EXHIBIT 4 

PREPA Fiscal Plan dated April 19, 2018

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 1 of 118
Puerto Rico 

Electric Power 

Authority

1

Puerto Rico Electric Power Authority

New Fiscal Plan for PREPA 

As Certified by The Financial Oversight and Management Board for Puerto Rico

April 19, 2018

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2 New PREPA Fiscal Plan

Disclaimer

▪The Financial Oversight and Management Board for Puerto Rico (the “FOMB,” or “Oversight Board”) has formulated this New Fiscal Plan based on, among other things,

information obtained from the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) and the Puerto Rico Electric Power Authority (“PREPA” and together

with AAFAF, the “Government”).

▪This document does not constitute an audit conducted in accordance with generally accepted auditing standards, an examination of internal controls or other attestation

or review services in accordance with standards established by the American Institute of Certified Public Accountants or any other organization. Accordingly, the Oversight

Board cannot express an opinion or any other form of assurance on the financial statements or any financial or other information or the internal controls of the Government

and the information contained herein.

▪This New Fiscal Plan is directed to the Governor and Legislature of Puerto Rico based on underlying data obtained from the Government. No representations or

warranties, express or implied, are made by the Oversight Board with respect to such information.

▪Any statements and assumptions contained in this document, whether forward-looking or historical, are not guarantees of future performance and involve certain risks,

uncertainties, estimates and other assumptions made in this document. The economic and financial condition of the Government and its instrumentalities is affected by

various legal, financial, social, economic, environmental, governmental and political factors. These factors can be very complex, may vary from one fiscal year to the next

and are frequently the result of actions taken or not taken, not only by the Government, the Oversight Board, and other third-party entities such as the government of the

United States.

▪Because of the uncertainty and unpredictability of these factors, their impact cannot be included in the assumptions contained in this document. Future events and actual

results may differ materially from any estimates, projections, or statements contained herein. Nothing in this document should be considered as an express or implied

commitment to do or take, or to refrain from taking, any action by the Oversight Board, the Government, or any government instrumentality in the Government or an

admission of any fact or future event. Nothing in this document shall be considered a solicitation, recommendation or advice to any person to participate, pursue or

support a particular course of action or transaction, to purchase or sell any security, or to make any investment decision.

▪By receiving this document, the recipient is deemed to have acknowledged the terms of these limitations. This document may contain capitalized terms that are not

defined herein, or may contain terms that are discussed in other documents or that are commonly understood. You should make no assumptions about the meaning of

capitalized terms that are not defined, and you should refer questions to the Oversight Board at comments@oversightboard.pr.gov should clarification be required.

▪This New Fiscal Plan is based on what the Oversight Board believes is the best information currently available to it. To the extent the Oversight Board becomes aware of

additional information after it certifies this New Fiscal Plan that the Oversight Board determines warrants a revision of this New Fiscal Plan, the Oversight Board will so

revise it.

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3 New PREPA Fiscal Plan

Executive Summary (1/2)

▪ Puerto Rico’s future economic growth and vitality depends on affordable and reliable power. For too 

long, electricity provided by PREPA has been expensive and unreliable. PREPA’s problems were made 

incalculably harder by Hurricanes Irma and Maria, which leveled PREPA’s infrastructure and knocked out all 

electricity across the Island left thousands without power for several months. The New Fiscal Plan for PREPA 

provides a roadmap to shedding this history and emerging from these storms by creating a new power sector for 

Puerto Rico that will: provide electricity below 20 c/kWh; deliver low-cost, clean, and resilient power; rebuild and 

maintain a modern, reliable grid; implement operational efficiencies to lower cost and improve service; and 

establish a fiscally responsible entity.

▪ PREPA must change drastically. Power generation infrastructure is aging and inefficient. The transmission 

and distribution grid is fragile and severely storm-damaged. Operations are inefficient and unresponsive. 

Electricity is provided at a high cost and is unreliable. Debt proceeds were used to subsidize shortcomings 

instead of used to invest in modernization. Responses to Hurricanes Irma and Maria fell far short of what 

customers expected and deserved. Summed together, it is clear that Puerto Rico needs a comprehensive 

power sector transformation.

▪ The New Fiscal Plan provides the framework for the myriad negotiations and processes that must occur 

for the successful transformation of PREPA. The New Fiscal Plan includes a set of aspirational rate and 

reliability targets that set the parameters for funding and transformation processes that can no longer be 

delayed, including near term investments in restoration, generation and resiliency; the scope and focus of 

federal funding; and the funding and/or size of transition charge available for restructuring debt and pension 

liabilities. The New Fiscal Plan also clarifies the roles and responsibilities of various stakeholder groups in 

driving forward the transformation of PREPA as well as the specific processes that are integral to such as 

transformation, such as the IRP, Title III plan of adjustment, and the transaction. 

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4 New PREPA Fiscal Plan

Executive Summary (2/2)

Elements of a comprehensive power sector transformation: 

▪ Restructuring power generation: The New Fiscal Plan outlines possible paths to make generation cheaper, cleaner, 

and more reliable by shifting to a least-cost generation model, expanding distributed energy resources, modernizing 

baseload generation facilities, moving more generation closer to load, and reducing exposure to commodity price 

volatility. 

▪ Rebuilding and modernizing the grid: Puerto Rico needs an upgraded grid to increase reliability and resiliency, reduce 

cost, facilitated distributed generation and microgrids, and allow for better monitoring and control. While the federal 

government is working to repair and restore the grid after it was destroyed by Hurricanes Irma and Maria, it must not 

be rebuilt to its legacy state. Rather, the grid must be hardened and modernized.

▪ Transforming operations: PREPA must transform its operations to become cash flow positive within a year and meet 

the rate and reliability targets set forth in the New Fiscal Plan. This means making improvements in billing, collections, 

fuel management, procurement, labor costs, and budgeting, 

▪ Capital investment: The New Fiscal Plan provides for an approximately $12 billion capital investment program over the 

next five years to help achieve the goals of low-cost, reliable, and resilient power. Funding is proposed through a 

combination of federal funding, private investment, and rates. Historically, PREPA has not efficiently or effectively 

executed capital projects. To make the most of this funding, the transformation of PREPA also calls for new, private 

sector operators of the grid and generation assets.

▪ A new industry structure: Transforming the power sector requires overhauling the structure and management of 

PREPA. The New Fiscal Plan lays out one approach, which is attracting a private sector concessionaire to manage 

the grid while privatizing generation. The eventual details of the transaction to effect the transformation will be 

determined through a competitive auction process through which the market and public will be able to provide 

proposals and input. No matter the industry structure, the regulator must be robust, independent, well-funded, and 

expert. 

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5 New PREPA Fiscal Plan

Executive Summary

I. Governance and Implementation

II. Historical Context and Current Challenges

III. Operational Initiatives and Performance Improvements

IV. Baseline Financial Projections

V. Macro Resource Planning

VI. Rate and Regulatory Structure

VII. Liquidity Management

VIII.Labor and Pensions

IX. Post-Certification Reporting

X. Transformation Plan

Appendix

Table of Contents

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6 New PREPA Fiscal Plan

PREPA Executive Summary 

▪ The Fiscal Plan projections are subject to uncertainties. Those include, but are not limited to:

– Lack of visibility regarding the availability and terms of federal funding for the restoration and rebuilding plan

– The impact of the recent catastrophic hurricanes resulting in limited visibility as to expected recovery and revenue collections and 

the longer term repopulation of the island

– Need for a new IRP to reassess needs under a new set of load scenarios to achieve long-term goals of system reliability, fuel 

diversification, and renewables integration

– The impracticality of tying the FY2019 budget to the Fiscal Plan at this stage

– Uncertainty as to load forecast given continuously shifting views on macroeconomic indicators

– Limited information regarding future macro resource planning

▪ PREPA’s amended and restated Fiscal Plan is premised on a transformation of Puerto Rico’s energy sector in a transaction that will 

take at least 18 months. The ultimate form of the transformation will be informed by many elements currently unknown and beyond 

PREPA’s control including market appetite for the transaction and legislative action. PREPA, therefore, expects to amend and modify 

this Fiscal Plan to reflect the inputs received from the transformation process.

▪ Puerto Rico’s ability to execute on the transformation of the energy sector and the ultimate structure of any such transformation may be 

impacted by the amount, structure, terms and conditions of the federal funding available to support the transformation.

▪ To meet the requirements of the FOMB, PREPA has also included a plan in which PREPA continues to operate during the 

Transformation period while driving cost-saving initiatives under the Fiscal Plan. In the event the transformation does not occur as 

planned, PREPA anticipates this Fiscal Plan would require additional amendment.

▪ PREPA subsidiaries and affiliates are included in the PREPA Fiscal Plan. These subsidiaries and affiliates include: PREPA holdings, 

LLC; Interamerican Energy Sources, LLC; Employees Retirement System; PREPA Networks, LLC; and PREPA Networks. PREPA

Networks will be privatized as part of the Plan.

▪ Certain elements of the transformation of the energy sector in Puerto Rico such as the development and implementation of a new 

regulatory scheme will occur outside of PREPA. PREPA has addressed those elements in the Transformation Section of this Fiscal 

Plan but notes that these will also be part of an overall sector transformation contemplated in the Government Fiscal Plan.

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7 New PREPA Fiscal Plan

Summary of PREPA’s Fiscal Plan Development - a Deliberate Process Leading 

to the Transformation of the Energy Sector Outside of PREPA

Timeline April 28, 2017 June 30, 2017 July 2, 2017 May – Sep 2017 Aug – April 2018 TBD, 2018-2019

Fiscal Plan 

certified

FY18 budget 

certified Title III filed

Fiscal Plan 

revisions and 

amendments

Transformation 

Plan

Exit from Title 

III (Plan of 

Adjustment)

What ▪ Financial 

Oversight and 

Management 

Board for 

Puerto Rico 

(FOMB) 

certified 

PREPA Fiscal 

Plan for FY17-

26 subject to 

amendments, 

including 

achieving a 21 

cent per kWh 

target rate by 

2023

▪ PREPA

continued to 

revise its 

Fiscal Plan in 

close 

coordination 

with the 

FOMB

▪ Impact of 

hurricanes 

Irma and 

Maria 

affected 

fiscal plan 

assumptions 

and 

objectives

▪ Working team 

established to 

develop operational and 

regulatory 

transformation 

plan

▪ The FOMB 

established 

revised deadlines (April 

2018) to 

submit an 

amended Fiscal 

Plan based on 

certain 

principles set 

forth in letter 

on December 

12th, 2017 and 

updated macro 

assumptions 

and other data

▪ Determination 

of amount and 

terms of 

federal funds 

available to 

support 

transformation 

of energy 

sector

▪ Plan of 

adjustment 

contemplating 

transfer of 

certain of 

PREPA’s

assets 

approved by 

the Federal 

District Court

▪ PREPA

submitted its 

FY2018 

budget, which 

the FOMB

approved and 

certified, 

subject to 

reconciling and 

agreeing to 

their 

requirements 

for a revised 

Fiscal Plan 

with 

amendments

▪ FOMB filed a 

voluntary 

petition 

under Title 

III of 

PROMESA

in the United 

States 

District Court 

for the 

District of 

Puerto Rico

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8 New PREPA Fiscal Plan

I. Governance and Implementation

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9 New PREPA Fiscal Plan

Fiscal Plan Implementation

Market Participation

▪ The base case for the transformation of the electric sector in Puerto Rico is anticipated to involve a sale of existing 

generation assets, development of new generation and a concession by the public entity of the T&D System. PREPA

expects this structure to be tested against the market.

▪ Puerto Rico’s ability to execute on the transformation of the energy sector and the ultimate structure of any such 

transformation may be impacted by the amount, structure and terms of the federal funding available to support the 

transformation, and may be adjusted according to market feedback

Recovery

▪ As part of the energy sector reform, safeguards and rate regulation will be put in place via a strong regulator to 

protect ratepayers and ensure the development of a world class energy system via the establishment of the 

appropriate regulatory framework (i.e., with clear and transparent KPIs, targets and milestones, including rightsizing operational costs for the new demand environment; delivering projects efficiently across asset planning, 

procurement, and construction; lowering long term maintenance costs while increasing reliability through predictive 

maintenance strategies; and lowering long-term fuel and purchased power costs).

Transformation

▪ On January 23rd, 2018 the Governor of Puerto Rico announced the plan to radically shift from the current energy 

sector model by enacting deep energy sector reform that fully leverages private market expertise, know-how and 

investment in order to promote the lowest possible rates and compliance with applicable environmental regulations.

Historical Challenges

▪ For reasons within and outside of its control, PREPA has historically been unable to implement a business plan that 

leads to the lowest possible energy rates for Puerto Rico’s ratepayers or achieve compliance with environmental 

regulations, while ensuring reliability and power quality.

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10 New PREPA Fiscal Plan

Governance Structure: Restructuring at PREPA until Energy Sector Transformation

AAFAF

Project Management

Office (“PMO”) 

Leadership 

(Implementation)

Working Groups

PREPAExecutive 

Management

Central Government

PREPA

Governing Board of Directors

PREPA CEO /

Executive 

Director

PMO Director

Workforce Customer 

Relations

Fiscal Infrastructure: 

T&D

Infrastructure: 

Generation

Innovation Strategic 

Communications

Reporting & 

Performance 

Metrics (KPIs)

Chief Financial 

Advisor 

(“CFA”)

Consulting / Legal / 

Regulatory / 

Compliance

Fiscal Agency and Financial Advisory Authority 

(AAFAF by its Spanish Acronym)

Special 

Advisors

*On March 20th, 2018, the PREPA Board of Directors announced the replacement of the Executive Director with the appointment of a CEO

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11 New PREPA Fiscal Plan

Governing Board

Board Composition:

▪ Similar to the Senior Management of the Company, the 

Governing Board of PREPA is made up of individuals 

who have served for less than one year in their current 

positions

▪ The Governing Board consists of eight members, with 

one current vacancy for a customer representative that 

will be filled in an upcoming public election

▪ BOD composition includes a mix of Governor appointees 

and politically independent members

▪ Four of the five BOD committees are chaired by an 

independent member and/or constitute a majority of 

the committee1, including the Finance and Audit 

Committee which is exclusively composed of 

independent members

Current Focuses Include:

▪ Power restoration and recovery

▪ Near-term liquidity challenges spawned by recent storms

▪ Improving PREPA’s overall transparency and credibility

▪ Enhancing internal human capital capabilities and 

business processes

▪ Transformation Plan for Puerto Rico’s Energy Sector 

Governor Appointed 

Board Member

Independent Board 

Member

Independent Board 

Member

Independent Board 

Member

Governor Appointed 

Board Member

Governor Appointed 

Board Member

Customer Elected 

Board Member

Governor 

Appointed 

President of 

the Board

1 The 5 committees are Audit, Executive, Finance, Legal, Infrastructure. Executive does not have a majority of independent members

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12 New PREPA Fiscal Plan

PREPA Governing Boards’ Vision for the future of power in Puerto Rico

Development of a long-term transformation execution plan, with the goal of not just emerging from bankruptcy and restoration of power, 

but establishing a model for power generation and delivery that sets a global example for cost, resilience, sustainability, customer 

engagement and empowerment.

System Serves as an 

Economic Growth 

Engine for Puerto 

Rico

▪ The quality, reliability, and cost of power attracts new commercial and industrial development to Puerto Rico, and 

encourages existing commercial and industrial customers to expand their operations. Transformation and 

reinvestment in the power system creates new jobs. Innovation in the generation and delivery of power creates a 

local ecosystem of businesses that provide for evolving needs for equipment, technology and services in Puerto Rico 

and beyond.

System is a Model of 

Sustainability

▪ There is a progressive focus on diversifying energy resources and reducing the carbon intensity of the power sector, 

in both primary generation and backup generation. Power generation is efficient and minimizes emissions.

▪ Customers have incentives to use energy wisely and to generate their own clean energy. The grid and grid systems 

are designed to take maximum advantage of increasingly cost effective renewable power generation alternatives and 

to integrate emerging technologies.

System is Reliable 

and Resilient

▪ The grid is thoughtfully planned, well maintained and safely operated to achieve defined reliability and resiliency 

goals. There is visibility into the system at all levels, and control where appropriate. Standards for recoverability 

create a measure for resilience. The choice of architecture (distributed vs. regionalized vs. centralized) is 

intentionally made to balance reliability/resilience and cost objectives while also taking advantage of advancements 

in technology and innovation.

System is CustomerCentric

▪ The system serves the customer with affordable, reliable power, with transparent metrics for quality of service and 

with equitable consideration across all customers. Quality/Reliability can be differentiated for customers in a manner 

that serves their total cost and risk objectives. Customers are engaged by innovative products and value added 

services that provide choice among rate plan and risk management options, and provide access to wholesale 

contracting options for large customers. Customers are empowered with behind-the-meter alternatives for energy 

efficiency, demand management, and distributed generation, with the ability to become prosumers if they so choose.

System Promotes 

Financial Viability

▪ The system is premised on positive economics on both sides of the meter. Rates are reasonable and create value for 

the customer, while pricing is sufficient to cover costs. Rate and market design create incentives to purchase, 

consume or produce energy in a manner that benefits the entire system. Subsidies are minimized, and those that 

remain have a non-distortionary impact. Operational excellence and sound long term planning reduce the cost to 

serve. Rates are affordable within a model that allows the utility to earn a reasonable rate of return and service its 

debt. The business model is robust to changes such as outmigration and reduction in energy demand, and does not 

create disincentives for adoption of cheaper energy resources, either at the grid level or at the customer premises.

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13 New PREPA Fiscal Plan

Recent Actions by Governing Board to Assist Until Sector Transformation

CEO Appointment

▪ On March 20th, 2018, PREPA’s governing board announced the appointment of Walter M. Higgins as PREPA’s firstever non-politically appointed CEO

▪ Higgins comes to PREPA with more than 40 years of top management experience, including: Sierra Pacific Resources 

(SPR) (now known as NVEnergy); AGL Resources and Atlanta Gas Light Company, notably the first deregulated 

natural gas utility in the United States; Louisville Gas and Electric Company; and Portland General Electric Company.

▪ The PREPA Chief Executive Officer (“CEO”) role replaces the Executive Director, and is a permanent position. The 

CEO reports directly to the Governing Board and is the most senior officer managing the organization. PREPA 

directors and leaders of functional areas such as T&D and Generation report to and meet regularly with the CEO.

Chief Financial 

Advisor (“CFA”)

▪ On December 1, 2017, the Governing Board announced the retention of Todd W. Filsinger of Filsinger Energy 

Partners, as CFA. Mr. Filsinger has been active in the energy sector for over 25 years and is recognized globally as 

a leader and turn-around specialist in the energy sector, involved with major industry restructurings such as Calpine 

and Energy Future Holdings

▪ Chief Financial Advisor (“CFA”) responsibilities include developing and leading ongoing financial and operational 

restructuring efforts and initiative implementation. The CFA reports directly to the Governing Board and has 

independent oversight of PREPA financial matters.

▪ Responsibilities include developing and supporting ongoing financial and operational restructuring efforts, advancing 

the transformation process, budgeting responsibility, expense approvals, fiscal and transformation plan 

implementation, and interaction with the FOMB and other stakeholders.

