In re: PROMESA
Title III
THE FINANCIAL OVERSIGHT AND
MANAGEMENT BOARD FOR PUERTO RICO,
Debtor.1
NOTICE OF REMOVAL
To the Honorable United States District Court Judge Laura Taylor Swain:
The Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”), as fiscal
agent for the Puerto Rico Electric Power Authority (“PREPA”), pursuant to the authority granted
to it under the Enabling Act of the Fiscal Agency and Financial Advisory Authority, Act 2-2017
(“Act 2-2017”), hereby removes (the “Removal”) to the United States District Court for the District
of Puerto Rico (the “District Court”), pursuant to section 306(d)(1) of the Puerto Rico Oversight,
Management, and Economic Stability Act (“PROMESA”)2 and Rule 9027 of the Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”), made applicable in this case pursuant to
1
The last four (4) digits of PREPA’s federal tax identification number are 3747.
2
PROMESA is codified at 48 U.S.C. §§ 2101-2241.
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1. The Civil Action is a judicial action seeking, among other relief, to compel
PREPA’s compliance with two orders3 (collectively, the “Orders”) issued by the Comisión de
Energía de Puerto Rico, identified hereinafter by its English acronym as PREC (the Puerto Rico
Energy Commission), and a declaration that compelling compliance with the Orders does not
violate PROMESA. As explained more fully in section I.C below, the Civil Action involves a
demand that PREPA comply with: (1) the PREC order issued on November 17, 2017 in the matter
In re: Temporary Oversight Measures Related to the Procurement and Management of Restoration
Services by PREPA, Case No. CEPR-MI-2017-0008 (the “Procurement Order”); and (2) the PREC
order issued on the morning of March 5, 2018 in the matter In re: Puerto Rico Electric Power
Authority’s Fiscal Plan, Case No. CEPR-IN-2018-001 (the “Fiscal Plan Order”). In addition to
violating Puerto Rico law, the Orders directly invade the authority of the Oversight Board over
fiscal and budgetary matters relating to PREPA under PROMESA sections 201-205, 48 U.S.C. §§
2141-2145, and infringe upon the authority granted by Act 2-2017 to AAFAF as the exclusive
supervision and oversight of any Fiscal Plan pursuant to PROMESA section 303, 48 U.S.C. §
2163.
2. PREPA is a party to the Civil Action, and AAFAF, as PREPA’s fiscal agent,
financial advisor and reporting agent under Act 2-2017, has standing to remove the Civil Action
under PROMESA section 306(d)(1), 48 U.S.C. § 2166(d)(1). The Civil Action presents challenges
to the scope of the Oversight Board’s authority over fiscal plans and budgets, all of which are
3
True and correct copies of the Rate Orders as entered in the Civil Action are included in the attachments referenced
in paragraph 20 of this Notice.
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subject to Oversight Board review and approval under PROMESA sections 201 and 202, 48 U.S.C.
§§ 2141, 2142, and seeks a declaration from the Local Court as to an interpretation of the limits of
PROMESA.
3. On June 30, 2016, the Oversight Board was established in accordance with
PROMESA section 101(b). On August 31, 2016, President Obama appointed the Oversight
5. Pursuant to PROMESA section 315, “[t]he Oversight Board in a case under this
title is the representative of the debtor” and “may take any action necessary on behalf of the debtor
to prosecute the case of the debtor, including filing a petition under section 304 of [PROMESA] .
. . or otherwise generally submitting filings in relation to the case with the court.”4
6. On June 29, 2017, the Oversight Board issued a restructuring certification pursuant
to PROMESA sections 104(j) and 206. On July 2, 2017, the Oversight Board filed a voluntary
petition for relief for PREPA pursuant to section 304(a) of PROMESA, commencing PREPA’s
7. Background information regarding PREPA and the commencement of this Title III
Case is contained in the Notice of Statement of Oversight Board Regarding PREPA’s Title III Case
[D.I. #2].
4
The Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), as PREPA’s
representative pursuant to PROMESA section 315(b), has authorized AAFAF to file this Notice.
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8. As the Court is aware, AAFAF previously removed certain civil actions pertaining
to PREC Rate Orders, which were the subject of judicial review, to this Court. See Instituto de
de Energía Eléctrica de P.R., Case No. KLRA201700444; Autoridad de Energia de P.R. &
de P.R., Case No. KLRA20170446, both filed in the Estado Libre Asociado de Puerto Rico
Tribunal de Apelaciones Región Judicial de San Juan-Caguas on May 30, 2017. In the Rate
Orders, PREC not only determined rates for PREPA, but also made broad rulings and issued
directives regarding the scope of its powers and authority with respect to, among other things,
PREPA’s budget and spending; these directives directly conflict with the role and undermine the
authority of the Oversight Board. Although another party to the prior Rate Case filed a motion to
remand, PREC did not join in that remand motion. PREC filed a “Response,” but did not ask this
Court to remand the civil actions to the Commonwealth Court from which it was removed.
That evening, PREC filed a Verified Adversary Complaint in this Court against the Financial
Oversight Management Board and PREPA seeking preliminary and permanent injunctive relief to
enjoin “FOMB from mandating that PREPA take substantive electricity actions without [PREC]
approval.” (the “PREC Adversary Complaint”) PREC included a Motion for Preliminary
Injunction with its papers. See P.R. Energy Comm. v. P.R. Fiscal Agency and Financial Advisory
Authority and P.R. Electric Power Auth., Case No. 18-ap-00021-LTS (D.P.R. Mar. 4, 2018).
10. The next morning, March 5, 2018, PREC entered the Fiscal Plan Order. PREC
served the Fiscal Plan Order by electronic mail at 8:52 a.m. AST. In the Fiscal Plan Order, PREC
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demanded that PREPA submit the draft Fiscal Plan that it previously had submitted to the
11. PREC was not finished. On the evening of March 5, 2018, PREC filed the Civil
Action that is the subject of this removal and served it on PREPA on March 6, 2018. The Court
of First Instance entered an Order on March 7, 2018 requiring PREPA to respond to the Civil
12. The organization and authority of PREC are established by the Puerto Rico Energy
Transformation and RELIEF Act, Act 57-2014 (“Act 57-2014”), of the Laws of Puerto Rico, as
amended by the Electric Power Authority Revitalization Act, Act 4-2016 (“Act 4-2016”).
Subsections (ll) and (nn) of Article 6.3 of Act 57-2014 provide, in pertinent part, “The Energy
Commission shall have the following powers and duties: … (ll) Sue and be sued in complaints or
causes of action in its own name against any natural or juridical person that fails to meet or
interferes with the requirements, purposes and objectives of [Act 57-2014] before the Court of
First Instance or any other administrative forum of the Commonwealth of Puerto Rico [and] …
(nn) File recourses, issue orders, and seek and grant any legal remedies that may be necessary to
enforce the provisions of this Act, as well as its rules, regulations, orders, and determinations.”5
13. The Civil Action was filed pursuant to PREC’s authorization to file a complaint
against a “person that fails to meet or interferes with the requirements” of Act 57-2014, and to
5
While Act 57-2014 was amended by Act 4-2016, the above-quoted operative language of Act 57-2014 remained
unchanged.
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14. The Orders infringe directly upon the authority of (i) the Oversight Board over
fiscal and budgetary matters relating to PREPA under PROMESA sections 201-205, 48 U.S.C.
§§2141-2145, and (ii) the Government of Puerto Rico, acting through PREPA’s board and
management to control the business and operations of PREPA and AAFAF as the fiscal agent for
PREPA pursuant to Act 2-2017, as expressly preserved in PROMESA section 303, 48 U.S.C.
§2163. The broad overreach of the Orders extends far beyond the regulatory authority of
PREC. Specifically, the Procurement Order seeks to fabricate entirely novel oversight authority
for PREC and purports to establish a process under which PREPA’s contracts for emergency
system restoration following the devastation caused by Hurricanes Irma and Maria are subject to
PREC oversight and approval. The Procurement Order directly conflicts with the Governor’s
Governor Rosselló issued Executive Order 2017-66 establishing the Office of Contract and
OCPC’s mission is to ensure compliant and efficient PREPA procurement to support the
restoration of power, recovery, and rebuilding of a stronger Puerto Rico. The process that PREC
is seeking to impose impermissibly interferes with PREPA’s procurement process and directly
15. The Fiscal Plan Order likewise seeks to illegally interpose PREC in PREPA’s
preparation and revision of its Fiscal Plan subject to the Oversight Board’s authorization pursuant
[1]
As the scope of the Orders far transcends the regulatory power of PREC, it is only through removal of the Civil
Action in its entirety that this Court can ensure that the budgetary and fiscal authority of the Oversight Board and
managerial control of the PREPA board and management are preserved in a manner that is consistent with the goals
and provisions of PROMESA.
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16. The Fiscal Plan Order also usurps the authority the Puerto Rico Legislature granted
exclusively to AAFAF under the Enabling Act. Act 2-2017 established AAFAF as the “fiscal
agent, financial advisor, and reporting agent of all entities of the Government of Puerto Rico” and
communication, and cooperation” between the Oversight Board, see § 5(a), and Puerto Rico’s
Enabling Act empowers AAFAF to “collaborate in conjunction with the Governor of Puerto Rico
and his representatives in the creation, execution, supervision, and oversight of any Fiscal Plan
. . . .” Id. § 5(b). No other government entity under either PROMESA or Puerto Rico law is
authorized as a governmental representative to engage with the Oversight Board regarding Fiscal
Plans.
17. Further, PREC in Section VII of the Civil Action Complaint seeks a declaration
that issuance of and seeking compliance with the Orders do not violate PROMESA or Article VI
18. As it is functionally impossible for PREPA to comply with the Fiscal Plan process
set forth in PROMESA and PREC’s Fiscal Plan Order, it is properly within the jurisdiction of this
Court to adjudicate the Civil Action in a manner that gives effect to the Supremacy Clause included
19. PREC has already consented to the jurisdiction of this Court by filing a Response
in the PREC Rate Case Orders removed to this Court. That case presents similar issues regarding
Orders by PREC which exceed its authority and infringe on the rights and powers of the Oversight
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20. In addition, by its attempts to interfere with the operations and authorities of the
Oversight Board, PREPA, and AAFAF, PREC has consented already to the jurisdiction of the
Court and engaged in impermissible claim splitting through its PREC Adversary Complaint.
PREC in the Rate Case Orders, the Civil Action, and the PREC Adversary Complaint relies on the
identical facts and circumstances to obtain relief that would interfere with and interpose itself into
the process created by PROMESA. By making these filings in this Court, PREC consented to the
jurisdiction of the Court and acknowledged that the Court is the proper forum for the adjudication
of the issues it raised. Further, PREC’s attempt to seek adjudication on the same facts in two fora
constitutes impermissible claim splitting as determined by the law of the First Circuit and the
District of Puerto Rico. See Barreto-Rosa v. Varona-Mendez, 470 F.3d 42 (1st Cir. 2006). Without
removal of the Civil Action, there is a significant risk that inconsistent rulings as to relevant facts
and law could occur among the actions pending in this Court and the Local Court. Thus, the Civil
Action should be removed to ensure that impermissible claim splitting and conflicting rulings do
not result.
21. In light of the facts supporting removal set forth above, this Court has original
subject matter jurisdiction under PROMESA section 306(a)(2), 48 U.S.C. § 2166(a)(2), to hear
and decide the PROMESA-related claims asserted in the Civil Action as “related to” the Title III
Case. Indeed, section 306(a)(2) embodies precisely the type of federal jurisdictional grant
referenced in Act 57-2014 for proceedings such as the Civil Action. The Civil Action does not
constitute an action to enforce the police or regulatory power of a governmental unit, except insofar
as PREC seeks to impermissibly expand its authority and interfere with the Oversight Board’s
powers and mandate under PROMESA. Accordingly, AAFAF may remove the Civil Action under
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PROMESA section 306(d)(1), 48 U.S.C. § 2166(d)(1), under the procedures established by Fed.
R. Bankr. P. 9027(a).
22. Venue for removal is proper in the District Court because the Local Court lies
23. Removal of the Civil Action is timely because this Notice is being filed within 30
days after receipt of a copy of the initial pleading setting forth the claim or cause of action sought
24. The Civil Action is and remains subject to the automatic stay imposed by section
362 of the title 11 of the United States Code, made applicable by section 301(a) of PROMESA, 48
U.S.C. §2161(a). The Civil Action does not constitute an action to enforce the police or regulatory
power of a governmental unit, except insofar as PREC seeks to impermissibly expand its authority
and interfere with the Oversight Board’s powers and mandate under PROMESA. Nothing in this
25. PREPA will promptly file a true and correct copy of this Notice with the Clerk of
26. PREPA will promptly serve a true and correct copy of this Notice of Removal upon
27. Bankruptcy Rule 9027(a)(3) requires “a statement that upon removal of the claim
or cause of action the party filing the notice does or does not consent to entry of final orders or
judgment by the bankruptcy court[.]” Fed. R. Bankr. P. 9027(a)(3). AAFAF respectfully submits
that such a statement is not necessary under the circumstances in this matter. Removal of the Civil
Action does not come within the plain meaning of Rule 9027(a)(3) in that the District Court is not
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a “bankruptcy court.” Id. Moreover, the District Court is constituted under Article III of the
United States Constitution so that there should be no question as to its authority to enter final
orders or judgment. Cf. Stern v. Marshall, 564 U.S. 462, 131 S. Ct. 2594, 2604, 180 L. Ed. 2d 475
(2011) (non-Article III bankruptcy courts may not enter final orders or judgments in certain
circumstances). Notwithstanding the foregoing, AAFAF states that it consents to entry of final
28. AAFAF files this Notice without prejudice to or waiver of its rights pursuant to
PROMESA section 305,6 and does not by this Notice provide any consent otherwise required by
V. PLEADINGS
29. Pursuant to Bankruptcy Rule 9027(a)(1), copies of all process and pleadings filed
in the Civil Action are being filed as Exhibit A. Certified translations, as applicable, of all process
and pleadings filed in the Civil Action are being filed as Exhibit B.
6
PROMESA section 305 provides:
LIMITATIONS ON JURISDICTION AND POWER OF COURT.
Subject to the limitations set forth in titles I and II of this Act, notwithstanding any provision in this title to
the contrary, unless the Oversight Board consents or the plan so provides, the court may not, by any stay,
order, or decree, in the case or otherwise, interfere with—
(1) any of the political or governmental powers of the debtor;
(2) any of the property or revenues of the debtor; or
(3) the use or enjoyment by the debtor of any income-producing property.
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By its attorneys,
/s/__Nancy A. Mitchell___________________
Nancy A. Mitchell (admitted pro hac vice)
Nathan A. Haynes (admitted pro hac vice)
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Phone: 212.801.9200
Fax : 212.801.6400
Email: mitchelln@gtlaw.com
haynes@gtlaw.com
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By its attorneys,
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Exhibit A
Demandante SOBRE:
v. SOLICITUD DE ORDEN EN
AUXILIO DE JURISDICCIÓN ANTE
AUTORIDAD DE ENERGÍA ELÉCTRICA DE INCUMPLIMIENTO CON ÓRDENES
PUERTO RICO
Demandada
AL HONORABLE TRIBUNAL:
solicita:
I. Introducción
Autoridad de Energía Eléctrica de Puerto Rico (AEE) a cumplir, con carácter de urgencia,
con las siguientes órdenes, so pena de desacato civil a su Director Ejecutivo y a cualquier
(i) Incluir en todos los contratos que otorgue, que sean de los tipos
el asunto In re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No.
