IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO, et 

al.

Debtors.1

PROMESA

Title III

Case No. 17 BK 3283-LTS

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO

as representative of

PUERTO RICO ELECTRIC POWER AUTHORITY,

Debtor.

PROMESA

Title III

Case No. 17 BK 4780-LTS

REBUTTAL EXPERT DECLARATION OF DR. JOSÉ ISRAEL ALAMEDA LOZADA 

IN SUPPORT OF THE EMPLOYEES’ RETIREMENT SYSTEM OF PUERTO RICO 

ELECTRIC POWER AUTHORITY’S OBJECTION TO THE CONFIRMATION OF 

THE PUERTO RICO ELECTRIC POWER AUTHORITY’S PLAN OF 

ADJUSTMENT 

[Space intentionally left blank]

1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last four 

(4) digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto

Rico (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales

Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal

Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy Case No. 17 BK

3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of

the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 17 BK 3566-LTS) (Last Four Digits of Federal

Tax ID: 9686); and (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-

LTS) (Last Four Digits of Federal Tax ID: 3747). (Title III case numbers are listed as Bankruptcy Case numbers

due to software limitations.)

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2

1 Q. State your name. 

2 Dr. José Israel Alameda Lozada.

3 Q. State on whose behalf you are testifying before the Title III Court.

4 I am testifying on behalf of the Puerto Rico Electric Power Authority Employee’s Retirement 

5 System (“PREPA ERS” or “SREAEE”).

6 Q. What additional information did you review in preparation of your rebuttal 

7 testimony?

8 In addition to the materials reviewed in preparation for my direct testimony, I reviewed:

9 • Expert Testimony of Glenn George.

10 Q. What is the purpose of your rebuttal testimony?

11 The purpose of my rebuttal testimony is to establish that Dr. George failed to demonstrate that 

12 the principles of ratemaking mentioned in his report were tested or objectively assessed in the 

13 design of the Legacy Charge. Dr. George never expresses in a clear manner or comprehensive 

14 assessment of whether these eight individual principles were met or how. Moreover, while Dr. 

15 George expresses that the Legacy Charge is consistent with the principles of just and 

16 reasonable rates stated by Bonbright in the 1960s, he did not examine the principles updated 

17 by Rábago and Valova.

18 Q. What are the conclusions of your rebuttal testimony?

19 I conclude that Dr. George shows tremendous optimism regarding the feasibility of the Plan of 

20 Adjustment with the Legacy Charge, which is not validated by empirical data. Specifically, in 

21 that he concludes that the Legacy Charge would have minimal if any effect on the economy.

22 On the contrary, I conclude that the Legacy Charge will hurt Puerto Rico’s economy, as shown 

23 in my direct testimony. Additionally, I conclude that the Legacy Charge will reduce PREPA’s 

24 revenues in the long run. 

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3

25 Moreover, I conclude that Dr. George failed to demonstrate that the Bonbright principles were 

26 tested or objectively assessed in the design of the Legacy Charge. My detailed examination of 

27 most of the principles shows that they do not favor the Legacy Charge. Annex A. Moreover,

28 he did not consider the updated principles set forth by Rábago and Valova. 

29 I declare under penalty of perjury that the foregoing is true and correct to the best of 

30 my knowledge, information, and belief.

31

32 ______________________

33 José I. Alameda Lozada, Ph.D.

34 May 15, 2023

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1

ANNEX A – REBUTTAL TESTIMONY 

The Financial Oversight and Management Board (“FOMB”) presented the expert witnesstestimony 

of Dr. Glenn George (“Dr. George”). In his testimony (“George Report”), Dr. George addressed the 

feasibility of the Legacy Charge.

In summary, Dr. George’s conclusions are:

1. The Legacy Charge is fair and reasonable and would pay the debt service proposed by the 

FOMB easily and prudently.

2. The Legacy Charge would not cause harmful effects on the economy, and if it did cause

any, they would be minimal.

3. The Legacy Charge would not affect future investment needs, i.e. capital expenses

(“CapEx”) for the Puerto Rico Electric Powe Authority.

Dr. George was asked to study the methodology applied by Brattle Group, Inc. ("Brattle"), under 

the direction of the FOMB, to derive the Legacy Charge in the Plan of Adjustment, and provide an 

opinion on whether:

1. The Legacy Charge provides PREPA's creditors with reasonable recoveries of their claims, 

and does not affect PREPA's need to continue operations, nor burden Puerto Rico's 

economy; 

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

3. The design of the Legacy Charge is consistent with the principles of fair and reasonable 

rates.

On the other hand, ratemaking for public utilities is predicated on the concept of just and 

reasonable rates. The definition of just, fair, and reasonable rates is not only about the operational 

and financial aspect of the public utility. It considers the risk involved when higher rates are

imposed. In his report, Dr. George cites that “[o]ne way of determining whether utility rates are 

just and reasonable is to judge them against the ‘attributes of a sound rate structure’ articulated 

by James C. Bonbright in a seminal work in the field of public utility ratemaking.”

1 According to Dr. 

George, these attributes are: 

1. Rates should have the following practical attributes: simplicity, understandability, 

public acceptability, and feasibility of application.

2. Rates should be free from controversies as to proper interpretation.

3. Rates should effectively yield total revenue requirements under the fair return 

standard.

4. Rates should provide revenue stability from year to year.

1 George Report, ¶ 96.

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5. Rates themselves should be stable, i.e. rates should experience minimal unexpected 

changes that are seriously adverse to existing customers.

6. Rates should apportion the total cost of service fairly among different consumers.

7. Rate relationships should avoid “undue discrimination.”

8. Rates should promote efficiency, discouraging wasteful use of energy while 

promoting all justified types and amounts of use. 2

However, many factors, apart from an additional layer of energy charge, are associated with risky 

operations, not only to local businesses and families but for the public utility itself. All these effects 

together will hurt the prosperity of the overall economy. 

According to Rábago and Valova, Bonbright’s Principles of Public Utility Rates are often summarized 

in three categories: (1) revenue requirement; (2) fair apportionment of costs among customers; 

and (3) optimal efficiency.3 Rábago y Valova stated:

When James Bonbright’s “Principles of Public Utility Rates” was published in 1961, 

electric utilities and the environment in which they operated were vastly different. 

The central station utility model was dominant, and economies of plant scale 

appeared inexhaustible. In fact, the 1960s marked the zenith of the trend toward 

large power plants, and since that decade, we have seen a wide range of 

fundamental changes in the electricity system. These changes include widespread 

competition in the generation sector, retail competition, the emergence of 

renewable energy generation, and, most significantly, a revolution in scale that has 

ushered in an era of distributed energy resources (DER). Bonbright’s text did not 

account for these changes; now, nearly 60 years since the publication of the 

Bonbright’s treatise, it is time for a rewrite.

4

As customers increasingly seek to generate their own electricity through on-site generation, 

reduce their load through energy efficiency, and otherwise take more control over their energy 

usage and bills, utilities are facing challenges that were unimaginable or at least difficult to 

appreciate when Bonbright articulated the principles for public utility ratemaking. Consequently, 

Rábago and Valova added the following principles:

1. Regulators should fully comprehend and reflect resource value in rates.

2. Ratemaking must account for the relative market positions of various market actors, 

and for the information asymmetries among different customers, utilities, and 

market participants.

2

Ibid. citing James C. Bonbright, Principles of Public Utility Rates, Columbia University Press, New York NY, 1961, p. 

291. 

3 Karl R. Rábago and Radina Valova, Revisiting Bonbright’s principles of public utility rates in a DER world. Pace Energy 

and Climate Center, Pace University Elisabeth Haub School of Law, White Plains, NY, United States. The Electricity 

Journal 31 (2018) pp. 9–13, https://peccpubs.pace.edu/getFileContents.php?resourceid=43bdf87a9063c34. 

4 Rábago & Valova, op cit, p. 9.

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3. Sound rate design must be grounded in a careful assessment of practical economic 

impact on all market participants, especially customers.

4. Rates must support capital attraction for all resources that provide energy services, 

regardless of whether the affected investor is the utility, the customer, or a thirdparty provider. 

5. Rates must be designed to account for the incentives they create for utilities, 

customers, and non-utility market participants.

6. Just and reasonable rates require accurate accounting for utility costs.

7. Rate design and cost allocation are separate functions, driven by distinct policy 

objectives.

In our opinion, the George Report failed to demonstrate that the updated principles of just, fair,

and reasonable rates were tested or objectively assessed in the design of the Legacy Charge. The 

George Report concludes that “the Legacy Charge and associated Legacy Charge Revenues are 

consistent with the concept of just and reasonable rates[,]” 5 Dr. George never expresses in a clear 

manner or comprehensive assessment of whether these eight individual principles were met or 

how. Moreover, while Dr. George argues that the Legacy Charge is consistent with the principles 

of just and reasonable rates stated by Bonbright in the 1960s, he did not examine the principles 

updated by Rábago and Valova. These updated principles are essential to evaluate the Legacy 

Charge, as they account for the changes in technology in the past few decades.

Attributes # 1 and #2: 

“Rates should have the following practical attributes: simplicity, understandability, public 

acceptability, and feasibility of application.” 

“Rates should be free from controversies as to proper interpretation.” 

To begin with, the words “simplicity,” “understandability,” “public acceptability,” and “feasibility of 

application” are subjective. They are based on values of judgment, without any scientific 

foundation. To offset this value judgement, Dr. George should have considered incorporating logical 

and empirical validations. However, the George Report is not concerned with defining these terms.