▪ The CFA reports directly to the Governing Board and will have independent oversight of PREPA financial matters 

and broad responsibilities over the financial aspects of operations

Director for 

Strategic 

Transformation 

Initiatives

(“PMO Director”)

▪ Established by Governing Board Resolution in 2017 to lead the Project Management Office (PMO)

▪ Develop clear & specific policy rationales for project prioritization, implementation and timelines

▪ Manage and supervise working groups, internal staff, special advisors, external resources

▪ Develop and publish relevant transformation metrics and KPIs, and prepare reports with assistance from 

Special Advisors & Working Group Leads

▪ Oversee engagement with external stakeholders and promote internal (PREPA) stakeholder engagement and 

transparency to ensure PREPA meets transformation schedules

▪ The PMO Director is Fernando Padilla

Transformation 

Advisory Council 

(TAC)

▪ December 11, 2017: Governing Board named 11 utility industry leaders to serve as TAC members

▪ Recognizing that PREPA’s expertise in the energy sector is valuable in planning for the sector transformation, the TAC 

was formed to provide the Governing Board and management with advice on developing a long-term vision and 

transformation execution plan for the island’s power system

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14 New PREPA Fiscal Plan

Recent Actions by Governor / AAFAF for Transparency & Sector Transformation

Office of Contract 

Procurement and 

Compliance 

(OCPC)

▪ Established through Executive Order 2017-66, November 2017 (See next slides)

▪ Mission is to ensure compliant and efficient PREPA procurement to support recovery, restoration of 

power and rebuilding of energy grid

▪ All qualifying PREPA procurements of over $500K are reviewed and approved by OCPC prior to 

final action

▪ Independent review with technical experts to confirm contracts and procurement are compliant 

with local and federal laws and regulations

▪ Implement procurement process controls and procedures to mitigate compliance risk, limit 

potential de-obligation risk and enhance accountability

▪ Implement process enhancements including automation and integration, monitoring and reporting 

to increase transparency, accountability and effectiveness

Transformation & 

Privatization

▪ Private-Public Partnership Act Amendment (filed Puerto Rico House / Senate on March 6, 2018)

▪ Regulatory structure modifications under development

▪ 18+ month transformation and privatization process: Preparation / Market Process / Approvals

▪ Working Group established between Governor, FOMB, and advisory teams to coordinate and lead 

transaction process

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15 New PREPA Fiscal Plan

The Transformation Plan is Intended to Provide a Roadmap for a Transformed 

Energy Sector for Puerto Rico

Provides Puerto Rico with a 21st century energy sector that serves as an 

engine of economic growth while protecting the environment

Builds energy infrastructure that recognizes the need for a transformed and 

resilient system, while taking into account the projected decrease in demand

Achieves low-cost and reliable energy

Provides sustainable structural and financial models for energy on the Island 

Leverages available federal funding for disaster recovery

Increases generation from renewable energy

Provides platform for the implementation of innovative technology to drive 

efficiencies and improve customer service through operational excellence

Provides, professional and independent governance

Relies on a robust and transparent regulatory framework to regulate private and 

monopoly components of the new energy sector, promote private investment, 

and implement and manage efficient rate designs and effective incentives

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16 New PREPA Fiscal Plan

Critical Work Streams Identified for the Illustrative Transformation Period

PREPA will undertake or complete the following tasks over the TransformationPeriod:

Further implement cost controls and improve 

cash flow by executing the following initiatives:

▪ Procurement process enhancements (i.e. OCPC)

▪ Cash distribution controls

▪ Collection of insurance proceeds

▪ Maximize federal funding available for disaster 

recovery

▪ Improved account maintenance and billing quality

▪ Improved fleet management

▪ Inventory management: warehouse consolidation 

and improved training on inventory management 

software

Process

▪ Identify, introduce, and integrate 

private energy sector participants, 

capital, and expertise into the Puerto 

Rico Energy sector over at least 18 

months

▪ Analyze and establish a productive 

industry structure and regulatory 

process to incentivize investment 

and innovation in energy technology

Considerations

▪ Amount and terms of federal funding 

available to support transformation 

of the electric sector will be a 

primary driver of the structure and 

desirability for approach to 

transformation and extent of private 

ownership or concession

▪ Any limitations to funding availability 

caused by structural or 

organizational options will be 

thoroughly scrutinized during the 

transformation identification and 

integration process

Update 

Pension 

Actuarial 

Report and 

redesign 

pension 

structure

Update 

projected 

maintenance 

expenditures

Continued 

improvement 

of 

Governance 

Structure

Complete 

Transformation 

Transactions

Restore 

power to its 

customer 

base

Ensure funding 

for continued 

operations, 

including billing 

all customers 

and securing 

external funding

Provide all 

necessary 

assistance for 

the undertaking 

of the 

Transformation 

process

Prepare 

integrated 

resource 

plan

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17 New PREPA Fiscal Plan

Transformation Process – Illustrative Timeline

The transformation timeline and structure may be adjusted at any time based on feedback from participating parties

▪ T&D and Generation processes are expected to follow separate, but similar, transaction timelines

▪ The RFQ process will be open to any and all interested parties, who are encouraged to submit their feedback 

and qualifications

Phase I: Request for 

Preparation Qualifications (“RFQ”) Closing

Phase II: Request for 

Proposals (“RFP”)

▪ Marketing materials / 

financial model

▪ Materials for investor 

diligence / dataroom

▪ Participant qualification 

requirements and 

transaction structure 

feedback questions 

(“RFQ Documentation”)

▪ Public release of 

RFQ Documentation

▪ Preliminary diligence 

by participants 

based on publicly 

available information

▪ Submission and 

subsequent 

evaluation of RFQ 

responses

▪ Shortlisting of 

qualified parties to 

participate in 

Phase II

▪ Release of RFP 

documentation to 

shortlisted 

participants

▪ Detailed due 

diligence

▪ Evaluation of RFP 

submissions

▪ Negotiation of 

definitive transaction 

documentation with 

selected party 

▪ Public 

announcement of 

RFP results

▪ Regulatory and 

governmental 

approvals

▪ Closing conditions 

met

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18 New PREPA Fiscal Plan

II. Historical Context and Current Challenges

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19 New PREPA Fiscal Plan

PREPA is Vertically Integrated and the Sole Provider of Energy in Puerto Rico

1 PREPA-owned plants excluding renewables

SOURCE: PREPA and Puerto Rico Energy Resiliency Working Group report

Key statistics on PREPA

▪ PREPA serves 1.5M customers and has 6,227 employees

▪ For FY2017, PREPA had total revenues of $3.4B, total assets of $9.4B, and 

total liabilities of $11.4B

▪ Overview of generation system:

– Generating Capacity: 5,839 MW (PREPA 4,878 MW; IPP 961 MW)

– 45% of generation is from oil, compared with national average of 4%

– 31 major generating units in 20 facilities; older than national average

– 4% of generation capacity from renewables, vs. national average of 15%

– Plants average ~40 years old1

▪ Overview of transmission and distribution system

– Transmission Lines: 2,416 miles (230 kV / 115 kV)

– Distribution Lines: 30,675 miles (38 kV, 13 kV, 8 kV, 4kV)

– 38 kV substations: 283

– 115 kV substations: 51

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 20 of 118
20 New PREPA Fiscal Plan

PREPA’s Historic Challenges in Operating and Maintaining the Electric System 

are now Exacerbated by the Catastrophic Damage Caused by Hurricanes 

Irma and Maria (1/2)

Generation

▪ Frequent power plant outages (12 times more often than mainland US average)

▪ High dependence on fuel oil and inability to diversify fuel mix (<4% from renewables 

and 45% oil, relative to industry average of 4% oil)

▪ Principal generation located far from demand centers with a poorly maintained

T&D infrastructure

Transmission 

and 

distribution

▪ T&D infrastructure that has not been adequately maintained, further contributing to 

outages, losses, poor quality

▪ The $2.5 billion estimated expenditure need identified by PREPA in the 4-28 Certified Fiscal

Plan for repair and maintenance prior to the hurricanes is no longer sufficient and does not

address necessary resiliency and hardening; post-hurricane T&D expenditure could exceed

$13B

▪ Highly vulnerable to catastrophic events impacting delivery of electric service

Collections 

and customer 

service

▪ Relatively high level of technical losses and theft (17.3% of energy lost in FY 2016 was 

higher than industry average; source: PREPA Planning and Research Directorate)

▪ Disorganized and ineffective customer service infrastructure

▪ Inconsistent and unreliable IT system for remote, reliable, and timely collections, and service

▪ High vulnerability to damage from disasters immediately impacting collections, revenue, 

and service

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 21 of 118
21 New PREPA Fiscal Plan

PREPA’s Historic Challenges in Operating and Maintaining the Electric System 

are now Exacerbated by the Catastrophic Damage Caused by Hurricanes 

Irma and Maria (2/2)

Post-Irma and 

Maria Challenges

▪ Accelerated migration of population

▪ Accelerated demand reductions

▪ Greater possibility of distributed generation and inside fence generation

▪ Dramatic economic contraction and job losses

▪ Deeper distrust in state-monopoly as sole provider of electricity

Operating 

Environment

▪ PREPA’s static business model has not adopted changes in a rapidly changing and 

innovative industry

▪ Legal requirements to provide power to certain customers at subsidized rates

▪ Poor quality of electric service has impacted business and investment climate

▪ The prolonged and ongoing recession has led to a significant drop in energy sales

▪ Poor credit rating leading to lack of market access and the inability to invest in needed 

capital expenditure projects

Environmental 

and Safety 

Compliance

▪ Safety system and record dramatically below industry standards

▪ History of environmental non-compliance

▪ Inability to execute PREPA’s strategic environmental compliance plan, including 

timely compliance with MATS (Mercury and Air Toxic Standards) EPA emission limits

Organizational

▪ Lack of institutionalized processes and procedures

▪ Outdated systems and information technology

▪ Above-market benefits in collective bargaining agreements with evergreen provisions

▪ Underfunded pension obligations (over $3.6B)

▪ Significant losses of experienced personnel

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 22 of 118
22 New PREPA Fiscal Plan

PREPA is One of the Largest Public Power Utilities in the US by Customer, 

but has Relatively Low Generation and Sales on a Per Customer Basis

SOURCE: PREPA, as of June 30, 2016, based on unaudited results APPA. “U.S. Electric Utility Industry Statistics, 2014”. 2016-2017 

Annual Directory & Statistical Report

Net 

Generation 

(M MWh)

30

20

10

0 Santee NPPD LADWP JEA PREPA IPA

Cpr.

SaltRiver

CPS NYPA OPPD

Customers 

Served (M)

1.5

1.0

0.5

0

PREPA LADWP LIPA SRP CPS SMUD Austin JEA Seattle 

CL

Memphis

Sales 

(M MWh)

20

0

40

Salt- OPPD

River

CCPU

Dist. 1

NYPA SRP Santee LIPA PREPA

Cpr.

LADWP NPPD

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 23 of 118
23 New PREPA Fiscal Plan

Poor Macroeconomic Trends have Deepened Impacts Upon 

PREPA’s Operations

Consumption

Population

As the economy deteriorated, population declined, and disruptive technologies emerged, demand dropped 

18% from 2007 to 2017

5,000

6,000

7,000

15,000

18,000

21,000

Real GNP (Constant 1954 

Dollar Terms)

Consumption 

Real GNP 2,500

3,000

3,500

15,000

18,000

21,000

24,000 8,000 24,000 4,000

PR Population

GWh Consumption

8,000

7,500

7,000

6,500

6,000

5,500

Residential1

9,500

9,000

8,500

8,000

7,500

7,000

6,500

Commercial

5,000

4,000

3,000

2,000

1,000

0

Industrial

Consumption (GWh)Consumption (GWh)

GWh Consumption

13% loss in demand in the 

residential sector since 2005 peak

10% loss in demand in the 

commercial sector since 2007 peak

48% loss in demand in the key 

industrial sector since 2006 peak

Consumption (GWh)

SOURCE: PREPA’s rate records from 2000-2017

NOTE: here and elsewhere in the document, Fiscal Year begins in July of the previous calendar year

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 24 of 118
24 New PREPA Fiscal Plan

Pre-Storm Reliability Metrics were Dismal Relative to Industry and Trending Worse

FY17 2016 Utility Peer Group Comparison of PREPA reliability to median North 

American Utility Peer Group reliability(1) PREPA1

Lower 

Quartile Median(3) Upper Quartile

SAIDI 14.35 2.77 1.92 1.35 On average, PREPA customers do not have power for 14.4 hours

SAIFI 4.83 1.32 1.04 0.86 PREPA customers lose power almost 5 times a year on average

CAIDI 2.97 2.10 1.84 1.57 On average, when PREPA customers lose power it takes 3 hours to restore

1 PREPA data LTM as of July 2017, SAIDI/CAIDI are measured in hours and SAIFI is measured in # of occurrences

2 FY 2017 data projected based on prior year performance for August through December to exclude the impact of the hurricanes

3 Source of SAIFI, SAIDI and CAIDI North American utility data is the IEEE Benchmark report

System Average Interruption Duration Index (“SAIDI”)

16

14

12

10

8

FY 14 FY 15 FY 16 FY 17

Hours

System outage duration

5.0

4.5

4.0

3.5

3.0

FY 14 FY 15 FY 16 FY 17

Interruptions

System Average Interruption Frequency Index (“SAIFI”)

Number of system outages

2.0

2.5

3.0

3.5

FY 14 FY 15 FY 16 FY 17

Hours

Customer Average Interruption Duration Index (“CAIDI”)

Customer outage duration

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 25 of 118
25 New PREPA Fiscal Plan

Key Operational Areas – Headcount decline

SOURCE: PREPA Human Resources Directorate

1 PREPA has ~600 employees who are awaiting approval from the Employees Retirement System of PREPA

Employee Retirements from 2012-2017

The loss of almost 30% of its workforce since 2012 has constrained PREPA's ability to respond to challenges

1,018

630

375

Transmission & Distribution 

Generation

Customer Service

8,638 8,622

8,245

7,214

6,754

6,448

6,227

6,000

6,500

7,500

7,000

9,000

8,500

8,000

5,500

5,000

FY FY FY FY FY FY FY 

2012 2013 2014 2015 2016 2017 2018

1

Total Headcount

▪ Of the 2,343 employees that retired between 

2012 and 2017, 2,023 (86%) were from 

operations and 320 from administration

Annual Average Employee Headcount

▪ 6,227 as of December 2017

▪ PREPA’s headcount declined by 2,411 from FY 2012 to Dec 2017 

– mostly due to retirement

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 26 of 118
26 New PREPA Fiscal Plan

Fuel/Purchased Power Expense Increased Dramatically over the Past 

Two Decades

$-

$0.01

$0.02

$0.03

$0.04

$0.05

$-

$200

$400

$600

$800

2

017

2

015

2

013

2

011

2

009

2

007

2

005

2

003

2

001

19991997199519931991

Fiscal Year

Cost per kWh

Operating Cost (USD M)

$1,000

Operating Expense Cost per kWh

$2,000 $0.10

$1,000 $0.05

$- $-

$3,000 $0.15

$4,000 $0.20

1995199319912

017

2

015

2

013

2

011

2

009

2

007

2

005

2

003

2

001

19991997

F&PP Expense (USD M)

Fuel & Purchased Power

Cost per kWh

Fiscal Year

Purchased Power 

23%

Labor 

Operating 

14%

Non-Labor 

Operating 

7%

Maintenance** 

6%

CILT &

Subsidies 

8%

Bad Debt* 

3%

Fuel 

39%

Operating Expense Breakdown

Cost per kWh

Oil 

45%

Coal 

17%

Natural 

Gas 

34%

Hydro 

1%

Renewables 

3%

Breakdown of Fuel and PP by Generation Type

SOURCE: PREPA Planning & Finance

Fuel and Purchased Power is the predominant cost and most volatile rate component for PREPA. Reducing dependence on refined fuel oil for power 

generation has long been a top priority for PREPA and though progress has been made, oil remains the main source of energy.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 27 of 118
27 New PREPA Fiscal Plan

PREPA’s Current Debt Structure is Not Sustainable

Status Quo Debt Service

Debt Balance, USD M1

9,043 8,988 9,413 9,232 9,042 8,089 7,587

2010 11 12 13 14 15 2016

$1,400

$1,200

$1,000

$800

$600

$400

$200

$-

FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 FY 30

USD M

Legacy Debt Relending Bonds Fuel Lines

▪ As demand has fallen, 

financial performance has 

declined and PREPA has 

borrowed to fund operating 

expenses. By 2014, PREPA

was overburdened with debt 

and had no access to 

additional liquidity

▪ PREPA had $9.25B 

outstanding debt as of 

5/3/2017, with debt service 

obligations of $4.5bn over 

the next five years

▪ The estimated annual debt 

service obligation based on 

term out of all long-term 

financial liabilities at a 5% 

interest rate over 25 years 

is approximately $657 

million per year

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 28 of 118
28 New PREPA Fiscal Plan

Pension: Underfunding Poses Another Significant Challenge for PREPA

PREPA 2014 Actuary Report

(USD B)

Discount Rate 8.25%

Total Pension Liability (“TPL”) 5.0

Fiduciary Net Position (PREPA ERS 

Assets ) (“FNP”) 1.4

Net Pension Liability (“NPL”) 3.6

Funded Ratio 28%

In February 2018, PREPA received a revised actuarial report from the Retirement System based on 2014 

data. The Net Pension Liability more than doubled from $1.7B to $3.6B compared to the initial report

▪ PREPA’s Employee Retirement System (“PREPA ERS”) is designed to meet the defined-benefit pension and other 

post-employment benefits (“OPEB”) obligations of PREPA’s active and retired employees (including beneficiaries)

▪ The PREPA ERS is significantly underfunded - as much as ~$3.6B (based on an optimistic 8.25% rate of return).

– PREPA is in the process of reviewing and updating these numbers and projections. PREPA expects that the 

unfunded liability could be significantly higher particularly when considering recent trends in PREPA employees 

and a more realistic lower rate of return.

▪ OPEB ($384m accrued) is entirely unfunded as reported in PREPA’s 2012 “Report of Actuary on the Other PostEmployment Benefit REVISED Valuation”, revised as of October 2015

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 29 of 118
29 New PREPA Fiscal Plan

III. Operational Initiatives and Performance Improvements

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 30 of 118
30 New PREPA Fiscal Plan

PREPA is Approaching 1.5 cents / kWh Savings

See Appendix for Work Plan 180 background and timeline

▪ Up to $130 million of improvement opportunities were identified in non-fuel & purchased power operating expense 

areas (i.e. 1 cent / kWh in FY 2023) through a bottoms-up analysis of the organization and work force

▪ PREPA has commenced “Work Plan 180” to discover and qualify additional improvements, further validate already 

identified opportunities, and develop initial execution plans for implementation

▪ Since FY 2012, PREPA has reduced its Labor O&M expenditure by over $200 million annually, and anticipates 

realizing an additional reduction of $40 million annually beginning FY 2019 due to pending retirements

▪ Emphasis is being placed on employee productivity, customer service quality, and long-term power system 

infrastructure improvements through status quo operational initiatives and energy sector transformation

▪ PREPA has identified and executed on certain performance improvement initiatives, and commenced the Work 

Plan 180 initiative discovery and implementation process on February 23, 2018, to enhance efforts to reach the 

1.5 cent / kWh target.