Plan Fiscal que la AEE presentó ante la Junta de Supervisión Fiscal (“JSF”) el
Rama Ejecutiva de Puerto Rico con personalidad jurídica propia, altamente especializada
e independiente, creada por la Ley 57-2014, según enmendada, conocida como la Ley de
reglamentar el sector eléctrico en Puerto Rico. A tenor con la citada Ley 57-2014, la
controversias sobre ese sector, y hacer cumplir la política pública energética de Puerto
Rico. En apretada síntesis, la misión principal de la Comisión es lograr que Puerto Rico
tenga un sistema eléctrico confiable, eficiente y transparente, que provea servicio eléctrico
a precios razonables. Desde luego, una de las entidades sujetas a la regulación y órdenes
de la Comisión es la AEE.
Entre los amplios poderes delegados a la Comisión bajo la Ley 57-2014 están:
con las compañías de servicio eléctrico, así como toda transacción, acción u
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(b);
6.3 (d);
interés público y cumplan con los parámetros que establezca esta Comisión
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• “Aprobar y revisar, según fuere aplicable, modificar las tarifas o cargos que
(w);
para alcanzar los propósitos de [la] Ley [57-2014]”, Artículo 6.3 (y);
cumplir con sus deberes, emitir órdenes y establecer multas para dar
• Interponer los recursos que sean necesarios para “hacer que se cumplan sus
Tras la constitución de la JSF a tenor con la Ley Pública 114-187 conocida como el
Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), la AEE
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los poderes delegados a la JSF bajo esa ley federal tienen supremacía y preeminencia
sobre todas las facultades de la Comisión bajo la Ley 57-2014. Proponer y concluir que
sus poderes, y de hacerla irrelevante –como parece argüir la AEE–, no solo es irrazonable
sino que contraviene el espíritu y las propias disposiciones de PROMESA que definen los
la Ley 57-2014. Véase, Secciones 501 y 503 (a)(1)(F)(vi) y (b)(1)(D) de PROMESA, 48 U.S.C.
§§ 2211-2213.
reglamentación local, véase Sección 303 de PROMESA, 48 U.S.C. § 2163, lo que por su
dicha Ley. Y es que los poderes delegados por PROMESA a la JSF sobre la AEE son de
eléctrico. Como explicaremos a continuación, la AEE no puede negarse a cumplir con las
cuestión no son incompatibles –de forma alguna– con PROMESA ni con el ejercicio de los
Más aún, independientemente del alcance de los poderes de la JSF sobre entidades
públicas del Gobierno de Puerto Rico declaradas por ésta como covered territorial
no tiene impacto sobre el fisco o estate de la AEE, ni impide de forma alguna que la
JSF ejerza sus poderes sobre la AEE. Ello descarta, de su faz, cualquier planteamiento
de preeminencia y sobreseimiento que pueda hacer la AEE o sus agentes para tratar de
atacar estas órdenes de la Comisión y, con ello, tratar de regresar al estado de monopolio
desregulado en grave perjuicio de todos los clientes de servicio eléctrico en Puerto Rico,
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del interés público y de las demás compañías de servicio eléctrico que operan o que
la Rama Ejecutiva del Gobierno de Puerto Rico creada por la Ley 57-2014 con
Comisión es Edificio World Plaza, 268 Avenida Muñoz Rivera Suite 702, San Juan,
Puerto Rico creada por la Ley Núm. 83 de 2 de mayo de 1941, según enmendada,
dirección física es 1110 Ave. Ponce de León, Edificio Neos, piso 8 oficina 801, San
Juan, PR; su dirección postal es PO Box 363928, Correo General, San Juan, PR
Torres.
conocida como la Ley de la Judicatura del Estado Libre Asociado de Puerto Rico
de 2003, 4 LPRA §25a; y en virtud de lo dispuesto en los incisos (ll) y (nn) del
[…]
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[…]
IV. Importancia de las Órdenes con las que la AEE está en Incumplimiento
auxilio de este Honorable Tribunal para obtener el cabal cumplimiento de la AEE, so pena
2017 en el asunto In re: Temporary Oversight Measures Related to the Procurement and
Anejo I; y (2) la Resolución y Orden (Resolution and Order) emitida el 5 de marzo de 2018
en el asunto In re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No. CEPR-IN-
2018-0001, véase Anejo II. Esto, a tenor con la autoridad que la Ley 57-2014 confirió a la
cualesquiera remedios legales que fueran necesarios para hacer efectivos los propósitos
de [la Ley 57-2014] y hacer que se cumplan sus reglas, reglamentos, órdenes y
en el que la Comisión emitió cada una de estas órdenes –con las cuales la AEE está
autoridad y jurisdicción que la Ley 57-2014 confirió a la Comisión, no solo sobre la AEE,
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esfuerzos para restaurar el servicio eléctrico tras el paso del huracán María por el
por parte de la AEE y posibles o actuales contratistas. La Comisión explicó que las
medidas anunciadas y requeridas en esta Orden eran necesarias y esenciales a raíz del
otros contratos otorgados por la AEE que demostraban su falta de disciplina, escrutinio
y prudencia. Ello, más aún cuando, por ser la AEE una corporación pública (sin
corporación), son los clientes de servicio eléctrico quienes pagan por la imprudencia y el
derroche de recursos de la AEE mediante el pago y aumento de tarifas. Es decir, por ser
la AEE una corporación pública que no tiene accionistas, es necesario tomar medidas
preventivas para evitar que la AEE continué incurriendo en gastos imprudentes, pues,
una vez la AEE incurre en tales gastos, no hay otra opción que no sea permitir que la AEE
recaude mediante el cobro de tarifas los ingresos necesarios para cubrir esos gastos
imprudentes. En la medida en que no hay accionistas, socios o miembros que sean dueños
incluir once (11) cláusulas o disposiciones particulares en todos los (i) contratos para
agregado de $10 millones o más; (ii) contratos para trabajos de infraestructura que tengan
cantidad de $250,000 o más, que sean otorgados por la AEE luego del 17 de noviembre
de 2017. Una de las once (11) cláusulas que, a tenor con esta Orden, la AEE debe incluir
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en vigor hasta tanto la AEE reciba aprobación por escrito de la Comisión, o hasta que
pasen cinco (5) días desde la fecha en que la AEE haya sometido el contrato a la
Comisión sin que ésta haya tomado acción dentro de dicho término.
contrato mencionados en la Parte II (a). Entre éstas, se ordenó a la AEE a someter ante la
contrato que la AEE se propusiera otorgar. También requirió a la AEE someter las
a la JSF el pasado 24 de enero de 2018. Entre los objetivos de la investigación está (i)
evaluar las iniciativas allí identificadas por la AEE en relación con el desarrollo de sus
(ii) examinar los posibles impactos que tendrían dichas iniciativas en la industria eléctrica
de Puerto Rico y en los clientes de servicio eléctrico, y (iii) determinar si las iniciativas
distribución de servicio eléctrico son o no consistentes con las disposiciones de la Ley 57-
con varios asuntos sustantivos en materia de servicio eléctrico que fueron abordados en
retos tras el paso de los huracanes Irma y María, y la restauración del servicio eléctrico;
las necesidades presupuestarias de la AEE para poder operar y proveer servicio eléctrico,
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AEE su propuesta de Plan Fiscal (de 24 de enero de 2018) para que fuese revisada y modificada,
https://juntasupervision.pr.gov/wp-content/uploads/wpfd/43/5a78d5c643e93.pdf.
AEE a entregar a la Comisión –en o antes de ese mismo día a las 3:00 p.m.– copia fiel y
exacta de la propuesta de Plan Fiscal que la AEE presentó ante la JSF el pasado 12 de
febrero de 2018, así como la lista de los empleados y consultores de la AEE con
relación entre temas y consultores o empleados. En dicha Orden, la Comisión explicó que
también aborda esos temas, ya que la JSF no requirió a la AEE que excluyera tema alguno
Rico, es esencial que la Comisión pueda tener acceso y examinar la propuesta de Plan de
comunicación de la JSF de 5 de febrero de 2018– en ésta se abordan asuntos que, sin duda
confiabilidad y calidad del servicio eléctrico, las relaciones que se vislumbran entre la
AEE y otras compañías de servicio eléctrico, las fuentes que se planifican utilizar para
generar energía, y las operaciones de otras compañías de servicio eléctrico. Todo ello
impacta los costos del servicio eléctrico y, por tanto, las tarifas que tendrán que pagar los
consumidores.
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propuesta de Plan Fiscal es o no consistente con las disposiciones de la Ley 57-2014 y los
Comisión sobre todo el sector eléctrico en Puerto Rico, y no solo para efectos de la AEE.
Han pasado más de tres (3) meses desde que la Comisión emitió la Orden de 17 de
aprobación de la Comisión. Peor aún, como demuestran los contratos que se incluyen
energía, para servicios al grid y para trabajo de infraestructura que tienen un valor
agregado de $10 millones o más; y (ii) contratos de servicios profesionales por la cantidad
de $250,000 o más, sin incluir las cláusulas requeridas en la Parte II(a) de la Orden y sin
otorgamiento, este contrato no fue sometido por la AEE a la Comisión para su evaluación
Anejo III y Parte II(a)(1)(2)(9) y (11) de la Orden que se acompaña como Anejo I.
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Comisión. Véase Anejo IV y Parte II(a)(1)(2)(9) y (11) de la Orden que se acompaña como
Anejo I.
del Contralor, los contratos que se acompañan como Anejos III, IV y V de esta Demanda
parecen ser solo una muestra de contratos otorgados por la AEE en contravención a la
Orden de la Comisión.
en el asunto In re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No.
CEPR-IN-2018-0001.
El término concedido por la Comisión a la AEE para que ésta entregue copia fiel y
exacta de la propuesta de Plan Fiscal que la AEE presentó ante la JSF el pasado 12 de
febrero de 2018, así como la lista de los empleados y consultores de la AEE con
relación entre temas y consultores o empleados, ha transcurrido sin que la AEE haya
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razón por la cual ello deba ser una preocupación para la AEE ni para este Honorable
Tribunal, ya que, por disposición expresa de la Ley 57-2014 (i) la Comisión está obligada
privilegios que exponga la AEE sobre documentos, materiales o información que tenga
parte sustantiva (sobre materias relacionadas, por ejemplo, con la infraestructura y confiabilidad
del servicio eléctrico) de la propuesta de Plan Fiscal, en la mañana del 5 de marzo de 2018
la Comisión propuso a la AEE que –a modo de cumplimiento parcial– entregara esta parte
A pesar de ello, la AEE no sometió versión alguna de la propuesta del Plan Fiscal en
tener acceso y examinar la propuesta de Plan Fiscal en cuanto antes, para así poder
someter sus determinaciones a la JSF sobre todos los asuntos de su expertise antes de que
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especificar por escrito los fundamentos legales y las fuentes de derecho que apoyan el
por la Comisión.
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Estados Unidos dispone que “the laws of the United States […] shall be the supreme law
of the land; and the judges in every state shall be bound thereby, anything in the
cláusula, el Congreso puede sobreseer (i.e. invalidar) una ley estatal mediante legislación
federal, ya sea implícitamente o mediante disposiciones expresas a esos fines en una ley
federal. Oneok, Inc. v. Learjet, Inc., 135 S.Ct. 1591, 1595 (2015), citando a Sprietsma v.
Mercury Marine, 537 U.S. 51, 64 (2002). Además, el sobreseimiento o preemption de una
ley federal sobre legislación estatal puede ser de campo (i.e. field preemption) o sólo en la
medida en que exista conflicto entre las disposiciones de la ley estatal y la ley federal (i.e.
Cuando una ley federal ocupa el campo (i.e. field preemption) no hay cabida alguna
federal. Id., citando a Arizona v. United States, 132 S.Ct. 2492, 2502 (2012). Por el
determinada materia o campo, pero (i) el cumplimiento con la ley federal y la ley estatal
de la ley federal. Véase, id., citando a California v. ARC America Corp., 490 U.S. 93, 100,
101 (1989).
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Ley federal prevalecerán sobre las leyes y reglamentos de Puerto Rico que sean
inconsistentes con PROMESA. 48 USC § 2103 (“The provisions of this Act shall prevail
over any general or specific provisions of territory law, State law, or regulation that is
inconsistent with this Act.”). Por tanto, a tono con la jurisprudencia citada de la Corte
Suprema de Estados Unidos, no cabe duda que PROMESA no ocupa campo alguno, sino
que sólo invalidará las leyes y reglamentos de Puerto Rico en tanto y en cuanto esas leyes
implantación de PROMESA.
En fin, las órdenes de la Comisión para cuya ejecución se solicita el auxilio de este
Honorable Tribunal, no son –de forma alguna– incompatibles con disposición alguna de
la AEE con estas órdenes facilitará que la Comisión, con su pericia en temas sobre el
1 La Sección 201(b)(1)(A)(i) de PROMESA, 48 U.S.C. § 2141, requiere que el Plan Fiscal de la AEE incluya
estimados de los ingresos y gastos de conformidad con los estándares de contabilidad acordados y que
estén en concordancia con la legislación aplicable. La Ley 57-2014 es legislación aplicable, ya que, a modo
de ejemplo, establece un mandato a la Comisión para que revise y apruebe las tarifas de la AEE y asegure
que éstas sean “justas y razonables” y que “garanticen el pago de la deuda de dicha corporación pública
con los bonistas”. En consideración a tales mandatos, a las inversiones que debe hacer la AEE para cumplir
con el Plan Integrado de Recursos aprobado por la Comisión, y así mejorar la calidad y confiabilidad del
servicio eléctrico, en el proceso de revisión tarifaria y de acuerdo con su pericia en la materia, la Comisión
establece el “revenue requirement” (i.e. necesidades de ingreso) de la AEE. Dicho de otro modo, en el
ejercicio de sus funciones bajo la Ley 57-2014 como el regulador de la industria eléctrica en Puerto Rico, es
la Comisión quien determina qué mejoras capitales son necesarias para que los consumidores en Puerto
Rico puedan recibir un servicio eléctrico confiable a precios razonables.