For instance, the meaning of “simplicity” and “understandability” are not included. However, the 

design of the rate has proven to be far from simple, as public record shows that there have been 

multiple interpretations of the result of the Legacy Charge, as customers struggle to understand 

the combination of the three components of the rate and their application per sector.6

5 George Report, ¶ 98.

6

Junta Fiscal da paso a un alza de $19 al mes en factura de energía eléctrica, 09/02/2023, 

https://jayfonseca.com/junta-fiscal-da-paso-a-un-alza-de-19-al-mes-en-factura-de-energia-electrica/ (stating that the 

Legacy Charge is $19); Factura de la luz subirá 30% para pagar pensiones y deuda de la AEE, 10/05/2023,

https://jayfonseca.com/factura-de-la-luz-subira-30-para-pagar-pensiones-y-deuda-de-la-aee/ (stating that the rate 

increase is 30%); Junta considera cargo en la factura de la luz de $13 para residencias, 11/05/2023, 

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Moreover, the basis for claiming that the Legacy Charge has “public acceptability” is not 

expressed.7In fact, the public record shows that public acceptability of the Legacy Charge is 

strained, among other things by the many announcements of increased rates which create both 

confusion and resistance:

In 2016: Act 4-2016 sought to place a “Transition Charge” on the electric bills of all PREPA’s 

customers. The Puerto Rico Energy Bureau (“PREB”) approved the Calculation Methodology 

and Adjustment Mechanism proposed a transition charge of 3.10 ¢/kWh.

In 2019: The Restructuring Support Agreement (“RSA”) with the bondholders would have 

resulted in a Transition Charge. This deeply concerned customers, because it would have 

resulted in a hike in the cost-per-kWh, over a 50- year horizon, starting at 2.768 ¢/kWh in

2021 and increased to 4.552 ¢/kWh by 2043 and thereafter until debt service were paid.

In 2022: The Plan of Adjustment included the Legacy Charge for 35 years to allow for 

sufficient revenues as a source of repayment for the new bonds issued under the Plan of 

Adjustment. The Legacy Charge involves both a volumetric component based on customer 

class and a customer’s electricity use, and a flat monthly connection charge, based on 

customer class. 

The Chairman of FOMB, David Skeel, publicly stated that “[e]ach member of the Board is fully 

aware that this Legacy Charge from PREPA is painful for Puerto Rico, its residents, and its 

businesses.”

8

(emphasis added)(our translation). Meanwhile, various organizations have joined 

forces against the Legacy Charge; creating the campaign “No Más Aumentos a la Luz”, which 

translates into “No More Electricity Rate Increases.” 9 This campaign has focused on mobilizing 

citizens to avoid new increases in electricity bills for payment to PREPA bondholders and has 

raised thousands of signatures, which have been provided to the FOMB. 10 Thus, any 

https://www.noticel.com/ahora/top-stories/20230511/junta-considera-cargo-en-la-factura-de-la-luz-de-13-pararesidencias/ (stating that the Legacy Charge is $13 for residential customers and $800 for commercial customers).

7 As a resident of Puerto Rico, I can attest that the public discussion on this issue is at best confusing. The population 

has not been well informed, as there have been conflicting reports of what the proposal for additional rate increases.

8

Junta Fiscal da paso a un alza de $19 al mes en factura de energía eléctrica by Jagual Media. 09/02/2023,

https://jayfonseca.com/junta-fiscal-da-paso-a-un-alza-de-19-al-mes-en-factura-de-energia-electrica/.

9 No más aumento, https://www.nomasaumentos.com/.

10 Pintan mural en contra de más aumentos a la luz: Es una obra del artista Jesús Delgado Burgos, 

https://www.metro.pr/noticias/2023/04/01/pintan-mural-en-contra-de-mas-aumentos-a-laluz/#:~:text=“La%20campaña%20No%20Más%20Aumentos%2C%20creada%20por%20el,el%20pago%20a%20los%2

0bonistas%20de%20la%20AE; Desolador panorama ante aumento en factura de luz: Auguran otra fuga masiva de 

profesionales al no poder enfrentar el aumento en el costo de vida,

https://www.metro.pr/noticias/2023/02/10/desolador-panorama-ante-aumento-en-factura-de-luz/; Gobernador 

reitera ante la Junta de Supervisión pedido para contrarrestar aumento en costo de combustible (Participa de la 34ta 

reunión pública del ente federal, https://www.aafaf.pr.gov/wp-content/uploads/Gov-Reiterates-OB-Req-OffsetIncrease-Fuel-Cost.pdf; Protestan contra alza de tarifas eléctricas en Puerto Rico,

https://www.telesurtv.net/news/puerto-rico-protesta-alza-tarifas-electricas-20220408-0028.html. 8 abril 2022.

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understanding of “public acceptability” by Dr. George is not based on realistic evaluations of 

public opinion, and ignores the public outcry against the Legacy Charge. 

Attribute #3: 

“Rates should effectively yield total revenue requirements under the fair return standard.” 

Dr. George never addressed the issue of a fair return for PREPA, nor provided a calculation of this 

parameter. Also, he did not provide any calculation of a fair return standard is, or a definition of 

fair return. On that issue, the seminal work of C.O. Ruggles stated:

There is no general agreement as to what is meant by fair return, but there appears 

to be a growing appreciation of the fact that public utilities should be permitted to 

earn a fair return. It is clear that a fair return would not be the same under all 

circumstances. Moreover, like a tax rate, the base upon which the return is 

computed naturally modifies the rate which would be necessary to provide a “fair 

return.” Leaving for later discussion what constitutes a proper base upon which the 

rate of return should be calculated, consideration may be given, first, to several 

factors which affect the cost of conducting a public utility, or which constitute 

elements of risk which must be given attention in determining fair return. 11 

Moreover, the George Report is only focused on residential sectors. However, PREPA’s total 

revenues are not only sourced from the residential sectors. They also come from industrial, 

commercial, agriculture and government sectors, including central government, municipalities,

and federal agencies. Although the residential sector groups the largest percentage of PREPA

customers (91.46%), is not the largest consumer of kWh. The largest consumers are commercial 

and industrial sectors, which account for 55.75% of total consumption of kWh. Residential

customers account for 42.24%. On the other hand, industrial and commercial account for 58% of 

total revenues, while residential only accounts for 39%.12

Table 1

Note 1 Generación, consumo, costo, ingresos y clientes del sistema eléctrico de Puerto Rico - Datasets - Indicadores.PR. 

https://indicadores.pr/dataset/generacion-consumo-costo-ingresos-y-clientes-del-sistema-electrico-de-puerto-rico

11 C. O. Ruggles, Problems of Public-Utility Rate Regulation and Fair Return. Journal of Political Economy, Vol. 32, No. 

5 (Oct. 1924), pp. 543-566. 

12 Generación, consumo, costo, ingresos y clientes del sistema eléctrico de Puerto Rico - Datasets - Indicadores.PR. 

https://indicadores.pr/dataset/generacion-consumo-costo-ingresos-y-clientes-del-sistema-electrico-de-puerto-rico.

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Attribute #4: 

 

“Rates should provide revenue stability from year to year.” 

 

Dr. George did not make any comments to support the fact that this attribute is met.

Table 2

Note 2 Generación, consumo, costo, ingresos y clientes del sistema eléctrico de Puerto Rico - Datasets - Indicadores.PR. 

https://indicadores.pr/dataset/generacion-consumo-costo-ingresos-y-clientes-del-sistema-electrico-de-puerto-rico

Table 2 depicts the coefficient of variation (“CV”). CV, as a statistical measure, shows the relative 

variability of data. The CV is calculated as the ratio of the standard deviation (found in the 

numerator) to the mean or average (found in the denominator). It shows the extent of variability 

in relation to the mean of the total population. The CV is useful to understand the level of revenue

instability. In Table 2, we can see that the CV for total revenues between 2020 and 2023 was

20.14%, which is higher than the CV for consumption, cost per kWh and Year Bill Paid of energy. 

Therefore, the degree of variation for revenues is high and the attribute of revenue stability is not 

validated by the most basic information.

Attributes #6 and #7: 

 “Rates should apportion the total cost of service fairly among different consumers.” 

 “Rate relationships should avoid ‘undue discrimination.’” 

These attributes will be assessed jointly in the following analysis. 

According to Dr. George, the Revenue Envelope Model, which fixed the upper bound at 6%, is 

affordable for residential customers in Puerto Rico without causing any decrease in welfare levels. 

The Oversight Board relied on the Revenue Envelope Model to estimate the upper 

bound of incremental revenues—in addition to the revenue requirements defined 

in the 2022 Fiscal Plan—while remaining within certain economic and societal 

limitations. This upper bound on revenue is known as the “Revenue Envelope.” The 

Revenue Envelope Model estimates the fixed and volumetric charges required to 

generate the Revenue Envelope over a 28-year forecast period (the same period 

used in the 2022 Fiscal Plan). To estimate the Revenue Envelope, the Oversight 

Board took into consideration a number of factors, including customers’ willingness 

and ability to pay higher rates, and the future sustainability of PREPA as a going 

concern. The Revenue Envelope represents the upper bound on revenue which 

Year Natural Consumption kWh x customer Total revenue PREPA from residents Cost per kWh (cents) Year Bill Paid

2020 5,073 $1,306.61 19.51 $989.54

2021 5,167 $1,473.60 21.02 $1,086.10

2022 4,770 $1,823.22 28.05 $1,337.95

2023 (Jan-Feb) 4,716 $1,147.26 22.79 $1,075.04

Deviation Standard 222.17 289.51 3.72 150.20

Average 4,932 1,438 23 1,122

Coef Variation 4.51% 20.14% 16.30% 13.38%

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could reasonably be available for debt repayment, capital expenditures, and other 

prudent PREPA expenses. (emphasis added). 13

However, it should be noted that the George Report did not depict any survey, or comprehensive 

study to support the willingness or ability of customers to pay the rate hikes. Dr. George simply

assumes this factor when it is of such paramount importance. There is no analysis of cost of living, 

poverty levels, geographical differences amongst customers, nor other factors that should have 

been considered. The FOMB used a threshold payment of 6% share of wallet (“SOW”) of Median 

Household Income. If the 2021 Median Household Income is $21,967, then an upper bound of 

incremental is $1,318. For 2024 (expected year for Legacy Charge start), if projected median 

income is $24,000 (plus 9.3% inflation value), the upper bound is $1,440.

