The Puerto Rico Energy Bureau (PREB) continued its evidentiary hearings in NEPR-AP-2023-0003, Puerto Rico’s ongoing electric rate case, with a full day of testimony on December 18, 2025. The hearing focused on unresolved questions surrounding federal funding, liquidity constraints, and the interaction between ratepayer-funded capital and federal grant programs administered primarily through FEMA.
The session included testimony from representatives of LUMA Energy, Genera PR, and Puerto Rico Electric Power Authority (PREPA), as well as questioning by intervenors and the Bureau. No determinations were made during the hearing; the record reflects ongoing disputes over funding prioritization, reimbursement timing, and accountability mechanisms.
As a follow-up to prior sessions, the Bureau examined testimony related to PREPA’s ownership of hydroelectric water assets, including its role as owner of 20 of Puerto Rico’s 37 dams. Testimony addressed PREPA’s ability to sell raw water to both the Puerto Rico Aqueduct and Sewer Authority (PRASA) and AES.
Witnesses were questioned about the difference in rates charged for raw water, with testimony indicating that PRASA pays approximately $140.02 per acre-foot, while AES pays approximately $325.84 per acre-foot. Intervenors raised questions regarding whether the lower PRASA rate covers PREPA’s fixed costs, particularly in light of PREPA’s Title III bankruptcy. PREPA witnesses testified that they could not confirm whether a formal cost-of-service study had been conducted for these agreements and noted that current administrators were not involved in the original negotiations or subsequent amendments.
A significant portion of the hearing focused on the use of the “Hopefulness Matrix,” a project-ranking framework used by LUMA and Genera to assess the likelihood that capital projects will receive federal funding. Projects are ranked from 0 (ineligible) to 3 (high likelihood of federal coverage).
Intervenors and the Bureau questioned why projects ranked as 1 (eligible but not actively pursued) or even 3 (high likelihood) were still being classified as Non-Federal Capital (NFC) and therefore proposed for recovery from ratepayers. Utility witnesses testified that ratepayer funding is often requested upfront to address urgent system needs and avoid liquidity shortfalls while federal reimbursements remain pending.
LUMA witnesses testified regarding liquidity gaps arising from delays in federal reimbursement, including administrative timelines associated with proof-of-payment documentation from the Puerto Rico Treasury (Hacienda). Genera witnesses testified to a different experience, stating that their reimbursements through COR3 are typically processed more quickly, and emphasized differences in project profiles and payment structures between transmission and distribution work and generation projects.
Testimony identified multiple categories of projects that are generally ineligible for FEMA Public Assistance, including:
During questioning, witnesses explained that certain generation-related components were categorized as ineligible due to maintenance classification or prior purchase, and that assessment-only expenditures (such as preliminary studies for electromagnetic pulse hardening) do not qualify as reimbursable capital work.
A recurring theme throughout the hearing was the timing gap between capital expenditures and federal reimbursement. LUMA witnesses testified that, despite receiving approximately $1.1 billion in Working Capital Advances, reimbursement timelines—averaging over 100 days—create operational challenges. Genera witnesses countered that their reimbursement timelines are typically shorter and highlighted changes in Working Capital Advance rules requiring timely disbursement to vendors.
The Bureau also questioned the status of unallocated and administratively deactivated projects, with testimony indicating that hundreds of projects and hundreds of millions of dollars remain either reserved for contingencies or at risk of non-reimbursement due to administrative status within FEMA systems.
Hearing Examiner Scott Hempling questioned whether access to ratepayer funds could reduce incentives to aggressively pursue federal funding. Utility witnesses testified that professional responsibility and operational standards remain the primary motivators, while acknowledging that financial penalties could theoretically function as incentives.
During cross-examination of an expert witness, intervenors raised the existence of pending litigation filed by PREPA and the Public-Private Partnerships Authority challenging LUMA’s management contract. Objections were raised on grounds of speculation, and the Examiner sustained the objection, limiting testimony on the potential impact of the litigation on funding decisions.
The December 18 evidentiary hearing highlights how rate design, federal funding, and operational liquidity are tightly interconnected in Puerto Rico’s electric system. Decisions emerging from PREB’s rate case will influence not only how costs are allocated between federal sources and ratepayers, but also how quickly critical infrastructure work can proceed amid administrative and reimbursement constraints.
Because electricity rates affect residents, businesses, and the broader economy, the issues examined in this hearing extend beyond the utilities themselves. The record developed in NEPR-AP-2023-0003 will play a central role in shaping Puerto Rico’s energy transition, system reliability, and affordability in the years ahead.