Al considerar este escenario, así como las disposiciones de PROMESA que enmarcan la autoridad de la JSF
en asuntos primordialmente fiscales, las disposiciones de la Ley 57-2014 que delegan amplios poderes a la
Comisión para regular y fiscalizar la industria eléctrica en Puerto Rico, y las disposiciones de PROMESA
que reconocen la existencia y el expertise de la Comisión bajo la Ley 57-2014, no cabe duda alguna de que
las órdenes para cuya ejecución la Comisión solicita el auxilio de este Honorable Tribunal no presentan
conflicto alguno con PROMESA ni con los poderes delegados a la JSF. Más aún cuando, según hemos
alertado, ninguna de las órdenes objeto de esta Demanda tiene impacto alguno sobre el fisco o estate de
la AEE, ni impide de forma alguna que la JSF ejerza sus poderes sobre la AEE. Sobre la autoridad
primordialmente fiscal de la JSF, véase Secciones 101(a) (“The purpose of the Oversight Board is to provide
a method for a covered territory to achieve fiscal responsibility and access to the capital markets.”);
104(i)(1)(B); 201(b)(1) (“A Fiscal Plan developed under this section shall, with respect to the territorial
government or covered territorial instrumentality, provide a method to achieve fiscal responsibility and
access to capital markets”); 201(b)(1)(A) al (J); 203(d)(2)(A) (“[W]ith respect to covered territorial
instrumentalities at the sole discretion of the Oversight Board—(A) make reductions in nondebt
expenditures to ensure that the actual quarterly revenues and expenses for the covered territorial
instrumentality are in compliance with the applicable certified Budget or, in the case of the fiscal year in
which the Oversight Board is established, the budget adopted by the Governor and the Legislature or the
covered territorial instrumentality, as applicable;”); 203(e); y 209 (“An Oversight Board shall terminate
upon certification by the Oversight Board that— (1) the applicable territorial government has adequate
access to short-term and long-term credit markets at reasonable interest rates to meet the borrowing needs
of the territorial government; and (2) for at least 4 consecutive fiscal years—(A) the territorial government
has developed its Budgets in accordance with modified accrual accounting standards; and (B) the
expenditures made by the territorial govern- ment during each fiscal year did not exceed the revenues of
the territorial government during that year, as deter- mined in accordance with modified accrual
accounting standards.”)
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de 2017 sobre los contratos de la AEE son totalmente cónsonas con los objetivos y las
misiones de PROMESA.
solicita a este Honorable Tribunal que declare con lugar esta Demanda y, en su
consecuencia, ordene a la AEE a cumplir inmediatamente con las dos (2) órdenes de la
cualquier otro remedio que en derecho proceda y que este Honorable Tribunal entienda
adecuado conceder.
RESPETUOSAMENTE SOMETIDA.
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acronym) and the Financial Oversight and Management Board for Puerto Rico (“FOMB”) also may conduct some
type of contract review. Those reviews do not relieve the Commission of its duty under Act 57-2014 to ensure
that rates are just and reasonable generally, and do not include imprudent costs specifically. The Commission
is pleased to coordinate with both AFFAF and FOMB to avoid duplication of effort but it must and will carry out
its independent legal obligation. To that end, the Commission contacted representatives of AFFAF and FOMB
in May 2017, and FOMB again in November 2017, providing a systematic path to coordination. The Commission
is awaiting their response but in the meantime must and will use its unique expertise and experience with
PREPA, demonstrated in numerous prior orders—most importantly the Transition Charge, the Integrated
Resource Plan and Rate Case—to protect Puerto Rico’s citizens.
2 See, in general, Part Four of the Commission’s Final Resolution and Order, In Re: Review of Rates of the Puerto
Rico Electric Power Authority, CEPR-AP-2015-0001, January 10, 2017 at pp. 147-156 (“Resolution and Order
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I. BACKGROUND
on PREPA’s Rates”) and Part II of the Commission’s Final Resolution addressing PREPA’s Motion for
Reconsideration, CEPR-AP-2015-0001, March 8, 2017 at pp. 14-34. See also, PREPA’s Verified Motion for
Reconsideration of Provisions of the Final Resolution and Order, filed January 30, 2017, and PREPA’s Appeal to
the Puerto Rico Court of Appeals challenging the legality of the Commission’s determinations, Case No.
KLRA2017-0444, consolidated with Case No. KLRA2017-0446. Of special concern is that PREPA’s attempts at
freeing itself from required oversight have been supported by both AAFAF and the FOMB. See Notice of
Removal, Case No. 17-04780 (LTS), Adversary Case No. 17-00256 (Docket Entry No. 279).
3 While PREPA announced its intention to cancel the Whitefish contract on October 29, 2017, Whitefish would
continue providing services until certain milestones were completed. As of the date of this Order, Whitefish
continues to provide services to PREPA.
4 http://cb.pr/whitefish-no-se-va-hasta-que-entregue-la-linea-de-aguirre-y-aguas-buenas/. This amount is
expected to increase, given, as noted before, that Whitefish would continue providing services to PREPA until
the completion of certain milestones.
5 The Puerto Rico Energy Transformation and RELIEF Act, as amended.
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PREPA’s IRP and Petition for Rate Review),6 PREPA’s maintenance contracts with
Mitsubishi-Hitachi and Alstom Caribe,7 PREPA’s multiple power purchase agreements with
renewable energy providers,8 and PREPA’s power purchase agreement with EcoEléctrica.9
Appendix A to this Order provides detailed insight into these and other examples. As the
aforementioned list shows, these concerns are not limited to contracts related to a specific
area of PREPA’s operations, but rather span multiple areas of PREPA’s business.
While the Commission has not made a finding regarding the prudency of these
actions, they provide an insight into the type of decisions within PREPA that fuel the
Commission’s concerns. Particularly, the Commission is concerned that PREPA’s
management culture, a product of its 70-year long self-regulated monopoly status, is
unwilling or unable to obtaining the type of concessions from its contractors generally
sought after by investor-owned utilities worried about their bottom line.
b. The case for Commission oversight
In order to be financially and operationally sustainable, a utility’s rates must be
sufficient to recover all of its costs, provided such costs are deemed by the regulator to be
prudent. In the traditional setting of an investor-owned utility, a regulator is able to induce
prudent spending and performance by preventing a utility from recovering through its rates
costs which are deemed by the regulator to be the result of imprudent actions—those costs
are thus paid for by the utility’s shareholders, not ratepayers. This after-the-fact review is
known as cost disallowance. The certainty that imprudent actions will result in lost revenues
aligns the interests of shareholders and ratepayers, leading to better performance.
PREPA’s case is different. PREPA is a government-owned, non-profit utility; it has no
shareholders. Because it has no shareholders, all of its costs must be recovered through its
rates, which means that ratepayers are entirely responsible for the costs incurred by PREPA.
Once a cost is incurred, there is no practical choice but to reflect those costs in PREPA’s rates.
If the Commission were to prevent PREPA from recovering a cost deemed as imprudent,
PREPA would operate at a deficit, or would have to cut other necessary spending. Neither
result is consistent with a financially healthy and sustainable utility providing reliable
service. This certainty of recovery of costs reduces management’s incentives to seek during
negotiations concessions from contractors that would reduce PREPA’s overall costs and
exposure to risks and, ultimately, benefit PREPA’s ratepayers. Before-the-fact review by the
6 See, in general, the Part IV(A)(3) of the Final Resolution and Order, In Re: Integrated Resource Plan for the
Puerto Rico Electric Power Authority, Case No. CEPR-AP-2015-0002, September 26, 2016 (“Resolution and
Order on PREPA’s IRP”) and Parts Two, Three and Four of the Commission’s Resolution and Order on PREPA’s
Rates.
7 Resolution and Order on PREPA’s Rates at ¶208 and ¶¶211 – 218, respectively.
8 Resolution and Order on PREPA’s IRP, at ¶¶171-188.
9 Resolution and Order on PREPA’s Rates, at ¶152.
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11 See Statement of Motives of Act 57-2014 at ¶20.
12 See sub-section (l) of Section 6.3 of Act 57-2014.
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13 The Commission intends the term “energy, grid services, and fuel” to refer to provision of energy to be
consumed by PREPA or sold by PREPA to customers; to the commitment to make generating capacity available
when needed (commonly referred to as “capacity services”); to credits associated with production of “green”
or renewable energy as defined by Act 83-2010; to administration of energy efficiency, demand response, and
other demand-side management programs; to the services necessary to support the transmission of electric
power to customers, including but not limited to frequency and voltage regulation, operating and spinning
reserves, startup-related costs, black start capabilities, and flexible ramping capabilities; to purchases of
combustible fuels; and to tolling, transportation, or other delivery payments associated with fuel purchases.
14 The Commission intends the term “infrastructure work” to refer to materials purchased for and labor applied
to PREPA’s physical assets. These assets include, but are not limited to, generation, transmission, distribution,
fuel delivery, information technology, warehousing, and transportation infrastructure and assets.
15 The Commission intends the term “professional services” to refer to work for hire that has no impact on
PREPA’s physical assets, including but not limited to: legal services; advisory services; modeling, potential
studies, and other analyses; engineering and design work, and others.
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(3) A clear, detailed scope of the work and activities included in the contract.
(4) A total budget associated with the described scope, provided that PREPA may seek
from the Commission a modification of this requirement in extraordinary
circumstances.
(5) An estimated spending schedule associated with the described scope and budget,
with both monthly spending estimates and clear and objective milestones.16 Spending
schedules must include spending estimates associated with those milestones.
(6) A schedule of all labor, material, and/or service rates associated with the contract.
(7) A scope and budget amendment process, which shall include a requirement to
provide advanced notice, with no less than 30 calendar days in advance, to the
Commission, of any proposed amendment to the contract scope, budget and amount,
provided PREPA may seek an exception to the 30-day requirement (but not to the
advance notice requirement) in extraordinary circumstances.
(8) Require invoices to be submitted to PREPA on, at least, a monthly basis in electronic
format. Invoices must contain the amount invoiced under the contract since the last
invoice and the total amount invoiced since the contract’s execution, as well as a
description of the work completed and being invoiced and the total amount of
contract funds remaining after deducting the amount included in the most recent
invoice.
(9) A requirement wherein PREPA’s contractor must submit, 10 calendar days in advance
of a new month, monthly budget updates, with milestones accomplished and
estimated spending and work to be completed in the upcoming month.
(10) A clear description of performance guarantees in the contract, including a
requirement that work performed under the contract will conform to all applicable
legal and regulatory requirements. Contracts must include a certification from the
contractor that they are aware of all legal and regulatory requirements and that,
except for unforeseen or extraordinary circumstances, the contracted budget is
sufficient to meet these requirements.
(11) A clear description of risk-sharing provisions, including provisions describing the
allocation of responsibility for costs between PREPA and PREPA’s contractor in the
event of error on PREPA’s part, error on the part of PREPA’s counterparty, shared
error, and the occasion of circumstances beyond the control of PREPA and PREPA’s
counterparty.
16 In the case of contracts for energy, grid services, and fuel, “milestones” means delivery of such energy, grid
services, or fuel. The requirement for spending estimates associated with delivery of milestones does not apply
to such contracts. However, the schedule of labor, material, and/or service rates must include a rate for the
delivery of energy (in MWh), capacity (in MW), fuel (in MMBTU and physical units), or other services (in the
appropriate units).
6
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2 Expert Report of Paul Chernick, Docket CEPR-AP-2015-0001, at p. 115, fn. 122.
3 Resolution and Order on PREPA’s Rates at ¶161.
4 Id. at fn. 133.
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5 Final Resolution and Order on PREPA’s IRP at ¶ 13.
6 Id. at ¶ 109.
7 Id. at ¶ 110.
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conducted by Siemens PTI reviewed closely only three options: one from GE and
two from Siemens technologies.8
"We acknowledge that Siemens's witness asserted that the consulting arm of
Siemens was "independent" of the manufacturing arm. However, both arms are
commonly owned. At a time of deep citizen concern about PREPA's rates and
performance, perceptions of bias or favoritism matter. If and when PREPA seeks
to purchase new generation equipment, the Commission will require, and will
ensure, that PREPA's process for procurement is competitive and objective."9
(3) Navigant Consulting
"[M]uch of the crucial work that Navigant has done for PREPA in [the Rate Case]
proceeding has been below industry standards. It has caused consultants to incur
extra costs to identify errors, get clarification, seek documentary support, and
sometimes even to understand the basic outlines of a proposal. Problems include
the errors in the average-and-excess computations and the analysis of peak loads.
Navigant witnesses have also made claims in testimony and discovery responses
that they have been unable to support (such as the claimed benefits of the
unbundled rates, or the response that billing determinants were decreased to
reflect the residential fuel subsidy). The witnesses’ have frequently been unable
to identify potential solutions, in such issues as whether coincident peak
contributions could be computed in the same manner as non-coincident peaks, or
whether multiple monthly peaks could be used for allocating generation costs for
a utility in which every month contributes to capacity requirements. They took
inconsistent positions between the cost-of-service study and rate design (on such
issues as seasonality), and sometimes provided misleading information (such as
the suggestion that PREPA had actual monthly NCP data by tariff code). 10
"With regard to cost allocation and rate design, PREPA, the Commission and the
public interest have been poorly served by PREPA’s consultants. PREPA should
take steps to procure more competent assistance from Navigant or other firms, or
bring more of this expertise in-house."11
(4) EcoEléctrica12
"The EcoEléctrica contract [...] requires an "excess energy payment" for energy
required above a 76% capacity factor. EcoEléctrica sets the usage level associated
with the 76% capacity factor monthly and sets the excess energy rate weekly.
8 Id. at ¶ 111.
9 Id. at ¶ 112.
10 Chernick Expert Report at § IX.
11 Id.
12 Resolution and Order on PREPA’s Rates at ¶¶ 150-153.
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13 Id. at ¶152.
14 Id. at ¶208.
15 Id. at ¶¶211-218.
16 Expert Report of Jeremy Fisher and Ariel Horowitz, Docket CEPR-AP-2015-0001 at § V(C)(6)(b)(ii).
17 Resolution and Order on PREPA’s Rates at ¶215.
18 Id. at ¶216.
19 Id. at ¶217.
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20 Id. at ¶218.
21 Fisher and Horowitz Expert Report at § V(C)(7)(a)(i).
22 Id. at § V(D)(3).
23 Id. at § V(D)(3)(b)(ii).
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ANEJO II
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Cu a n t ia : $450,000.00
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fin a l in voice.-
per for m a n ce wit h in a per iod of seven (7) ca len da r da ys a ft er BDO's r eceipt of su ch
t o com pen sa t ion except for wh a t h a s been a ccr u ed for ser vices r en der ed u n der
com pen sa t ion except for wh a t h a s been a ccr u ed for ser vices r en der ed u n der t h e
wit h t h e et h ica l obliga t ion s a pplica ble t o BDO u n der t h e cir cu m st a n ces.—————
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Accou n t in g a n d Ad vis or y S er vices BDO P u er t o Rico, P .S .C, '"' <^
P a ge 4
Ar t icle 3. In voices
3.1 BDO sh a ll pr esen t a r ea son a bly it em ized list of r em a in in g billa ble wor k t h a t is in
n ot ifica t ion h a s been issu ed BDO in coor din a t ion wit h P RE P A will en su r e t h a t n o
n ot ifica t ion h a s been issu ed BDO in coor din a t ion wit h P RE P A will en su r e t h a t n o
3.3 P a ym en t s per for m ed u n der t h is Con t r a ct r ela t ed t o Accou n t in g Ser vices will be
3.4 All in voices su bm it t ed by BDO sh a ll in clu de t h e followin g Cer t ifica t ion in or der t o
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pr eviou sly obt a in ed. I, a lso cer t ify t h a t t h e on ly con sider a t ion t o pr ovide t h e
Ar t icle 4. Com plia n ce wit h Act of Oct ober 30,1975, N o. 18, a s a m en ded
en for cea ble. Th e dem a n d of t h e obliga t ion s of eit h er P a r t y u n der t h is Con t r a ct will be
Com m on wea lt h of P u er t o Rico, in com plia n ce wit h t h e Act of Oct ober 30, 1975, N o. 18,
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Accou n t in g a n d Advisor y Ser vices BDO P u er t o Rico, P .S.C.