Regarding the median household income in Puerto Rico, in comparison to the states of the United 

States, Dr. George stated: “Moreover, the Census Bureau noted that household income reporting 

in the 2020 Survey may include non-recurring federal income support (e.g., COVID relief and 

stimulus payments), which would tend to inflate household incomes.”14 However, the Median 

Household Income is closely related to the poverty level threshold of 2021 and 2022. 

Table 3

Year Median Household Income Puerto Rico Poverty Level Threshold

2021 $21,967 $21,811

2024 $24,000 a/ $23,842 a/

Note 3 .a/ FOMB inflated 2021 by a 9.255%. Same rate of inflation is applied to Poverty Level. 

Table 4

13 George Declaration, ¶ 32.

14 Ibid., ¶ 37 f.n. 32.

Poverty Thresholds for 2022 by Size of Family and Number of Related Children Under 18 Years

(In dollars)

 None One Two Three Four Five Six Seven Eight or 

more

One person (unrelated individual):

Under 65 years............................. 15,225

65 years and over......................... 14,036

Two people:

Householder under 65 years.......... 19,597 20,172

Householder 65 years and over...... 17,689 20,095

Three people.................................... 22,892 23,556 23,578

Four people..................................... 30,186 30,679 29,678 29,782

Five people...................................... 36,402 36,932 35,801 34,926 34,391

Six people........................................ 41,869 42,035 41,169 40,339 39,104 38,373

Seven people................................... 48,176 48,477 47,440 46,717 45,371 43,800 42,076

Eight people..................................... 53,881 54,357 53,378 52,521 51,304 49,760 48,153 47,745

Nine people or more......................... 64,815 65,129 64,263 63,536 62,342 60,699 59,213 58,845 56,578

Source: U.S. Census Bureau, 2023.

Size of family unit

Related children under 18 years

Note: The source of the weighted average thresholds is the 2023 Current Population Survey Annual Social and Economic Supplement (CPS ASEC).

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Table 5

Even under the Plan of Adjustment, the Legacy Charge will only be applied to around 54% of 

PREPA’s residential customers. This is because PREPA already has subsidized residential customers 

that are exempt from most of the Legacy Charge and those residential customers under the 

Commonwealth’s Healthcare Programs are also projected to be exempt. Thus, approximately half 

of residential customers will have to finance the incremental value of the Legacy Charge, and this 

is over 700,000 households. These households have been hit by higher costs of living vis a vismany 

locations in the United States; as well as the impact of Hurricanes Irma, María (2017) and recently 

Fiona (2022); Earthquakes; and other calamities. 

The ratio of average energy bill relative to median household income in Puerto Rico is higher than 

any state of United States. This ratio for 2021 was 4.9%; for 2022 was 5.9%; for 2023 was 4.6%;

and for 2024, it is 5.0%. Meanwhile, the highest ratios amongst the states are in Mississippi with 

3.5%; West Virginia with 3.3% and Alabama with 3.1%. See Table 9. 

FOMB and Dr. George base their assumptions on the idea that Puerto Rico’s economy is 

homogeneous, meaning that all the economic sectors, families, and households are under a similar 

median income, level of wealth, population size and structure, a ratio savings to income, federal 

social welfare payments,without highly unequal income and wealth distribution, employment, and 

so on. The analysis on Table 1 (page 12); Table 3 (page 17) and Table 4 (page 22) of the George 

Report shows that median household income and the 6% of SOW are similar for all households 

residing at each municipality. This is one of the great pitfalls of the analysis, it constitutes a big

fallacy.

The level of economic activity and income is highly concentrated in a few high-income level and 

metropolitan location sites. Table 6 shows that five (5) out of the seventy-eight (78) municipalities 

have 44.5% of all establishments in Puerto Rico; generate 49.4% of all jobs; and generate 55.6% of 

total salaries. These top five municipalities compose 28.9% of Puerto Rico’s population. Regarding 

median household income, the top five municipalities accounted for 29.3% of total households but 

Poverty Thresholds for 2021 by Size of Family and Number of Related Children Under 18 Years

(In dollars)

 None One Two Three Four Five Six Seven Eight or 

more

One person (unrelated individual): 13,788

Under 65 years............................. 14,097 14,097

65 years and over......................... 12,996 12,996

Two people: 17,529

Householder under 65 years.......... 18,231 18,145 18,677

Householder 65 years and over...... 16,400 16,379 18,606

Three people.................................... 21,559 21,196 21,811 21,831

Four people..................................... 27,740 27,949 28,406 27,479 27,575

Five people...................................... 32,865 33,705 34,195 33,148 32,338 31,843

Six people........................................ 37,161 38,767 38,921 38,119 37,350 36,207 35,529

Seven people................................... 42,156 44,606 44,885 43,925 43,255 42,009 40,554 38,958

Eight people..................................... 47,093 49,888 50,329 49,423 48,629 47,503 46,073 44,585 44,207

Nine people or more......................... 56,325 60,012 60,303 59,501 58,828 57,722 56,201 54,826 54,485 52,386

Source: U.S. Census Bureau, 2022.

Weighted

average

thresholds

Size of family unit

Related children under 18 years

Note: The source of the weighted average thresholds is the 2022 Current Population Survey Annual Social and Economic Supplement (CPS ASEC).

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captured 37.1% of total income. The median household income of these top five municipalities is 

26.6% higher than the overall median household income for Puerto Rico. 

Table 6 Top five municipalities: Establishments, Employees, Total Salaries, and Population 2020

Note 4 Source: Instituto de Estadísticas.

Conversely, at the bottom level, the five municipalities are Ceiba, Vieques, Florida, Las Marías, and 

Culebra. They have 1.3% of total the population in 2020, and controlled only 0.92% of 

establishments, generated only 0.61% of jobs and generated only 0.42% of total salaries.15

Table 7 Top Five Municipalities and Median Household Income, 2021.

Note 5 Source: Median Household Income (2021 prices) and Households, U.S. Census 

Table 8

Note 6 Median Household Income (2021 prices) and Households, U.S. Census 

15 Source: Instituto de Estadísticas.

Top 5 Establishments Employees Total Salaries Population 2020

San Juan 10,975 225,806 $8,113,579,805 342,259

Guaynabo 2,483 50,079 $1,837,843,995 89,780

Bayamón 2,899 50,259 $1,349,913,914 185,187

Caguas 2,212 42,820 $1,188,635,802 127,244

Carolina 1,947 41,449 $1,136,613,232 154,815

Top 5 20,517 410,413 $13,626,586,748 899,285

Rest PR 25,598 421,077 $10,899,422,817 2,212,589

Total PR 46,115 831,490 $24,526,009,565 3,111,874

% total Top 5 44.5% 49.4% 55.6% 28.9%

Col. A Col. B Col. C

Top 5 

Households, 

2017-2021

Median Household 

Income 2021 prices

Total Household 

Income

San Juan 142,829 $24,347 $3,477,457,663

Carolina 61,112 $30,678 $1,874,793,936

Bayamón 66,689 $27,812 $1,854,754,468

Caguas 48,226 $27,062 $1,305,092,012

Guaynabo 31,429 $39,176 $1,231,262,504

Sub-Total 350,285 $27,816 $9,743,360,583

Total PR 1,195,195 $21,967 $26,254,848,565

% of Total 29.3% 126.6% 37.1%

Municipios % of Total Average income Average Bill Paid Monthly Bill $ % Cost Energy/MHI

$14,000 $19,999 23 29.5% $17,810 $1,319 $110 7.4%

$20,000 $23,999 35 44.9% $21,880 $1,422 $118 6.5%

$24,000 $29,999 13 16.7% $26,354 $1,841 $153 7.0%

$30,000 over 7 9.0% $35,106 $2,115 $176 6.0%

78 100.0% $24,000 $1,614 $135 6.7%

Median HH Income Classes

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 12 of 30
Table 10 shows the median household income and the cost of kWh paid per household in a given 

municipality. It is clear that Puerto Rico pays a higher cost of kWh relative to median income than 

any of the states. However, in many municipalities, the cost of kWh relative to median income 

exceeded the 6% ratio. A total of fifty-six (56) out of the seventy-eight (78) municipalities have a 

cost of kWh relative to median income over the ratio of 6% already. The cost of electricity is high, 

not only for the residential sector, but also for industrial and commercial. 

Table11 classified the municipalities by median household income at 2024 (inflated by a 9.1% 

increase since 2021), average income, cost of kWh by year and month, and percentage of the cost 

of energy relative to average median income. Low-income municipalities paid higher energy bills 

than the those classified at the high-level of income. For instance, the twenty-three (23) 

municipalities at the median income level of $14,000 to $19,999, pay $110.00. This constitutes 

7.4% of income. On the other hand, those municipalities ranked at the top seven (7), with a median 

income of $30,000 and over, pay $176.00. This constitutes 6% of income. Meanwhile, outliers such 

as Vieques and Culebra exhibit higher percentages probably due to their role induced by the 

economy of visitors, in which, the consumption of energy is relatively high due to the consumption 

of non-residents. Such situations result in a spread value that ranges from 15.9% of income in 

Vieques to 3.4% of income in Maricao.