Operations: On January 23, 2018, PREPA shut down Aguirre’s combined cycle unit and Cambalache’s peaking units 

for fuel saving purposes

▪ Preliminary fuel savings estimate is $28M annually based on more efficient utilization and dispatching lower cost 

generation plants

Fuel Mix: As of the week ending February 24, 2018, PREPA increased LNG consumption at the Costa Sur plant to 

lower overall fuel costs

▪ Preliminary fuel savings estimate is $24M annually based on lower priced fuel source

Recent Updates: Near-Term Operational Improvements identified through WP-180

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 31 of 118
31 New PREPA Fiscal Plan

Performance Improvement Activities (WP – 180)

See Appendix for Work Plan 180 background and timeline

PREPA along with its Financial Advisors has initiated a team based Performance Improvement Initiative, known as WP180, focused on evaluating operational and contractual business practices of the organization with the goal of 

identifying opportunities to increase operating efficiency and reduce costs. Teams of employees and advisors have 

been actively reviewing the operations of PREPA’s directorates (i.e. Transmission/ Distribution, Generation, 

Administrative, Customer Relations, HR, etc) as well its principal cost centers (e.g. Fuel and Power Purchasing). 

Initiatives identified by each team are evaluated, scoped, and prioritized with detailed execution plans developed that 

ensure implementation and monitor performance. It is anticipated that all existing and future performance improvement 

efforts will be analyzed and validated through the Work Plan 180 process.

Work Plan 180 Performance Improvement Goals

Substantially improve employee safety to levels defined as top decile performance as recognized by OSHA standards

Improve environmental compliance and achieve zero notices of violation

Maximize efficiency of labor efforts and eliminate unproductive processes or work rules 

Sell off non-core assets (PREPA Net) to be reviewed by its holding company board (i.e. PREPA Holdings)

Improve cost competitiveness of the organization

Develop formal corporate processes that analyze spend and define the most effective utilization of available funds 

Improve reliability performance of the corporate assets

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 32 of 118
32 New PREPA Fiscal Plan

*Achievement possible within 18-month transformation period, all other initiatives are likely to require privatization

1 Subject to further diligence. Sizing of potential impact is preliminary and provided solely for illustrative purposes (as discussed with FOMB advisors).

2 Subject to material change and revisions. The initiatives are subject to varying levels of execution risks due to a series of affecting factors, including but not limited to required actions and results that are outside of 

PREPA’s control. 

3 Financial impact is subject to material change. Activities flagged as “TBD” are in the process of being sized.

4 A number of the initiatives included would impact the fuel/purchased power cost items and thus do not directly impact free cash flow.

PREPA Identified Operational Improvement Initiatives

Certain performance improvements have begun and will continue during the 18-month period, but full potential of opportunities identified will 

require or be optimized by privatization

Category Opportunity Type Initiative Stage 18 Month* Initiative Sizing

Non-F&PP Productivity Improvement Optimize Procurement and Logistics Review / Analysis Yes TBD

Non-F&PP Productivity Improvement Inventory Management Review / Analysis Yes TBD

Non-F&PP Productivity Improvement CBA Work Rules Review / Analysis Yes TBD

Non-F&PP Productivity Improvement Vegetation Management Underway Yes N/A

Non-F&PP Productivity Improvement T&D Maintenance Execution Underway Yes N/A

Non-F&PP Current Cash Expense Collections - Credit Card Fee Cap Review / Analysis Yes $2

Non-F&PP Current Cash Expense Business Processing Outsourcing Review / Analysis Yes $5 - 10

Non-F&PP Current Cash Expense Staffing Evaluation / Right Sizing Underway Yes $15 - 20

Non-F&PP Current Cash Expense Non-Technical Losses Underway Yes $15 - 20

Non-F&PP Current Cash Expense Account Maintenance and Billing Quality Underway Yes $3

Non-F&PP Current Cash Expense Employee Benefits Expense Optimization Underway Yes $35 - 40

Non-F&PP Current Cash Expense Behind the Meter Underway Yes TBD

Total Non-F&PP Current Cash Expense $75-95

F&PP Current Cash Expense Fuel Sourcing Underway Yes $5 - 10

F&PP Current Cash Expense Dispatch Improvements Underway Yes $25 - 30

F&PP Current Cash Expense Increased LNG Usage Underway Yes $20 - 25

F&PP Current Cash Expense Public Lighting Outsourcing/P3 Review / Analysis $25 - 40

F&PP Current Cash Expense Conventional PPOA Price Renegotiation Review / Analysis $100 - 130

Total F&PP Current Cash Expense $175 - 235

Non-F&PP Future Cost Increases Fleet Management Reorganization Review / Analysis Yes TBD

Non-F&PP Future Cost Increases Pension Obligation Reform Review / Analysis Yes TBD

Non-F&PP Future Cost Increases Smart/Micro Grids, Automated Systems Underway TBD

F&PP Future Cost Increases Renewable PPOA Price Renegotiation Underway Yes $45 - 55

F&PP Future Cost Increases Reduce Forced Outages, System Heat Rate Underway $90 - 120

F&PP Future Cost Increases New LNG Supply Permits and Funding Underway Yes $200 - 300

Total Avoided Future Cost Increases $335 - 475

Total 585-805

Revenue recovery 

opportunities from 

behind the meter 

generation exist but 

require changes to 

rate structure

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 33 of 118
33 New PREPA Fiscal Plan

Potential Cost Reductions – Public Lighting Outsourcing/P3

▪ Switching to LED street technology can save between 50% and 80% in energy costs, in addition to reduced 

maintenance costs due to longer bulb lifespan (average 20-year expected)

▪ A portion of the total cost savings is allocated for return on upfront investment made through a public private partnership

▪ Societal benefits: A study conducted by US Department of Transportation found that the improved lighting 

conditions provided by LED technology can decrease traffic accidents by 3.1%

▪ Approximately 10% of light emitted by current public lighting fixtures causes glare and only 40% of the light 

produced illuminates its intended target

▪ Savings not assumed in steady state financial projections

Benefits of converting public light fixtures with LED bulbs

Potential cost savings assumed from energy efficient LED investment in public lighting (40%), USD M

$95 $99

$58 $58 $56 $56

$39 $39 $38 $38

$20

$40

$60

$80

$100

$120

$-

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

Potential Cost 

Reduction 

through LED

Cost of Public 

Lighting with 

LED

SOURCE: Cost-Benefit Study for the Proposal to Modernize Street Lighting in Puerto Rico by Estudios Tecnicos Inc. as of January 15, 2015.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 34 of 118
34 New PREPA Fiscal Plan

Potential Cost Reductions – Non-Technical Losses

0%

2%

4%

6%

8%

10%

12%

14%

16%

16 17

System Losses

FY02 03 04 05 06 07 08 09 10 11 12 13 14 15

$10

$-

$20

$30

$50

$40

$60

$70

$80

$100

$90

FY FY FY FY FY 

19 20 21 22 23

USD M

PREPA can reduce costs by continuing to improve its theft reduction program. Reducing commercial losses to 

approximately 3% will further reduce fuel and purchased power costs.

1% Commercial Loss Cost Reduction 

Cost of Commercial Losses

Non - Technical (Commercial)

Technical

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 35 of 118
35 New PREPA Fiscal Plan

Employee Benefits Reform

1 Based on discussion with AAFAF. PREPA continues to analyze the impact of Act 26-2017, including a potential mandate to further reduce medical benefits, as may be required by the 

Fiscal Plan Compliance Committee that was created under the same statute

2 Pension savings from switching to a defined contribution system are approximated at $30M per year. Pension savings from a benefits reduction are estimated at $28M per year, using the 

assumption that the unfunded liability would require a $147M per year payment without a benefits reduction. Like other debt, the payment of the unfunded liability is not included in the 

financial projections. Additionally, there is considerable uncertainty around the size of the unfunded liability and payment. Conflicting and incomplete information from PREPA RS has 

yielded estimates from $60-$147M per year

58 10

26 26

10

58

10

FY 2022 FY 2023

10

26

58

10

58

26

FY 2019 FY 2020 FY 2021

Overtime Benefit Reform

Medical Benefit Reform Pension Benefits Reform2

As a result of Act 26-2017, PREPA has the following opportunities to reduce its employee costs1:

▪ Overtime – labor overtime rates are assumed to be reduced from 2x to 1.5x (25% cost reduction from 

$40 to $30 million per year)

▪ Health – PREPA currently self-funds all medical expenses, and spends approximately $9,600 per 

employee per year, significantly above the contribution levels at other government agencies1. Act 26-

2017 sets forth guidelines to align government agency health plan contributions. PREPA estimates 

there could be cost reductions through potential combination of the following:

– Enrollment in an externally insured medical plan through a competitive process

– Adjustment of copays and deductibles

▪ Pension reform2 – PREPA currently estimates savings from pension benefits reform, including both 

from switching to a defined contribution system and reducing benefits by roughly 10%

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 36 of 118
36 New PREPA Fiscal Plan

Potential Cost Reductions – Renewable PPOAs

$180

$170

$160

$150

$140

$130

$120

$110

$100

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

Blended Contract Price $/MWh

Baseline 2015 IRP Pricing

Moderate Pricing Improvement for Non-Operating 

High Pricing Improvement for Non-Operating

$72 $74 $76 $76

$42 $43 $44 $44

$-

$10

$20

$30

$40

$50

$60

$70

$80

USD M

FY 20 FY 21 FY 22 FY 23

Renewable PPOA Price Improvement

(non-operating)

Renewable PPOAPricing

(non-operating)

SOURCE: PREPA Planning, Bloomberg New Energy Finance, Restructuring Advisor Analysis

Note: Price improvement potential is based on PREPA analysis of comparable contracts and modelling of current market capacity and PPOA pricing; assumes that all projects in pipeline are built

High savings from new renewables

Moderate savings from new renewables

▪ Future renewable PPOA contract price assumptions are preliminarily assessed as above potential competitive procurement prices

▪ Achieving the potential cost reductions could be negotiated or assisted by Title III process, and are included for illustrative purpose

PREPA has identified potential areas of opportunity for revised contract price assumptions

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 37 of 118
37 New PREPA Fiscal Plan

Potential Cost Reductions - Retirements

Approximately 10% of PREPA’s work force has submitted paperwork to 

retire with the Retirement System. If all ~600 employees retire and are 

not replaced, PREPA will realize employee cost savings of ~$45M

$-

$0.050

$0.100

$0.250

$0.200

$0.150

$0.300

FY 2018 FY 2022 FY 2023

PREPA Employee Costs: Portion of Required Rate

FY 2019 FY 2020 FY 2021

$0.300

$0.250

$0.200

$0.150

$0.100

$0.050

$-

FY 2018 FY 2022 FY 2023

Rate Impact from Illustrative 10% Employee Cost Reduction

FY 2019 FY 2020 FY 2021

14.5%

85.5%

Other Costs / kWh Employee Cost / kWh

Total Rate Adjusted Rate

Employee Costs Other Costs

Reduction Rate before Reduction

▪ Employee Costs contribute ~15% of 

PREPA’s total cost structure for the 

Fiscal Plan Period

▪ A 10% reduction in headcount causes 

a ~1.5% reduction to the Total Rate

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 38 of 118
38 New PREPA Fiscal Plan

IV. Baseline Financial Projections

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 39 of 118
39 New PREPA Fiscal Plan

Fiscal Plan Status, Key Assumptions and Metrics

The Financial Projections in this section assume PREPA continues to exist “steady state” as a public corporation. The impact of aspirational operational 

initiatives is included where some certainty on implementation exists

Input Assumptions

Macroeconomic Revised forecasts due to the combined effects of austerity, population decline, natural disasters, and increased deployment of 

Distributed Generation / Energy Efficiency (“DG/EE”)

Current Rates Continuing operating under ~7.5 cent (base + provisional) rate that went into effect in August 2016 

Review rate regulation alternatives such as Formula Rate Making (FRM) and Multi-year rate filings

Fuel & 

Purchased 

Power

Price of Residual Oil (#6) is approximately 40% higher than the forecast used in the Certified Fiscal Plan (EIA Annual Energy 

Outlook 2017); proportionally higher than expected diesel burn due to systeminstability

Ongoing 

Maintenance

Expenditure requirements and schedule has changed significantly. Currently, there is low visibility on revised aggregate levels 

and timing due to restoration activities and need for updated IRP. PREPA is expected to require additional funds above the annual 

average anticipated for Transmission IRP maintenance.

MATS

Compliance / 

Renewables

Construction start date moved to January 1, 2020 – online date to July 1, 2021. Alternative projects to accommodate additional 

LNG capacity are currently being discussed and are in the early stages of evaluation. Other compliance alternatives will be 

reviewed in the updated IRP. RFP for 300 - 600MW of renewable capacity will be developed.

Liquidityand 

Operations

Assumes receipt of external funding to cover expected deficit estimated for lost revenue but does not include repayment or 

terms associated with potential credit facilities

FY2020 and beyond require rate adjustments or external funding for necessary operating and maintenanceexpenses

Interest payments from loan incorporated into cash flows, but not cost of service

Restoration 

Funding

Timing of expenditure and disbursement still uncertain and are not included in the financial projections. Currently, the central

government has initial disbursement of $2 billion approved with 100% FEMA cost share. Puerto Rico is requesting a cost-share 

adjustment for future FEMA’s program amounts under the Stafford Act, but potentially requires 10% cost-share match from PREPA. 

Puerto Rico seeks Community Development Block Grant-Disaster Recovery (CDBG-DR) funding to cover the cost-share match 

requirements of Stafford Acts programs. Historically, either FEMA or Congress has authorized a 100% federal cost-share for large 

and catastrophic disasters such as Hurricane Andrew in Florida and Hurricane Katrina in Louisiana and Mississippi. PREPA

assumes this cost share will be paid for through the current maintenance line item

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 40 of 118
40 New PREPA Fiscal Plan

Macro Assumptions and Drivers

FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

-11%

FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

0%

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

-10%

FY 17 FY 18 FY 23

+10%

FY 19 FY 20 FY 21 FY 22

NG D6 D2

Population 

decline

Economic 

stagnation

Energy 

efficiency 

distributed 

generation

Fuel price 

inflation

▪ Short term fuel price budget projections 

were adjusted for recent changes in 

residual oil and diesel prices. Long-term 

prices are expected to rise and increase 

per unit fuel costs

▪ Distributed generation, both net metering 

and grid defection, and energy efficiency 

solutions deployment are assumed to 

accelerate during restoration, which 

drives down load and energy sales an 

additional 10% by FY2023

▪ Economic decline for the fiscal plan 

forecast period is offset by increased 

federal funding for restoration, which 

creates short term employment 

opportunities but does not stop the net 

migration from the island

▪ The central government population 

forecast projects accelerated population 

decline due the combined effects of 

austerity, economic depression, and 

natural disaster impacts

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 41 of 118
41 New PREPA Fiscal Plan

Load Forecast Scenarios and Fiscal Plan Base Case

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

-21%

-30% +25% -10%

Reduced 

sales / 

consumption

Scenario Distributed 

Generation (DG)

Energy 

Efficiency (EE)

High

Long run 

170MW capacity 

penetration

Assumes historical 

trend stays constant, no 

acceleration

Base

Incremental 25% of 

industrial load shed 

relative to High

30% of commercial / 

residential load 

achieves 30% more EE

Low

Incremental 50% of 

industrial load shed 

relative to High

40% of commercial / 

residential load 

achieves 30% more EE

▪ Storm damage and restoration has complicated short 

and long term load forecasts due to uncertain impacts 

from secular trends in DG and EE. Scenarios were 

developed to test a range of possible outcomes

LOAD FORECAST SCENARIOS

FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

Apr '17 Fiscal Plan 16,996 16,489 15,693 15,064 14,476 13,957 13,438

Upper Bound 16,996 11,910 15,697 15,583 15,423 15,287 15,172

Base Case 16,996 11,910 14,939 14,587 14,177 13,777 13,433

Lower Bound 16,996 11,910 14,008 13,472 12,901 12,355 11,828

13,000

12,000

11,000

10,000

14,000

15,000

16,000

17,000

18,000

GWhSales

Other economic

13,433

FY2017 Load

750

Population decline

Energy efficiency

FY2023 Load

1,220

Distributed gen

1,190

16,996

370

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 42 of 118
42 New PREPA Fiscal Plan

In Addition to the Base Rate, PREPA’s Overall Fuel & 

Purchased Power Spend is Projected to Stay Relatively Flat

PREPA’s Fiscal Plan Baseline assumes continuing to operate as a public entity and implementing the capital plan laid out 

in the 2015 Integrated Resource Plan, with modifications on timing and capacity due to updated load forecasts

$0.18 $0.18

$0.16

$0.11 $0.11 $0.13 $0.13 $0.13 $0.14 $0.14 $0.15

$0.20

$0.18

$0.16

$0.14

$0.12

$0.10

$0.08

$0.06

$0.04

$0.02

$-

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000

$500

$

FY 12 FY 13 FY 14 FY 15 FY 23

Cost per kWh

USD M

FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22

$0.20

Financial projections are in preliminary form and subject to change. More detail to be provided

Fuel (Refined Commodity and Shipping)

Conventional Purchased Power (AES & Eco)

Renewable Purchased Power

Cost per kWh

$118 $111

$107

$86

$52 $58

$74

$140

$120

$100

$80

$60

$40

$20

-

FY12 FY13 FY14 FY15 FY16 FY17 FY18

$ per Barrel

PREPA average cost per 

barrel of refined fuel

PREPA average cost per barrel of refined fuel

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 43 of 118
43 New PREPA Fiscal Plan

Historical & Projected Operating Expense

Comments

Salaries

Current headcount of 5,468 operating employees (6,285 total) is held flat through the forecast period (PREPA and 

advisors are analyzing labor benchmarks to determine potential rightsizing adjustments to headcount)

Assumes 1% growth in salaries beginning in FY2019 through the forecastperiod

Pension & Benefits expenses are projected using historic spending levels plus input from the FY2018 budget

Going forward these costs are assumed to fluctuate relative to headcount and revised actuarial numbers, with pension 

reform savings estimated from switching to a defined contribution system and reducing benefits by roughly 10%

Pension & Benefits Includes retirement system (including annual additional employer contribution totaling $60M beginning in FY2020),

health plan, social security, Christmas bonus and worker’s compensation insurance

All overtime and overtime benefits are projected separately from full-time and temporary employees

Comprised of materials, per diem, property & casualty insurance premiums, restructuring fees, retiree medical benefits,

Non-labor O&M security expenses, banking services, maintenance, utilities, and miscellaneous expenses

FY2018 is based on budget itemized requests for non-labor/non-fuel O&M expenses from PREPA’s directorates

FY2019 and beyond is projected using historic spending levels plus input from the FY2018 budget

* Additional Employer Contribution included for illustrative purposes and will be updated once update Actuarial valuation is completed.