P a ge 6
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BDO sh a ll be con sider ed a s a n in depen den t con t r a ct or for a ll m a t er ia l pu r poses u n der
Th e a ppea r in g P a r t ies a gr ee t h a t t h eir r espon sibilit ies for da m a ges u n der t h is Con t r a ct
Su pr em e Cou r t of P u er t o Rico.—
Ar t icle?. In su r a n ce
Com pen sa t ion In su r a n ce a s r equ ir ed by Wor k m en 's Com pen sa t ion Act of t h e
Com m on wea lt h of P u er t o Rico. BDO sh a ll a lso be r espon sible for com plia n ce wit h
sa id Wor k m en 's Com pen sa t ion s Act by a ll it s su bcon t r a ct or s, a gen t s, a n d in vit ees, if
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Accou n t in g a n d Advisor y Ser vices BDO P u er t o Rico, P .S.C.
P a ge 7
If im por t ed t ech n ica l per son n el a r e exem pt ed, a s per Act of Ma y 16,1958, N o.16,
B. E m ployer 's Lia bilit y In su r a n ce - BDO sh a ll pr ovide E m ployer 's Lia bilit y In su r a n ce
BDO a s r esu lt of bodily in ju r y, by a cciden t or disea se, in clu din g dea t h a r isin g ou t of
ou t side of a n d dist in ct fr om a n y cla im u n der t h e Wor k m en 's Com pen sa t ion Act of t h e
C. Com m er cia l Gen er a l Lia bilit y In su r a n ce - BDO sh a ll pr ovide a Com m er cia l Gen er a l
Lia bilit y In su r a n ce wit h lim it s of $1,000,000 com bin ed sin gle lim it s cover in g a ll
Th e Com m er cia l Gen er a l Lia bilit y a n d Com m er cia l Au t om obile Lia bilit y In su r a n ce
b. A t h ir t y (30) da y ca n cella t ion or n on r en ewa ble n ot ice t o be sen t by cer t ified m a il wit h
c. An en dor sem en t in clu din g t h is Con t r a ct u n der Con t r a ct u a l lia bilit y cover a ge
d. Wa iver of su br oga t ion in fa vor of P RE P A for cla im s du e t o BDO's sole n egligen ce;
Con dit ion s in t h is policy by BDO sh a ll n ot pr eju dice P RE P A's r igh t s u n der t h is policy."
F u r n ish in fl of P olicies
r epr esen t a t ive of in su r er in P u er t o Rico, descr ibed t h e cover a ge a ffor ded. Also, or igin a l
t a xes by a n in st a llm en t , pla n in fu ll com plia n ce wit h it s t er m s (ca lled "Cer t ifica do Deu da
Depa r t m en t of P u er t o Rico.——————————————————————————
f. Cer t ifica t ion issu ed by t h e Mu n icipa l Reven u es Collect ion Cen t er (MRCC),
gover n m en t a l a gen cy. To r equ est su ch Cer t ifica t ion , BDO will u se t h e for m issu ed by
t h e MRCC (ca lled "CRIM-Cer t ifica dos, Ra dica cion , E st a do de Cu en t a y Todos los
g. A P er son a l P r oper t y Ta x F ilin g Cer t ifica t ion , issu ed by t h e MRCC wh ich in dica t es
t h a t BDO h a s filed it s P er son a l P r oper t y Ta x Ret u r n for t h e la st five (5) con t r ibu t or y
h . Cer t ifica t ion , issu ed by t h e Ch ild Su ppor t Adm in ist r a t ion , a ssu r in g t h a t BDO is in
com plia n ce wit h t h e wit h h oldin gs r equ ir ed by la w a s a n em ployer (ca lled "Cer t ifica cion
de Cu m plim ien t o de ASU ME " or "Cer t iflca do ASU ME pa t r on a l" in t h e websit e).————
disa bilit y or sick n ess or socia l secu r it y for dr iver s/ch a u ffeu r s), or is pa yin g su ch
con t r ibu t ion s by a n in st a llm en t pla n in fu ll com plia n ce wit h it s t er m s. To r equ est su ch
Resou r ces of P u er t o Rico. (ca lled "Cer t ifica cion N ega t iva de Deu da de Con t r ibu cion es
de Segu r o pa r Desem pleo y Segu r o por In ca pa cida d n o ocu pa cion a l Tem por a l
(P a t r on a l)" a n d "Cer t ifica do Deu da Segu r o Ch ofer il" in t h e websit e).— ————————
pr esiden t , vice-pr esiden t , dir ect or s, execu t ive dir ect or , m em ber s of it s boa r d of dir ect or s
or boa r d of officer s, n or a n y of it s officia ls or per son s per for m in g equ iva len t fu n ct ion s for
ser vices su ch a s m essen ger a n d ph ot ocopy ser vices, t o com ply wit h a ll t h e pr eviou s
Cer t ifica t ion s a n d t o n ot ify P RE P A of su ch com plia n ce. If a n y of t h e pr eviou sly r equ ir ed
Cer t ifica t ion s sh ows a debt , a n d BDO h a s r equ est ed a r eview or a dju st m en t of t h is
If t h e r equ est ed r eview or a dju st m en t is den ied a n d su ch det er m in a t ion is fin a l, BDO will
a for em en t ion ed cer t ifica t ion s a n d docu m en t s is a n essen t ia l con dit ion of t h is Con t r a ct ;
r efu n d a ll pa ym en t s r eceived.-
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a n y dir ect or in dir ect per son a l fin a n cia l in t er est t h a t m a y a dver sely a ffect t h is Con t r a ct .
In a ddit ion t o t h e r est r ict ion s a n d lim it a t ion s est a blish ed u n der t h e pr ovision s of Act 12
ben efit fr om a n y Con t r a ct wit h P RE P A for a per iod of t wo (2) yea r s a ft er lea vin g
BDO cer t ifies t h a t it does n ot r eceive pa ym en t or ben efit of a n y n a t u r e for ser vices
cor por a t ion or m u n icipa lit y of P u er t o Rico. BDO a lso cer t ifies t h a t it m a y h a ve
con su lt in g ser vices con t r a ct s wit h ot h er gover n m en t a l a gen cies or bodies in P u er t o Rico
a n d elsewh er e, bu t su ch con dit ion does n ot con st it u t e a con flict of in t er est for BDO.—-
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ser vices, wh ich in clu des n ot r epr esen t in g con flict in g in t er est s wit h r espect t o P RE P A.
BDO r epr esen t s con flict in g in t er est s wh en on beh a lf of a clien t it m u st con t en d for t h a t
pr esen t clien t . Also, BDO r epr esen t s con flict in g in t er est s wh en it s con du ct is descr ibed
obliga t ion t o disclose t o P RE P A a ll in for m a t ion a n d cir cu m st a n ces of it s r ela t ion s wit h
wit h in a t h ir t y (30) da y per iod. Du r in g sa id per iod, BDO m a y r equ est a m eet in g wit h t h e
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E xecu t ive Dir ect or t o pr esen t t h eir a r gu m en t s r ega r din g t h e a lleged con flict of in t er est s,
t h ir t y (30) da y per iod or t h e con t r over sy is n ot sa t isfa ct or ily set t led du r in g t h e m eet in g,
t h is Con t r a ct sh a ll be ca n celled.-
BDO cer t ifies t h a t it wilt n ot discr im in a t e a ga in st a n y per son on a ccou n t of a ge, r a ce,
color , n a t ion a l or igin or socia l con dit ion s, ph ysica l or m en t a l im pa ir m en t , sex, sexu a l
obliga t ion s u n der su ch pr ovision s n ot in clu ded by t h e ju dicia l decla r a t ion .——————
P RE P A will dedu ct a n d wit h h old a t sou r ce t o BDO t h e equ iva len t of seven per cen t (7%)
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Rico, sect ion 1062.08; or t wen t y-n in e per cen t (29%) in t h e even t t h a t BDO is a n on -
r esiden t a n d n on U . S. cit izen in dividu a l; or a for eign cor por a t ion or pa r t n er sh ip wh ich is
su bject t o wit h h oldin g a t sou r ce. All in voice sh a ll be segr ega t ed by con cept s (ser vices,
m a t er ia ls, equ ipm en t s, et c), t o iden t ify t h e a m ou n t s su bject t o wit h h oldin g, a n d a void
P RE P A will dedu ct a n d wit h h old a Specia l Con t r ibu t ion t o BDO t h e equ iva len t of on e
poin t five per cen t (1.5%) fr om pa ym en t for ser vices u n der t h is Con t r a ct , in com plia n ce
wit h Ar t icle 1, La w N o. 48-2013. N ot wit h st a n din g, a dver t isin g spot s, r ejm bu r sa ble
wit h h oldin g or dedu ct ion fr om t h e fees for feder a l in com e t a x pu r poses. BDO sh a ll be
Sen /ice (IRS) or ot h er a ppr opr ia t e F eder a l Gover n m en t Agen cy. N ever t h eless, P RE P A
in vest iga t ion or dem a n d t h a t m igh t give r ise t o a n y losses r equ ir ed t o be in dem n ified
Ar t icje 20. Ch a n ge in La w
in su r r ect ion s, epidem ics, ea r t h qu a k es, st or m s, floods, civil dist u r ba n ces, lock ou t s, fir es, ;
'(.^ ^
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Accou n t in g a n d Advisor y Ser vices BDO P u er t o Rico, P .S.C.
P a ge 18
Ar t icle 22. Am en dm en t s
23.2 E xcept for a cla im lim it ed solely t o seek in g n on -m on et a r y or equ it a ble r elief, a n y
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st a t e cou r t s of P u er t o Rico.-
BDO a gr ees t o com ply wit h t h e pr ovision s of Act 84 of J u n e 18, 2002, a s a m en ded,
wh ich est a blish es a Code of E t h ics for Con t r a ct or s, Su pplier s a n d E con om ic In cen t ive
por t ion s of t h e Ser vices t o ot h er m em ber fir m s of t h e Globa l BDO P u er t o Rico, P .S.C
(in clu din g "BDO E n t it ies"), wh o m a y dea l wit h P RE P A dir ect ly, t h ou gh BDO a lon e will
r em a in r espon sible t o P RE P A for t h e Ser vices, a n d (2) per son n el (in clu din g n on -
t h eir r espect ive a ffilia t es or fr om in depen den t t h ir d-pa r t y ser vice pr ovider s (in clu din g
su bcon t r a ct in clu des, a s a con dit ion for it s lega l va lidit y a n d en for cea bilit y, a pr ovision
Con t r a ct t er m s a n d con dit ion s; a n d (3) t h e su bcon t r a ct in clu des, a s a con dit ion for it s
va lidit y a n d en for cea bilit y, a pr ovision est a blish in g for t h e su bcon t r a ct or t h e obliga t ion t o
com ply wit h a lt BDO's obliga t ion s u n der t h e Con t r a ct (m ir r or im a ge cla u se), except for
su ch obliga t ion s, t er m s, a n d con dit ion s wh ich exclu sively r ela t ed t o wor k s or ser vices
it s t er m in a t ion for a n y r ea son , wit h ou t t h e pr ior wr it t en con sen t of BDO, r equ est for
t welve (12) m on t h s en ded on t h e a u dit r epor t da t e for t h e im m edia t ely pr ecedin g fisca l
yea r , or (ii) in flu en ce BDO's oper a t ion s of fin a n cia l policies or h a s a n y ca pit a l ba la n ces
Act 21-2012. Sa id n ot ice sh a ll clea r ly in dica t e t h e r igh t s gr a n t ed, in clu din g a copy of t h e
fu n ds t o be a ssign ed or t r a n sfer r ed, a n d specific iden t ifica t ion in for m a t ion r ega r din g t h e
fu lfill it s obliga t ion s a n d r espon sibilit ies u n der t h is Con t r a ct , or a cla im a r ises for
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"P u er t o Rico E lect r ic P ower Au t h or it y", for a dm in ist r a t ive cost s for pr ocessin g sa id
a ssign m en t -
1.1 Th is pa r t set s for t h t h e t er m s a n d con dit ion s on wh ich BDO will per for m t h e
1.2 BDO will est a blish a n d docu m en t a n u n der st a n din g wit h P RE P A r ega r din g t h e
edu ca t ion a Ba ch elor 's Degr ee wit h Ma jor in Accou n t in g, wit h a t lea st t wo (2) yea r s
Ar t icle 2. P a ym en t Ter m s
2.2 BDO's m a xim u m pr ofession a l fees for t h e Accou n t in g Ser vices will be on e
BDO will per for m Advisor y Ser vices a s descr ibed below. P er for m a n ce of t h e Advisor y
Th e Scope of Ser vices, Lim it a t ion s, a n d Specific Addit ion a l U n der st a n din gs for t h e
Advisor y Sen /ices will be t h ose set for t h in E xh ibit B, Advisor y Ser vices.———————
for t h below.
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2.3 BDO's m a xim u m pr ofession a l fees for t h e Advisor y Ser vices will be t h r ee h u n dr ed
2.4 P RE P A sh a ll a lso r eim bu r se BDO for ot h er r ea son a ble expen ses in cu r r ed, wit h
P RE P A's pr eviou s a ppr ova l, in per for m in g t h e Advisor y Ser vices. BDO'S fees
con n ect ion wit h cer t a in pu r ch a ses, wh ich it u ses t o r edu ce ch a r ges t h a t we wou ld
Ar t icle 3. Addit ion a l Gen er a l Ter m s a n d Con dit ion s for t h e Advisor y Ser vices
3.1 BDO will per for m t h e Advisor y Ser vices in a ccor da n ce wit h a pplica ble pr ofession a l
3.2 BDO will n ot a ssu m e a n y of P RE P A's m a n a gem en t r espon sibilit ies in con n ect ion
I.
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3.3 P RE P A sh a ll a ssign a qu a lified per son t o over see t h e Advisor y Ser vices. P RE P A
(in clu din g a ccess t o r ecor ds, syst em s, pr em ises a n d people) t h a t BDO r ea son a bly
3.6 BDO will r ely in P RE P A In for m a t ion m a de a va ila ble t o t h em a n d, u n less BDO
expr essly a gr ees ot h er wise, will h a ve n o r espon sibilit y t o eva lu a t e or ver ify it .
