIONAL NET REVENUES” ADJUSTING THE PROPORTION OF REVENUE 

ENVELOPE COLLECTED THROUGH FIXED VS. VOLUMETRIC RATES

The Plan of Adjustment and Disclosure Statement describe a proposal to restructure PREPA’s debt principally through an issuance of $5.68 billion of New Bonds to fund partial recoveries on creditors’ claims.The Board asserts that the Revenue Envelope uses the the affordable rate combination that yields the greatest increase in revenue collection. The scenarios vary the proportion of the Board’s Revenue Envelope rates for the hypothetical customer collected through volumetric rates instead of fixed rates. The Board assumes approximately 87% fixed; I consider lower fixed proportions. The remaining calculations to arrive at “Additional Net Revenues” are performed using the same methodology as the Board. Disclosure Statement.Fixed Proportion of Hypothetical Customer’s Revenue Envelope RatesSources:Revenue Envelope and Legacy Charge Derivation Workbook.Notes:

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 82 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 83 of 91
2021 Median 

Monthly 

Consumption (kWh)

Estimated 2024 

Median Monthly 

Consumption (kWh)

[A] 

2024 Base Rates from 

2022 Fiscal Plan 

Applied to 2024 

Median Monthly 

Consumption

[B] 

Base Rates Plus 

Revenue Envelope 

Rates Applied to 2024 

Median Monthly 

Consumption

[C]

Base Rates Plus Legacy 

Charge Rates Applied 

to 2024 Median 

Monthly Consumption

[D]

Base Rates Plus 

Revenue Envelope 

Rates

([B] / [A] - 1) × 100

[E]

Base Rates Plus 

Legacy Charge Rates

([C] / [A] - 1) × 100

GSS 211 750 754 $196.00 $237.36 $227.25 21.10% 15.94%

GSP 212 15,000 15,073 $3,335.76 $4,611.85 $4,353.26 38.25% 30.50%

GST 213 225,000 226,091 $45,995.51 $50,618.93 $49,978.01 10.05% 8.66%

GSS 311 750 742 $193.15 $236.11 $229.34 22.24% 18.73%

GSP 312 15,000 14,848 $3,289.11 $4,673.19 $4,412.80 42.08% 34.16%

GST 313 225,000 222,725 $45,317.45 $51,020.83 $50,346.97 12.59% 11.10%

TOU-T 363 1,000,000 989,890 $214,001.10 $231,211.95 $230,154.51 8.04% 7.55%

LIS 333 8,052,286 7,970,879 $1,606,123.00 $1,728,048.68 $1,723,500.75 7.59% 7.31%

TOU-T 963 446,933 442,415 $89,478.02 $98,476.74 $97,693.03 10.06% 9.18%

GSS 211 1,001 1,005 $259.79 $308.70 $301.69 18.83% 16.13%

GSP 212 15,000 15,073 $3,335.76 $4,611.85 $4,354.31 38.25% 30.53%

GST 213 250,000 251,213 $51,055.99 $55,930.62 $55,292.75 9.55% 8.30%

GSS 211 501 503 $132.46 $166.30 $156.22 25.55% -

GSP 212 7,500 7,536 $1,755.00 $2,918.04 $2,663.75 66.27% -

GST 213 62,500 62,803 $13,091.45 $16,081.98 $15,497.70 22.84% -

26.06% 19.94%

EXHIBIT 14

ELECTRICITY BILL FOR NON-RESIDENTIAL CUSTOMERS: BASE, REVENUE ENVELOPE, AND LEGACY CHARGE RATES

Overall (Average) Percent Difference

(b) Industrial Customer Classes

(a) Commercial Customer Classes

Median Monthly Electricity Bill as of 2024 Percent Difference

(c) Government Customer Classes

(d) Municipality Customer Classes

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 83 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 84 of 91
EXHIBIT 14

ELECTRICITY BILL FOR NON-RESIDENTIAL CUSTOMERS: BASE, REVENUE ENVELOPE, AND LEGACY CHARGE RATES

[1]

[2]

[3]

[4]

[5]

[6]

[7]

[1]

[2]

[3]

Notes:

Median Monthly Consumption (kWh) is calculated as a median of the monthly medians of electricity consumption. This consumption information was taken from the LUMA data.