0.03

0

0.07

0.01

0.06

0.05

0.04

0.02

0

500

400

800

900

100

200

300

600

700

FY2023

143

277

273

142

274

270

FY2021

140

FY2022

315

260

148

253

282

271

138

FY2017

265

318

FY2019

268

269

136

FY2014

285

189

262

202

FY2013

350

216

227

196 153

FY2016 FY2018

147

218

284

FY2015 FY2020

139

335

Cost per kWh Total Operating Salaries Total Other Operating Expenses Total Operating Pension & Benefits

Cost per kWh

USD M

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 44 of 118
44 New PREPA Fiscal Plan

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

Administrative, 

Vehicles, 

Buildings, and 

General

Planning and 

Environmental 

Protection

Customer 

Service

Transmission & 

Distribution

Transmission 

IRP

Generation

Historical and Projected Maintenance Expense

$-

$50

$100

$150

$200

$250

$300

$350

$400

$450

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

USD M

Budget Actual Maintenance Expense

Since FY2013, PREPA has underspent on budget maintenance, directly impacting the reliability of the system

Current Base Case Projections maintain pre-Maria view on 

future maintenance and IRP spend until better visibility is gained

SOURCE: PREPA Planning & Finance

FY2017 actual 

maintenance spend $166 

million below budget

Budget FY2018, actual 

maintenance expenditure expected 

to be significantly below budget due 

to impact of hurricanes and 

shortage in skilled labor

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 45 of 118
45 New PREPA Fiscal Plan

Indicative Revenue Requirement Under Steady State Assumptions

▪ Required revenue leads to rates of 24.1 c/kWh by FY23, excluding debt service and legacy pension obligations

▪ Assumes PREPA maintains its tax-exempt status, operational initiatives are implemented, and the planned 

2015 IRP initiatives are completed with some delays

PREPA steady-state 5-year revenue requirement

USD M, kWh, $/kWh

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Sales kWh 11,909,977,894 14,939,939,239 14,587,321,263 14,177,824,192 13,777,704,654 13,433,002,018

Overall Rate $/kWh $ 0.245 $ 0.230 $ 0.229 $ 0.238 $ 0.240 $ 0.241

Total Revenues $ 2,921 $ 3,430 $ 3,341 $ 3,378 $ 3,306 $ 3,234

Operating Expenses

Total Fuel & Purchased Power Expense $ 1,497 $ 1,872 $ 1,889 $ 1,935 $ 1,917 $ 1,959

CILT and subsidies 255 293 287 292 285 298

Total Labor Expense 396 372 291 295 299 303

Total Other Operating Expenses 411 431 378 382 383 383

Total Non-Fuel Operating Expense 1,062 1,095 957 969 967 984

Total Operating Expenses $ 2,559 $ 2,938 $ 2,837 $ 2,885 $ 2,855 $ 3,040

 - - - - - -

Adjustment for other income (33) (33) (26) (26) (26) (26)

Adjustment for revenue recovery - - - - - -

EBIT $ 395 $ 525 $ 529 $ 519 $ 476 $ 220

Operating margin 13.52% 15.30% 15.85% 15.36% 14.40% 6.81%

Maintenance expense $ 395 $ 496 $ 521 $ 486 $ 425 $ 317

Net income $ - $ - $ - $ - $ - $ -

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 46 of 118
46 New PREPA Fiscal Plan

Projected Base Revenue, Funding Gap, and Initiatives

FY 19 FY 20 FY 21 FY 22 FY 23

To achieve neutral funding balance under the status quo, without considering legacy debt, PREPA will need to raise rates, 

underspend or finance maintenance. Access to capital requires successful Title IIIconclusion.

Base revenue decline with 

load over the forecast 

period

O&M expenses fluctuate 

near term but also decline 

with load

Before impact of 

initiatives, PREPA has 

negative cash flow

Initiatives identified and 

executed in FY18 and 19 

lead to run rate cash flow 

improvements

Initiatives leads to a 

sustainable position

USD B

0.9 1.1 1.1 1.1 1.0

-1.2 -1.1

-1.3 -1.3 -1.3

-0.2 -0.2

-0.3 -0.3 -0.3

0.2

0

0.2 0.2 0.2

0

-0.2 -0.1 -0.1 -0.1

*Financial projections and cost estimates are in preliminary form and subject to change.

Base Revenues

O&M Expense 

Pre-Initiatives

Pre-Initiatives 

Change in Net 

Funds

Operating / 

Revenue 

Enhancements

Post-Initiative 

Change in Net 

Funds

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 47 of 118
47 New PREPA Fiscal Plan

Even With Operational Improvements, PREPA Status Quo Full Cost of Service Rates 

are Projected to Reach 30 Cents per kWh

Projected cost of service1rate including debt service and cost reduction initiatives identified for the 18-month period

Reducing rates Requires Restructuring of PREPA Obligations and Implementation of Transformation Plan

1 Cost of Service includes investments for MATS to replace non-compliant residual oil generation with diesel or natural gas 

2 Debt Service Obligation estimated based on term out of all long-term financial liabilities at a 5% rate over 25 years; includes interest payments on Commonwealth loan

3 Maintenance expense necessary Transmission IRP project expenditures, which are expected to be revised and updated during the IRP process.

0.13 0.14 0.14 0.15

0.02 0.02 0.02 0.02 0.02

0.05 0.05 0.05 0.05

0.05

0.05 0.05 0.05

0.13

0.05

0.02

0.03 0.02

0.03 0.03

0.04

0.28

FY 2020

0.28

0.01

FY 2019

0.01

FY 2021 FY 2022 FY 2023

0.29

0.01

0.29

0.01

0.29

Debt service2 MATS Compliance Maintenance3 Non F&PP operating CILT & Subsidy Fuel & PP

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 48 of 118
48 New PREPA Fiscal Plan

Debt Sustainability Analysis Shows that Payment of Legacy Debt Service Requires 

an Additional Increase Over the Projected Base Rates

Overall Rate and Required Increases to Cover Operating Shortfalls and TransitionCharges

Rate Increase for Debt Service $0.005 $0.010 $0.015 $0.020 $0.025 $0.030 $0.035

Present Value of Revenue from 

Rate Increase (Billions)

$1.1 $2.2 $3.2 $4.3 $5.4 $6.5 $7.5

$9.478bn outstanding debt, including accrued interest, end Fiscal Year 2017 (6/30/2017), TC revenue discounted at 5%

Analysis does not include funding for legacy pension obligations

$0.30

$0.25

$0.20

$0.35

$0.40

$0.45

FY 2019FY 2020FY 2021FY 2022FY 2023FY 2024FY 2025FY 2026FY 2027FY 2028FY 2029FY 2030FY 2031FY 2032FY 2033FY 2034FY 2035FY 2036FY 2037FY 2038FY 2039FY 2040FY 2041FY 2042FY 2043FY 2044FY 2045FY 2046FY 2047FY 2048

Overall Rate Breakeven Increase

No Transition Charge +1 Cent Transition Charge

+2 Cent Transition Charge +3 Cent Transition Charge

▪ At current rates, PREPA does not 

have debt capacity

▪ Funding pension and debt 

obligations on an ongoing basis will 

require access to capital for 

maintenance, reduced maintenance, 

or adjustment to rates

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 49 of 118
49 New PREPA Fiscal Plan

V. Macro Resource Planning

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 50 of 118
50 New PREPA Fiscal Plan

Updated Generation Baseline Considers Both Improving Grid Reliability and 

Achieving Lower Cost Power as a Goal

PREPA is in the process of developing realistic scenarios and forecasts for Post-Transformation and for 

analysis in the 2018 IRP process, and has developed initial views on cost potential

FY 2023 Goals / 

Target

1 Comment / Constraint

Resource Expansion Focus Reliability & 

Resiliency

PREPA IRP principles seek to achieve lowest rate in compliance 

with reliability and environmental criteria

Fuel & Purchased Power Cost Reduction 20-25% Driven by aggressive declines in capital cost projections

Renewable Generation 20-25% Major upgrades to generation + T&D system required to support 

25%; increasing reliability issues at >25%

Clean Low Cost Fuel Supply 20-30 TBtu / Yr New and existing options to be analyzed and compared

Reciprocating Engines 500 MW Flexible fast response generation for system stability

Battery Storage 100–600 MWh For voltage support / frequency regulation and load shifting

Generating Unit Retirements TBD Reliability and black start issues must be considered

Investment (Generation, Fuel Supply) $3.3 Billion Significant dependency on federal funding for T&D and private 

investment in overall system

Power generation capacity projections that include significant low cost renewable power generation must include 

necessary upgrades to generation and T&D to meet acceptable reliabilitycriteria

1 These aspirational targets can be potentially achieved, but only after securing substantial resources for T&D and Generation improvements before and after 

FY23 Preliminary scenario still under development, and will be thoroughly analyzed through the IRP process running between March and September 2018

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 51 of 118
51 New PREPA Fiscal Plan

Levers to Decrease Fuel and Purchased Power, PREPA’s Largest Cost Component

▪ Generation Efficiency / 

Flexibility Investment

– Lower heat rates

– Lower cost fuel

▪ Dispatch Optimization

– Reduce diesel burn

– Increase baseload 

plant utilization

▪ Preventative 

Maintenance

– Reduce forced 

outage

▪ Improve fuel 

mix

▪ Contract 

Renegotiation

▪ New Generation 

Resource 

Procurement

– Low cost solar

and wind

– Energy storage

– Flexible efficient 

combustion 

engines

Levers to Achieve Illustrative Transformed FY 2023 Fuel & Purchased Power Mix

▪ Reducing exposure to historically high and volatile fuel prices requires significant capital investment in high efficiency and stable / 

predictable cost generation assets

▪ Opportunities exist to improve costs today through operational initiatives and Title III, but the greatest opportunity lies in longer term 

(beyond 2023) reconfiguration of Puerto Rico generation assets through Transformation Plan

Natural Gas

Diesel

EcoElectrica AES Coal

Wind

Solar 

PREPA Fuel Conventional PPA Renewable PPA

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 52 of 118
52 New PREPA Fiscal Plan

The Updated Baseline Scenario Improves on the Status Quo 

Expense Rate

PREPA Status Quo Transformed Baseline

The updated baseline generation capital spending plan envisions achievement of 20-25% lower fuel and 

purchased power costs through efficient, flexible generation and diverse, energy fuel sources

$0.10

$0.11

$0.12

$0.13

$0.14

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

FY 2019 FY 2020 FY 2021 FY 2022 FY 2023

1 Necessary investment and external funding availability will determine achievability of long- term goals

$0.18

$0.16

$0.14

$0.12

$0.10

$0.08

$0.06

$0.04

$0.02

$-

FY 19 FY 20 FY 21 FY 22 FY 23

Projected F&PP Cost per kWh

▪ Preliminarily, a 20-25% reduction ($400 - 500 million) in fuel and purchased power cost from the $2 billion per year 

currently spent under normal operating conditions (pre-storm or post restoration) is an aggressive but potentially 

realistic target for FY2023 (~12 cents)

▪ Reductions in these costs beyond 25%, up to 50% may be possible within a 10-year time horizon, with adequate 

Generation and T&D investments1

▪ Increasing renewable generation beyond targeted levels of total generation may also be possible within a 10 year time 

horizon, again, with sufficient upgrades to the overall system that require substantial near term capital investment

$0.15

$0.16

Transformed Baseline Fuel & Purchased Power, USD M

New high efficiency P3 

power generation, low 

cost fuel supply comes 

online coupled with low 

cost renewable power 

generation and storage 

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 53 of 118
53 New PREPA Fiscal Plan

Updated Baseline: Capital Needs

PREPA is analyzing technologies and concepts to achieve the lowest cost rate that meets minimum 

reliability and environmental compliance criteria

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500 Long Term 

Renewable

Near Term 

Renewable

Liquified Natural Gas 

Import Terminal

New Combined Cycle 

Gas Turbines

Existing Unit 

Conversion to NG

Fast Response 

Reciprocating Engines

Battery Energy 

Storage System

▪ Technologies currently under review and analysis include:

– Reciprocating engines – fast-response, moderate efficiency, multiple fuel input capability > reliability / flexibility

– Solar PV – low cost, no variable fuel component, can reduce fuel burn if planned properly > cost / environmental

– Wind, & Other Renewables – low cost, no or low variable fuel component > cost / environmental

– Battery Storage – reliability in case of power plant outages, load shifting for low cost generation > reliability

– Combined Cycle Gas Turbines (CCGT) – high efficiency > baseload / cost

▪ System design improvement concepts being studied now 

and in the IRP, including, but not limited to:

– Reducing the size of PREPA’s largest unit to reduce the 

requirement for spinning reserves and decrease heat 

rates across the generation fleet

– Adding flexible generation and battery storage to limit 

the need for spinning reserves at low efficiency plants

– Conversion of Northern plants to natural gas and 

pursuing a low / alternative fuel supply strategy

– Southern plant repowering and gas supply expansion at 

Costa Sur, Aguirre Offshore Gas Port (AOGP), and 

other natural gas supply opportunities

– Solar plus storage peaking unit additions and 

substitution for existing fossil generation

– Demand response and distributed generation dispatch 

control resource development and procurement

USD M

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 54 of 118
54 New PREPA Fiscal Plan

Updated Baseline: Generation Capital Sequencing 

* All of the above is subject to the new IRP process. The findings from the IRP will serve as a baseline to analyze bids for Energy Sector 

Modernization through privatization or concession structures

Long term power system goals include:

▪ Retirement of old and inefficient units, and repowering and replacement of generation 

assets through privatization to reduce fuel expense, system heat rate, and exposure to 

volatile fuel prices, and to improve system flexibility to integrate renewable resources

▪ Construction of Clean Fuel Supply Infrastructure such as the Aguirre Offshore Gas Port 

(“AOGP”) and other options for MATS compliance and generation system efficiency

▪ T&D system hardening to ensure that the electric grid is reliable and resilient against 

future atmospheric events, and capable of handling variable customer load and 

generation from renewables and distributed resources 7,500

8,000

8,500

9,000

9,500

10,000

Total System Heat Rate 

(BTU/kWh)

Efficient generation comes online

Jul-19 Jul-20 Jul-21 Jul-22 Jul-23

Clean Fuel Supply Infrastructure 

Battery Energy Storage Solution Pilot 

Battery Storage System Deployment 

Existing Unit Fuel Conversions

Fast Response Reciprocating Engines

New Combined Cycle Turbine 

New Combined Cycle Turbine 

Near Term Renewable RFP 

Large Renewable Procurement

Jul-17 Jul-18

Illustrative Capacity Expansion Plan – TO BE REVISED POST IRP

Development, 

Permitting, 

Financing

Engineering, 

Procurement, 

Construction

Online Date

PREPA is preparing to reassess its capital spending plan to ensure MATS compliance and reliable, 

efficient generation.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 55 of 118
55 New PREPA Fiscal Plan

VI. Rate and Regulatory Structure

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 56 of 118
56 New PREPA Fiscal Plan

Current Rate Structure Overview

PREPA’s current rate structure is composed of four primary components –

Base Rate, Provisional Rate, Fuel Adjustmentand Purchased Power

The 3 primary categories of customers make up 96% ofrevenue

- Commercial (47%), Residential (37%) and Industrial(12%)

PREC approved a permanent rate structure that has yet to be 

implemented that would eliminate the 11% surcharge construct and 

instead include direct pass through line items in customer’s bills to cover 

CILT and subsidies

Base Rate 

30%

Provisional 

Rate 6%

Fuel 

Adjustment 

41%

Purchased 

Power 

23%

Fuel & 

Purchased 

Power 64%

Figures in c/kWh Residential Commercial Industrial Overall Comments

Base Rate Revenue 5.6 6.7 4.7 6.2

Intended to cover PREPA's O&M, not increased since 1989. Includes 

fixed charge ($3) for clients on secondary distribution, and demand 

charges for clients served by primary distribution & transmission.

Provisional Rate Revenue 1.1 1.2 1.2 1.2 Authorized by PREC to cover PREPA's O&M deficit ($222MM as of 

August 2016) during the pendency of the permanent rate case.

Base + Provisional Rate 6.7 7.9 5.9 7.4 Total rate revenue per unit sales to cover PREPA O&M

Fuel Adjustment Revenue 8.2 8.1 7.5 8.1 Fuel commodity, shipping, and other fuel related costs plus 11% 

surcharge intended to cover CILT + subsidies authorized by law

Purchased Power 4.8 4.8 4.5 4.8 Cost of purchased power based on contracts plus 11% surcharge 

intended to cover CILT + subsidies authorized by law

Total Revenue 19.7 20.8 17.9 20.3

Avg. Client Bill per Month $87.50 $1,202 $60,105 $193.67

Share of Revenues per 

customer class (%) 37% 47% 12%

SOURCE: June 2017 Monthly Operating Report

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 57 of 118
57 New PREPA Fiscal Plan

Rate Design for Public Utilities Should Follow a Clear Set of Principles

A bridge rate case that sets rates until a concession is finalized and incorporates some rate design 

tools should be developed by PREPA; a full rate case should be developed and approved by the 

regulator thereafter with a full public comment process

▪ Simplicity and public acceptability

▪ Freedom from controversy

▪ Revenue sufficiency

▪ Revenue stability

▪ Stability of rates

▪ Fairness in apportionment of total 

costs

▪ Avoidance of undue rate discrimination

▪ Encouragement of efficiency

Principles for all public utility rates Specific priorities for the Puerto Rico power sector

▪ Provide low-cost power to all customer classes, 

without any sudden or unexpected changes

▪ Support reliability for all customers by providing a 

sustainable source of revenue for a utility to operate and 

maintain a modern grid

▪ Enable new energy technologies while accounting for 

the need to maintain the grid as a backbone of the 

system

▪ Incentivize distributed generation in specific 

locations where it provides benefits to the system

▪ Attract capital by providing a clear and stable path for a 

new utility investor to collect the revenue requirement

▪ Promote economic growth through rate designs that 

encourage investment in industry on the island

3

1

5

4

2

6

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 58 of 118
58 New PREPA Fiscal Plan

The annually updated and reconciled Formula Rate Mechanism (“FRM”) proposed by PREPA 

bases rates on Fiscal Plan budgets, and most effectively implements the plan while 

preserving review and oversight

Costs Liquidity Sales

PREPA and Future Private Participants Will Require a Reasonable 

Regulatory Process

▪ FRM bases rates only on real 

and necessary costs

▪ Rates would be updated based 

directly on Fiscal Plan budgets

▪ Rates will automatically adjust 

for other sources of 

emergency funds

▪ Actual costs reviewed and 

reconciled after the fact

▪ Helps address the ongoing 

challenges of having no access 

to capital markets and few 

reserves, while needing to 

make essential investments in 

recovery, environmental 

compliance

▪ Avoid/minimize historical 

undue political influences

▪ Annual reconciliations address 

changes in sales/demand, 

protects customers from 

forecast errors and remove 

disincentives from reaching 

efficiency gains and renewable 

energy deployment

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 59 of 118
59 New PREPA Fiscal Plan

Rate Design Challenges & Opportunities – Stranded Costs Recovery

In the event that the Transformation Plan is not successfully executed, there are well-understood 

ratemaking and regulatory responses used by utilities faced with serious threats of uneconomic bypass 

and stranded costs.