3.7 P RE P A sh a ll be r espon sible for it s per son n el's com plia n ce wit h it s obliga t ion s
pr esen t a t ion s or ot h er com m u n ica t ion s BDO pr ovides u n der t h is Con t r a ct (Repor t s),
(in ciu din g t o it s a ffilia t es) or r efer t o BDO or t o a n y ot h er BDO's a ffilia t es in con n ect ion
a . t o P RE P A's la wyer s (su bject t o t h ese disclosu r e r est r ict ion s), wh o m a y r eview
c. t o ot h er per son s (in clu din g P RE P A a ffilia t es) wit h BDO pr ior wr it t en con sen t ,
r ecom m en da t ion s, con clu sion s or fin din gs. H owever , P RE P A m u st a ssu m e sole
BDO's in con n ect ion wit h t h em . Th is pr ovision does n ot a ffect P RE P A's a bilit y t o
r equ ir ed t o u pda t e a n y fin a l Repor t for cir cu m st a n ces of wh ich BDO becom es a wa r e, or
con sequ en t ia l, or specia l da m a ges in con n ect ion wit h cla im s a r isin g ou t of t h is
Ser vices in con n ect ion wit h cla im s a r isin g ou t of t h is Con t r a ct or ot h er wise r ela t in g
t o t h e Advisor y Ser vices. Th is lim it a t ion will n ot a pply t o losses ca u sed by BDO
pa r t ies (in clu din g P RE P A a ffilia t es a n d a t t or n eys) a n d r esu lt in g lia bilit ies, losses,
da m a ges, cost s a n d expen ses (in clu din g r ea son a ble ext er n a l a n d in t er n a l lega l
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Accou n t in g a n d Ad vis or y S er vices BDO P u er t o Rico, P .S .C. '"^
P a ge 28
wor k in g pa per s com plied in con n ect ion wit h t h e Advisor y Ser vices (bu t n ot
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Wit h r espect t o a n y Advisor y Ser vices, if U .S. Secu r it ies a n d E xch a n ge Com m ission
a ffilia t es, or r equ ir e specific t a x disclosu r e a s t o t h ose r est r ict ion s. Accor din gly, P RE P A
t .^
Accou n t in g a n d Advisor y Ser vices BDO P u er t o Rico, P .S.C.
P a ge 30
u n der st a n din gs a n d r epr esen t a t ion s wit h r espect t h er et o, in clu din g a n y con fiden t ia lit y
Con t r a ct s pr eviou sly deliver ed. In a ddit ion , a n y policy, pr ot ocol, Con t r a ct (ot h er t h a n
a n d/or t est ify in r ela t ion t o a n y sen /ices u n der t h is en ga gem en t , in ju dicia l or
in clu din g r ea son a ble a t t or n ey's fees, in cu r r ed by BDO in r espon din g t o su ch r equ est s.-
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Th is Con t r a ct is t h e com plet e Con t r a ct bet ween t h e pa r t ies wit h r espect t o t h e su bject
da t ed J a n u a r y 30,2017
wor k a n d com pen sa t ion set for t h in t h is Con t r a ct . F or t h e pu r pose of t h is cla u se, t h e
P u er t o Rico, a s well a s pu blic in st r u m en t a lit ies, pu blic cor por a t ion s a n d t h e Office of
Con t r a ct a t a n y t im e.——
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BDO pr ofession a l per son n el sh a ll per for m t h e followin g Accou n t in g Ser vices, bu t n ot
lim it ed t o, u n der t h e dir ect su per vision of P RE P A's m a n a gem en t , in r ela t ion t o t h e
Accou n t in g a n d Advisor y Ser vices Con t r a ct :
10. U t ilize, bu t n ot lim it ed, t o Micr osoft Office a pplica t ion s a n d Or a cle a ccou n t in g
BDO sh a ll per for m t h e followin g Advisor y Ser vices, bu t n ot lim it ed t o, in r ela t ion t o t h e
Accou n t in g a n d Advisor y Sen /ices Con t r a ct :
5. BDO's r espon sibilit y will be t o a ssist a n d lea d t h e P RE P A's per son n el a ssign ed
for t h is pr oject in t h e design of su ch r epor t s, a s deem ed n ecessa r y, t o m eet t h e
P RE P A's r espon sibilit ies wit h t h e P ROME SA r equ ir em en t s.— —————————
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P ROF E SSIONAL SE RVICE S CONTRACT
AP P E AR
WTTNESSETH
WH E RE AS, P RE P A, by vir h ie of it s en a blin g a ct (Act 83), h a s t h e a u t h or it y t o
en ga ge t h ose pr ofession a l, t ech n ica l a n d con su lt in g ser vices n ecessa r y a n d
con ven ien t t o t h e a ct ivit ies/ pr ogr a m s, a n d oper a t ion s ofP RE P A;
WH E RE AS/ a s est a blish ed in Sect ion 205 (1) of Act 83 of Ma y 2, 1942,
a ll pu r ch a ses a n d con t r a ct s for su ppU es or ser vices, except per son a l ser vices, m a de
by P RE P A, in clu din g it s ca pit a l con st r u ct ion con t r a ct s, sh a ll be m a de by ca llin g for
bids wit h su fficien t t im e befor e t h e da t e t h e bids a r e open ed so t h a t P RE P A ca n
gu a r a n t ee pr oper k n owledge a n d a ppea r a n ce of com pet it ive bidder s.
WH E RE AS, by vir t u e of Resolu t ion No. 4573 of Decem ber 20, 2017, P RE P A's
Boa r d of Dir ect or s a u t h or ized t h e Act in g E xecu t ive Dir ect or t o en t er in t o t h is
Agr eem en t t o per for m a fin a n cia l r isk a ssessm en t ba sed on det a iled r eview of a ll
P RE P A's r espon se expen dit u r es, in clu din g bu t n ot lim it ed t o, r eview of exist in g
execu t ed con t r a ct s, in voicin g m ech a n ism s, cu r r en t com plia n ce wit h Com m on wea lt h
a n d feder a l pr ocu r em en t r egu la t ion s/ a n d cu r r en t com plia n ce wit h feder a l st a t u t es
a n d r egu la t ion s on disa st er r espon se a n d r eim bu r sem en t . H om e will a lso con du ct
a n a ssessm en t of over a ll con t r a ct m a n a gem en t con t r ols a n d policies a n d will
in t er fer e wit h key P RE P A P er son n el on t h e fin din gs in r isk a ssessm en t . Th e Boa r d
of Dir ect or a u t h or ized a m a xim u m a m ou n t of $1,500,000.
WH E RE AS, P RE P A desir es t o en t er in t o t h is Con t r a ct wit h t h e Con t r a ct or for
t h e per for m a n ce of t h e Ser vices.
WH E RE AS, t h e Con t r a ct or st a t es t h a t it is r ea dy, willin g a n d a ble t o pr ovide
t h e Ser vices pu r su a n t t o t h e t er m s a n d con dit ion s set for t h h er ein .
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t h e exclu sive opt ion of P RE P A, for a ddit ion a l a n n u a l fisca l per iods su bject
t o t h e a va ila bilit y of fu n ds a n d pr eviou s a u t h or iza t ion of t h e Secr et a r ia t of
t h e E xecu t ive Br a n ch , E it h er pa r t y sh a ll h a ve t h e r igh t t o t er m in a t e t h is
Con t r a ct , a t a n y m om en t / by pr ovidin g t h e ot h er pa r t y t h ir t y (30) da ys
wr it t en n ot ice by r egist er ed m a il/ r et u r n r eceipt r equ est ed, or over n igh t
expr ess m a il. If n ot ice is given / t h is Con t r a ct sh a U t er m in a t e u pon t h e
expir a t ion of t h ir t y (30) da ys a n d P RE P A sh a ll be obliga t ed t o pa y a ll fees
a n d exp en s es in cu r r ed u p t o t h e d a y of effect ive t er m in a t ion , in
a ccor da n ce wit h t h e t er m s of t h is Con t r a ct . Th e r igh t s, du t ies a n d
r espon sibilit ies of t h e P a r t ies sh a ll con t in u e in fu ll for ce a n d effect du r in g
t h e t h ir t y (30) da y n ot ice per iod. Con t r a ct or sh a ll h a ve n o fu r t h er r igh t t o
com pen sa t ion except for wh a t h a s been a ccr u ed for ser vices r en der ed
u n der t h is Agr eem en t u n t il sa id da t e of effect ive t er m in a t ion .
As com pen sa t ion for ser vices r en der ed u n der t h is Con t r a ct , P RE P A a gr ees a n d
Con t r a ct or a ccept s t h a t t h e t ot a l a m ou n t t o be pa id u n der t h is Con t r a ct sh a ll n ot
exceed On e Million F ive H u n dr ed Th ou sa n d U .S. Dolla r s ($1,500,000.00) (t h e
"Con t r a ct Am ou n t ")2. H owever , n ot h in g h er ein sh a ll pr eclu de t h e pa r t ies fr om
a g r e e i n g t o i n cr e a s e s a i d a m ou n t ,
P RE P A wiU on ly pa y for ser vices t h a t a r e eviden ced by a pr oper ly su bm it t ed
in voice for ser vices r en der ed. N ot wit h st a n din g t h e for egoin g, a n y in cr ea se t o t h e
Agr eem en t Am ou n t sh a ll be eviden ced in wr it in g a n d sign ed by bot h Con t r a ct or
a n d P RE P A. P RE P A will n ot be r equ ir ed t o m a k e a dva n ce pa ym en t s for a n y
ser vice t o be r en der ed by Con t r a ct or u n der t h is Agr eem en t . Con t r a ct or sh a U
pr om pt ly n ot ify P RE P A wh en t h e bUlin g u n der t h e pr esen t Agr eem en t a m ou n t s
t o seven t y five per cen t (75%) of t h e Agr eem en t Am ou n t . On ce t h is n ot ifica t ion
h a s been issu ed. Con t r a ct or , in coor din a t ion wit h P RE P A, wiU en su r e t h a t n o
ser vices will be r en der ed in excess of fh e Agr eem en t Am ou n t / except wh en a
wr it t en a m en dm en t is a gr eed u pon by bot h P a r t ies. In a ddit ion , Con t r a ct or sh a ll
pr esen t a r ea son a bly it em ized H st of t h e r em a in in g billa ble wor k t h a t is in
pr ogr ess u n der t h e Agr eem en t . Appen dix A a t t a ch ed h er et o pr ovides a sch edu le
of t h e per son n el a ssign ed t o pr ovide t h e Ser vices.
2 P u r su a n t t o Ar t icle 18 of Act 3-2017, a ll a gr eem en t s for pr ofession a l or a cqu ir ed ser vices in excess of
$10,000.00 m u st be a ppr oved id wr it in g by t h e Gover n or or t h e per son t o wh om h e delega t es su ch a u t h or it y.
An y a gr eem en t s execu t ed in con t r a ven t ion of t h is r equ ir em en t s sh a ll be n u ll.
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VI. RE SP ONSIBILITIE S OF P RE P A
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m a t er ia ls developed a n d pr epa r ed by t h e Con t r a ct or , it s a gen t s or r epr esen t a t ives,
for p u r p os es of p eifor m in g t h e obliga t ion h er eu n d er . I n t h e even t of a n y
t er m in a t ion . Con t r a ct or sh a ll deliver su ch in for m a t ion , dr a ft s, r epor t s, pa per s a n d
ot h er m a t er ia ls t o P RE P A, in docu m en t for m a n d/or a s com pu t er pr ogr a m da t a , a n d
t h e Con t r a ct or r ecogn izes P RE P A's r igh t t o r equ est su ch docu m en t a t ion a n d/or
com pu t er pr ogr a m da t a , Sh ou ld Con t r a ct or fa il t o deliver sa id in for m a t ion , P RE P A
m a y seek a ju dicia l or der t o en for ce it s r igh t s. E xcept a s ot h er wise pr ovided, a U
in for m a t ion / dr a ft s, docu m en t s, r epor t s/ pa per s a n d ot h er m a t er ia ls developed a n d
p r ep a r ed by t h e Con t r a ct or or a n y S u b-Con t r a ct or / or a n y of it s a gen t s or
r epr esen t a t ives, for pu r poses of per for m in g t h e obliga t ion s h er eu n der sh a ll be
deem ed pr ivileged wor k pr odu ct of P RE P A.
A. Con fiden t ia l In for m a t ion (t h e "Con fiden t ia l In for m a t ion "); Defin it ion : Th e t er m
Con fiden t ia l In for m a t ion / a s u sed t h r ou gh ou t t h is Con t r a ct , m ea n s a n y in for m a t ion
con cer n in g P RE P A a n d/or P RE P A's oper a t ion s a n d t h a t of it s Con t r a ct or (e.g., t h e
pr oject s, com pu t er pr ocessin g syst em s, object a n d sou r ce codes a n d ot h er bu sin ess
a n d fin a n cia l a ffa ir s of P RE P A). Th e t en xi Con fiden t ia l In for m a t ion sh a ll a lso be
deem ed t o in clu de a ll n ot es, a n a lysis/ com pila t ion , st u dies a n d in t er pr et a t ion or
ot h er docu m en t s pr epa r ed by Con t r a ct or , it s a gen t s or r epr esen t a t ives in con n ect ion
wit h t h e P RE P A's oper a t ion s. Th e t er m Con fiden t ia l In for m a t ion does n ot in clu de
t h is Con t r a ct .
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< "Con fiden t ia l In for m a t ion " sh a ll n ot a pply t o a n y in for m a t ion wh ich :
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In con n ect ion wit h t h e ser vices r en der ed u n der t h is Con t r a ct , Con t r a ct or wiU fu r n ish
P RE P A a n y n ecessa r y r epor t s, a n a lyses or ot h er su ch m a t er ia ls t h a t exist a s of t h e
da t e r equ est ed/ a s P RE P A m a y r ea son a bly r equ est . Con t r a ct or sh a ll n ot in voice die
t im e spen t t o ga t h er a n d deliver su d-i in for m a t ion . P RE P A, h owever / a ck n owledges
t h a t Con t r a ct or m a y develop for it self/ or for ot h er s/ pr oblem solvin g a ppr oa ch es,
fr a m ewor k s or ot h er t ools a n d pr ocesses developed in per for m in g t h e ser vices a n d
a n y a ddit ion a l ser vices pr ovided h er eu n der , a n d n ot h in g con t a in ed h er ein pr eclu des
Con t r a ct or fr om developin g or disclosin g su ch m a t er ia ls a n d in for m a t ion pr ovided
t h a t t h e sa m e do n ot con t a in or r eflect Con fiden t ia l In for m a t ion .
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In for m a t ion , a s well a s a n y ot h er docu m en t t h a t m a y r ela t e t o it s wor k u n der t h is
Con t r a ct / t o P RE P A wit t iin t h ir t y (30) da ys a ft er da t e of t h e expir a t ion or ea r lier
t er m in a t ion of t h is Con t r a ct , a n d sh a ll cer t ify t h a t a ll t h e in for m a t ion h a s been
r et u r n ed t o P RE P A or dest r oyed, bu t for elect r on ic in for m a t ion h eld in a r ch ive
a n d/or ba ck u p files t o t h e ext en t su ch files ca n n ot be delet ed wit h ou t u n r ea son a ble
effor t or expen se a n d cr ea t ed in t h e or din a r y cou r se pu r su a n t t o est a blish ed da t a
ba ck u p/a r ch ive pr ocedu r es; pr ovided, h owever . Con t r a ct or m a y r et a m it s own wor k
pr odu ct a s lon g a s it m a in t a in s t h e con fiden t ia lit y of P RE P A's Con fiden t ia l
In for m a t ion a s ot h er wise pr ovided in t h is Con t r a ct . Du r in g t h is t h u -t y (30) da y
per iod, a n d except t o t h e ext en t m a k in g su ch docu m en t s a va ila ble wou ld r esu lt in .
t h e loss of lega l pr ivilege for P RE P A, t h ese docu m en t s sh a ll be a va ila ble for
in spect ion by t h e Office of t h e Com pt r oller of P u er t o Rico. Th is Ar t icle sh a ll su r vive
t h e t er m in a t ion / expir a t ion or com plet ion of t h is Con t r a ct .