Median Monthly Electricity Bill under Base Rates is calculated by applying the base fixed and volumetric rates from the 2022 PREPA Fiscal Plan to Estimated 2024 Median Monthly 

Consumption (kWh). The Median Monthly Electricity Bill under Revenue Envelope Rates is calculated by applying the fixed and volumetric rates from the Board’s Revenue Envelope to 

Estimated 2024 Median Monthly Consumption and adding the Median Monthly Electricity Bill under 2022 Fiscal Plan Base Rates. The Median Monthly Electricity Bill under Legacy Charge 

Rates is calculated by applying the fixed and volumetric rates from the Board’s proposed Legacy Charge to Estimated 2024 Median Monthly Consumption and adding it to the Median Monthly 

Electricity Bill under 2022 Fiscal Plan Base Rates. 

The PREPA rate classes are defined as follows: General Service at Secondary Distribution Voltage (GSS) rates apply to any non-residential service with a load lower than 50kVA. They also 

apply to temporary electric power service for limited use in streets, carnivals, and others. General Service at Primary Distribution Voltage (GSP) rates apply to industrial customers and 

commercial customers for which service is rendered through a single point of connection and a single meter. General Service at Transmission Voltage (GST) rates apply to commercial and 

industrial customers connected to the transmission system that have a demand of 250 kVA or greater, for general uses, e.g., motive power, heating, refrigeration, and incidental lighting of 

industries, hotels, and any other establishment. Time of Use at Transmission Voltage (TOU-T) rates apply to commercial and industrial customers with a demand of 1,000 kVA or greater that (1) 

transfer load from the on-peak period to the off-peak period; (2) add load during the off-peak period; and (3) remove load from the on-peak period. Large Industrial Service -115 kV (LIS) rates 

apply exclusively for industries with a demand equal to 12,000 kW or higher, with a load factor equal to 80% or higher, and a monthly average power factor equal to 95% or higher.

The Estimated 2024 Monthly Consumption (kWh) was extrapolated from 2021 to 2024 based on the Board's methodology. The Board extrapolates the 2021 load to 2024 by using the same 

percent change in the average annual load 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.

Disclosure Statement.

Overall (Average) Percent Difference is calculated as a weighted average of the percent difference for all types of customers, and their proportion of electricity consumption, sourced from LUMA 

data.

Revenue Envelope and Legacy Charge Derivation Workbook.

Sources:

Legacy Charge Rates do not include additional charges for the Municipal Customer Class, hence Column E does not have a percentage change value for the Municipal Class.

For rate classes TOU-T 963 and TOU-T 363, the average of the on-peak/off-peak rates provided in the Revenue Envelope and Legacy Charge Derivation Workbook is used in the calculations.

2022 PREPA Fiscal Plan

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 84 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 85 of 91
In 2017 In 2024

Based on the 

Board's Proposed 

Maximum Rates

Based on the 

Board's Proposed 

Legacy Charge 

Rates

Assuming a One Penny 

Increase to the Board's 

Proposed Maximum 

Rates

Assuming a 2.5 Cent 

Increase to the 

Board's Proposed 

Maximum Rates

Electricity Cost as 

Share of Total 

Operating Costs

2.47% 2.47% 3.10% 2.95% 3.21% 3.35%

Percentage Change - - 26.06% 19.94% 30.53% 36.74%

Calculation

[1]

[2]

[3]

[4]

[5]

[1]

[2]

Sources:

Revenue Envelope and Legacy Charge Workbook.

EXHIBIT 15

ELECTRICITY COSTS RELATIVE TO OPERATING COSTS IN MANUFACTURING INDUSTRY IN PUERTO RICO

Notes:

Operating Costs include cost of materials, components, resales, purchased fuels consumed, purchased electricity, contract work, and other operating expenses, 

and are obtained from the US Census Bureau "Island Areas: Cost of Materials by Manufacturing Industry for Puerto Rico: 2017."

