A federal appeals court threw a wrench this week in a plan to take Puerto Rico’s government-owned utility out of bankruptcy, in a decision that could spell higher electricity rates to come for the U.S. territory.
On Wednesday, the 1st U.S. Circuit Court of Appeals ruled that bondholders for the Puerto Rico Electric Power Authority (PREPA) had a claim to about $8.5 billion in revenue and interest from the utility — but stopped short of awarding that amount, which will be determined by a lower bench.
The decision is a win for bondholders, who had opposed a debt restructuring plan by the Financial Oversight and Management Board for Puerto Rico, which aimed to slash PREPA’s debt to $2.5 billion.
The ruling could mean higher utility rates for the people of Puerto Rico in order to satisfy potentially higher claims from PREPA’s creditors, said former oversight board member Justin Peterson, who resigned shortly before his term expired last summer in response to the board’s handling of the dispute.