Potential Options that could be considered as part of rate design:

▪ Adopt economically efficient rate designs. Uneconomic incentives to bypass utility supply or delivery can be 

avoided or minimized:

– Properly reflect fixed and volumetric costs in rates, and properly assign costs to classes

– Move more costs, especially fixed network costs that do not change with customers’ use, to fixed values 

than to volumetric costs to reduce volatility and discourage inefficient bypass

– Consider unbundling delivery and supply rates and costs. This can help protect essential grid cost recovery 

and preserve funding for grid improvement and “future utility” goals. Rate unbundling also facilitates private 

generation investment

– Rates that discount delivery prices without reducing grid costs must be carefully designed to promote the 

desired social goal (e.g., promoting renewable energy) without stranding grid costs or creating cross 

subsidies that hurt customers least able to respond, who are often low income or low use

▪ Use targeted rate tools. Customer or group-specific rate tools such as economic development rates, load 

retention rates, and special customer class (e.g., very high voltage, interruptible) rates can reduce the risk of 

uneconomic load loss and attract new load to areas where capacity (T&D and Generation) is available at little 

marginal cost. This helps the utility and the economy

▪ Explicit stranded cost charges. Impose non-bypassable charges on customers designed to recover identified 

categories of stranded costs. In some cases, a non-bypassable charge can reduce the incentive to depart as a 

means of avoiding responsibility for stranded costs

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 60 of 118
60 New PREPA Fiscal Plan

CILT is a Common Construct for Mainland Public Power Utilities

Methods Used to Calculate Payments in Lieu of Taxes

Percentage

of Utilities

Number

of Utilities

% of Gross Electric Operating Revenue 22% 29

Assessment of Electric Utility and City Budget 18% 23

Property Tax Equivalent 15% 19

Flat Amount Paid Annually 12% 16

Charge per Kilowatt-hour Sold 9% 11

% of Net Utility Plant in Service 4% 5

% of Income (Net, Operating, or Total) 2% 3

Other/Did not Indicate 18% 23

Categories of Payments and Contributions to State and Local 

Governments

Percentage of

Total

Other Taxes and Fees 43.1%

Payments in Lieu of Taxes 35.6%

Gross Receipts Tax 16.1%

Free or Reduced Cost Electric Services 4.1%

Other, including Equipment and Materials 0.6%

Use of Employees 0.5%

Total 100.0%

According to an American Public Power Association study of 176 public power utilities, in 2014, public 

power utilities contributed 5.6% of electric operating revenues back to the communities they serve

SOURCE: 2016 APPA Study – Public Power Pays Back: Payments and Contributions by Public Power Utilities to State and Local Governments in 2014

88% of U.S. public power utilities with over 50,000 customers make PILT (payment in lieu of taxes) or similar 

payments to government entities

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 61 of 118
61 New PREPA Fiscal Plan

Significant Reforms Have Removed Inefficiencies From CILT Program

See Appendix for comparable programs and supporting data

Under the new rate structure, which will be implemented at the beginning of FY2019, 

PREPA will recover the cost of CILT via the CILT rider on customer bills. Customers will 

have greater transparency and there will be greater accountability. Any additional 

reductions or amendments would require legislation

The Government of Puerto Rico has made significant changes in the treatment of the Contribution in 

Lieu of Taxes (CILT) by enacting Act 57-2014 and Act 4-2016

▪ Moving of all the municipal public lighting to the subsidies rider in the customer bill

▪ Removal of all municipal for-profit entities from receiving an electric service credit from the CILT

▪ Establishing a total consumption (kWh) cap on the municipal CILT, which will also be reduced by 15% (in three 

fiscal years, 5% each)

▪ Providing that the municipality will pay for any excess, plus the for-profit ventures

▪ Establishing a mechanism that promotes energy efficiency and additional savings above the mandated total 

consumption cap imposed on Municipalities by Act-57-2014 (i.e. 5% yearly reduction in the maximum consumption 

amount for a total 15% reduction over three years). Municipalities would receive a payment from PREPA for the 

value of the difference between the mandatory total consumption cap and actual consumption, which would only 

be payable if all municipalities, in the aggregate, comply with their respective consumption caps

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 62 of 118
62 New PREPA Fiscal Plan

Background – Contribution In Lieu of Taxes (CILT)

SOURCE: PREPA Planning Dept.

Expense Breakdown Expense Breakdown (% of Revenue)

-

50

100

150

200

250

300

$-Millions

FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

10.0%

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

CILT

Public Lighting

Special Customer Subsidies

▪ Currently, CILT and public lighting are recovered through an inexact and inefficient rate adjustment mechanism that 

changes based on Fuel and Purchased Power Expenses. This approach suffers from the following shortcomings:

– Unless Fuel and Purchased Power expenses are sufficiently high, the compensation provided to PREPA is less than 

the cost of the CILT and public lighting, creating a cumulative cash deficit

– An imprecise relationship existed between the revenue and expense streams

– The costs of these programs were opaque and customers were not aware they were funding these programs

▪ As part of the PREPA Revitalization Act (Act 4-2016), the Legislature approved the full recovery of CILT, public lighting 

and subsidies

▪ The municipalities’ for-profit facilities are excluded from the CILT, so municipalities must pay for this consumption.

▪ Estimated cost of for-profit municipal facility consumption that was previously included in CILT is $21m per year

▪ Municipal CILT and Public Lighting are projected to be within the industry average range of 2 – 6% of revenues. Subsidies 

for special customers (e.g., low income, hotels) are required by law.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 63 of 118
63 New PREPA Fiscal Plan

Comparison of U.S. Public Power Utilities – CILT

<$1bn $1-2bn >$2bn

Annual Revenue $645.27m $1.29bn $3.16bn

Payments in Lieu of Taxes 

(or other payments / 

services to government)

$44.37m $62.51m $342.1m

Payments to Government

as % of Revenue 7.52% 5.15% 11.07%

Sample Size

PREPA1

$3.23bn

$76.06m

2.36%

- 5 6 3

Average

SOURCE: BAML Research

1 FY2016 figures

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 64 of 118
64 New PREPA Fiscal Plan

VII. Liquidity Management

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 65 of 118
65 New PREPA Fiscal Plan

Cash Management Controls & Liquidity Improvement

PREPA has implemented several specific initiatives that have produced meaningful improvements to its current liquidity situation 

and positioned PREPA to continue to drive further progress. Current PREPA expectation is that the Company will return to cash 

flow neutrality (customer collections equal / exceed operating cash outflows) in the 1st quarter of FY 2019

Other 

Initiatives

▪ Managing the FEMA reimbursement process; delay in payment to restoration vendors until PREPA collects the 

reimbursement funds from FEMA

▪ Establishing the actual validated claims for storm related insurance matters, and eventual collection of these funds

▪ On-going effort to evaluate options and execution tactics related to material changes in staffing levels and capabilities

Managing Fuel 

& Purchased 

Power

▪ Managing generation fleet resources with a view to optimizing economics when the transmission grid allows

▪ Operating the power grid with a lower level of spinning reserves, improving dispatch

▪ Negotiations with multiple vendors resulting in delayed cash outflows

Increasing 

Collections

▪ Collaboration between PREPA & Government agencies, which resulted in approximately $100M of accelerated 

collections and prepayments for future power deliveries in December 2017 and January 2018

▪ On-going discussions with public corporations to validate / determine potential collections of past due amounts

▪ Testing market appetite for potential prepayment plans with industrial clients

Cash 

Management 

Controls

▪ Monitoring of liquidity, cash receipts and disbursements; weekly forecast to actual variance analysis

▪ Cash distribution controls; CFA approval required for all disbursements greater than $2 million and for the 

classification of all Eligible Uses pursuant to the Government loan

▪ Efforts to maximize federal funding available for disaster recovery

Accountability

▪ Applying more rigor into the evaluation of potential projects and cash expenditures

▪ More robust weekly reporting requirements where currently feasible

▪ Enhancing the planning models and tools used to evaluate PREPA activities

Fiscal 

Governance

▪ Hiring of a Chief Executive Officer

▪ Appointment of the Chief Financial Advisor (“CFA”) reporting directly to the PREPA Board

▪ Creation of the Office for Contract and Procurement Compliance (“OCPC”)

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 66 of 118
66 New PREPA Fiscal Plan

PREPA Bank Balances – Operating and Segregated Accounts1

Note: Operating Accounts include General Fund, Working Fund and Revenue Fund accounts.

Note: Operating Accounts balance excludes PREPA deposits held at GDB

$(330) Commonwealth 

Loan proceeds 

in Segregated 

Account

$530 $513

$588 $537

$456

$339

$208 $258 $211

$300

$-

$100

$200

$300

$400

$500

$600

$700

6/30/2017 7/31/2017 1/31/2018 2/28/2018

Millions

8/31/2017 9/30/2017 10/31/2017 11/30/2017 12/31/2017

PREPA’S operating cash balance has significantly decreased following the impact of Hurricanes Irma and Maria

▪ PREPA’s Operating accounts cash balance declined by $330M from Aug 31st through Jan 31st, 2018, and declined an additional $47M from Jan 

31st through Feb 28th

▪ The use of cash during the period was primarily driven by lower than normal customer collections due to the impact of Hurricane Maria, payment 

of Employee Disbursements (including Overtime related to the emergency), Energy Purchases (Fuel), Emergency Spend and Other 

Disbursements

▪ On Feb 23, 2018, PREPA received a $300M emergency loan from the Puerto Rico Treasury Department (“Commonwealth Loan”) to provide 

short-term liquidity relief and enable it to continue operations

▪ PREPA’s combined Operating and Segregated account bank balance at 2/28/18 was $511M

Operating Accounts

Segregated Account

3/31/2018

$97

$300

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 67 of 118
67 New PREPA Fiscal Plan

VIII. Labor and Pensions

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 68 of 118
68 New PREPA Fiscal Plan

Background on Labor and Pensions

Improvements to the Collective Bargaining Agreement are necessary to operate PREPA in an 

efficient manner. PREPA will engage actively with the Unions to address such improvements

▪ PREPA’s pension is underfunded by $3.6B 

based on estimates from February 2018 using 

the 2014 Actuarial Report data

▪ PREPA’s retirement system has differing 

benefits dependent on start date

▪ Employees who started with PREPA on or 

before Dec 31, 1992:

– Paid 75% of average of highest three years 

of service annually

▪ Employees who started with PREPA after 

Dec 31, 1992:

– Require 30 years of service and being older 

than 55 to retire with full pension benefits; 

Paid 75% of average of highest three years 

of service annually (capped at $50k)

Labor Pension

▪ PREPA’s work force is over 70% unionized and 

belongs to 4 different Unions (source: PREPA 

Personal Directorate February 7, 2018):

– UTIER – 3,555 Employees

– UEPI – 284 Employees

– UITICE – 592 Employees

– UPAE – 5 Employees

▪ All union contracts are arguably in effect 

continuing under a questionable evergreen clause; 

PREPA Management believes work rules and CBA 

articles hinder efficiency

▪ The union contracts include narrow work rules 

that, among other things, prevent PREPA 

management from efficiently deploying and 

supplementing human resources in an 

efficient manner

▪ PREPA is understaffed in certain high skilled 

functions, partially due to a wave of retirements in 

2017 (which is spilling over into 2018)

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 69 of 118
69 New PREPA Fiscal Plan

Labor: Right Sizing Plan Needs to Consider Critical Needs in Operational Areas

Targeted 

areas for 

reengineering 

and

business 

process 

outsourcing

Directorate Jun-17 Emergency Stabilization Total

E&S

Ending

Headcount

Generation 1,411 386 0 386 1,797

Transmission and Distribution 2,512 230 106 336 2,848

Customer Service 1,239 86 143 229 1,468

Operations Support1 420 65 1 66 486

Executive and General Administration2 251 0 0 0 251

Human Resources 144 0 0 0 144

Finance 118 0 0 0 118

Planning and Environmental Protection 64 0 0 0 64

Legal 54 0 0 0 54

Governance Board 3 0 0 0 3

Total 6,216 767 250 1,017 7,233

▪ Prior to the hurricanes, PREPA already faced a shortage in skilled workers, particularly in Generation, T&D, Customer 

Service and IT

▪ The emergency and stabilization headcounts in the chart below represent needs identified by Directorate heads for 

emergency and stabilization purposes unrelated to the hurricane and as of mid-August 2017

▪ The staffing ramp-up will be dependent on a variety of factors:

– Constraints related to outsourcing contracts imposed by applicable law (e.g., Act 3-2017) and CBAs

– Identifying candidates with the right skill sets

– Impact of announcement of sector transformation

– Unpredictable retirement patterns

▫ 585 PREPA employees had filed paperwork to retire as of February 2018, per the Retirement System records

▫ Employees can elect to halt the retirement process after submitting paperwork

▪ Headcount excluding hurricane relief workers is down to 6,107 as of mid December 2017

SOURCE: PREPA HR Directorate

1 June 2017 headcount by sub-division: Ground Transportation (178), Supplies (171), Ops & Infrastructure (52) and Operational Safety (19)

2 June 2017 headcount by sub-division: Corporate Strategy (104), General Services (75), Retirement System (39), Executive (33)

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 70 of 118
70 New PREPA Fiscal Plan

Addressing Labor Reform

Task / Phase Description Target 

Dates

Development of 

Efficiency Optimization

Plan

Prepare a framework for discussion with the Unions regarding the impact on labor 

of an the efficiency optimization plan June 15th

Discussions with Union Participate in discussions/negotiations with the Unions around how to accommodate 

the efficiency optimization plan and the needs of labor going forward

July 15th

ImplementEfficiency 

Optimization Plan

If an agreement is reached, then implement negotiated terms TBD

Implement Tittle III 

Restructuring Option

If unable to reach an agreement, then develop a restructuring plan under Tittle III and 

begin process to implement plan

TBD

UTIER Non-Union UITICE UEPI PILOTO

Note: The above proposed timeline is subject to change based upon the ability to reach an agreement with the Unions

Headcount by Union Status and Directorate

500 1,000 1,500 2,000 2,500 3,000

Environmental Planning and Protection

Legal

Transmission & Distribution

Generation 

Executive & Corporate

Customer Service

Governing Board

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 71 of 118
71 New PREPA Fiscal Plan

Addressing Pension Reform

PREPA is working closely with its Financial Advisors and Counsel to obtain information needed for 

the Actuarial Review. As of March 1, 2018, the Retirement System had refused to provide detailed 

census level data and was put in receivership on March 23

Develop Fact Base

▪ PREPA’s Employee Retirement System (“PREPA ERS”) is designed to meet the defined-benefit pension and 

other post-employment benefits (“OPEB”) obligations of PREPA’s active and retired employees (including 

beneficiaries)

▪ The PREPA ERS is significantly underfunded and PREPA is in the process of requesting from the ERS 

information to update these assumptions and projections

▪ OPEB ($384m accrued) is entirely unfunded as reported in PREPA’s 2012 “Report of Actuary on the Other 

Post- Employment Benefit REVISED Valuation”, revised as of October 2015

▪ A pension consultant was retained by PREPA and began a formal Actuarial Review process in January, 2018 

to update the actuarial report, which will include: Current state of pension plan funding, and assessment of 

liabilities, expenses and cash flows

▪ Using the pension consultant’s work as a fact base, PREPA will seek to work with the PREPA ERS to define 

and pursue a strategy to address retirement system reform

▪ Pension reform needs to be addressed as part of the overall transformation of the energy sector. There are a 

variety of ways under which legacy pension obligations can be addressed in a sustainable manner as part of 

energy sector transformation efforts.

▪ Until additional detail can be provided, PREPA estimates pension reform savings yearly beginning in FY2020 

from switching from a defined benefit to a defined contribution plan and reducing benefits by roughly 10%

Define Strategy and Execute

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 72 of 118
72 New PREPA Fiscal Plan

Pension Consultant Proposed Project Plan

Task / Phase Description Target 

Dates*

Receive data from actuary Receives all requested data from actuary including final reconciled data and detailed assumptions. Apr 13th

Receive data from PREPA Receives all requested data from PREPA including updated census and claims info. Apr 13th

Assumption Review Review experience studies, demographic and economic assumptions in comparison to public 

peers. Evaluate impact of plan freeze or reductions in benefits on assumptions. May 18th

Assumption Review and 

Plan Design Kick- off

Meeting

In-person meeting to present assumption review, discuss status of replication and begin plan 

design/funding discussions.

May 28th31st

Initial Set-up and 

baseline projection

Collect reconciled data from prior valuation. Program valuation system to replicate Pension and 

OPEB results. Correspond with actuary to resolve discrepancies. Develop 30 year initial baseline 

and deterministic projection.

June 13th

Update data

Scrub and reconcile updated census data. Correspond with PREPA to resolve census data 

discrepancies. Analyze updated claims experience. Correspond w/ PREPA or insurance carrier 

regarding claims. Prepare updated claims to use. Update 30 year initial baseline and deterministic 

projection.

June 27th

Sensitivity analysis Determine impact on liabilities of changes in: discount rate, investment return, mortality, retirement, 

turnover, disability. July 11th

Baseline projection, 

Sensitivity analysis and 

Plan Design Meeting

In-person meeting to present baseline projection, sensitivity analysis and continue plan design 

discussions.

July 16th20th

Plan Design and 

Scenario analysis

Determine long-term impact of some or all of the following options: reducing benefits for active 

employees, reducing benefits for retirees, increasing contributions, increasing investment return.

August 

22nd

Plan Design Meeting In-person meeting to present plan design options including impact on participants. August 

27th-31st

*Target dates assume all data is received by April 13th. Given the current lack of cooperation on data sharing by PREPA ERS, timelines may need to be revised.

** Regardless of data availability, PREPA will work with the FOMB actuarial consultant to align on assumptions and provide initial estimate of the unfunded 

pension obligation and pensions costs by the end of May

Given the current lack of cooperation on data sharing by PREPA ERS, timelines may need to be revised. 

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 73 of 118
73 New PREPA Fiscal Plan

Medical Benefits

▪ PREPA is working with its medical benefits broker, Essential Insurance, to substantially reduce 

healthcare costs in fiscal year 2018-19

– In the interest of executing self help measures, PREPA plans to reduce the annual cost of its 

healthcare plan for active employees

Kick Off

Finalize Goals 

for Project

Discuss Design

Scenarios

Discussions 

with Insurers

Draft Design Due

Discuss Reform with 

Mgmt/Counsel

Finalize Design

Communication 

with Unions

Begin RFQ

Finalize RFQ

Finalize Contract 

& OCPC

New Plan Goes 

Into Effect

2/19 4/10 5/30 7/19 9/7 10/27 12/16

Timeline

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 74 of 118
74 New PREPA Fiscal Plan

IX. Post-Certification Reporting

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 75 of 118
75 New PREPA Fiscal Plan

Post-certification Reporting Requirements

Requirements end upon exit from Title III

Report type

Public reporting 

Detail deadlines

Liquidity tracking Monthly upon FP 

certification

13-week cash flow report including all receipts 

and disbursements, accounts receivable, 

accounts payable, and restoration report as 

outlined in Commonwealth loan agreement

Weekly until restructuring, biweekly thereafter

Budget to actuals Monthly reporting 

of headline I/S 

numbers 

consistent with 

prior public 

reporting on 

website; B/S 

reported once per 

year. Begin upon 

budget cert.