US Census Bureau "Island Areas: Cost of Materials by Manufacturing Industry for Puerto Rico: 2017."

Manufacturing includes industries with NAICS codes 31-33.

One Penny and 2.5 Cents Increases correspond to additional charges applied to the additional volumetric charges under the Board's Propsoed Maximum Rates.

The ratio of Electricity Cost to Total Operating Cost is assumed to remain the same in 2024, as it was in 2017.

Electricity Cost as Share of Total Operating Costs

 Electricity Cost × (1 + Percentage Change) 

Total Operating Costs + Percentage Change × Electricity Costs

 Electricity Cost 

 Total Operating Costs

Percentage Change is calculated in Exhibit 14.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 85 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 86 of 91
Revenue 

Envelope 

Rates

One Penny 

Increase

2.5 Cent 

Increase

Revenue 

Envelope 

Rates

One Penny 

Increase

2.5 Cent 

Increase

One Penny 

($ Millions)

2.5 Cent 

($ Millions)

GSS 211 $0.0150 $0.0250 $0.0400 $0.0300 $0.0400 $0.0550 $128.04 $308.07

GSP 212 $0.0150 $0.0250 $0.0400 $0.0150 $0.0250 $0.0400 $200.02 $454.84

GST 213 $0.0100 $0.0200 $0.0350 $0.0100 $0.0200 $0.0350 $61.47 $124.94

GSS 311 $0.0225 $0.0325 $0.0475 $0.0225 $0.0325 $0.0475 $0.25 $0.58

GSP 312 $0.0225 $0.0325 $0.0475 $0.0225 $0.0325 $0.0475 $7.54 $17.74

GST 313 $0.0150 $0.0250 $0.0400 $0.0150 $0.0250 $0.0400 $58.03 $128.36

TOU-T 363 $0.0150 $0.0250 $0.0400 $0.0150 $0.0250 $0.0400 $10.09 $22.26

LIS 333 $0.0150 $0.0250 $0.0400 $0.0150 $0.0250 $0.0400 $4.68 $10.35

TOU-T 963 $0.0150 $0.0250 $0.0400 $0.0150 $0.0250 $0.0400 $0.59 $1.31

$470.71 $1,068.47

(a) Commercial/Government/Municipality Customer Classes

(b) Industrial Customer Classes

EXHIBIT 16

ADDITIONAL RATE INCREASES FOR NON-RESIDENTIAL CUSTOMERS

 AND IMPACT ON “ADDITIONAL NET REVENUES”

Volumetric Adder

≤ 500 kWh > 500 kWh

Incremental “Additional 

Net Revenues”

Total Net Revenues

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 86 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 87 of 91
EXHIBIT 16

ADDITIONAL RATE INCREASES FOR NON-RESIDENTIAL CUSTOMERS

 AND IMPACT ON “ADDITIONAL NET REVENUES”

Notes:

[1]

[2]

Sources:

[1]

[2] 2022 PREPA Fiscal Plan.

The One Penny and 2.5 Cent Increases are applied to the Volumetric Adder rates Proposed under the Board's Revenue 

Envelope.

The additional volumetric charges in the One Penny and 2.5 Cent scenarios increase the Proposed Revenue Envelope 

volumetric rates by an additional penny and 2.5 cents, respectively, for all non-residential customer classes. I repeat the 

Board’s affordability methodology each year using this income series and projected revenue requirement rates from the 2022 

PREPA Fiscal Plan. The remaining calculations to arrive at “Additional Net Revenues” are performed using the same 

methodology as the Board. 

Revenue Envelope and Legacy Charge Derivation Workbook.