Dr. George and the FOMB fail to understand that Puerto Rico is heterogenous. Its population has 

different incomes and energy payments; it deviates from the $24,000 median income and SOW of 

6% or a $120 monthly payment as an upper bound of cash which can reasonably be made available, 

according to them. However, Tables 10 and 11 show a different story when income distribution is 

taken into account. 

This analysis shows that the Legacy Charge creates an unduly discriminatory rate, which burdens 

a class of residential customers with the biggest portion of the total cost of service, on top of 

double digit cost of living inflation, especially in food and gas prices and other sources of energy. 

While the intent to exempt low income sectors is admirable, the result is overwhelmingly 

prejudicial to the non-exempt customers. 

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 13 of 30
Table 9 Ratio of Median Household Income by State relative to Average Annual Bill kWh($)

Note 7 Source: U.S. Census

State MHI Average Yearly Bill % of

2021 ($) MHI

Mississippi $46,637 $1,624 3.5%

West Virginia $46,836 $1,554 3.3%

Alabama $56,929 $1,773 3.1%

Arkansas $50,784 $1,485 2.9%

Louisiana $57,206 $1,576 2.8%

Kentucky $55,629 $1,496 2.7%

South Carolina $62,542 $1,664 2.7%

Florida $59,734 $1,565 2.6%

Georgia $61,497 $1,609 2.6%

Hawaii $82,199 $2,134 2.6%

Tennessee $62,166 $1,571 2.5%

Oklahoma $60,096 $1,436 2.4%

Texas $67,404 $1,590 2.4%

Connecticut $80,958 $1,875 2.3%

North Carolina $62,891 $1,444 2.3%

Missouri $63,594 $1,423 2.2%

Arizona $70,821 $1,577 2.2%

Michigan $64,488 $1,410 2.2%

Indiana $70,190 $1,518 2.2%

Ohio $62,689 $1,347 2.1%

Rhode Island $74,982 $1,565 2.1%

Delaware $68,687 $1,427 2.1%

Nevada $64,340 $1,322 2.1%

South Dakota $73,893 $1,494 2.0%

Alaska $81,133 $1,607 2.0%

North Dakota $68,882 $1,355 2.0%

New Mexico $53,463 $1,048 2.0%

Virginia $80,268 $1,570 2.0%

Pennsylvania $72,627 $1,405 1.9%

New York $72,920 $1,400 1.9%

Massachusetts $86,566 $1,637 1.9%

Kansas $75,979 $1,386 1.8%

California $81,575 $1,484 1.8%

Iowa $72,429 $1,315 1.8%

Montana $64,999 $1,174 1.8%

Vermont $76,079 $1,310 1.7%

Wisconsin $69,943 $1,202 1.7%

New Hampshire $88,841 $1,503 1.7%

Maine $71,139 $1,193 1.7%

Nebraska $78,109 $1,296 1.7%

Wyoming $71,052 $1,162 1.6%

Maryland $97,332 $1,532 1.6%

Minnesota $80,441 $1,257 1.6%

Oregon $81,855 $1,277 1.6%

Idaho $76,918 $1,172 1.5%

New Jersey $88,559 $1,348 1.5%

Illinois $79,253 $1,151 1.5%

Washington $87,648 $1,194 1.4%

Colorado $84,954 $1,104 1.3%

District of Columbia $90,640 $1,109 1.2%

Utah $87,649 $970 1.1%

Puerto Rico MHI Average Yearly Bill % of

2021 ($) MHI

2021 $21,967 $1,086 4.9%

2022 $22,648 $1,338 5.9%

2023 $23,350 $1,075 4.6%

2024 $24,000 $1,209 5.0%

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 14 of 30
Table 10 Ratio of Median Household Income to Cost per kWh 2024 (Projection)

Note 8 Source: U.S. Census. The Median Household Income in 2024 is the value of 2021 inflated by 3.1% per year, according to 

the methodology performed by the FOMB.

Median Household 

Income 2024 prices

Cost kWh 2024 % Cost/MHHI

1 Vieques $16,325 $2,593 15.9%

2 Culebra $27,427 $3,803 13.9%

3 Arroyo $15,966 $1,465 9.2%

4 Guánica $14,046 $1,237 8.8%

5 Cabo Rojo $20,301 $1,786 8.8%

6 Dorado $32,497 $2,819 8.7%

7 Lajas $17,036 $1,477 8.7%

8 Humacao $24,507 $2,105 8.6%

9 Comerío $16,023 $1,370 8.5%

10 Hormigueros $20,197 $1,653 8.2%

11 Ceiba $22,668 $1,823 8.0%

12 Mayagüez $16,936 $1,357 8.0%

13 Isabela $18,708 $1,493 8.0%

14 Barceloneta $20,814 $1,659 8.0%

15 Ponce $19,389 $1,542 8.0%

16 Naguabo $20,116 $1,553 7.7%

17 Río Grande $25,870 $1,988 7.7%

18 Cataño $21,948 $1,677 7.6%

19 Fajardo $23,709 $1,810 7.6%

20 Salinas $20,281 $1,539 7.6%

21 Luquillo $24,272 $1,837 7.6%

22 Santa Isabel $22,708 $1,699 7.5%

23 Guayama $19,464 $1,447 7.4%

24 Yauco $17,966 $1,336 7.4%

25 Patillas $19,429 $1,439 7.4%

26 Aguadilla $18,508 $1,360 7.3%

27 Manatí $21,225 $1,530 7.2%

28 Naranjito $20,929 $1,497 7.2%

29 Vega Alta $23,848 $1,682 7.1%

30 Arecibo $21,098 $1,487 7.0%

31 Sabana Grande $20,602 $1,435 7.0%

32 Peñuelas $19,800 $1,371 6.9%

33 Vega Baja $23,497 $1,619 6.9%

34 Juana Díaz $23,402 $1,611 6.9%

35 San Germán $18,018 $1,237 6.9%

36 San Juan $26,600 $1,821 6.8%

Total PR $24,000 $1,614 6.7%

37 Rincón $27,034 $1,817 6.7%

38 Corozal $21,070 $1,415 6.7%

39 Aguada $20,467 $1,374 6.7%

40 San Sebastián $18,368 $1,218 6.6%

41 Coamo $21,050 $1,379 6.6%

42 Quebradillas $20,701 $1,354 6.5%

43 Guaynabo $42,802 $2,755 6.4%

44 Las Marías $16,774 $1,065 6.3%

45 Canóvanas $25,693 $1,629 6.3%

46 Juncos $24,345 $1,541 6.3%

47 Camuy $21,572 $1,350 6.3%

48 Orocovis $17,084 $1,063 6.2%

49 Toa Alta $30,698 $1,898 6.2%

50 Yabucoa $18,865 $1,165 6.2%

51 Moca $19,322 $1,183 6.1%

52 Guayanilla $20,784 $1,267 6.1%

53 Bayamón $30,386 $1,848 6.1%

54 Utuado $17,275 $1,050 6.1%

55 San Lorenzo $21,129 $1,270 6.0%

56 Las Piedras $26,730 $1,592 6.0%

57 Añasco $23,150 $1,367 5.9%

58 Villalba $22,640 $1,318 5.8%

59 Ciales $20,747 $1,188 5.7%

60 Hatillo $22,894 $1,306 5.7%

61 Morovis $23,597 $1,339 5.7%

62 Toa Baja $29,048 $1,637 5.6%

63 Adjuntas $16,732 $938 5.6%

64 Caguas $29,567 $1,647 5.6%

65 Carolina $33,517 $1,816 5.4%

66 Barranquitas $22,168 $1,190 5.4%

67 Florida $23,476 $1,255 5.3%

68 Maunabo $23,684 $1,255 5.3%

69 Loíza $21,349 $1,128 5.3%

70 Jayuya $18,333 $967 5.3%

71 Cidra $25,486 $1,329 5.2%

72 Lares $19,261 $965 5.0%

73 Aguas Buenas $23,866 $1,184 5.0%

74 Gurabo $38,753 $1,897 4.9%

75 Trujillo Alto $37,090 $1,771 4.8%

76 Cayey $26,028 $1,192 4.6%

77 Aibonito $23,095 $1,045 4.5%

78 Maricao $21,002 $709 3.4%

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 15 of 30
Table 11 Ratio of Median Household Income to Cost per kWh 2024 (Projection) Ranked by Median Household Income