▪ Include I/S in the reporting package

▪ Provide monthly reports required pursuant to 

the terms of the Superpriority Post-petition 

Revolving Credit Loan Agreement, by and 

between Puerto Rico Electric Power Authority, 

as Borrower, and Commonwealth of Puerto 

Rico, as Lender

Tracking of budgeted to actual cash flow per 

budget certification agreements with FOMB

package to

▪ Include explanation for material variances 

(>10% and $30 million)

Monthly after budget is certified

Cash management 

measures 

implementation 

schedule

Provide updates on new and in-progress cash N/A

management measures targeting near-term 

financial stability to the FOMB

Varies by report

FOMB reporting cadence

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 76 of 118
76 New PREPA Fiscal Plan

Post-certification Next Steps and Milestones

Requirements end upon exit from Title III

Report type Detail Target date

CILT updates Execute CILT reforms described in the Rate & Regulatory

Section and provide a summary of corresponding cost 

reductions and collections from municipal customers 

benefitting from CILT

▪ Reform in effect by July 2018

▪ Collection mechanisms executed by 

Dec 2018

Pension sizing 

and reporting

Update projected costs of pension liabilities andcosts ▪ Initial estimate with FOMB by 

end of May

▪ Full report by Sept 2018

Work Plan 180 

tracking

Provide summary of Work Plan 180 findings and define

milestones for improvements based on results

▪ One-time, then as defined 

by findings

FP measures 

implementation 

schedule

Development of FP initiative timeline (e.g., list of all actions

PREPA has to take in order to realize baseline 

projections + measures)

▪ Development 1-month post 

certification; subsequent 

monthly reporting

Contract 

evaluation

Evaluate all PPOAs and existing contracts to determine

long-term strategic corporate benefit, or potential options

for renegotiationor rejection under Title III

▪ Regular status reporting

▪ Final determination on all contracts 

by June 2018

Near-term 

generation RFP

Launch near-term RFP for new generation by end of June 2018 ▪ June launch; projects operational by 

Q4 FY2019

Integrated 

Resource Plan

Begin and complete new IRP in calendar year2018 ▪ New process by end of June 2018; 

complete IRP by beginning 

of Oct 2019

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 77 of 118
77 New PREPA Fiscal Plan

X. Transformation Plan

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 78 of 118
78 New PREPA Fiscal Plan

Transformation Table of Contents

A. Targets and Goals of the Transformation

B. Generation Transformation and T&D 

Concession Structure

C. Proposed Regulatory Framework

D. Federal Funding

E. Grid Resiliency

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 79 of 118
79 New PREPA Fiscal Plan

A. Targets and Goals of the Transformation

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 80 of 118
80 New PREPA Fiscal Plan

A PREPA Transformation Should Achieve a Set of Ambitious Targets on Rates, 

Reliability, and Resiliency

1 SAIFI – total # of annual customer interruptions / total # of customers served; US median of 1.04SAIDI – sum of all customer interruptions duration in hours per year / total # of 

customers served; US median of 1.92

▪ Rate target: By 2023, achieve an all-in rate target of under 20 c/kWh with rates 

decreasing year over year, including:

– Fuel and purchased power cost reduction target of >5c compared with steady state 

2023 projections

– Operational initiatives to reduce costs by 1-1.5c

▫ Operational plan that includes cost reductions in labor, addressable costs (e.g., theft, 

inventory management) and utilization of new technology, phased in through FY2025

– CILT and subsidy reform which discourages overconsumption and considers new 

operating environment

▪ Reliability target: By 2023, achieve reliability performance in line with mainland US utility 

median performance, measured via industry-standard SAIFI (average number of outages 

per customer) and SAIDI (average length of outage per customer) metrics1

▪ Resiliency target: By 2023, achieve a set of recognized resiliency targets – 1 or fewer 

outage days per customer, 0 critical services without power for over 48 hours

▪ To achieve these targets, a grid modernization plan will need to be implemented that 

leverages federal funding and concessionaire rate-based spending to lower rates and 

support goals across costs, reliability and resiliency

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 81 of 118
81 New PREPA Fiscal Plan

Rates under 20c by 2023 Could be Achieved Through a Complete Power Sector 

Transformation

Average customer rates by year, c/kWh

1 Includes $15M in annual funding for regulator in line with assumptions regarding increased funding for electric utility regulator

2 Includes concessionaire incentive

3 Includes return on equity and cost of debt for new capital investments, with a 50/50 debt to equity split for funding

4 Requires a ~2.9B capital investment in new generation

5 Capex is assumed to be passed through to rates in FY18 and FY19 (prior to the concession), and rate based in FY20 (after the concession)

6 Capital recovery serves to both incentivize concessionaire and reduce annual volatility in capex expense incurred by customers

NOTE: Concessionaire incentive assumed at .1c/kWh based on operational gains; excludes debt, pension service, and interest from Commonwealth loan

COSTS EXCLUDE LEGACY DEBT AND PENSION OBLIGATIONS

20

16

4

8

14

22

10

6

18

12

2

0

2

5

13

4

2

5

6

1

10

18

4 4

1

2

2

19

19

20

11

1

5

22

17 17

1

21

2

0

12

FY2018

11

20

FY2023

17

10

4

2

22

1

Labor and operations2

CILT and subsidies1

Purchased power4

Cost of non-gen capex3

▪ Major drivers of transformation case include accelerated large scale renewable and storage procurement to 

eliminate need for large generation capex and shifting T&D to capital recovery model6

▪ Rate projections are not final, and are subject to optimal generation mix analysis as defined by IRP, 

federal funding decisions, and finalized market terms

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 82 of 118
82 New PREPA Fiscal Plan

Illustrative generation mix, TWh

NOTE: This generation plan does not assume nor require investment in an Aguirre offshore gas port or additional gas infrastructure. Determinations on gas infrastructure requirements 

will be assessed as part of the IRP process, but may not be required given demand forecast

1 Other includes waste-to-energy, hydro 2 2018 year-end numbers based on model results; operational numbers may differ due to impact of hurricane

3 Excluding Costa Sur co-fired

FY2018 FY2023

4.4

1.7

0.7

3.5

5.9

15.2

3.0

13.5

3.5

3.0

1.8

Co-fired

Gas

Coal

Solar

Diesel

Other1

Fuel oil

Wind

Storage ▪ A generation plan that 

builds renewables and 

additional gas can cut 

fuel oil costs and 

reduce price volatility

▪ ~2.9B of capital will be 

required to build a 

renewables-oriented 

generation fleet and 

repower existing 

facilities to run on gas, 

to be funded through 

private investment

▪ A rebuild and 

modernization of the 

grid will also be 

required in the same 

timeframe 

Resulting estimated fuel and variable O&M costs, USD M

FY2018 FY2023

831

661

6% 31% Share of solar and wind

An Aspirational Least-cost Generation Plan That Shifts Fuel Mix to Lower Cost 

Power Sources Can Lower System Operating Costs

Share of gas3 22% 39%

433

685

445 19

234 344

FY2023

202

1,320

277

653

107

433 234

20

277

FY2018 21 22

190

Storage

Renewable

Conventional

Required capital expenditures, USD M

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 83 of 118
83 New PREPA Fiscal Plan

NOTE: This generation plan does not assume nor require investment in an Aguirre offshore gas port or additional gas infrastructure. Determinations on gas infrastructure requirements will be 

assessed as part of the IRP process, but may not be required given demand forecast

1 Other includes biomass, hydro and waste-to-energy (biomass)

2 Reserve margin based on firm capacity, which is calculated as nameplate capacity multiplied by a derating factor to reflect probability the technology is available at time of peak

3 Per 2014 consulting engineer report. Results were based on peak demand of 3,300 which has since fallen. Report noted that in planned 2015 configuration, grid could accept up to 580 MW of renewables

507

507

454 454

420

492

820

728

309

500

0

3,000

1,000

2,000

4,000

2,500

1,500

3,500

6,500

6,000

5,500

5,000

4,500

2023

5,927

2,132

2018

106

1,603

6,302

262

1,910

106

1,276

Peak demand

Gas, other

Co-fired

Solar

Wind

Fuel oil

Storage

Other1

Gas, repower

Diesel

Coal

Reserve 

margin2

Capacity, MW

The Aspirational Generation Plan Includes High Level Reliability Planning 

Considerations Including a Large Reserve Margin, Diesel Capacity for 

Contingencies, and Storage

▪ Generation scenario projects a reserve margin 

of 62% by 2023, conservative compared with 

other large islands such as Hawaii (reserve 

margin of 30-45%)

▪ Diesel plants in North are kept online primarily

for contingency and to backup flexibility 

provided by batteries for renewable integration 

as needed

▪ Additional battery storage (300 MW / 

1200MWh) by 2023 is built to integrate 

renewables and support system reliability 

and flexibility 

▪ Renewables sited across the island will reduce 

reliance on cross-island transmission lines and 

increase resiliency to future storms

▪ Limited renewables build before FY21 

(550MW)3 ensures time to build supporting 

infrastructure (e.g., storage) before additional 

large-scale build begins 

▪ An IRP will provide full consideration of the 

capacity and flexible generation needed for 

reliability planning considerations

130% 62%

Solar and 

wind share 6% 39%

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 84 of 118
84 New PREPA Fiscal Plan

SOURCE: IRENA, BNEF, CleanTechnica

1 Based on announced auction results (not exhaustive). Assumes commissioning date of three years after auction announcement; 2 Based on prices listed in 2015 IRP

Note: On the rare occasion when multiple auctions occurred within the same month, the average price of those auctions is shown. In case of ambiguity regarding the auction’s date, the date when the winning bids were 

selected and announced was taken as the main reference.

12 18

350

200

400

16

250

100

2026

150

300

0

20 22 24

50

2010 14

Levelized cost of electricity (LCOE) for solar by year1

$/MWh, nominal

Levelized cost of electricity for wind by year1

$/MWh, nominal

200

120

22

20

0

12

180

160

80

40

2026

60

140

2010 14 16

100

18 20 24

~13% capacity factor

~26% capacity factor

~42% capacity factor

~22% capacity factor

Recent Renewables Pricing Indicates That Low-cost Power 

is Achievable as Generation from Renewables Grows

▪ While Puerto Rico’s previous renewables PPA pricing was broadly consistent with global averages in 2011-12, cost of electricity 

generated by wind and solar going forward is expected to be substantially below prices quoted in 2015 PREPA IRP, consistent with

global markets for solar and wind

▪ Compared across global markets, Puerto Rico is well-situated for renewables generation, with high capacity factors for solar and wind 

(~20-24% and ~25-34%) – meaning Puerto Rico can produce a large amount of power per unit installed, and can thus potentially realize 

favorable pricing

Auction results, mainland USA

Auction results, other countries

Puerto Rico PPA2

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 85 of 118
85 New PREPA Fiscal Plan

2

8

3

12

NOTE: This generation plan does not assume nor require investment in an Aguirre offshore gas port or additional gas infrastructure. Determinations on gas infrastructure requirements 

will be assessed as part of the IRP process, but may not be required given demand forecast

1 Preliminary views on generation and rebuilding & resilience costs provide context for the probable magnitude of investments

2 Includes majority of T&D and other maintenance line items from previously forecast PREPA plan as this figure constituted all forecasted capex noted in PREPA model

3 Excluding system operations and some outstanding resiliency investments (e.g., critical infrastructure hardening); figure represents “floor” on funding necessary to support suggested 

resilience build while maintaining long-term rates which meet target criteria; 4 Return on new T&D capex is expected to cost ~2c/kWh in 2023

23% 58% 20%

▪ Plan assumes over 50% of required capex is spent by FY20, primarily to rebuild grid

▪ Concessionaire funding is expected to generate a return that balances affordability and attractiveness to investors4

▪ The amount of federal funding received will likely dictate concessionaire funding

▪ Less federal funding will necessitate higher rates or lower levels of grid resiliency

Generation

T&D rebuild and 

resilience spending2

Maintenance capex and 

system ops

Total requirement

Illustrative funding split

Capex spend, 

2018-20231, USD B Considerations

▪ Used to build out renewable generation to create fuel cost savings shown 

in aspirational generation scenario

▪ Final generation mix and spend to be determined by upcoming IRP

▪ Full rebuild of current grid and resilience build out; including extensive 

hardening of T&D infrastructure, selective undergrounding, and relocation 

of limited facilities (e.g., substations) where necessary

▪ Majority of pre-hurricane forecasted maintenance capex (T&D and other)

▪ System operations upgrades

▪ Federal funding for rebuild of current grid and T&D resilience build out3

▪ Concessionaire investment for forecast maintenance, operations, and 

some hardening (e.g., for critical infrastructure)

▪ Generation privately funded

▪ Total requirement assumes significant federal funding, enabling 

widespread build of T&D to support both resilience goals and grid which 

supports large-scale renewables deployment

Potential sources of funding:

Transformational Rate Projections Assume Total Capex Required to Optimize Rates 

and Improve Reliability is in the Range of $12B

Private generation Federal Concessionaire /PREPA

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 86 of 118
86 New PREPA Fiscal Plan

53-851

1

37

8

6

A Long-term Operational Plan Under an Expert Concessionaire Might Realize Labor 

Cost Savings Beyond Identified Operational Improvements

84

62

77

77

300

SOURCE: PREPA FTE and salary data, FERC 2016 data, PREPA financial statements and projections, Section 4.2 of LIPA-PSEG OPERATIONS SERVICES AGREEMENT 

G&A

Transmission

Distribution

Customer 

service

Total2

1 Run rate from achieving median performance of similarly-sized utilities, from FERC benchmarking of a set of vertically integrated, coastal and / or rural mainland utilities; full savings not achieved until FY2025; pensions not 

included in savings build-up above 2 Generation not included in benchmarking due to the differences between PREPA and other U.S. utilities in fuel mix and transportation costs 3 Utility peer set chosen from PREPA 

benchmarking study submitted to PREC as part of 2016 rate case Note: benchmark savings replace savings PREPA has identified in steady state projections (e.g., figures include overtime savings)

Potential savings 

by 20231, USD M 

Current fully loaded labor 

spend, USD M 

21

27

▪ Benchmarking using costs for vertically integrated, 

similarly-sized utilities in the mainland US indicate a 

$50-80M savings opportunity by increasing 

PREPA’s labor cost efficiencies to median utility 

performance3, incremental to non-labor operational 

improvements identified in steady state financial 

projections

▪ Largest savings opportunity is in administrative 

function – T&D savings are assumed to phase in 

more slowly after full repair and rebuild of power 

grid is complete

▪ Top decile savings relative to coastal peer utilities 

exceed $100M for categories identified

▪ Savings could be realized through multiple 

initiatives, including performance management, 

reduction of non-core spending, process 

automation), other initiatives identified through 

WP180 – potential also exists for private operator to 

enable additional savings through shared services

Full savings potential (savings ramp over time)

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 87 of 118
87 New PREPA Fiscal Plan

Beyond Improving Rates, a Transformation Should Target Measurable 

Improvements in System Reliability and Resilience

SOURCE: PREPA, North American utility data is the IEEE benchmark report 1.04 0.86 1.32

4.83

1.92 1.35 2.77

14.35

1.57 2.10 1.84

2.97

PREPA Median

Low 

Quartile

Reliability

Resilience

Potential metrics Actions

PREPA 5-year target

▪ Maintenance: Maintain adequate 

level of maintenance capex given 

new grid in order to reduce both 

O&M costs and interruptions

▪ System operations: Upgrades 

including monitoring and automation 

technology to identify issues 

requiring action and enable 

automated responses during 

interruptions

▪ Other (O&M): Institute predictive 

maintenance programs

SAIDI (sum of all customer 

interruptions duration in 

hours per year/total # of 

customers served)

CAIDI (SAIDI/SAIFI)

1 or fewer outage-days 

per customer

0 critical services 

without power more 

than 48 hours

$4-5B in targeted 

resilience investments

Targets

1 Based on PREPA figures reported in 2017 compared to 2016 North American utility peer group (per IEEE benchmark report)

▪ T&D upgrades: Harden existing 

infrastructure assets, relocate or 

underground subset of assets

▪ Microgrids: Develop microgrid 

capabilities for critical infrastructure

▪ Other (generation): Build out 

distributed generation fleet less 

reliant on N-S transmission loops

Description

▪ Grid resiliency equal to mainland US hurricaneprone utilities: (e.g., resilience targets suggested 

by Sandia National Labs after 

Superstorm Sandy)

▪ Economic analysis of additional resiliency built 

into critical parts of system sufficient to deliver 

power during large storms and capital investment 

consistent with mainland US utilities

Upper 

Quartile

SAIFI (total # of annual 

customer interruptions/total 

# of customers served)

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 88 of 118
88 New PREPA Fiscal Plan

Revised Integrated Resource Plan (“IRP”) Overview and Timeline

RFP Process Required Actions / Approvals Date

RFP to Governing Board Sent – Complete 2/27/2018

RFP to OCPC and OMB Sent – Complete 2/28/2018

RFP Out to Bidders Sent – Complete 3/10/2018

RFP Responses Due Responses Received – Complete 3/24/2018

RFP Selection - Delayed RFP and contract to OCPC / BOD / OMB TBD

Contract Approved and Signed TBD

IRP Complete 9/28/2018

Background

PREPA will analyze system requirements and market trends to develop a new capitalplan

▪ A re-examination of PREPA’s system and capital plan is needed in light of factors like the impacts of Hurricanes Irma and Maria, lower demand 

forecasts, increased estimates for distributed generation, and rapidly declining costs for renewables, in order to assure that planned investments 

are still necessary and cost-efficient

▪ The need to re-build the system due to the damages caused by Hurricanes Irma and Maria represents a unique opportunity to leverage locally 

available renewable energy sources and battery storage capacity, and lower dependence on external fuel sources

▪ PREPA issued a Request for Expressions of Interest at the end of 2017 to garner interest from qualified consultants. PREPA is currently working 

towards completing the IRP by September of 2018 pursuant to the following timeline

▪ The IRP process will be open and transparent to the public. Specifically, the assumptions, approach, and methodology driving the IRP 

model should be made public so that third parties can understand inputs to each scenario, methodology and be able to participate and 

attend hearings to understand tradeoffs and decisions driving approval of the final capital plan and revenue requirement. 

▪ PREPA was required, under Puerto Rico Act 57 of 2014, to prepare an IRP that analyzes and identifies its preferred strategy for satisfying system 

requirements over the planning horizon

▪ Main factors addressed in the 2015 IRP are reliability, stability, environmental compliance, and future renewable generation levels under market, 

regulatory and economic constraints

▪ The best performing portfolio is recommended taking into account cost, reliability, and environmental considerations based on the results of 

system and production cost modeling in PROMOD and PSSE

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 89 of 118
89 New PREPA Fiscal Plan

Targets/Goals for the IRP

A NEW IRP – Focus, Goals and Targets

▪ PREPA will undertake an updated integrated resource plan (IRP) commencing in Spring 2018 for completion in September 2018. The purpose of this 

guidance outline is to understand the objective function(s) that the IRP will be optimized against.