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Th e Con t r a ct or will Com ply wiU. a ll a pplica ble St a t e La w, Regu la t ion s or E xecu t ive
Or d er s t h a t r egu la t e t h e con t r a ct in g p r oces s a n d r equ ir em en t s of t h e
Com m on wea lt h of P u er t o Rico. P a r t icu la r ly: La w N u m . 237-2004, a s a m en ded/ wh ich
est a bU sh es u n ifor m con t r a ct in g r equ ir em en t s for pr ofession a l a n d con su lt a n t
ser vices for t h e a gen cies a n d gover n m en t a l en t it ies of t h e Com m on wea lt h of P u er t o
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A. E xecu t ive Or der N u m . OE -1991-24 of J u n e 18, 1991 t o r equ ir e cer t ifica t ion of
com plia n ce wit h t h e In t er n a l Reven u e Ser vices of t h e Com m on wea lt h of P u er t o
Rico: P u r su a n t t o E xecu t ive Or der N u m ber OE -1991-24 of J u n e 18, 1991, t h e
Con t r a ct or will cer t ify a n d gu a r a n t ee t h a t it h a s filed a ll die n ecessa r y a n d r equ ir ed
in com e t a x r eh u n s t o fh e Gover n m en t of P u er t o Rico for t h e la st five (5) yea r s.
Th e Con t r a ct or , fu r t h er will cer t ify t h a t it h a s com plied a n d is cu r r en t wit h t h e
pa ym en t of a n y a n d a ll in com e t a xes t h a t a r e, or wer e du e, t o t h e Gover n m en t of
P u er t o Rico. Th e Con t r a ct or sh a ll pr ovide, t o t h e sa t isfa ct ion of P RE P A, a n d
wh en ever r equ est ed by P RE P A du r in g t h e t er m of t h is Con t r a ct , t h e n ecessa r y
docu m en t a t ion t o su ppor t it s com plia n ce wit h t h is da u se. Th e Con t r a ct or wiU be
given a specific a m ou n t of t im e t o pr odu ce sa id docu m en t s. Du r in g t h e t er m of t h is
Con t r a ct , t h e Con t r a ct or a gr ees t o pa y a n d/or t o r em a in cu r r en t wit h a n y r epa ym en t
pla n a gr eed t o by t h e Con t r a ct or wit h t h e Gover n m en t of P u er t o Rico. E xecu t ive
Or der 19910E 24.
B. E xecu t ive Or der N u m . OE -1992-52 of Au eu st 28, 1992 t o r equ ir e cer t ifica t ion of
com plia n ce wit h t h e Depa r t m en t of La bor of t h e Com m on wea lt h of P u er t o Rico.
P u r su a n t t o E xecu t ive Or der N u m ber 1992-52, da t ed Au gu st 28,1992 a m en din g OE -
1991-24, t h e Con t r a ct or wiU cer t ify a n d wa r r a n t t h a t it h a s m a de a ll pa ym en t s
r equ ir ed for u n em ploym en t ben efit s, wor k m en 's com pen sa t ion a n d socia l secu r it y
for ch a u ffeu r s, wMch ever is a pplica ble, or t h a t in lieu t h er eof/ h a s su bscr ibed a
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C. Soda l Secu r it y a n d In com e Ta x Ret en t ion s: In com plia n ce wit h E xecu t ive Or der
1991 OE - 24; a n d C.F .R. P a r t 404 et Seq./ t h e Con t r a ct or will be r espon sible for
r en der in g a n d pa yit ig t h e F eder a l Socia l Secu r it y a n d t ocom e Ta x Con t r ibu t ion s for
a n y a m ou n t owed a s a r esu lt of t h e m com e, fr om t h is Con t r a ct . E xecu t ive Or der
19910E 24: C.F .R. P a r t 404 et . Seq.
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F . In com e Ta x Ret en t ion La w: P RE P A sh a ll dedu ct a n d wit h h old seven per cen t (7%)
of a n y a n d a ll pa ym en t s t o r esiden t s of t h e Com m on wea lt h of P u er t o Rico a s
r equ ir ed by t h e In t er n a l Reven u e Code of P u er t o Rico. In ca se of U S cit izen s a n d
N on U S cit izen s, t h a t a r e n on r esiden t s of t h e Com m on wea lt h of P u er t o Rico t h e
Con t r a ct or will r et a in t wen t y per cen t (20%) a n d t wen t y-n in e per cen t (29%)
r espect ively. P RE P A wiU r em it su ch wit h h oldin gs t o t h e Gover n m en t of P u er t o
Rico's Tr ea su r y Depa r t m en t (k n own in Spa n ish a s Depa r t a m en t o de H a cien da de P u er t o
Rico). Th e Con t r a ct or wffl r equ est P RE P A n ot t o m a k e su ch wit Kh oIdm gs if, t o t h e
sa t isfa ct ion of P RE P A/ t h e Con t r a ct or t im ely pr ovides a r elea se fr om su ch obliga t ion
by t h e Gover n m en t of P u er t o Rico's Tr ea s u r y Dep a r t m en t .
3L.P .R.A.S8611et seq., 2011 L.P .R.232; 232-2011.
G. Specia l Con t r ibu t ion for P r ofession a l a n d Con su lt in g Ser vices: As r equ ir ed by
Act N o. 48-2013, a s a m en ded, P RE P A will wit h h old a specia l con t r ibu t ion of on e
poin t five per cen t (1.5%) of t h e gr oss a m ou n t s pa id u n der t h is Con t r a ct .
I. Com plia n ce wit h Act N o. 1 of Gover n m en t a l E t h ics: Th e Con t r a ct or wiU cer t ify
com plia n ce wit h Act N o. 1 of J a n u a r y 3, 2012, a s a m en ded, k n own a s t h e E t h ics Act
of t h e Gover n m en t of P u er t o Rico, wh ich st ipu la t es t h a t n o em ployee or execu t ive of
P RE P A n or a n y m em ber of lu s/h e im m edia t e fa m ily (spou se/ depen den t ch ildr en or
ofh er m em ber s of h is/h er h ou seh old or a n y in dividu a l wh ose fm a n cia l a ffa ir s a r e
u n der t h e con t r ol of t h e em ployee) sh a ll h a ve a n y dir ect or in dir ect pecu n ia r y
in t er est in t h e ser vices t o be r en der ed u n der t h is Con t r a ct , except a s m a y be
expr essly a u t h or ized by t h e Gover n or of P u er t o Rico in con su lt a t ion wit h t h e
Secr et a r y of Tr ea su r y a n d t h e Secr et a r y of J u st ice of t h e Gover n m en t . 3 L.P .R.A. §
8611 et sea .;
Adm in ist a r a t ive Or der dem a n din g pa ym en t or a n y econ om ic su ppor t r ega r din g
Act N o. 168-2000, a s a m en ded, t h e sa m e is cu r r en t a n d in a ll a spect s in com plia n ce.
Act No. 168-2000 "La w for t h e St r en gt h en in g of t h e F a m ily Su ppor t a n d Livelih ood of
E lder ly P eople" in Spa n ish : "Ley pa r a el F or t a lecim ien t o del Apoyo F a m ilia r y Su st en t o de
P er son a s de E da d Ava n za da ", 3 L.P .R.A. §8611 et seq.
M. N eea t ive Cer t ifica t ion of Cr im in a l P r ocedu r es: Th e Con t r a ct or cer t ifies a n d
gu a r a n t ees t h a t , a t t h e execu t ion of t h is Con t r a ct , n eit h er t h e it , n or a n y of it s
ch a ir per son , vice ch a ir per son , dir ect or s, execu t ive dir ect or , a n y m em ber of it s boa r d
of dir ect or s or boa r d of officia ls, or a n y per son per for m m g equ iva len t fu n ct ion s for
t h e (Com pa n y N a m e); or it s su bsidia r ies or a lt er egos h a ve been con vict ed or h a ve
p lea d ed gu ilt y, a n d n eit h er it , n or a n y of t h e a for em en t ion ed p er s on s , h a s
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If t h e st a t u s of t h e Con t r a ct or ch a ir per son , vice ch a ir per son , dir ect or s, execu t ive
dir ect or , a n y m em ber of it s boa r d of dir ect or s or boa r d of officia ls/ or a n y per son
per for m m g equ iva len t fu n ct ion s for t h e [Com pa n y N a m e); or it s su bsidia r ies or a lt er
egos, wit h r ega r ds t o t h e ch a r ges pr eviou sly m en t ion ed sh ou ld ch a n ge a t a n y t im e
du r in g t h e t er m of t h is Con t r a ct / t h e Con t r a ct or sh a ll n ot ify P RE P A im m edia t ely.
Th e fa ilu r e t o com ply wit h t h is r espon sibilit y con st it u t es a viola t ion of t h is Cla u se.
N . Con sequ en ces of N on -Com plia n ce: Th e Con t r a ct or expr essly a gr ees t h a t t h e
con dit ion s ou t lin ed t h r ou gh ou t t h is Sect ion X a r e essen t ia l r equ ir em en t s of t h is
Con t r a ct . Con sequ en t ly/ sh ou ld a n y on e of t h ese r epr esen t a t ion s/ wa r r a n t ies or
cer t ifica t ion s be in cor r ect , in a ccu r a t e or m islea din g, in wh ole or in pa r t , t h er e sh a ll
be su fficien t ca u se for t h e P RE P A t o r en der t h is Con t r a ct n u ll a n d Void/ a n d t h e
Con t r a ct or sh a ll r eim bu r se t h e P RE P A a ll m on eys r eceived u n der t h is Con t r a ct .
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(b) Viola t ion ; lia bilit y for u n pa id wa ges; liqu ida t ed da m a ges. In t h e even t
of a n y viola t ion of t h e cla u se set for t h in pa r a gr a ph (a ) of t h is sect ion , t h e
Con t r a ct or a n d a n y Su b Con t r a ct or r espon sible t h er efor sh a ll be lia ble
for t h e u n pa id wa ges. In a ddit ion , su ch Con t r a ct or a n d Su b Con t r a ct or
sh a ll be lia ble t o t h e Un it ed St a t es a n d/or Com m on wea lt h of P u er t o Rico
for liqu ida t ed da m a ges of $10 for ea ch ca len da r da y a la bor er or
m ech a n ic wor k ed m or e t h a n t h e st a n da r d for t y-h ou r wor k weel; wit h ou t
r eceivin g over t im e pa y. Su ch liqu ida t ed da m a ges win be ca lcu la t ed
sepa r a t ely for ea ch la bor er or m ech a n ic t h a t wor k ed m or e t h a n for t y
h ou r s in a week wit h ou t r eceivin g over t im e wa ges a s r equ ir ed u n der
pa r a gr a ph (a ) of t h is sect ion .
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3. Clea n Air Act a n d t h e F eder a l Wa t er P ollu t ion Con h -ol Act . Th e Con t r a ct or a gr ees
t o com ply wit h a ll a pplica ble st a n da r ds, or der s or r egu la t ion s issu ed pu r su a n t t o die
Clea n Air Act , a s a m en ded/ 42 U .S.C. § 7401 et seq./ a n d t h e F eder a l Wa t er P ollu t ion
Con t r ol Act , a s a m en ded, 33 U .S.C. 1251 et seq. Th e Con t r a ct or a gr ees t o r epor t ea ch
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A. E m ployer 's Lia bilit y In su r a n ce - Con su lt a n t sh a ll pr ovide E m ployer 's Lia bilit y
In su r a n ce wit h m in im u m bodily in ju r y lim it s of $500,000 for ea ch em ployee a n d
$500/000 for ea ch a cciden t cover in g a ga in st t h e lia bilit y im posed by la w u pon
Con su lt a n t a s r esu lt of bodily in ju r y, by a cciden t or disea se, in clu din g dea t h
a r isin g ou t of a n d in t h e cou r se of em ploym en t , ou t side of a n d in t h e cou r se of
em ploym en t / a n d ou t side of a n d dist in ct fr om a n y cla im u n der t h e Wor k m en 's
Com pen sa t ion Act of t h e Com m on wea lt h of P u er t o Rico.
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P r ofe s s ion a l S e r vice s C on t r a ct H O R N E F e d e r a l L L C . "<i'^ /
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Th e Com m er cia l Gen er a l Lia bilit y a n d Com m er cia l Au t om obile Lia bilit y In su r a n ce
r equ ir ed u n der t h is Con t r a ct sh a ll be en dor sed t o in clu de:
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P r ofession a l Ser vices Con t r a ct H ORN E F eder a l LLC.
P a ge 22
6. Wor k m en 's Com pen sa t ion : Th e Con t r a ct or sh a U pr ovide wor k m en 's com pen sa t ion
in su r a n ce a s r equ ir ed by Act 45-1935, a s a m en ded. Con h -a ct or sh a ll a lso be
r espon sible for com plia n ce wit h Act 45 by a ll it s su bcon t r a ct or s/ a gen t s a n d in vit ees,
if a n y, or sh a ll cer t ify t h a t su ch su bcon t r a ct or s/ a gen t s a n d ir r vit ees h a ve obt a in ed
sa id policies on t h eir own beh a lf. Con t r a ct or sh a ll fu r n ish t o P RE P A a cer t ifica t e
fr om t h e
P u er t o Rico's St a t e In su r a n ce F u n d sh owin g t h a t a ll per son n el em ployed in t h e wor k
a r e cover ed by t h e wor k m en 's com pen sa t ion in su r a n ce/ in a ccor da n ce wit h t h is
Agr eem en t .
^
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P r ofession a l Ser vices Con t r a ct H ORN E F eder a l LLC.
P a ge 23
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(b) Applica ble Regu la t ion s a n d P olicy. Applica ble r egu la t ion s, F E MA
policy, a n d ot h er sou r ces set t in g for t h t h ese r epor t in g r equ ir em en t s
in clu de/ bu t a r e n ot lim it ed t o:
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P r ofe s s ion a l S e r vice s C on t r a ct H O R N E F e d e r a l L L C . - <<;:! /
P a ge 25
15. Recor ds Ret en t ion . Th e Con t r a ct or a gr ees t o m a in t a in a ll book s, r ecor ds, a ccou n t s
a n d r epor t s a n d a fl ot h er r ecor ds pr odu ced or collect ed in con n ect ion wit h t h is
Con t r a ct for a per iod of n ot less t h a n t h r ee (3) yea r s a ft er t h e da t e of fin a l pa ym en t
a n d dose-ou t of a ll pen din g m a t t er s r ela t ed t o t h is Con t r a ct . If a n y lit iga t ion , cla im ,
or a u dit is r ea son a bly a n t icipa t ed t o a r ise or is st a r t ed befor e t h e expir a t ion of t h e 3-
yea r per iod, t h e r ecor ds m u st be r et a in ed u n t il a U U t iga t ion , cla im s, or a u dit fin din gs
in volvin g t h e r ecor ds h a ve been r esolved a n d fin a l a ct ion t a k en ,
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,if
19. Com plia n ce wit h t h e Da vis-Ba con Act (a pplica ble t o con st r u ct ion con t r a ct s in
excess of $2,000 fu n ded by (i) gr a n t s fr om a ll F eder a l a een des ot h er t h a n F E MA;
a n d (ii) t h e followin g F E MA pr oer a m s: (1) E m er e:en cv Ma n a sem en t P r epa r edn ess
Gr a n t P r ogr a m , (2) H om ela n d Secu r it y Gr a n t P r oer a m ; (3) N on pr ofit Secu r it y
Gr a n t P r oer a m ; (4) Tr iba l H om ela n d Secu r it y Gr a n t P r oer a m ; (5) P or t Secu r ih ^
^ Gr a n t P r oa r a m ; a n d (6) Tr a n s it S ecu r it y Gr a n t F r oe:r a m ).