Municipality

Median Household 

Income 2024 prices 

(MHHI) a/

Cost kWh 2024, year 

b/ Monthly Paid % Cost/MHHI

1 Guaynabo $42,802 $2,755 $230 6.4%

2 Gurabo $38,753 $1,897 $158 4.9%

3 Trujillo Alto $37,090 $1,771 $148 4.8%

4 Carolina $33,517 $1,816 $151 5.4%

5 Dorado $32,497 $2,819 $235 8.7%

6 Toa Alta $30,698 $1,898 $158 6.2%

7 Bayamón $30,386 $1,848 $154 6.1%

8 Caguas $29,567 $1,647 $137 5.6%

9 Toa Baja $29,048 $1,637 $136 5.6%

10 Culebra $27,427 $3,803 $317 13.9%

11 Rincón $27,034 $1,817 $151 6.7%

12 Las Piedras $26,730 $1,592 $133 6.0%

13 San Juan $26,600 $1,821 $152 6.8%

14 Cayey $26,028 $1,192 $99 4.6%

15 Río Grande $25,870 $1,988 $166 7.7%

16 Canóvanas $25,693 $1,629 $136 6.3%

17 Cidra $25,486 $1,329 $111 5.2%

18 Humacao $24,507 $2,105 $175 8.6%

19 Juncos $24,345 $1,541 $128 6.3%

20 Luquillo $24,272 $1,837 $153 7.6%

Total PR $24,000 $1,614 $135 6.7%

21 Aguas Buenas $23,866 $1,184 $99 5.0%

22 Vega Alta $23,848 $1,682 $140 7.1%

23 Fajardo $23,709 $1,810 $151 7.6%

24 Maunabo $23,684 $1,255 $105 5.3%

25 Morovis $23,597 $1,339 $112 5.7%

26 Vega Baja $23,497 $1,619 $135 6.9%

27 Florida $23,476 $1,255 $105 5.3%

28 Juana Díaz $23,402 $1,611 $134 6.9%

29 Añasco $23,150 $1,367 $114 5.9%

30 Aibonito $23,095 $1,045 $87 4.5%

31 Hatillo $22,894 $1,306 $109 5.7%

32 Santa Isabel $22,708 $1,699 $142 7.5%

33 Ceiba $22,668 $1,823 $152 8.0%

34 Villalba $22,640 $1,318 $110 5.8%

35 Barranquitas $22,168 $1,190 $99 5.4%

36 Cataño $21,948 $1,677 $140 7.6%

37 Camuy $21,572 $1,350 $112 6.3%

38 Loíza $21,349 $1,128 $94 5.3%

39 Manatí $21,225 $1,530 $128 7.2%

40 San Lorenzo $21,129 $1,270 $106 6.0%

41 Arecibo $21,098 $1,487 $124 7.0%

42 Corozal $21,070 $1,415 $118 6.7%

43 Coamo $21,050 $1,379 $115 6.6%

44 Maricao $21,002 $709 $59 3.4%

45 Naranjito $20,929 $1,497 $125 7.2%

46 Barceloneta $20,814 $1,659 $138 8.0%

47 Guayanilla $20,784 $1,267 $106 6.1%

48 Ciales $20,747 $1,188 $99 5.7%

49 Quebradillas $20,701 $1,354 $113 6.5%

50 Sabana Grande $20,602 $1,435 $120 7.0%

51 Aguada $20,467 $1,374 $115 6.7%

52 Cabo Rojo $20,301 $1,786 $149 8.8%

53 Salinas $20,281 $1,539 $128 7.6%

54 Hormigueros $20,197 $1,653 $138 8.2%

55 Naguabo $20,116 $1,553 $129 7.7%

56 Peñuelas $19,800 $1,371 $114 6.9%

57 Guayama $19,464 $1,447 $121 7.4%

58 Patillas $19,429 $1,439 $120 7.4%

59 Ponce $19,389 $1,542 $129 8.0%

60 Moca $19,322 $1,183 $99 6.1%

61 Lares $19,261 $965 $80 5.0%

62 Yabucoa $18,865 $1,165 $97 6.2%

63 Isabela $18,708 $1,493 $124 8.0%

64 Aguadilla $18,508 $1,360 $113 7.3%

65 San Sebastián $18,368 $1,218 $101 6.6%

66 Jayuya $18,333 $967 $81 5.3%

67 San Germán $18,018 $1,237 $103 6.9%

68 Yauco $17,966 $1,336 $111 7.4%

69 Utuado $17,275 $1,050 $88 6.1%

70 Orocovis $17,084 $1,063 $89 6.2%

71 Lajas $17,036 $1,477 $123 8.7%

72 Mayagüez $16,936 $1,357 $113 8.0%

73 Las Marías $16,774 $1,065 $89 6.3%

74 Adjuntas $16,732 $938 $78 5.6%

75 Vieques $16,325 $2,593 $216 15.9%

76 Comerío $16,023 $1,370 $114 8.5%

77 Arroyo $15,966 $1,465 $122 9.2%

78 Guánica $14,046 $1,237 $103 8.8%

a/ inflating 9.025% the value of 2021. Same procedure of FOMB

b/ equals the consumption of FY 2022 times cost kWh of $0.2806

Source LUMA; 

Generación, consumo, costo, ingresos y clientes del sistema eléctrico de Puerto Rico - Datasets - Indicadores.PR

https://indicadores.pr/dataset/generacion-consumo-costo-ingresos-y-clientes-del-sistema-electrico-de-puerto-rico. 

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 16 of 30
Dr. George is of the opinion that “revenue generated from the Legacy Charge represents the upper 

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

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

among other requirements.”

16

While PREPA’s revenues are important for the cash flow of the utility, PREPA also has an important 

role in Puerto Rico’s economy and its potential recovery towards sustainable economic growth. It 

is important to understand that the Legacy Charge has a harmful effect over all sectors. In the case 

of the Legacy Charge, if imposed, it will hurt the business sector, affect the welfare of local families,

and increase the cost of living, among other depressive effects in a stagnated economy, such as 

Puerto Rico’s. There is plenty of literature supporting the thesis that higher energy prices have 

perverse effects on economic growth and competitiveness. 17 The interindustry effects of the 

Legacy Charge should also be addressed because of how Puerto Rico’s economic sector is 

structured. The harmful effects of rate hikes are transmitted throughout sectors. 

Meanwhile, another issue is the decline in population level, due to low fertility and childbirth rates, 

coupled with net emigration. The information in Table 14 shows that the total level of the 

population has been decreasing since 2001, when it reached the value of 3.8 million inhabitants. 

In fact, it is observed that from 1961 to 2018, net migration has been negative, implying that 

emigration exceeds immigration. If the total level of the population had consistent increases, it was 

explained partially by natural growth, that is, more live births than deaths. Using an econometric 

model, we test the residential customer forecast with the following equation:

Resident customers = f (Resident Customers (-1), Trend, Trend 2 ) 

Where:

Dependent variable: Resident customers (number)

Independent variables: Trend values and Resident customers lagged by one year.

16 George Report, ¶ 14.

17 Lesson For EPA: Higher Energy Prices Harm People, https://www.instituteforenergyresearch.org/the-grid/lesson-forepa-higher-energy-prices-harm-people/; Lessons For The Energy Transition From The 2021 Energy Crisis, 

https://www.weforum.org/agenda/2021/10/energy-transition-risks-crisis/; Impacto De Los Precios De La Energía En 

La Competitividad Industrial Europea, https://www.totalenergies.es/es/pymes/blog/impacto-precios-electricidadenergia-competitividad-industriaeuropea#:~:text=En%20conclusi%C3%B3n%2C%20la%20fiscalidad%20de%20los%20precios%20de,impacto%20de%

20dichos%20precios%20en%20sus%20costes%20productivos; El encarecimiento de la energía y su impacto en la 

industria manufacturera: ¿a qué sectores está afectando más?, https://www.caixabankresearch.com/es/analisissectorial/industria/encarecimiento-energia-y-su-impacto-industria-manufacturera-sectores; La Evolución De Los 

Costes Energéticos Y Su Efecto En La Competitividad De La Industria Española, https://academicae.unavarra.es/handle/2454/40751. See, also, José Alameda-Lozada, El Shock Petrolero de 2014: La caída de los precios 

del crudo y sus efectos en la economía de Puerto Rico Pablo-Arocena y Ana C. Diaz (2015), https://e.exam10.com/ekonomika/51363/index.html. 

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 17 of 30
The equation was performed using Dynamic OLS (DOLS) and a cointegrating procedure from EViews software. The estimated parameters are shown in Table 12. The forecast for residential 

sector customers are shown in Table 13. The forecasted value behaved at a negative trend. The 

expected value of residential customers in 2030 is near 1,261,000; and in 2040 it is 1,080,000. 

Table 12 Regression of results of Residential Customer Forecast Equation

Dependent Variable: LOG(CUSTOMER_RESIDENTIAL)

Method: Fully Modified Least Squares (FMOLS)

Sample (adjusted): 2002 2023

Included observations: 22 after adjustments

Cointegrating equation deterministics: C @TREND @TREND^2

Long-run covariance estimate (Bartlett kernel, Newey-West fixed

 bandwidth = 3.0000)

Variable Coefficient Std. Error t-Statistic Prob. 

LOG(CUSTOMER_RESIDENTIAL (-1)) 0.867562 0.240416 3.608592 0.0020

Constant 1.886205 3.370461 0.559628 0.5826

@TREND -0.003008 0.002882 -1.043765 0.3104

@TREND2 0.000119 8.84E-05 1.346987 0.1947

R-squared 0.934438 Mean dependent var 14.09804

Adjusted R-squared 0.923510 S.D. dependent var 0.022095

S.E. of regression 0.006111 Sum squared resid 0.000672

Long-run variance 9.23E-05

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

05 10 15 20 25 30 35 40 45 50

CUSTOMER_RF ± 2 S.E.

Forecast: CUSTOMER_RF

Actual: CUSTOMER_RESIDENTIAL

Forecast sample: 2000 2050

Adjusted sample: 2001 2050

Included observations: 50

Root Mean Squared Error 26878.55

Mean Absolute Error 14649.44

Mean Abs. Percent Error 1.129966

Theil Inequality Coef. 0.011030

 Bias Proportion 0.153207

 Variance Proportion 0.016675

 Covariance Proportion 0.830118

Theil U2 Coefficient 1.237265

Symmetric MAPE 1.150843

Graph 1 Regression of results of Residential Customer Forecast Equation

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 18 of 30
Table 13 Residential Customer Forecast results of Residential Customer Forecast Equation

Table 14 Macroeconomic impact of the Legacy Charge in Population Size and Residential Sector

Note 9 Elasticity values reached using Table 15 equation. 