▪ These guidelines will help articulate the IRP objective function(s), the relationship between the IRP and the fiscal plan, and how the regulatory 

process intermediates between the two.

Overview of the Process:

▪ The integrated resource plan provides choices between options that are articulated as constellations of generation, transmission and distribution asset 

deployments over time to meet the desired objective functions and the tradeoffs between these options. PREPA will recommend asset deployment options 

that represent the most economically efficient, on a risk adjusted basis, approach to meeting the desired objective functions with the least amount of 

undesired outcomes.

▪ The regulatory compact, defined as the set of regulator rules that define rates, asset ownership, business model, utility services and their market 

structure arbitrate the translation of the integrated resource plan into both the expected rates, what costs the utility can recover, what services it can 

offer, and therefore, its expected financial condition. Given the uncertainty on the future regulatory compact, therefore, it is untimely to use rates 

as a metric for an IRP at this juncture.

IRP Customer Centric Approach:

PREPA’s vision sets forth a customer centric approach as one of the core vision for the future elements, along with reliability. At the most fundamental level, 

there are clearly distinct customer segments that place dramatically different values on power quality, power reliability and resilience. All customers demand 

the same levels of reliability and resiliency but different levels of power quality, depending on the end use equipment. In other words, service levels are directly 

dependent on the end use for the customer. As for all IRPs, the customer requirements for power reliability, quality and resilience set some of the most critical 

criteria for the IRP’s objective function.

PREPA has generally outlined the following regarding customer requirements, and the objective function for these IRP elements:

▪ Large commercial and industrial (C&I) customers: particularly those in manufacturing (i.e. pharmaceutical sector) and hospitality experience

▪ significant business costs if power supplies are interrupted or are not of sufficient power quality. Therefore, the objective functions for these customers 

may be a N-1-1 design for the power delivery where one contingency does not lend to a total loss of service or the ability to meet peak demand

▪ Rural areas: the long duration of power outages is unacceptable. The objective function for these customers may be a maximum of 3 days without 

power for a catastrophic event, and under normal condition have N-1 reliability design criteria.

▪ Critical Facilities: identified in the recent DOE (Build Back Better) report, the objective function is zero critical facility days without power when faced 

with a total power failure, with N-1-1 reliability under normal operating conditions. Critical facilities include Police, Fire, EMS & Medical facilities with the 

ability to quickly connect mobile diesel generator when faced with total power loss conditions to make them operational under catastrophic failure 

conditions.

▪ All remaining customers: the objective function is a maximum of 3 days without power for a catastrophic event, and under normal condition have N- 1 

reliability design criteria.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 90 of 118
90 New PREPA Fiscal Plan

Targets/Goals for the IRP

Focus on Meeting Customer Objectives while Minimizing Total System Costs

1. Reduction in required reserve margin to 50% would allow PREPA to mothball its least efficient units with the concomitant reduction in fuel costs

2. Energy efficiency and demand response when compared with other island rural and metropolitan areas is largely untapped and reduce 

demand for power at typically 3 to 5 ¢/kwh, as the cost of saved energy, as well as provide dynamic load response as increased renewables 

enter the system or in response to system perturbations.

3. New renewables, both intermittent and with storage, under competitive bidding process should have total delivered costs that is below the cost of 

oil based electric production. Solar plus storage utility and distributed scale power can be on line within two to three years—faster than most 

conventional generation.

4. LNG and modernization of generation plants was shown in the 2015 IRP to be a lower cost alternative than continued reliance on oil fired steam 

plants. Recent market experience in comparable jurisdictions shows that major oil companies and LNG suppliers are willing to offer 10-year fixed 

price (hedged) contracts at prices that would deliver power at the rate of 10¢/kwh. In addition PREPA has to comply with the MATS regulatory 

mandate. Siting of these facilities and its impact must be studied in detail in addition to the cost savings.

▪ PREPA’s vision includes Financial Viability and Economic Engine. The IRP objective function of minimizing total system costs directly impacts

▪ these vision elements.

▪ The appropriate economic objective function is the total system costs, which measures all the utility and customer resources necessary to 

achieve the reliability, resilience and power quality objective function of the different customer segments. Total system costs include both capital, 

operating expenses and fuel, and given the volatility of fossil fuel, is presented on a risk adjusted basis.

▪ Under PREPA’s cost structure, most costs (85%) recovered in rates is for fuel or purchased power. Thus, the focus of the IRP on addressing this 

element of the cost structure.

▪ There are several premises regarding the ability to reduce the fuel and purchased power total system cost significantly over the next 10 years. 

PREPA‘s view is that an IRP objective function target would be a 30% reduction in fuel and purchased power costs vs. the business as 

usual case, with an additional reduction of 20% in the volatility of these costs. Four major opportunities underlie this perspective:

▪ Each of these major opportunities reduces fuel costs and volatility. That said, caution as these targets are subject to be proven or 

disproven by the IRP.

▪ Capital requirements for generation, transmission and distribution infrastructure may increase from the business as usual case due to the need

▪ for additional physical assets to meet customer reliability, resilience and power quality needs. Since these assets could be on either the utility or 

the customer side of the meter, it is not yet possible to provide a credible estimate of what that increase would be.

▪ It is possible to recognize that the increase in capital cost is offset by the reduction in business interruption cost. Based on the aftermath of 

Hurricane Maria, PREPA will draw upon this experience to estimate the cost of interruption so that the capital costs can be compared against the 

improvement in system resilience.

▪ Therefore, the IRP should measure the reduction in cost of interruption at system wide level. Given the weakened state of the entire PREPA

system and its vulnerability to another hurricane disruption, PREPA assumes the cost of interruption is reduced by 60% from business as usual 

case, particularly if the customer resilience criteria are met.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 91 of 118
91 New PREPA Fiscal Plan

Targets/Goals for the IRP

Ensuring Sustainability and Protection of the Environment

▪ PREPA’s vision sets forth PREPA being a model for sustainability as one of the core visions for the future elements. Many IRPs explicitly set the sustainability goal as a 

regulatory Renewable Portfolio Standard target, and make this an explicit objective function that the IRP must meet as it determines the optimal portfolio mix. This is because 

the RPS is a regulatory mandate. Accordingly, the IRP should set a minimum of 20% by 2030 objective function, measured as renewable generation/total generation, with 

distributed renewables treated as a reduction in load, unless the excess power is fed back to the grid for a small incremental cost.

▪ PREPA must also meet environmental compliance standards, particularly MATS, as an objective function that is a matter of compliance. In the near term, this tends to drive 

toward fuel switching, which depending on the fuel, can either create a savings or additional costs.

Creating Customer Value

▪ Holistically, the PREPA IRP is focused on creating customer value, for each of the customer segments. This is an important paradigm shift from previous IRPs which 

focused on minimizing total system costs, as a proxy for revenue requirements.

▪ Priority for customers is their total bills and the uninterrupted availability of power (resilience) along with reliability and power quality. The electricity rate is of secondary

importance. (If residential customer bills go down, but their rate goes up, the customers are better off. This could happen due to a combination of energy efficiency, fuel cost

savings, and increased grid upgrades to improve reliability, resilience and power quality.)

▪ Finally, the rate PREPA charges depends entirely on the regulatory compact that exists.

Regulatory Compact Implications to Customers and PREPA Fiscal Plan 

▪ The current regulatory compact is not viable since PREPA can not recover its operating cost, much less earn a return on capital. Since PREPA does not set the regulatory 

approach, the fiscal plan will take the selected option from the IRP and show the implications of alternative regulatory approaches to both the customer and PREPA’s overall 

financial viability. Successful mainland regulatory models should be used to redefine what an efficient regulatory compact should be to enhance the environmental, efficiency 

and safety regulations and to define the optimum energy cost for PREPA’s customers. In other words, the current set of regulatory rules and operations must be re-vamped.

▪ These approaches include, but are not limited to:

– Full Cost recovery in rates of both operating cost and return on rate base capital;

– Differentiated rates based on service level (e.g., power quality, reliability and resilience) so that the customers desiring higher service levels pay for those services 

and there is no cross subsidy;

– Allowing the utility to invest and/or operate in partnership with the customer on the customer side of the meter;

– Allowing the customer to provide power and ancillary services to the grid from grid tied microgrids, mini grids, or aggregated distributed resources; and

– Performance based rate incentives for operational improvements.

Integration with PREPA Fiscal Plan 

▪ Given the complexities of the IRP process and its range of regulatory approaches, it is not possible, nor credible at this juncture to quantitatively modify 

the current PREPA Fiscal Plan with the IRP objective function targets.

▪ Once the IRP is done, and if any of the regulatory compact issues are clarified by that time, PREPA will be able to determine the fiscal impacts of aligning to the selected 

IRP preferred option and whether it has the balance sheet strength to do so (whether privatized or not), or whether other partnerships with third party capital will be

required.

▪ The IRP should test both the generation plans outlined in the macro resource planning and the transformation sections of the Fiscal Plan as scenarios in 

the IRP model, to ensure that a range of potential technological options and futures are tested

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 92 of 118
92 New PREPA Fiscal Plan

Even Before IRP Completion, Small Scale Procurement of Near-Term Generation is 

In Line with All Generation Scenarios and Carries Resiliency Benefits

April 2018 October 2018 March 2019

Fiscal Plan 

certification

IRP development following targets 

defined in Fiscal Plan

Initial RFP Initial RFP-driven deployments within one year

Title 5

Considerations

▪ Conducting a utility-led RFP for privately funded new low-cost generation will provide a tangible first step towards 

lowering the cost of power and realizing near-term savings

▪ Projects should be deployable in the near-term without large-scale grid investment or other infrastructure build-out 

(e.g. solar + storage, modular LNG systems) and should be consistent with any potential long-term generation 

solution resulting from the IRP (e.g. relatively small scale of procurement, potentially ~200MW

▪ RFP process will be transparent and open to all interested parties

▪ PREPA can engage with both parties holding shelved contracts and those who have submitted reasonable Title V 

projects for near-term consideration

▪ PREPA has taken initial steps towards near-term targets through issuing PREPA issues RFP for electrical power 

solutions for Vieques and Culebra

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 93 of 118
93 New PREPA Fiscal Plan

Microgrids Can Play a Role in Increasing System Resiliency

1 In some remote areas, fully disconnected grids may be feasible, but will require increased investment and government support

SOURCE: NYPA Build Back Better Plan

Illustrative view on hypothetical islanding considerations 

Microgrid overview based on population and location of critical infrastructure 

▪ Key locations for microgrids include hospitals, police and 

fire stations, shelters, remote communities, water treatment 

facilities, ports, and other infrastructure deemed critical

▪ Can be sized to support the direct facility and/or supply 

surrounding area

▪ Local generation (e.g., nearby assets, industrial-sited 

assets) can also provide basis for microgrids with necessary 

components (e.g., controls, lines)

▪ Plan includes estimates for renewables 

and storage, assumed to be built closer to 

load, forming the basis for microgrid 

potential 

– IRP and on-the-ground analysis 

required to appropriately size and site 

microgrids 

▪ Microgrids do not imply independent 

operation all the time; these are largely 

components of a centralized grid 

infrastructure1

▪ Microgrids provide localized generation, 

providing a variety of system benefits:

– Reduce daily strain on transmission

– Reduce “domino effect” witnessed 

during system failure (e.g., recent 

storm) through islanding capabilities

– Enable limited generation during grid 

outages through independent 

operation

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 94 of 118
94 New PREPA Fiscal Plan

B. Generation Transformation and T&D Concession Structure

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 95 of 118
95 New PREPA Fiscal Plan

Local Market Concerns and Objectives (e.g., Rates; Reliability; Transparency)

▪ Minimize manufacturing losses and/or 

backlogs

▪ Increase Productivity

▪ Avoid/minimize need for 

backup/redundant systems

▪ Avoid/minimize equipment damages

▪ Retain/attract manufacturing, 

commercial, and business operations

▪ Maximize capital investment, economic 

growth and job creation

▪ Avoid creating new or additional 

stranded and inefficiently shifted costs

These concerns must be addressed 

when transforming the Island’s 

energy sector so as to:

Traditional Concerns

■ Cost of energy

■ Quality (voltage and

frequency)

■ Frequency and duration of

interruptions/outages

■ Environmental

New Post Hurricane Concerns

■ Overall resiliency and

redundancy

■ Increased recovery times

■ Operational continuity

■ Generation redundancy and

distribution

■ Transmission and Distribution

capacity and resiliency

In the post-Hurricane Irma and Maria era, local market concerns, challenges, and objectives 

have amplified

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 96 of 118
96 New PREPA Fiscal Plan

Base Case Illustrative End State Structures for Transformation

T&D Concession Generation sale

Industry end structure may take various other forms (e.g., vertically-integrated utility) 

based on industry participant feedback during market sounding

▪ New franchises created for one or more privately 

owned generation companies

▪ Generation franchises create right to operate utility 

scale generation and sell to delivery utility

▪ Franchisees can acquire useful generation assets 

now owned by PREPA under Title III process

▪ CPCNs for major new investments not authorized 

by statute, franchise, investment plan, or IRP 

including new competitive utility-scale generation

▪ Energy sales can occur through negotiated 

contracts (PPOAs) subject to market power test and 

backup regulation

▪ Migration to other market structures (e.g., periodic 

auctions) possible if and as future market develops

▪ IRP, objective performance standards, reserve 

requirements, and Renewable Portfolio Standard 

regulations apply

▪ Regulation of subsequent purchases / sales / 

reorganizations under traditional standards

▪ Delivery and retail utility functions provided by single 

private concessionaire using publicly- owned wires and 

retail service assets subject to conditions and rate and 

performance regulation

▪ Concession awarded via competitive process

▪ Concessionaire must make and fund necessary 

investments not otherwise publicly funded; title to all 

assets remains public

▪ Concessionaire receives retail rate revenues set 

generally under established rate standards

– Rates recover prudent operating and supply costs

– Rates include return of/on cost of new investments

– Potential return on value of other assets and 

recovery of unrecovered investment costs at end of 

concession term linked to investment obligation

– Performance on metrics and incentives can also 

affect rates and revenues

▪ IRP and Renewable Portfolio Standard (RPS)

▪ CPCNs for major investments not authorized by 

statute, franchise, investment plan, or IRP

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 97 of 118
97 New PREPA Fiscal Plan

C. Proposed Regulatory Framework

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 98 of 118
98 New PREPA Fiscal Plan

Summary of End State Regulatory Structure Detailed in Commonwealth Fiscal Plan

An independent regulatory framework must support the desired transformation, create investor confidence, and implement 

stable and accepted modes of regulation and economically efficient rates.

Challenges

▪ Current structure does not support incorporation of private entities and capital through concession

▪ Regulatory climate not sufficiently stable and predictable to attract private participation or support private investment

End state

▪ Independent regulators with relevant expertise

▪ Advisory and advocacy staff and functions strictly separated

▪ Sufficient, dedicated funding enabled through charter, through a combination of pass-through charges and fees

▪ Mandate to improve cost and reliability performance, including a broad range of ratemaking and approval tools 

outlined in Commonwealth Fiscal Plan

▪ Post-Title III, the regulator will approve new rate case and assume all regulatory responsibilities including approval 

rights for issuance of new debt

▪ FOMB maintains limited rights while PREPA continues to remain a covered entity under PROMESA 

Transition

▪ Transition to new regulatory structure immediately, which provides that the Public Services Commision shall not have 

the authority to hear appeals of the Energy Bureau and cannot engage in any substantive review of its work. This 

shall be done through amendment to PREC Organic Act so that structure and funding are established before bids are 

solicited for the transaction

▪ The Energy Bureau’s authority and funding will have a transition period to account for FOMB authorities pretransformation

▪ FOMB approves a capital plan, budget, and revenue requirements, and the issuance of new debt and the structuring 

of existing debt through the Plan of Adjustment

▪ Regulator authorizes bridge rate in line with certified budget to maintain PREPA during transition

▪ The regulator will approve the FOMB-guided IRP, but any budget / debt service implied by the current rate case will 

be superseded by the FOMB-approved budget

▪ The regulator will be able to hear cases pertaining to microgrids and distributed generation development during the 

transition period

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 99 of 118
99 New PREPA Fiscal Plan

Rate and Incentive Tools

1 For a general background discussions of variants of these and other and tools, see, e.g.,

http://www.eei.org/whatwedo/PublicPolicyAdvocacy/StateRegulation/Documents/innovative_regulation_survey.pdf.

Proven regulatory tools can incentivize and promote investment, efficiency, and high performance on metrics in Puerto Rico in the context of 

well-understood established regulatory models.1 These tools can be included in the franchise / concession structure and thereafter by the 

regulator. Particular tools can be chosen and refined as investor discovery proceeds and as other policy, market structure, and future 

investment needs solidify.

Performance 

and 

Investment

Metrics

Multi-Year 

Rate and 

Investment

Plans

Decoupling/ 

Revenue 

Adjustments

Trackers and 

Formula Rate

Mechanisms

▪ Direct adjustment of revenues and returns has been successfully used to incentivize performance and support

development of selected assets and/or projects. Operational performance metrics can include both rewards and

penalties, especially where the metric is strongly under the utility’s control.

▪ Examples include FERC incentive rates for certain transmission projects, ROE/ROR incentives for achieving 

designated operational and economic KPIs (e.g., IL) and/or “output” incentives (e.g., UK).

▪ Formal mechanisms that set or cap rates or revenues over time taking into account attrition, inflation, and target 

innovation and efficiency gains. Less formal versions include rate steps or freezes. They aim to offer greater 

regulatory certainty to customers and utilities while increasing incentives to control costs, make specific investments 

and innovate.

▪ The UK, Ontario, and more than fifteen US states (e.g., GA, CO, CA, NY, IA) have used versions of multi- year rate 

plans with positive effects on efficiency and cost containment.

▪ Mechanisms to offset or mitigate the impact on utility revenues and cost recovery of attrition caused by, e.g., 

economic turmoil, energy efficiency and demand response efforts, or DER penetration, especially where there are no 

parallel reductions in utility costs.

▪ Various forms of decoupling have been widely adopted across mainland jurisdictions, especially in jurisdictions with 

strong commitments to energy efficiency and demand management (e.g., NY, CA, MD, OH, IL) and decoupling forms 

a part of the UK regulatory scheme.

▪ Mechanisms to periodically adjust rates or allowed revenues in response to changes in costs and/or sales, especially 

where those changes are significant and unpredictable. May be symmetric and coupled with performance incentives 

and prudence review. Can also be used to retroactively reconcile rates and revenues to account for unexpected 

changes or emergencies.

▪ Variations include full formula rates (e.g., FERC, IL) and targeted capital and expense trackers used in numerous

states and provinces and in Puerto Rico in the existing CILT, subsidy, and Fuel+PPriders.