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(a ) Th e Con t r a ct or sh a ll com ply wit h t h & Da vis-Ba con Act / 40 U .S.C. g§ 3141-
3148, a n d t h e r equ ir em en t s of 29 C.F .R. § 5.5 a s m a y be a pplica ble, wh ich a r e
in cor por a t ed by r efer en ce in t o t lu s Con t r a ct .
20. Com plia n ce wit h t h e Copela n d An t i-Kick ba ck Act (a pplica ble t o a ll con t r a ct s
su bject t o t h e Da vis-Ba con Act ).
(d) Th e Con t r a ct or wiU sen d t o ea ch la bor u n ion or r epr esen t a t ive of wor k er s
wit h wh ich it h a s a collect ive ba r ga in in g Con t r a ct or ot h er con t r a ct or
u n der st a n din g a n ot ice a dvisin g t h e la bor u n ion or wor k er s' r epr esen t a t ive of
t h e Con t r a ct or 's com m it m en t s u n der sect ion 202 of t h e U S E xecu t ive Or der
11246 of Sept em ber 24, 1965, a s a m en ded/ a n d sh a ll post copies of t h e n ot ice
in con spicu ou s pla ces a va ila ble t o em ployees a n d a pplica n t s for em ploym en t .
(e) Th e Con t r a ct or will com ply wit h a U pr ovision s of E xecu t ive Or der 11246/ a n d
of t h e r u les, r egu la t ion s, a n d r eleva n t or der s of t h e Secr et a r y of La bor .
(f) Th e Con t r a ct or will fu r n ish a ll in for m a t ion a n d r epor t s r equ ir ed by E xecu t ive
Or der 11246/ a n d by t h e r u les, r egu la t ion s, a n d or der s of t h e Secr et a r y of
La bor , or pu r su a n t t h er et o, a n d wffl per m it a ccess t o it s book s, r ecor ds, a n d
a ccou n t s by P RE P A, t h e Com m on wea lt h of P u er t o Rico, a n d t h e Secr et a r y of
La bor for pu r poses of in vest iga t ion t o a scer t a in com plia n ce wit h su ch r u les,
r egu la t ion s/ a n d or der s.
a m ea n s of en for cin g su ch pr ovision s in clu din g sa n ct ion s for n on com plia n ce;
P r ovided, h owever , t h a t in t h e even t t h e Con t ca ct or becom es in volved in / or is
t h r ea t en ed wit h , lit iga t ion wit h a Su b-con t r a ct or or ven dor a s a r esu lt of su ch
dir ect ion , t h e Con t r a ct or m a y r equ est t h e U n it ed St a t es t o en t er in t o su ch
lit iga t ion t o pr ot ect t h e in t er est s of t h e Un it ed St a t es.
22. Age Discr im in a t ion Act of 1975. Th e Con t r a ct or sh a ll com ply wit h t h e pr ovision s of
t h e Age Disa -u n in a t ion Act of 1975. N o per son m t h e U n it ed St a t es sh a ll, on t h e
ba sis of a ge/ be exclu ded fr om pa r t icipa t ion in , be den ied t h e ben efit s of, or be
su bject ed t o discr im in a t ion u n der , a n y pr ogr a m or a ct ivit y r eceivin g feder a l
fin a n cia l a ssist a n ce.
23. Am er ica n s wit h Disa bilit ies Act . Th e Con t r a ct or sh a ll com ply wit h t h e a ppr opr ia t e
a r ea s of t h e Am er ica n s wit h Disa bilit ies Act of 1990, a s en a ct ed a n d fr om t im e t o
t im e a m en ded, a n d a n y ot h er a pplica ble feder a l r egu la t ion . A sign ed, wr it t en
cer t ifica t e st a t in g com plia n ce wit h t h e Am er ica n s wit h Disa bilit ies Act m a y be
r equ est ed a t a n y t ia h e du r in g t h e t er m of t h is Con t r a ct .
24. Tit le VI of t h e Civil Righ t s Act of 1964. Th e Con t r a ct or sh a ll com ply wit h t h e
pr ovision s of Tit le VI of t h e Civil Righ t s Act of 1964. N o per son sh a U , on t h e
gr ou n ds of r a ce, color , or n a t ion a l or igin , be exclu ded fr om pa r t icipa t ion in , be
den ied t h e ben efit s of, or be su bject ed t o discr im in a t ion u n der a n y pr ogr a m or
a ct ivit y r eceivin g feder a l fin a n cia l a ssist a n ce.
25. Sect ion 504 of t h e Reh a bilit a t ion Act of 1973, a s Am en ded. Th e Con t r a ct or a gr ees
t h a t n o ot h er wise qu a lified in dividu a l wit h disa bilit ies sh a ll, solely by r ea son of h is
disa bilit y, be den ied die ben efit s, or be su bject ed t o discr im in a t ion in clu din g
discr im m a t ion in em ploym en t , a n y pr ogr a m or a ct ivit y t h a t r eceives t h e ben efit s
fr om t h e feder a l fin a n cia l a ssist a n ce.
(a ) Defin it ion s.
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(2) Wom en 's Bu sin ess E n t er pr ise. A bu sin ess t h a t is: (a ) a t lea st 51 per cen t
own ed by on e or m or e wom en a n d (b) wh ose m a n a gem en t a n d da ily
oper a t ion s a r e con t r olled by on e or m or e wom en ,
(3) Min or it y Bu sin ess: A bu sin ess t h a t is (a ) a t lea st 51 per cen t own ed by
on e or m or e m in or it y gr ou p m em ber s a n d (b) wh ose m a n a gem en t a n d
d a ily op er a t ion s a r e con t r olled by on e or m or e m in or it y gr ou p
m em ber s.
(3) Dividin g t ot a l r equ iiem en t s, wh en econ om ica lly fea sible, in t o sm a ller
t a sk s or qu a n t it ies t o per m it m a xim u m pa r t icipa t ion by sm a ll a n d
m in or ify bu sin esses, a n d wom en 's bu sin ess en t er pr ises;
32. U .S. Depa r t a ien t of H om ela n d Secu r it y Sea l, Logo, a n d F la gs. Th e Con t r a ct or sh a ll
n ot u se t ih e U .S. Depa r t m en t of H om ela n d Secu r it y sea l(s), logos, cr est s, or
r epr odu ct ion s of fla gs or lik en esses of DH S a gen cy officia ls wit h ou t specific F E MA
pr e- a ppr ova l.
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39. Cer t ifica t ion of Gover n m en t Agr eem en t s: Th e Con t r a ct or h er eby cer t ifies t h a t , a t
fee t im e of execu t ion of t h is Agr eem en t / it does n ot h a ve a n y ot h er a gr eem en t wit h
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a n y a gen cy, pu blic cor por a t ion , m u n icipa lit y, or in st r u m en t a lit y of t h e Gover n m en t
of P u er t o Rico.
If t o Con t r a ct or ;
H ORNE F eder a l LLC
S. N eil F or bes
1215 19t h St r eet Nor t h west 3r d F loor
Wa sh in gt on D.C. 20036
Ift oP RE P A:
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J u ^ t o Lu is Gor fea lea J 6r r ^ S. N eil F or bes
(A<<h n g E xecu t ive Dir ect or P a r t n er In Ch a r ge/Ma n a ger
Ta x Id N u m ber : Ta x Id. N u m ber :
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o E jecu t ivo Au t or iza d o
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APPEAR
AS F IRST P ARTY: Th e P u er t o Rico E lect r ic P ower Au t h or it y (P RE P A), a pu blic
cor por a t ion a n d gover n m en t in st r u m en t a lit y of t h e Com m on wea lt h of P u er t o Rico,
cr ea t ed by Act 83 of Ma y 2,1941, a s a m en ded, r epr esen t ed in t h is a ct by it s E xecu t ive
Dir ect or , J u st o Lu is Gon za lez Tor r es, of lega l a ge, m a r r ied, en gin eer a n d r esiden t of
J u a n a Dia z, P u er t o Rico.
AS SE COND P ARTY: Cobr a Acqu isit ion s LLC, a lim it ed lia bilit y com pa n y or ga n ized
a n d exist in g u n der t h e la ws of t h e St a t e of Dela wa r e wit h a pla ce of bu sin ess a t 14201
Ca liber Dr ive, Su it e 300, Okla h om a Cit y, Okla h om a 73134, h er ein r epr esen t ed byAr t y
St r a eh la , of lega l a ge, m a r r ied, a n d a r esiden t of Okla h om a Cit y, Okla h om a (h er ein a ft er
r efer r ed t o collect ively a s t h e "Con t r a ct or ") wh ose a u t h or it y of r epr esen t a t ion is
eviden ced by cor por a t e r esolu t ion .
WITNESSETH
In con sider a t ion of t h e m u t u a l coven a n t s h er ein a ft er st a t ed, t h e P a r t ies a gr ee a s
follows:
Am en dm en t No. 2 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A's E lect r ica l Gr id
Repa ir s - H u r r ica n e Ma r ia
P a ge 2 of 2
TCO 362830983^ 2
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o E jecu t ivo Au t or iza do
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APPEAR
AS SE COND P ARTY: Cobr a Acqu isit ion s LLC, a lim it ed lia bilit y com pa n y or ga n ized
a n d exist in g u n der t h e la ws of t h e St a t e of Dela wa r e wit h a pla ce of bu sin ess a t 14201
Ca liber Dr ive, Su it e 300, Okla h om a Cit y, Okla h om a 73134, h er ein r epr esen t ed byAr t y
Sfr a eh la , of lega l a ge, m a r r ied, a n d a r esiden t of Okla h om a Cit y, Okla h om a (h er ein a ft er
r efer r ed t o collect ively a s t h e "Con t r a ct or ").
WH E RE AS: P RE P A a n d t h e Con t r a ct or a gr ee t h a t fu r t h er a m en dm en t s t o t h e
Or igin a l Con t r a ct a r e n ecessa r y, specifica lly t o Ar t icle 59 a s su ch a r t icle wa s a m en ded
by Am en dm en t No. 1.
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Am en dm en t No, 3 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s - H u r r ica n e Ma r ia
P a ge 2 of 2
WITNESSETH
U^ feJ ^ ^ 19^ —
J ^ t o Lu is Ggfo?41ez^ t y St r a eh la
E xecu t ive Difect or " Ch ief E xecu t ive Officer
E m ployer Socia l Secu r it y E m ployer ID Nu m ber
TCO 36Z830982V1
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Ad m in is t r a d or d e Docu m en t os
o E jecu t ivo Au t or iza do
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Cu a n t ia : $245,429,800.00,
N u m . Cu en t a : 01-1747-^ 9§-5 55-474
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APPEAR
J u a n a Dia z, P u er t o Rico.
AS SE COND P ARTY: Cobr a Acqu isit ion s LLC (Con t r a ct or ), a lim it ed lia bilit y com pa n y
or ga n ized a n d exist in g u n der t h e la ws of t h e St a t e of Dela wa r e wit h a pla ce of bu sin ess
a t 14201 Ca liber Dr ive, Su it e 300, Okla h om a Cit y, Okla h om a 73134, h er ein r epr esen t ed
by Ar t y St r a eh la , of lega l a ge, m a r r ied, a n d a r esiden t of Okla h om a Cit y, Okla h om a .
WH E RE AS: P RE P A a n d t h e Con t r a ct or a gr ee t h a t a fu r t h er a m en dm en t t o t h e
TOO 362850620v1
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Am en dm en t No. 4 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s ~ H u r r ica n e Ma r ia
P a ge 2 of 7
WITNESSETH
Th e office of t h e Ch ief of St a ff sh a ll h a ve t h e a u t h or it y t o t er m in a t e t h is
Con t r a ct a t a n y t im e. In t h e even t t h e Ch ief of St a ff exer cises t h is
a u t h or it y, su ch t er m in a t ion sh a ll be deem ed a t er m in a t ion by P RE P A
u n der Ar t icles 14 a n d 15.
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Am en dm en t No. 4 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s - H u r r ica n e Ma r ia
P a ge 3 of 7
B. Cer t ifica t ion s issu ed by t h e Mu n icipa l Reven u es Collect ion Cen t er (MRCC): (a )
a Cer t ifica t ion a ssu r in g t h a t t h e Con t r a ct or does n ot owe a n y t a x a ccr u in g du r in g
t h e la st five (5) yea r s t o su ch gover n m en t a l a gen cy or ot h er docu m en t a t ion
a ccept a ble t o P RE P A pr ovidin g eviden ce t h a t a n y t a xes a llegedly owed a r e
cu r r en t ly u n der a dm in ist r a t ive r eview, a n d; (b) a P er son a l P r oper t y Ta x F ilin g
Cer t ifica t ion t h a t in dica t es t h a t t h e Con t r a ct or h a s filed t h eir P er son a l P r oper t y
Ta x Ret u r n for t h e la st five (5) con t r ibu t or y t er m s.
Am en dm en t No. 4 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s - H u r r ica n e Ma r ia
P a ge 4 of 7
8. An t i-cor r u pt ion Code for a N ew P u er t o Rico: Con t r a ct or a gr ees t o com ply wit h t h e
pr ovision s of Act 2-2018, kn own a s t h e An t i-Cor r u pt ion Code for a New P u er t o Rico,
a s t h e sa m e m a y be a m en ded fr om t im e t o t im e.
9. Gover n m en t E t h ics Act : Th e Con t r a ct or h er eby cer t ifies t h a t it is in com plia n ce wit h
Act 1 of J a n u a r y 3, 2012, a s a m en ded, k n own a s t h e E t h ics Act of t h e Gover n m en t
Case:17-04780-LTS Doc#:771 Filed:03/13/18 Entered:03/13/18 17:53:43 Desc: Main
Document Page 131 of 168
Am en dm en t No. 4 t o E m er gen cy Ma st er Sen /ice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s - H u r r ica n e Ma r ia
P a ge 5 of 7
10. Cer t ifica t ion a s t o N o Con vict ion : Con t r a ct or h er eby cer t ifies t h a t it h a s n ot been
con vict ed in P u er t o Rico or U n it ed St a t es F eder a l cou r t for u n der Ar t icles 4.2, 4.3
or 5.7 of Act 1-2012, a s a m en ded, k n own a s t h e Or ga n ic Act of t h e Office of
Gover n m en t E t h ics of P u er t o Rico, a n y of t h e cr im es list ed in Ar t icles 250 t h r ou gh
266 of Act 146-2012, a s a m en ded, k n own a s t h e P u er t o Rico P en a l Code, a n y of t h e
cr im es t ypified in Act 2-2018, a s a m en ded, kn own a s t h e An t i-Cor r u pt ion Code for a
New P u er t o Rico or a n y ot h er felon y t h a t in volves m isu se of pu blic fu n ds or pr oper t y,
in clu din g bu t n ot lim it ed t o t h e cr im es m en t ion ed in Ar t icle 6.8 of Act 8-2017, a s
a m en ded, k n own a s t h e Act for t h e Adm in ist r a t ion a n d Tr a n sfor m a t ion of H u m a n
Resou r ces in t h e Gover n m en t of P u er t o Rico. P RE P A sh a ll h a ve t h e r igh t t o
t er m in a t e t h e a gr eem en t in t h e even t Con t r a ct or is con vict ed in P u er t o Rico or
U n it ed St a t es F eder a l cou r t for a n y of t h e cr im es specified in t h is pa r a gr a ph .