Fiscal Year Customer Residential Fiscal Year Customer Residential

2000 1,115,350 2023 1,374,083

2001 1,235,572 2024 1,328,286

2002 1,252,650 2025 1,319,680

2003 1,269,030 2026 1,310,007

2004 1,285,573 2027 1,299,292

2005 1,303,257 2028 1,287,560

2006 1,314,808 2029 1,274,843

2007 1,317,920 2030 1,261,170

2008 1,314,010 2031 1,246,576

2009 1,323,728 2032 1,231,095

2010 1,335,147 2033 1,214,766

2011 1,340,999 2034 1,197,627

2012 1,340,458 2035 1,179,719

2013 1,353,901 2036 1,161,083

2014 1,332,681 2037 1,141,764

2015 1,327,898 2038 1,121,805

2016 1,327,651 2039 1,101,250

2017 1,335,089 2040 1,080,147

2018 1,339,951 2041 1,058,541

2019 1,344,813 2042 1,036,480

2020 1,341,733 2043 1,014,009

2021 1,349,586 2044 991,175

2022 1,364,229 2045 968,027

2046 944,609

2047 920,969

2048 897,151

2049 873,202

2050 849,164

Elasticity to Consumption Rate of Chg Consumption kWh Changes 

Explanatory Variables 2022 2040 Variables 2022: 6,875 mKWh Consumption M kWh

Customers 1.776626 1,364,229 1,080,147 -20.8% -37.0% 4,332

Population 1.169212 3,224,189 2,943,829 -8.7% -10.2% 6,176

Cost kWh (Cents $)

 Plus 1.5 a/ -0.219618 24.3 27.62 13.7% -3.0% 6,669

 Plus 2.0 a/ -0.219618 24.3 28.12 15.7% -3.5% 6,638

 Plus 2.5 a/ -0.219618 24.3 28.62 17.8% -3.9% 6,607

a/ the forecasted cost per kWh for 2040 is 26.12 cents. See Appendix 1

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 19 of 30
Table 15 Calculation of Elasticity Value

The level of residential consumption is not only associated with the cost per kWh but also to the 

amount of customers and the population size in Puerto Rico. In fact, decreases in residential 

customers and population levels induce declines in levels of energy consumption more than the 

cost per kWh does. The analysis performed by FOMB and Dr. George skipped the effects of other 

relevant macroeconomic variables to support conclusions based upon the long-term capacity of 

the Legacy Charge to pay debt service. 

Moreover, Dr. George states in his report:

The Legacy Charge proposed by the Oversight Board was designed to generate the 

revenues available for debt repayment (“Legacy Charge Revenues”) beginning in FY 

2024 over a 35-year period, through FY 2058. Specifically, “[t]he Plan of Adjustment 

specifies that payment of the New Bonds will be funded through an increase in Net 

Revenues generated through the imposition and collection of a Legacy Charge 

added to the bills of PREPA’s customers [i.e., Legacy Charge Revenues].” (footnotes 

omitted).18

This statement is sustained by FOMB’s Legacy Charge Derivation:

The maximum volumetric charge under the Revenue Envelope calculation was 

therefore set so that the resulting electric bill would be affordable, in the first year 

of implementation, for non-exempt households with assumed income of $24,000, 

18 George Report, ¶ 33.

Dependent Variable: LOG(CONSUMO_RESIDENTIAL__MKWH_)

Method: Fully Modified Least Squares (FMOLS)

Sample (adjusted): 2001 2023

Included observations: 23 after adjustments

Cointegrating equation deterministics: C @TREND @TREND^2

Long-run covariance estimate (Bartlett kernel, Newey-West fixed bandwidth = 3.0000)

 

Variable Coefficient Std. Error t-Statistic Prob. 

LOG(CUSTOMER_RESIDENTIAL) 1.776626 0.719004 2.470954 0.0244

LOG(COST_KWH_RESIDENTIAL) -0.219618 0.056649 -3.876847 0.0012

LOG(POPULATION) 1.169212 0.455813 2.565113 0.0201

C -33.24663 9.908677 -3.355304 0.0038

@TREND -0.000557 0.00914 -0.06092 0.9521

@TREND^2 0.000195 0.000215 0.90827 0.3764

R-squared 0.691448 Mean dependent var 8.808895

Adjusted R-squared 0.600698 S.D. dependent var 0.06166

S.E. of regression 0.038963 Sum squared resid 0.025808

Long-run variance 0.000681

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 20 of 30
monthly volumetric consumption of 425 kWh, and using the rates in the 2022 Fiscal 

Plan as the baseline, where affordability is defined as a maximum total electricity 

bill not above 6% of total income. Affordability was set at 6% of total income, or 6% 

“wallet share,” because this 6% energy burden threshold is currently used in several 

mainland U.S. States as a baseline for providing support to consumers.19 (footnotes

omitted)(emphasis added).

In my direct testimony, I included my study, An Assessment of the Legacy Charge Proposed by the 

Financial Oversight and Management Board: Effects on the Puerto Rican Economy, April 2023. 

There, using six (6) equations, I demonstrated that the Legacy Charge will have a negative effect 

on the real growth of the Puerto Rican economy in the long term. Moreover, taking all 

macroeconomic variables into account, the Legacy Charge will reduce PREPA’s revenues in the long 

run. 

Table 16

Note 10 Source: Alameda, José. An Assessment of the Legacy Charge Proposed by the Federal Oversight and Management Board: 

Effects on the Puerto Rican Economy, April 2023. page 47.

Conclusions 

1. The expert witness, Dr. Glenn George, addressed the feasibility of the Legacy Charge. He stated 

that the Legacy Charge is fair and reasonable and would pay the debt service proposed by the 

FOMB easily and prudently. Dr. George shows tremendous optimism, not validated by empirical 

data, in concluding that there would be no harmful effects on the economy, and if there were

19 Exhibit P of the Disclosure Statement. 

Fiscal W/O 2.4 cents With 2.4 cents Gap 

Year Revenues to PREPA Revenues to PREPA

2023 $4,123 4,100 -$23

2024 $4,089 4,037 -$52

2025 $4,017 3,915 -$102

2026 $3,944 3,794 -$151

2027 $3,875 3,679 -$196

2028 $3,807 3,569 -$238

2029 $3,741 3,463 -$278

2030 $3,676 3,360 -$316

2031 $3,613 3,261 -$352

2032 $3,550 3,164 -$386

2033 $3,488 3,070 -$418

2034 $3,428 2,978 -$449

2035 $3,368 2,889 -$478

2036 $3,309 2,803 -$506

2037 $3,251 2,719 -$532

2038 $3,195 2,638 -$556

2039 $3,139 2,560 -$579

2040 $3,085 2,484 -$601

2041 $3,031 2,410 -$621

2042 $2,979 2,339 -$640

2043 $2,927 2,269 -$658

2044 $2,877 2,203 -$674

2045 $2,828 2,138 -$690

2046 $2,779 2,076 -$704

2047 $2,732 2,016 -$717

2048 $2,686 1,957 -$729

2049 $2,641 1,901 -$740

2050 $2,597 1,847 -$750

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 21 of 30
any, they would be minimal. Moreover, Dr. George failed to demonstrate that the Bonbright 

principles were tested or objectively assessed in the design of the Legacy Charge. Moreover, 

Rábago and Valova state that these attributes are outdated and the new technologies and 

changes in the energy sector should be considered. 

2. Nonetheless, the economy of Puerto Rico, including commercial, industrial, and residential 

sectors,will be hurt badly by such a level of rate increases. The Legacy Charge will be grounded 

in a weak and stagnated economy. Since 1996, the economy of Puerto Rico has suffered a 

secular stagnation, exhibiting a weak long run economic rate of growth. 

3. In my direct testimony, I found that taking into account many macroeconomic variables, i.e. 

Real GNP, Human Capital, Demand of energy for residential, commercial, and industrial sector, 

among others, the PREPA’s revenues will suffer in the long-run. The Legacy Charge has a 

negative effect on the real growth of the Puerto Rican economy in the long term. It will also 

affect demand for kWh in industrial sectors, inducing decreased consumption. This decrease 

translates into fewer revenues for the Commonwealth’s general fund, which risks compliance 

with the debt service obligations of the Commonwealth Plan of Adjustment. Furthermore, the 

reduction in energy demand will make PREPA’s operations unsustainable, particularly when we 

consider PREPA’s new revenue engagements through public-private partnerships, such as 

those with Luma Energy and GeneraPR.

4. Taking all macroeconomic variables together coupled with all sectors (commercial, industrial, 

and residential), as a result of the Legacy Charge, PREPA’s revenues will suffer in the long run. 

Including additional charges, PREPA’s revenues can be expected to decrease from $4,100 

million in 2023 to $2,484 million in 2040. 

5. Finally, any increase in rates would result in a cost of energy superior to the upper band of 

affordability in cost per kWh, as energy costs are already high in Puerto Rico.

I declare under penalty of perjury that the foregoing is true and correct to the best of my 

knowledge, information, and belief. 

 

 ______________________ 

 José I. Alameda Lozada, Ph.D. 

