Witnesses tell House subcommittee Puerto Rico’s exclusion from municipal code complicates PREPA process

Representative Jesús "Chuy" García and others asked witnesses about PREPA and Puerto Rico’s exclusion from conventional municipal bankruptcy protection.

Professor Melissa Jacoby summarized the legislative history: Congress earlier chose PROMESA, an oversight-and-exercise framework tailored to Puerto Rico’s sovereign and territorial relationship, instead of expanding chapter 9 municipal bankruptcy eligibility to Puerto Rican instrumentalities. Jacoby told the subcommittee that expanding chapter 9 eligibility to Puerto Rico’s instrumentalities would have been a more straightforward route and that PROMESA constitutes a more complex, novel structure whose components are only now being tested in litigation and restructuring proceedings.

Members expressed concern about the pace of PREPA’s restructuring, the effects on electricity rates, and the position of creditors seeking recovery against future net revenues. Witnesses said the PREPA case raises difficult policy questions about balancing creditor protections and preserving public goods, and they urged careful judicial and legislative treatment to ensure residents are not forced into unaffordable outcomes.

No specific statutory remedy was advanced at the hearing; members reiterated their interest in protecting ratepayers while resolving creditor claims.