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 Desc:

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 87 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 88 of 91
Scenarios

“Additional Net 

Revenues”

($ Billion)

Board’s Proposal: Using 2022 PREPA Fiscal Plan Gross Load $5.68Dr. Tierney’s Revised Net Load Forecasts

First Revised Net Load Forecast $5.75Second Revised Net Load Forecast $5.93Third Revised Net Load Forecast $6.24

[1]

[1] 

[2][3]

Revenue Envelope and Legacy Charge Derivation Workbook.Tierney Report.

EXHIBIT 17

“ADDITIONAL NET REVENUES” BASED ON DR. TIERNEY’S REVISED NET 

LOAD FORECASTS

Disclosure Statement.Notes:The Plan of Adjustment and Disclosure Statement describe a proposal to restructure PREPA’s debt principally through an issuance of $5.68 billion of New Bonds to fund partial recoveries on creditors' claims.Sources:

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 88 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 89 of 91
Customer Class Short Run Long Run Short Run Long Run

Residential

−0.10

−1.0

−0.228

−0.577

Commercial

−0.10 [

−0.3, 

−0.6]

Industrial

−0.10

−1.20

[1] 

[2]

Burke, Paul J. and Ashani Abayasekara,“The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional Analysis,” The Energy Journal 39, no. 2 (2018): 126

−46.

EXHIBIT 18

ELASTICITY ESTIMATES FROM THE ACADEMIC LITERATURE

Zhu, Xing, Lanlan Li, Kaile Zhou, Xiaoling Zhang, and Shanlin Yang. “A meta-analysis on the price elasticity and income elasticity of residential electricity demand,” Journal of Cleaner Production , No

201, (2018): 169-177.Sources:

Burke, Abayasekara (2018) Zhu et al. (2018)

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 89 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 90 of 91
Scenarios

“Additional Net 

Revenues”

($ Billion)

Board’s Proposal: Hypothetical Residential Customer Short Run Elasticity −0.2 and 

Long Run Elasticity −1.7

$5.68

Burke and Abayasekara (2018) Elasticity Estimates $5.97Zhu et al (2018) Elasticity Estimates $6.26

[1][2][1][2][3][4] Zhu, Xing, Lanlan Li, Kaile Zhou, Xiaoling Zhang, and Shanlin Yang. “A meta-analysis on the price 

elasticity and income elasticity of residential electricity demand,” Journal of Cleaner Production , No. 201, 

(2018): 169-177.Burke, Paul J. and Ashani Abayasekara,“The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional Analysis,” The Energy Journal 39, no. 2 (2018): 126−46.

EXHIBIT 19

“ADDITIONAL NET REVENUES” USING ELASTICITY ESTIMATES FROM ACADEMIC 

LITERATURE

Elasticity Estimates from Academic LiteratureRevenue Envelope and Legacy Charge Derivation Workbook.2022 PREPA Fiscal Plan.Notes:The Plan of Adjustment and Disclosure Statement describe a proposal to restructure PREPA’s debt principally through an issuance of $5.68 billion of New Bonds to fund partial recoveries on creditors’ claims.The scenarios vary the short run and long run elasticity of electricity demand used in the Board’s calculations. Burke and Abayasekara (2018) find short run elasticity −0.10 for residential, commercial, and 

industrial customers, and long run elasticity of −1.0 for residential, −0.6 for commercial, and −1.2 for 

industrial customers. I use these elasticity estimates and, following the Board’s methodology, I assume municipal and government customers have the same elasticity as commercial customers. Zhu et al. (2018) find a short run elasticity of −0.228 and a long run of −0.577 for the residential class. In this verison, I use the 

same adjustment factors as the Board to determine elasticities for other classes. The remaining calculations to arrive at “Additional Net Revenues” are performed using the same methodology as the Board. Sources:

Case:17-04780-LTS Doc#:3441-1 Filed:05/04/23 Entered:05/04/23 06:54:06 De

Exhibit Unredacted Expert Report of Maureen Chakraborty Page 90 of 90

Case:17-03283-LTS Doc#:24535-18 Filed:06/12/23 Entered:06/12/23 21:36:46 D

Exhibit AHG Ex 18 2023-04-28 Chakraborty Report (Dkt 3441-1) Page 91 of 91