 May 15, 2023 

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 22 of 30
Table 17

CONSUMPTION BY CLASS AND MUNICIPALITY (kWh) FY 2024 HH = Household

MUNICIPIO

Consumption kWh 

2022 Cost per kWh, 2024 $ Total Costs 2024

Households, 

2017-2021

Median HH 

Income Cost year per HH % Cost/MHHI

Adjuntas 18,746,694 0.2806 $5,260,322 5,611 $15,315 $938 6.1%

Aguada 63,654,867 0.2806 $17,861,556 12,995 $18,733 $1,374 7.3%

Aguadilla 103,941,197 0.2806 $29,165,900 21,442 $16,940 $1,360 8.0%

Aguas Buenas 37,629,244 0.2806 $10,558,766 8,917 $21,844 $1,184 5.4%

Aibonito 32,632,418 0.2806 $9,156,656 8,764 $21,139 $1,045 4.9%

Añasco 43,285,966 0.2806 $12,146,042 8,883 $21,189 $1,367 6.5%

Arecibo 167,578,417 0.2806 $47,022,504 31,624 $19,311 $1,487 7.7%

Arroyo 32,083,945 0.2806 $9,002,755 6,147 $14,614 $1,465 10.0%

Barceloneta 46,402,640 0.2806 $13,020,581 7,847 $19,051 $1,659 8.7%

Barranquitas 37,574,253 0.2806 $10,543,335 8,863 $20,290 $1,190 5.9%

Bayamón 439,320,384 0.2806 $123,273,300 66,689 $27,812 $1,848 6.6%

Cabo Rojo 106,454,472 0.2806 $29,871,125 16,722 $18,581 $1,786 9.6%

Caguas 283,040,777 0.2806 $79,421,242 48,226 $27,062 $1,647 6.1%

Camuy 54,681,887 0.2806 $15,343,737 11,367 $19,745 $1,350 6.8%

Canóvanas 84,819,354 0.2806 $23,800,311 14,612 $23,517 $1,629 6.9%

Carolina 395,601,702 0.2806 $111,005,838 61,112 $30,678 $1,816 5.9%

Cataño 52,079,103 0.2806 $14,613,396 8,716 $20,089 $1,677 8.3%

Cayey 68,062,647 0.2806 $19,098,379 16,022 $23,823 $1,192 5.0%

Ceiba 26,779,275 0.2806 $7,514,265 4,123 $20,748 $1,823 8.8%

Ciales 23,800,486 0.2806 $6,678,416 5,623 $18,990 $1,188 6.3%

Cidra 63,684,320 0.2806 $17,869,820 13,447 $23,327 $1,329 5.7%

Coamo 64,023,043 0.2806 $17,964,866 13,023 $19,267 $1,379 7.2%

Comerío 25,743,390 0.2806 $7,223,595 5,274 $14,666 $1,370 9.3%

Corozal 53,540,963 0.2806 $15,023,594 10,614 $19,285 $1,415 7.3%

Culebra 6,627,765 0.2806 $1,859,751 489 $25,104 $3,803 15.1%

Dorado 118,606,902 0.2806 $33,281,097 11,807 $29,744 $2,819 9.5%

Fajardo 78,419,201 0.2806 $22,004,428 12,158 $21,701 $1,810 8.3%

Florida 19,366,793 0.2806 $5,434,322 4,331 $21,487 $1,255 5.8%

Guánica 24,324,504 0.2806 $6,825,456 5,518 $12,856 $1,237 9.6%

Guayama 72,855,805 0.2806 $20,443,339 14,127 $17,815 $1,447 8.1%

Guayanilla 28,789,853 0.2806 $8,078,433 6,375 $19,023 $1,267 6.7%

Guaynabo 308,585,292 0.2806 $86,589,033 31,429 $39,176 $2,755 7.0%

Gurabo 97,926,457 0.2806 $27,478,164 14,486 $35,470 $1,897 5.3%

Hatillo 63,447,506 0.2806 $17,803,370 13,634 $20,955 $1,306 6.2%

Hormigueros 27,586,811 0.2806 $7,740,859 4,682 $18,486 $1,653 8.9%

Humacao 133,161,227 0.2806 $37,365,040 17,749 $22,431 $2,105 9.4%

Isabela 79,001,339 0.2806 $22,167,776 14,846 $17,123 $1,493 8.7%

Jayuya 17,253,149 0.2806 $4,841,234 5,004 $16,780 $967 5.8%

Juana Díaz 87,790,160 0.2806 $24,633,919 15,287 $21,420 $1,611 7.5%

Juncos 71,734,064 0.2806 $20,128,578 13,065 $22,283 $1,541 6.9%

Lajas 40,882,911 0.2806 $11,471,745 7,765 $15,593 $1,477 9.5%

Lares 33,983,137 0.2806 $9,535,668 9,882 $17,629 $965 5.5%

Las Marías 10,225,868 0.2806 $2,869,379 2,695 $15,353 $1,065 6.9%

Las Piedras 68,458,179 0.2806 $19,209,365 12,068 $24,466 $1,592 6.5%

Loíza 35,078,152 0.2806 $9,842,929 8,727 $19,541 $1,128 5.8%

Luquillo 44,535,949 0.2806 $12,496,787 6,803 $22,216 $1,837 8.3%

Manatí 79,067,078 0.2806 $22,186,222 14,500 $19,427 $1,530 7.9%

Maricao 4,771,797 0.2806 $1,338,966 1,888 $19,223 $709 3.7%

Maunabo 17,409,541 0.2806 $4,885,117 3,891 $21,678 $1,255 5.8%

Mayagüez 141,419,871 0.2806 $39,682,416 29,241 $15,501 $1,357 8.8%

Moca 56,125,300 0.2806 $15,748,759 13,315 $17,685 $1,183 6.7%

Morovis 46,055,658 0.2806 $12,923,218 9,654 $21,598 $1,339 6.2%

Naguabo 45,155,693 0.2806 $12,670,688 8,160 $18,412 $1,553 8.4%

Naranjito 44,277,266 0.2806 $12,424,201 8,302 $19,156 $1,497 7.8%

Orocovis 25,864,707 0.2806 $7,257,637 6,828 $15,637 $1,063 6.8%

Patillas 30,090,358 0.2806 $8,443,354 5,869 $17,783 $1,439 8.1%

Peñuelas 33,002,844 0.2806 $9,260,598 6,756 $18,123 $1,371 7.6%

Ponce 285,827,331 0.2806 $80,203,149 52,008 $17,747 $1,542 8.7%

Quebradillas 39,870,983 0.2806 $11,187,798 8,261 $18,947 $1,354 7.1%

Rincón 36,928,814 0.2806 $10,362,225 5,704 $24,744 $1,817 7.3%

Río Grande 110,338,852 0.2806 $30,961,082 15,573 $23,679 $1,988 8.4%

Sabana Grande 35,120,546 0.2806 $9,854,825 6,868 $18,857 $1,435 7.6%

Salinas 53,624,964 0.2806 $15,047,165 9,778 $18,563 $1,539 8.3%

San Germán 50,599,926 0.2806 $14,198,339 11,475 $16,492 $1,237 7.5%

San Juan 926,880,740 0.2806 $260,082,736 142,829 $24,347 $1,821 7.5%

San Lorenzo 61,438,371 0.2806 $17,239,607 13,571 $19,339 $1,270 6.6%

San Sebastián 59,901,681 0.2806 $16,808,412 13,803 $16,812 $1,218 7.2%

Santa Isabel 43,946,486 0.2806 $12,331,384 7,258 $20,784 $1,699 8.2%

Toa Alta 149,176,951 0.2806 $41,859,052 22,055 $28,098 $1,898 6.8%

Toa Baja 163,376,754 0.2806 $45,843,517 28,002 $26,587 $1,637 6.2%

Trujillo Alto 151,645,885 0.2806 $42,551,835 24,022 $33,948 $1,771 5.2%

Utuado 37,850,752 0.2806 $10,620,921 10,111 $15,812 $1,050 6.6%

Vega Alta 72,804,306 0.2806 $20,428,888 12,146 $21,828 $1,682 7.7%

Vega Baja 114,252,392 0.2806 $32,059,221 19,799 $21,507 $1,619 7.5%

Vieques 21,936,613 0.2806 $6,155,414 2,374 $14,942 $2,593 17.4%

Villalba 36,750,751 0.2806 $10,312,261 7,823 $20,722 $1,318 6.4%

Yabucoa 49,411,772 0.2806 $13,864,943 11,905 $17,267 $1,165 6.7%

Yauco 56,342,806 0.2806 $15,809,791 11,836 $16,444 $1,336 8.1%

Total 6,875,070,253 0.2806 $1,929,144,713 1,195,195 $21,967 $1,614 7.3%

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 23 of 30
Appendix 

Forecasting costs per kWh for Industrial, Commercial and Residential 

Puerto Rico Energy Power Authority (PREPA) 

 

The first step relies upon the estimation of cost per kWh with and without the TC. The time 

frame considered is from historical 2000 to 2019 and forecast for 2022 to 2050. The basic 

regression equation is:

Cost –per- kWh (cents) = f (West-Texas Intermediate (2022 price), Henry Hubb Gas price (2022 

prices)).

The two independent variables are: 

• West-Texas Intermediate (2022 price); 

• Henry Hubb Gas price (2022 prices). 

Source: https://www.eia.gov/outlooks/aeo/data/browser/#/?id=62-AEO2023&cases=ref2023&sourcekey=0

The dependent variable is:

• Cost-per-kWh from PREPA per sector.

Source: https://www.aeepr.com/aeees/estadisticas.asp

In 2020, PREPA’s net generation was mainly based on oil derived fuels by 70% and natural gas by 

near 30%. Therefore, the cost equation must take into account both fuel inputs. Notwithstanding, 

in the future, this will be biased toward natural gas. Then the model will be as follow:

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 24 of 30
The equation of cost shall be tested as follows: 

• Costs per kWh (cents) = f (West-Texas Intermediate (2022 price), Henry Hubb Gas price (2022 

prices). 

• The Costs per kWh (cents) are for industrial, commercial, and residential sectors.

Each equation will be tested on the time series procedure of Cointegration Fully Modify OLS 

(FMOLS). 

Several authors have claimed that cointegration, either Dynamic OLS (DOLS) or Fully Modified OLS 

(FMOLS) are both superior to the traditional statistical OLS: (1) OLS estimates are super- consistent, 

but the t-statistic obtained without stationary, or I(0) terms are only approximately normal.