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 100 of 118
100 New PREPA Fiscal Plan

Performance Metrics – Function & Criteria

Objectively 

Measurable

Controllable by 

the Utility

Promote Policy 

Goals

Reliability Resiliency Affordability Safety Service

▪ Reflect the actions and performance of the utility measured

▪ Be indicative of performance and performance improvement

▪ Adjust or be normalized for exogenous factors where practical

Metric should:

▪ Have a clear definition

▪ Be capable of reliable and consistent measurement

▪ Be verifiable and not be subject to manipulation or litigation

▪ Indicate achievement of one or more of the overall goals of the 

transformation or the public policy of the Government of Puerto Rico

▪ Be material

▪ Not be duplicative

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 101 of 118
101 New PREPA Fiscal Plan

Potential Performance Metrics

Delivery System Reliability

Generation Reliability & Efficiency

Resiliency

Safety

▪ System and district interruption statistics – SAIFI, SAIDI, CAIFI, CAIDI

▪ Customers experiencing more interruptions than targets

▪ Frequency of transmission outages / contingencies affecting customers or dispatch

▪ Unit availability (by franchise holder and unit)

▪ Forced outage rate (by franchise holder and unit)

▪ Environmental compliance

▪ Critical infrastructure protection / hardening (plan compliance)

▪ Preventive maintenance backlog

▪ Critical customer support (monitoring, redundancy, hardening)

▪ Emergency recovery plan compliance

▪ OSHA recordable events

▪ OSHA citations / violations

▪ Customer injury rates

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 102 of 118
102 New PREPA Fiscal Plan

Potential Performance Metrics

Affordability

Customer service functions

Regulatory Compliance / Performance

▪ Compliance with franchise conditions (completion and cost)

▪ Compliance with approved investment plans (completion and cost)

▪ Time to process interconnection requests (excluding delays attributable to customer)

▪ Timely metering reading and billing rate

▪ Actual vs estimated reading rate (AMI and manual)

▪ Customers on AMI/AMR

▪ Call center time to answer / physical office wait times

▪ Time to respond to service requests (by class / district as appropriate)

▪ Time to respond to billing / service inquiries

▪ Delivered price (normalized; metrics will vary for different types of utilities)

▪ Dispatch efficiency

▪ Uncollectible balances

▪ Days of sales outstanding, by class and private / government

▪ Non-technical losses / UFE

▪ Theft / tampering recoveries

▪ Rate of successful completion of payment plans

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 103 of 118
103 New PREPA Fiscal Plan

D. Federal Funding

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 104 of 118
104 New PREPA Fiscal Plan

Federal Funding and Impact on PREPA

Stafford Act Emergency Funding

▪ Emergency Work through the initial 180 days following the Incident Period for DR-4339 (Maria) is 100% Federally funded

▪ The cost to restore and repair the damaged infrastructure not covered by insurance proceeds is expected to be covered by FEMA Public Assistance 

funds (Federal cost share of 90%)

▪ Puerto Rico is requesting a cost-share adjustment for FEMA’s programs under the Stafford Act to 100% federal. Puerto Rico seeks Community 

Development Block Grant-Disaster Recovery (CDBG-DR) funding to cover the cost-share match requirements of Stafford Acts

▪ programs. Historically, either FEMA or Congress have authorized a 100% federal cost-share for large and catastrophic disasters such as Hurricane 

Andrew in Florida and Hurricane Katrina in Louisiana and Mississippi

▪ Does not cover any liquidity funding except to the extent reimbursements are received for costs previously funded by PREPA

▪ Reimbursement of individual expenses is subject to compliance with FEMA requirements

▪ Timing and amount of reimbursements are unclear but emergency funding will likely not impact transformation as it will go to PREPA to address 

emergency needs prior to transformation

Community Disaster Loans

▪ Loan to carry on existing local government functions of a municipal operation that have incurred a significant loss in revenue, due to a major disaster, 

that has or will adversely affect their ability to provide essential municipal services

▪ PREPA expects that a Community Disaster Loan (CDL) either directly or through the Government of PR will be necessary for PREPA to maintain

▪ the necessary liquidity to operate for the 18-month period of continued operations required by the fiscal plan

▪ Timing and terms of potential CDL for PREPA are unclear

– CDL would likely require senior position in the capital structure

– CDL might be payable upon a sale of PREPA’s assets or confirmation of a plan of adjustment unless Federal government agrees to the contrary

– CDL can (but is not required to) be forgiven by the Federal government

– Tenor and term still subject to input from United States Treasury

Permanent Funding Under the Stafford Act

▪ Permanent work to mitigate the damage to the power sector will likely be through alternative procedures provided under Section 428 of Stafford Act

▪ Timing and amount of funding is unclear

– Initial damage assessment likely to take twelve months

– Negotiation of fixed payment to Government of PR to address damage to power sector

▪ May be used to fund rebuild of current system or for an alternative use depending on agreement

▪ Timing, amount and terms will determine how the Federal funding will be integrated into plans for PREPA and the energy sector

transformation generally

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 105 of 118
105 New PREPA Fiscal Plan

E. Grid Resiliency

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 106 of 118
106 New PREPA Fiscal Plan

The Puerto Rico Energy Resiliency Working Group (ERWG), led by NYPA, 

Prepared a Grid Resiliency Rebuild Assessment

Rebuild Recommendations

Total

(millions)

Overhead Distribution (includes 38kV) $5,268

Underground Distribution $35

Transmission - Overhead $4,299

Transmission - Underground $601

Substations - 38kV $856

Substations - 115kv & 230kV $812

System Operations $482

Distributed Energy Resources $1,455

Generation $3,115

Fuel Infrastructure $683

Total Estimated Cost $17,606

1 Note: Each line item includes a 30% scope confidence escalator. Final cost estimates require multiple engineering studies and an updated IRP.

SOURCE: Puerto Rico Energy Resiliency Working Group report, November 2017, USACE

▪ Immediately following Hurricane Maria, PREPA set out to review and assess damage to the system and began 

emergency restoration

▪ Damage assessment and emergency restoration efforts were supported by NYPA, ConEd, and USACE. Further damage 

assessment and resiliency rebuild estimates were developed by The Puerto Rico Energy Resiliency Working Group, 

comprised of the following members:

– New York Power Authority, Puerto Rico Electric Power Authority, Puerto Rico Energy Commission, Consolidated 

Edison NY, Edison International, Electric Power Research Institute, Long Island Power Authority, Smart Electric 

Power Alliance, U.S. Department of Energy, Brookhaven National Laboratory, and the Public Service Enterprise Group

▪ The Puerto Rico Resiliency Working Group estimate for the cost to rebuild with minimum resiliency to withstand extreme 

Category 4 storms and sufficient design margin to ensure high survivability for Category 5 events are summarized below

▪ Absent substantial federal funding for the rebuilding effort, the Energy Resiliency Working Group recommendations cannot 

be implemented

▪ The ERWG Grid Resiliency Report was part of the 

Government’s formal request for supplemental Federal 

assistance

▪ Although Puerto Rico anticipates significantly more 

Federal Disaster Relief Assistance, out of the $17.6B for 

Federal Disaster Relief for the Rebuild of the Electric Grid, 

the Puerto Rico Government currently estimates that 

$13.7B of federal assistance would be available for repairs 

and improvements of the electric system.

▪ As of March 2018, FEMA has allocated $1.953 billion to 

USACE to execute the Mission Assignment for power grid 

restoration

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 107 of 118
107 New PREPA Fiscal Plan

Although Puerto Rico anticipates significantly more Federal Disaster Relief 

Assistance, it included $13.7B in assistance for Electric Power Infrastructure

Category Amount (M)

Distribution System Rehabilitation 

and Improvements $8,374

Transmission System Improvements $3,222

Hydro Plants Rehabilitation $235

Replacement of Peaking Units $1,173

Guajataca Dam Repairs $258

Impacts to Commercial Buildings 

and Irrigation Channels $117

Debris Removal and Emergency 

Staff Expenses $95

Distribution 

System 

Rehabilitation 

and 

Improvements

Transmission 

System 

Improvements

Replacementof 

Peaking Units

Hydro Plants 

Rehabilitation

Distribution System Rehabilitation and Improvements 

Transmission System Improvements

Hydro Plants Rehabilitation 

Replacement of Peaking Units 

Guajataca Dam Repairs

Impacts to Commercial Buildings and Irrigation Channels 

Debris Removal and Emergency Staff Expenses

▪ The preliminary estimate of $13.7B included in the Central Government Fiscal Plan is based on the following 

breakdown, which PREPA is in the process of evaluating and comparing to other third party estimates

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 108 of 118
108 New PREPA Fiscal Plan

Preliminary Restoration Rebuild Estimate

$4.2

$3.2

$6.0

$0

$2

$4

$6

$8

$10

$12

$14

BILLIONS

Cost estimates are in preliminary form and 

subject to change. More detail to be provided

PREPA is in the process of analyzing and validating cost 

estimates prepared by a third party engineering firm for T&D 

system repair and overall system improvement by cost type 

(e.g. labor, materials) and spending category (e.g. 

transmission poles, distribution switching equipment).

Power 

Transformers

Switching

& Control

Equipment

Towers & 

Fixtures

Steel Poles

Overhead 

Conductors 

& Devices

Distribution System Repair 

Transmission System Repair 

Overall System Improvements

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 109 of 118
109 New PREPA Fiscal Plan

Grid Resiliency – Potential Grid Improvements

SOURCE: Puerto Rico Energy Resiliency Working Group report, November 2017

The ERWG made recommendations for improvements and replacements that cannot be achieved by PREPA

absent substantial federal funding.

▪ Generation: Relocate smaller coastal or river-located facilities, use of load frequency control, build back 

renewable energy sources, and integrate DER

▪ Transmission: New monopole towers, high strength insulators

▪ Substations: Defense-in-depth (multilayered) flood protection

▪ Distribution: Use of concrete and galvanized steel poles, new backup control center

▪ System Ops: Use of microprocessor-based devices and proven control system technologies

▪ Aguirre Plant : Test and inspection; base repairs; spares replacement; storm hardening; install H-class 

machine at Aguirre to address MATS compliance, system stability, and fuel diversification issues

▪ Palo Seco Plant: Installation of dual fired F-class machine to address MATS compliance, system 

stability, and fuel diversification issues; storm hardening

▪ Other Plants: Test and inspection; base repairs; spares replacement; storm hardening

▪ Relocate 230 KV Transmission lines to existing highways (see image) 

Replace poles for higher wind rating; move high risk lines underground 

Straighten and grout existing poles or replace with deeper subgrade 

and/or engineered foundations

▪ Improve insulators, particularly in salt contamination areas

▪ Replace poles for higher wind loading, install breakaway service connections, install fully insulated wire, 

relocate distribution away from transmission, selectively underground distribution

▪ Replace poles with deeper subgrade support, selectively underground in areas with water-driven debris

▪ Relocate lines to accessible street level, selectively replace overhead with underground

▪ Add automated switches with FDIR capability

▪ Improve insulators, particularly in salt contamination areas

Hardening & 

Resiliency 

Executive

Summary

Transmission

Related 

Improvements

Distribution 

Related 

Improvements

Generation

Related 

Improvements

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 110 of 118
110 New PREPA Fiscal Plan

Timeline of Recommended System Improvements by the ERWG is Conditioned 

Upon Receipt of Necessary Federal Funding

The ERWG laid out a timeline for implementation and funding of recommended system improvements over time.

The timeline ignores any constraints on funding, and provides guidance on estimated sequencing 

and duration of activities.

SOURCE: Puerto Rico Energy Resiliency Working Group report, December 11, 2017

Activities underway or 

expected to begin in early 

Q1 2018:

▪ Rebuild and repair of 

salvageable substation 

equipment, fences, 

communications 

equipment, and 

restoration of physical 

security.

▪ FEMA audit (A-133 or 

single audits) preparation 

required for any entity 

that expends $750,000 

or more of federal 

assistance. Filings for 

2017 expenditures must 

be completed by 

September 30

▪ Transmission studies, 

engineering assessments, 

DER site studies, and 

other planning studies

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 111 of 118
111 New PREPA Fiscal Plan

Appendix

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 112 of 118
112 New PREPA Fiscal Plan

Work Plan 180 – Further Explained

▪ Initiate a detailed company-wide operational efficiency initiative to evaluate all aspects of 

the business to determine cultural, organizational, and process conditions that inhibit 

efficiency and success.

▪ Once the evaluation process is completed, a comprehensive plan of improvement initiatives 

will be developed, analyzed, and valued with the intention of forming an organizational 

playbook (Business Plan) utilized by the management team for execution and monitoring of 

business performance.

Objective

▪ A Steering Team will be formed and led by Strategic Advisors with participation of senior 

PREPA management that will be responsible for guiding the re-engineering of the 

organization and managing specific project teams in their efforts to evaluate and improve 

performance in major operational divisions.

▪ Four Project Teams will be formed to address the following areas of the organization:

– Generation, T&D, Customer Service & Corporate, and Fuel & Power Purchasing

Directorate Level 

Approach

▪ Each Project Team will consist of Strategic Advisors and PREPA staff members who 

possess in-depth knowledge of the specific organization and a strong desire to improve 

performance and drive the organization to higher standards of performance. Generally, the 

teams will consist of six to eight individuals with one specific individual assigned to provide 

financial analysis support.

Project Teams

▪ Evaluate existing division work processes and develop initiatives to address inefficiencies.

▪ Determine areas of the organizational structure where changes to work assignments, rules, 

and practices will improve efficiency.

▪ Evaluate financial planning process changes that will improve asset performance.

▪ Analyze external agreements/contracts for a determination of economic market 

competitiveness.

▪ Determine if improvements in Technology utilized will improve efficiency and provide 

recommendations for implementation.

Responsibilities

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 113 of 118
113 New PREPA Fiscal Plan

Work Plan 180 – Timeline

▪ Provide details of initiative to executive management and receive approval to proceed

▪ Select Steering Team members and conduct first meeting to educate and seek input from 

committee

▪ Steering Team will define each Project Team and solicit leadership to participate in the effort

▪ Conduct initial meeting of all Project Teams to educate and seek feedback from group on 

initiative process, timelines, expectations, and deliverables

▪ Steering Team meeting to discuss feedback from Project Teams and determine if 

modification to the Initiative Plan is required

Weeks 1-2

▪ Project Team Workshops 

(Execute efforts to address the Project charge and responsibilities)

▪ Executive management is provided an update on Initiative progress and status

▪ Project Teams provide initial status update on progress to Steering Team (initial 

identification of opportunities, financial impacts, execution plan, and process 

implementation for each initiative)

▪ Steering Team provides feedback and direction to each team along with expectations for 

final project plan

Weeks 3-5

▪ Project Teams incorporate feedback into their recommendations and finalize Business Plan 

▪ Project Team recommendations are incorporated into a Corporate Initiative Business Plan 

▪ Steering Team reviews Business Plans and submits to executive management for approval 

Executive management approves Business Plans and provides authorization for 

implementation

Weeks 6-7

▪ Business Plan initiatives are initiated

▪ Steering Team and Project Teams continue to meet to monitor performance improvement 

initiatives Modifications to Business Plan initiatives will be based on changes to the 

performance of the organization

Weeks 8+

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 114 of 118
114 New PREPA Fiscal Plan

Roadmap for Recovery and System Resilience

PREPA has developed a roadmap to protect critical loads and enhance overall system reliability 

through enhancement of system interconnectivity, improvements to infrastructure design and 

construction criteria, and establishment of electric system islands (a.k.a. micro-grids).

▪ Projects must meet at least three fundamental planning, design, and operational criteria:

– Enhance system stability and power service continuity during a major atmospheric event

– Contribute to black-start capability of the electrical system

– Improve power system restoration process and capability

▪ Infrastructure projects were identified to increase the resilience of the electrical grid

– Key underground 115 kV and 38 kV transmission circuits, connecting critical loads 

(e.g. Metro Zone)

– Gas Insulated Substations (GIS) to replace old, unreliable oil insulated substations

– Existing transmission line inspections, maintenance, and reconstruction

– Electrical system islands that isolate critical loads and / or have key infrastructure in place

▫ Requires black start capability

▫ Sufficient conventional generation, renewable generation, or both, along with adequate 

controls to operate reliably and independently until normal operation conditions return

▫ Existing generation, such as existing 20 MW turbines, hydroelectric plants, private 

generation, or new generation can be used to power these islands

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 115 of 118
115 New PREPA Fiscal Plan

Electric System Islands Identified

Sample Schematic

SOURCE: PREPA Recovery and System Resiliency Roadmap

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 116 of 118
116 New PREPA Fiscal Plan

Simplified Electric System Island Schematic Sample

Legend: 

Breaker 

Line 3000

Line 14400

Line 600

Line 5200

Line 400

SOURCE: PREPA Recovery and System Resiliency Roadmap

Monacillo TC 

38 kV Bus

Sub. 3089 – Clorox 

Manufacturing Co.

Sub. 3088 –

Plaza 

Warehousing & 

Realty Corp.

Sub. 3097 –

Bull-Bond 

Mfg. Corp.

Sub. 3092 –

Servimetal 

Inc.

Sub. 3099 –

Walmart

Sub. 3087 –

Manufacturera 

Berríos

Sub. 3070 –

WDC Puerto 

Rico Inc.

Sub. 3084 –

MOVA

Sub. 3090 – AAA

Sub. 3062 – SAM’s

Club

Sub. 3093 – JC

Penney

Sub. 3096 – Searle

Sub. 3085 – Centro Médico Turabo

Sub. 3065 – Hospital 

Menonita Caguas, Inc.

Sub. 3081 – Mylan, Inc.

Sub. 3094 –

Home Depot

Caguas Municipality Island 

(Average Demand = 20.75 MVA)

Sub. 3095 – Costco

Sub. 3061 – Walmart

Sub. 3091 – AAA

Caguas Sect. 

38 kV Bus

Aguas Buenas Sect.

38 kV Bus

Gautier Benítez Sect.

38 kV Bus

Caguas TC 

38 kV Bus

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Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 117 of 118
117 New PREPA Fiscal Plan

Select Identified Microgrids

Area Hospitals Water 

Supply

Government Industrial Commercial Piers Avg. MVA

Demand

Metropolitan Zone (San Juan, Guaynabo, 

Cataño, Trujillo Alto) X X X X X X 114.8

Metropolitan Zone (Bayamón, Toa Baja) X X X 25.5

Metropolitan Zone (Carolina) X X X 35.3

Caguas X X 20.8

Juncos / Las Piedras X 49.7

Humacao X X X 28.7

Mayagüez X X X 23.1

Maricao X X 5.6

San Sebastián / Lares X X 29.7

San Germán / Cabo Rojo / Lajas X X X 8.6

Aguadilla X X 10.1

Quebradillas / Isabela / Camuy / Hatillo X X 7.1

Vega Alta / Vega Baja / Manatí X X X 45.4

Barceloneta X 25.2

Fajardo / Luquillo / Río Grande X X X 16.3

Naguabo / Ceiba X X X X X 18.0

Yabucoa / Maunabo X X X 21.6

Barranquitas / Naranjito / Comerío X X 27.6

Cayey / Cidra X X 26.0

Cayey / Aibonito X X X 8.9

Ponce / Peñuelas X X X 56.6

Salinas / Santa Isabel / Coamo X X 10.9

Patillas / Arroyo X X 17.9

TTOTAL 633.4

SOURCE: PREPA Recovery and System Resiliency Roadmap

Case:17-03283-LTS Doc#:24695-4 Filed:06/30/23 Entered:06/30/23 12:18:50 Desc:

Exhibit 4 - PREPA Fiscal Plan dated April 19 2018 Page 118 of 118