20

FMOLS is a non-parametric approach used to deal with serial correlation found at time series data. 

Dynamic OLS (DOLS) is an alternative (parametric) approach in which lags and leads are introduced 

to cope with the problem regardless of the order of integration and the existence or absence of 

cointegration. Either DOLS or FMOLS are usually preferred to the OLS estimator because they take 

care of small sample bias but also the endogeneity bias by taking the leads and lags of the firstdifferenced regressors.

The different results are shown below. These results show different scenarios about the future cost 

of kWh in the industrial, commercial, and residential sectors. 

20 Purchasing power parity-symmetry and proportionality: Evidence from 116 countries. Augustine C. Arize a, John 

Malindretos, and Dilip Ghosh. International Review of Economics and Finance.See 

https://www.sciencedirect.com/science/article/abs/pii/S1059056014001956; Exchange-Rate Volatility and Foreign 

Trade: Evidence from Thirteen LDC's. Augustine C. Arize, Thomas Osang and Daniel J. Slottje. Vol. 18, No. 1, January 

2000. Journal of Business & Economic Statistics. American Statistical Association. pp. 10-17.

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 25 of 30
Forecasting the Total Cost per kWh 

Figure 1 

5

1 0

1 5

2 0

2 5

3 0

3 5

00 05 10 15 20 25 30 35 40 45 50

COSTOKWHPRF ± 2 S.E.

Forecast: COSTOKWHPRF

Actual: COSTOKWHPR

Forecast sample: 2000 2050

Included observations: 51

Root Mean Squared Error 1.931779

Mean Absolute Error 1.507803

Mean Abs. Percent Error 8.188964

Theil Inequality Coef. 0.047344

 Bias Proportion 0.012531

 Variance Proportion 0.003570

 Covariance Proportion 0.983899

Theil U2 Coefficient 0.679073

Symmetric MAPE 8.038123

Graph 2

 

 

 

 

 

 

Dependent Variable: COSTOKWHPR

Method: Fully Modified Least Squares (FMOLS)

Date: 04/07/23 Time: 21:05

Sample (adjusted): 2001 2022

Included observations: 22 after adjustments

Cointegrating equation deterministics: C

Long-run covariance estimate (Bartlett kernel, Newey-West fixed

 bandwidth = 3.0000)

Variable Coefficient Std. Error t-Statistic Prob. 

NATURAL_GAS_AT_HENRY_HUB -1.225778 0.177695 -6.898213 0.0000

WEST_TEXAS_INTERMEDIATE_SPO... 0.206758 0.014401 14.35668 0.0000

C 12.48650 1.097984 11.37220 0.0000

R-squared 0.843837 Mean dependent var 20.06718

Adjusted R-squared 0.827399 S.D. dependent var 4.923617

S.E. of regression 2.045531 Sum squared resid 79.49977

Long-run variance 2.400682

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 26 of 30
Forecasting Commercial cost 

Figure 2

5

1 0

1 5

2 0

2 5

3 0

3 5

00 05 10 15 20 25 30 35 40 45 50

COMERCIALF ± 2 S.E.

Forecast: COMERCIALF

Actual: COMERCIAL

Forecast sample: 2000 2050

Included observations: 51

Root Mean Squared Error 1.884514

Mean Absolute Error 1.456604

Mean Abs. Percent Error 7.351025

Theil Inequality Coef. 0.044160

 Bias Proportion 0.009108

 Variance Proportion 0.002094

 Covariance Proportion 0.988798

Theil U2 Coefficient 0.640849

Symmetric MAPE 7.262969

Graph 3

 

 

 

 

 

Dependent Variable: COMERCIAL

Method: Fully Modified Least Squares (FMOLS)

Date: 04/07/23 Time: 20:48

Sample (adjusted): 2001 2022

Included observations: 22 after adjustments

Cointegrating equation deterministics: C

Long-run covariance estimate (Bartlett kernel, Newey-West fixed

 bandwidth = 3.0000)

Variable Coefficient Std. Error t-Statistic Prob. 

NATURAL_GAS_AT_HENRY_HUB -1.196160 0.151493 -7.895810 0.0000

WEST_TEXAS_INTERMEDIATE_SPO... 0.210734 0.012278 17.16364 0.0000

C 13.03520 0.936081 13.92530 0.0000

R-squared 0.852526 Mean dependent var 21.02118

Adjusted R-squared 0.837002 S.D. dependent var 5.000733

S.E. of regression 2.018947 Sum squared resid 77.44679

Long-run variance 1.744894

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 27 of 30
Forecasting Industrial cost 

Figure 3

5

1 0

1 5

2 0

2 5

3 0

3 5

00 05 10 15 20 25 30 35 40 45 50

INDUSTRIALF ± 2 S.E.

Forecast: INDUSTRIALF

Actual: INDUSTRIAL

Forecast sample: 2000 2050

Included observations: 51

Root Mean Squared Error 1.923202

Mean Absolute Error 1.487460

Mean Abs. Percent Error 8.952369

Theil Inequality Coef. 0.053574

 Bias Proportion 0.006096

 Variance Proportion 0.004157

 Covariance Proportion 0.989747

Theil U2 Coefficient 0.714220

Symmetric MAPE 8.856569

Graph 4

 

 

 

 

 

 

Dependent Variable: INDUSTRIAL

Method: Fully Modified Least Squares (FMOLS)

Date: 04/07/23 Time: 20:45

Sample (adjusted): 2001 2022

Included observations: 22 after adjustments

Cointegrating equation deterministics: C

Long-run covariance estimate (Bartlett kernel, Newey-West fixed

 bandwidth = 3.0000)

Variable Coefficient Std. Error t-Statistic Prob. 

WEST_TEXAS_INTERMEDIATE_SPO... 0.186880 0.015584 11.99181 0.0000

NATURAL_GAS_AT_HENRY_HUB -1.197609 0.192285 -6.228304 0.0000

C 11.14808 1.188136 9.382831 0.0000

R-squared 0.812453 Mean dependent var 17.63286

Adjusted R-squared 0.792711 S.D. dependent var 4.529738

S.E. of regression 2.062345 Sum squared resid 80.81207

Long-run variance 2.811089

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 28 of 30
Forecasting Residential cost 

Figure 4

5

1 0

1 5

2 0

2 5

3 0

3 5

00 05 10 15 20 25 30 35 40 45 50

RESIDENCIAF ± 2 S.E.

Forecast: RESIDENCIAF

Actual: RESIDENCIAL

Forecast sample: 2000 2050

Included observations: 51

Root Mean Squared Error 2.024466

Mean Absolute Error 1.593914

Mean Abs. Percent Error 9.132959

Theil Inequality Coef. 0.051109

 Bias Proportion 0.016832

 Variance Proportion 0.008449

 Covariance Proportion 0.974719

Theil U2 Coefficient 0.688712

Symmetric MAPE 8.870747

Graph 5

Dependent Variable: RESIDENCIAL

Method: Fully Modified Least Squares (FMOLS)

Date: 04/07/23 Time: 20:51

Sample (adjusted): 2001 2022

Included observations: 22 after adjustments

Cointegrating equation deterministics: C

Long-run covariance estimate (Bartlett kernel, Newey-West fixed

 bandwidth = 3.0000)

Variable Coefficient Std. Error t-Statistic Prob. 

NATURAL_GAS_AT_HENRY_HUB -1.123928 0.195472 -5.749810 0.0000

WEST_TEXAS_INTERMEDIATE_SPO... 0.204053 0.015842 12.88026 0.0000

C 11.61968 1.207830 9.620294 0.0000

R-squared 0.828398 Mean dependent var 19.46130

Adjusted R-squared 0.810334 S.D. dependent var 4.861562

S.E. of regression 2.117240 Sum squared resid 85.17140

Long-run variance 2.905054

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 29 of 30
Table 18 Forecast Cost per kWh in Puerto Rico (cents of a dollar)

Note 11 The standard error is close to 2.0. Estimates should be within ± 4 cents.

Fiscal Years Total Commercial Industrial Residential

Cost kWh Cost kWh Cost kWh Cost kWh

2023 23.77 24.81 20.87 23.20

2024 26.34 27.38 23.31 25.64

2025 25.83 26.82 22.90 25.09

2026 26.36 27.33 23.41 25.57

2027 26.67 27.65 23.72 25.87

2028 26.89 27.86 23.92 26.08

2029 26.96 27.93 23.97 26.14

2030 26.94 27.92 23.95 26.14

2031 26.90 27.89 23.90 26.10

2032 26.85 27.85 23.85 26.08

2033 26.69 27.69 23.68 25.93

2034 26.64 27.65 23.62 25.89

2035 26.59 27.60 23.56 25.85

2036 26.74 27.76 23.70 26.00

2037 26.81 27.83 23.76 26.08

2038 26.73 27.76 23.67 26.01

2039 26.93 27.96 23.87 26.20

2040 26.84 27.87 23.77 26.12

2041 26.84 27.88 23.76 26.13

2042 26.94 27.98 23.85 26.23

2043 27.10 28.14 24.00 26.38

2044 27.23 28.27 24.12 26.51

2045 27.31 28.35 24.19 26.58

2046 27.46 28.51 24.33 26.73

2047 27.60 28.64 24.46 26.86

2048 27.77 28.81 24.61 27.03

2049 28.00 29.04 24.83 27.25

2050 28.06 29.11 24.89 27.31

CONFIDENTIAL

Case:17-03283-LTS Doc#:24530-12 Filed:06/12/23 Entered:06/12/23 17:45:09 Desc:

Exhibit 12 Page 30 of 30