Con t r a ct or sh a ll pr om pt ly in for m P RE P A of a n y con vict ion or gu ilt y plea for a n y of
t h e a for em en t ion ed cr im es du r in g t h e t er m of t h is Con t r a ct .
11. Cer t ifica t ion of Gover n m en t Agr eem en t s: Th e Con t r a ct or h er eby cer t ifies t h a t , a t t h e
t im e of execu t ion of t h is Agr eem en t , it does n ot h a ve a n y ot h er m a t er ia l a gr eem en t
for ser vices wit h a n y a gen cy, pu blic cor por a t ion , m u n icipa lit y, or in st r u m en t a lit y of
t h e Gover n m en t of P u er t o Rico.
'^ • l!K,V ^
Am en dm en t No. 4 t o E m er gen cy Ma st er Ser vice Agr eem en t for P RE P A'S E lect r ica l
Gr id Repa ir s - H u r r ica n e Ma r ia
P a ge 6 of 7
15. An y fin a n cia l r ecor ds, su ppor t in g docu m en t s, a n d st a t ist ica l r ecor ds in r ela t ion wit h
t h e Con t r a ct a n d t h is Am en dm en t F ou r m u st be r et a in ed a ccor din g t o P RE P A's
P olicy for Con ser va t ion a n d Ret en t ion of Docu m en t s (Revised 2012) t h a t
est a blish es a per iod of r et en t ion (15 yea r s, of wh ich t h e la st five will be a ft er t h e
a u dit of t h e Office of t h e In spect or Gen er a l) gr ea t er t h a n t h a t r equ ir ed by F E MA a n d
t h e 2 CF R §200. Th e 2 CF R §200.333 will a pply t o a n y r ecor d or docu m en t n ot
m en t ion ed or cover ed in P RE P A's P olicy.
(MfMa i^
^ t o Gon za \ ez7~ \ _y (^ / Ar t y S t r a eh la
fe cu t ive D ir e ct or Ch ie f E xe cu t ive O ffice r
E m p loyer S ocia l S ecu r it y E m p loyer I D N u m ber
Case:17-04780-LTS Doc#:771 Filed:03/13/18 Entered:03/13/18 17:53:43 Desc: Main
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EXHIBIT B-1
TCO 362850620v1
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Document Page 134 of 168
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SJ2018CV01081
Case:17-04780-LTS Doc#:77105/03/2018 06:58:55
Filed:03/13/18 p.m. Página 1
Entered:03/13/18 de 2
17:53:43 Desc: Main
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Demandante SOBRE:
v. SOLICITUD DE ORDEN EN
AUXILIO DE JURISDICCIÓN ANTE
AUTORIDAD DE ENERGÍA ELÉCTRICA DE INCUMPLIMIENTO CON ÓRDENES
PUERTO RICO
Demandada
AL HONORABLE TRIBUNAL:
solicita:
(AEE).
de Procedimiento Civil y envíe una copia electrónica de éste a la representación legal que
Reglas de Procedimiento Civil y en las Guías del Usuario del SUMAC, proceda a expedir
electrónica de récord.
RESPETUOSAMENTE SOMETIDA.
2
SJ2018CV01081
Case:17-04780-LTS Doc#:77106/03/2018 11:34:34
Filed:03/13/18 a.m. Página 1
Entered:03/13/18 de 2
17:53:43 Desc: Main
Document Page 137 of 168
Case:17-04780-LTS Doc#:771 Filed:03/13/18 Entered:03/13/18 17:53:43 Desc: Main
Document Page 138 of 168
v. SOBRE:
AL HONORABLE TRIBUNAL:
que concedió un término de cinco (5) días a la AEE para comparecer por escrito
Demanda.
CERTIFICO que en esta fecha se ha presentado este escrito a través del sistema
los abogados de las partes sobre la presentación de este escrito y hará disponible copia fiel
RESPETUOSAMENTE SOMETIDA.
2
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Exhibit B
Certified translations of Process and Pleadings in the Civil Action
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TRIAL COURT
RE:
AUTHORITY
Defendant
Comes now Plaintiff, the Puerto Rico Electric Energy Commission (“Commission”),
represented by the undersigned attorney, and very respectfully states, alleges and prays:
I. Presentation
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The Puerto Rico Energy Commission requests from this Honorable Court, through this
Complaint, that it order in assisting the Commission’s jurisdiction, that the Puerto Rico Electric
Power Authority (AEE, Spanish acronym) comply in an urgent manner, with the following
orders under penalty of civil contempt, to its Executive Director and any other official
a) The Order (Order) issued on November 17th of 2017 in the matter: In re: Temporary
PREPA be ordered, under penalty of civil contempt, that its Executive Director and
(i) Include within all of the contracts which it grants, and being of the types
described within the first paragraph of Part II (a) of stated Order, clauses
(iii) Not grant any contracts of the types described in the first paragraph of Part
Attachment I.
b. The Resolutions and Order issued on March 5th of 2018 in the matter: In re: Puerto
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that its Executive Director plus any other responsible official, deliver to the
Commission true and exact copy of the proposal for Financial Plan which PREPA
presented to the Financial Oversight & Management Board (JSF, Spanish acronym)
this past February 12th of 2018, as well as the list of employees and consultants at
PREPA who have the knowledge as to explain the contents within stated proposal for
the Financial Plan, in detail, and the relationship between subject matters and
Plaintiff, Puerto Rico Energy Commission, is a public entity of Puerto Rico’s Executive
Branch having its own juridical identity, independent and highly specialized, established by Law
57-2014, as amended, known as the Puerto Rico Energy & Transformation Relief Act (“Law 57-
2014”), for purposes of regulating Puerto Rico’s electrical sector, and effect compliance with
Puerto Rico’s energy public policy. The Commission, in accordance with stated Law 57-2014, is
charged with regulating and supervising the electrical industry, adjudicate regarding
controversies within that sector, and execute compliance with Puerto Rico’s energy public
policy. In brief synthesis, the Commission’s main mission is to attain that Puerto Rico have a
trustworthy, efficient and transparent electrical system that provides electrical services at
reasonable prices. Of course, PREPA is one of the entities subject to the Commission’s
Among the encompassing powers delegated upon the Commission under Law 57-2014
are:
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modernize its plants or energy generating facilities, thus providing that all
energy purchase and sales contracts must comply with the standards, terms
• Control the quality and reliability of [PREPA’s] electrical services, and that
prices in Puerto Rico. The Energy Commission, in the exercise of its faculties
and powers, will require that prices in every energy purchase and sales
contract be fair and reasonable, in tune with the public interest and
• “Review and approve policies, strategic plans, and short, medium and long-
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Rico for any matter directly or indirectly related to the rendering of electric
6.3(v);
• “Compile and analyze all types of timely and reliable information regarding
determine Puerto Rico’s energy needs during any time period”, Article 6.3(z);
compliance with its duties, issue orders and establish fines as to comply with
those faculties granted it under law, and for implementation of [the] Law [57-
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• Place those resources that are necessary as to “ensure that its rules,
regulations, orders and rulings are complied with”, Article 6.3 (nn).
After the JSF was established, in accordance with Public Law 114-187 known as the
Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), PREPA has
consistently refused to comply with the Commission’s orders and has hindered regulatory
procedures, under the legally incorrect premise that PROMESA and the powers delegated to the
JSF under stated Federal law, bears supremacy and pre-eminency over all of the Commission’s
faculties under Law 57-2014. To propose and conclude that PROMESA turned the JSF into
regulator for electrical services and the industry in Puerto Rico, and that with the approval of
PROMESA and the delegation of powers upon the JSF has had the practical effect of voiding
Law 57-2014, and divest the Commission of all its powers and make it irrelevant – as PREPA
seems to argue – is not only unreasonable, but more so runs counter to the spirit of PROMESA’s
own provisions, which define the faculties of the JSF and acknowledge such Commission’s
existence, its establishment and its powers under Law 57-2014. See, Sections 501 and
respected, see Section 303 of PROMESA, 48 U.S.C. § 2163, which of course includes Law 57-
2014, and the regulations and orders by the Commission under shelter of stated Law. And it so is
that the powers delegated by PROMESA to the JSF over PREPA are mostly of a financial type,
and not regarding substantive matters insofar as energy services. As we explain below, PREPA
cannot refuse to comply with the Commission’s orders under pretext of an alleged supremacy by
PROMESA, since PROMESA does not cover any field whatsoever within legislation, and the
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indicated orders by the Commission are – in no way – incompatible with PROMESA nor with
Moreover, regardless of the scope of such powers by the JSF over public entities of the
Government of Puerto Rico, declared by it as being covered territorial instrumentalities (as the
PREPA case is), then PREPA’s compliance with the Commission’s orders, execution for
which we are requesting the assistance of this Honorable Court, has no impact over
PREPA’s estate or physical status, nor in any way hinders the JSF from exercising its
powers over PREPA. This rules out, on its face, any proposal regarding pre-eminence and
non-suit which PREPA or its agents might make in attempting to attack these orders by the
Commission and, through it, intend to revert to the status of an unregulated monopoly,
with great prejudice towards all electric energy service clients in Puerto Rico, the public
interest and of all other electrical (power) service firms which operate or desire to establish
1) Plaintiff, the Puerto Rico Energy Commission is a public entity for the Executive
Branch of the Government of Puerto Rico established under Law 57-2014 having its
own legal capacity, specialized knowledge and ample faculties to regulate Puerto
Rico’s electric power industry. The physical and postal address for the Commission
is: World Plaza Building, 268 Munoz Rivera Avenue, Suite 702, San Juan, PR 00918;
its phone number is (787) 523-6262; and its e-mail address is cepr@energia.pr.gov.
2) Defendant Puerto Rico Electric Power Authority is an electric power service firm
which in turn, is a public corporation for the Government of Puerto Rico, established
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by Law No. 83 dated May 2nd of 1941, as amended, known as the Puerto Rico
Electric Power Authority Act. Its physical address is 1110 Ponce de Leon Avenue,
Neos Building, Eighth Floor, Office 801, San Juan, PR; its postal address is PO Box
363928, General Post Office, San Juan, PR 00936-3928; its phone number is (787)
Justo I. Gonzalez-Torres.
III. Jurisdiction of this Honorable Court and Active Competency of the Commission
3) The Puerto Rico Energy Commission appears before this Honorable Court in view of
the provisions of what is provided under Article 5.001 of Law 201-2003, as amended,
known as the Commonwealth of Puerto Rico Judiciary Act of 2003, 4 LPRA, §25a;
and in view of the provisions of subsections (ll) and (nn) of Article 6.3 of Law 57-
The Energy Commission shall bear those faculties and duties which are established
as follows:
[…]
(ll) To sue and be sued in claims or causes of action in its own name at the Trial Court for
the Commonwealth of Puerto Rico, against any natural or juridical person which fails to
comply with or interferes with the requirements, purposes and objectives of this Law, or
in any other administrative forum within the Commonwealth of Puerto Rico. For such
purposes, the Commission’s active standing is acknowledged, in interposing all of the
necessary resources before the judicial forum, as to assure full compliance with the public
policy established in this Law;
[…]
(nn) To interpose resources, issue orders, establish and grant any legal remedies deemed
necessary as to effectuate the purposes of this Law, and enforce compliance with its rules,
regulations, orders and rulings.
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assistance from this Honorable Court as to obtain full compliance by PREPA, under penalty of
civil contempt, from its Executive Director and any other responsible official, regarding the
following Orders by the Commission: (1) the Order (Order) issued on November 17th of 2017 in
the matter of In re: Temporary Oversight Measures Related to the Procurement and Management
of Restoration Services by PREPA, Case No. CEPR-2017-0008, see Attachment I; and (2) the
Resolution and Order (Resolution and Order) rendered on March 5th of 2018 in the matter of In
re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No. CEPR-IN-2018-0001, see
Attachment II. This, in accordance with the authority which Law 57-2014 granted upon the
Commission of “[i]nterposing all resources, issue orders and to formalize and grant any legal
remedies necessary as to effectuate the purposes of the [Law 57-2014], and enforce compliance
with its rules, regulations, orders and decisions”. Article 6.3 (nn) of Law 57-2014, 9 LPRA §
1054b.
Following, and for the benefit of this Honorable Court, we explain the context under
which the Commission issued each of these orders – with which PREPA has failed to comply –
and their importance. As this Honorable Court may corroborate, both orders are clearly framed
and covered within the scope of the authority and jurisdiction which Law 57-2014 granted upon
the Commission, not solely over PREPA, but moreover all of Puerto Rico’s electrical sector.
A) Order (Order) issued on November 17th of 2017 in the matter In re: Temporary
Oversight Measures Related to the Procurement and Management of Restoration
Services by PREPA, Case No. CEPR-MI-2017-0008, see Attachment I.
The Commission issued this Order for purposes of implementing certain measures to
advance and insure accountability, prudence and reasonableness in the efforts to restore electric
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power services, after the passing of Hurricane Maria through the Puerto Rico island chain, and as
to avoid waste of resources, fraud and abusive practices by PREPA and potential or current
contractors. The Commission explained that the measures announced and required under this
Order were necessary and essential as result of the scandal regarding contracting of Whitefish
Energy Holdings, LLC (“Whitefish”), and of other contracts granted by PREPA, which
evidenced its lack of discipline, scrutiny and prudence therein. This, even more so when, being
PREPA a public corporation (lacking stockholders who suffer the proprietary consequences,
paying for the negligence and the resources wasted by the corporation), and the electric power
clients being those who pay for PREPA’s lack of prudence and waste of resources, through
payment of rate increases. That is, since PREPA is a public corporation lacking any
stockholders, it then becomes necessary to take preventive measures as to avoid that PREPA
continue incurring into negligent costs since, once PREPA does incur into such costs, there exists
no option other than to allow that PREPA collect the necessary revenues by charging rates as to
cover such negligent expenses. In the measure that no stockholders, partners or owner members
of PREPA exist, then the Commission cannot impose that any negligent expenses by PREPA
becomes losses for the stockholders, partners or members, instead of rate increases which affect
the consumers.
Under this backdrop, the Commission in Part II of the Order, ordered PREPA to include
eleven (11) special clauses or provisions in all of its (i) contracts for purchase of fuel, purchase
and sales of energy and service to the grid having an aggregate value of $10 million or more; (ii)
contracts for infrastructure work having a value of $1 million or more; (iii) professional services
contracts in the amount of $250,000 or more, which are granted by PREPA after November 17th
of 2017. One of the eleven (11) clauses which in accordance to the Order PREPA must
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include in the above stated contracts is geared towards establishing that the contract will
not come into force until PREPA receives approval in writing from the Commission, or
until five (5) days have elapsed from the date in which PREPA has submitted the contract
to the Commission, if same has not taken any action whatsoever within stated period.
In Part II (b) of the Order, the Commission ordered PREPA to submit certain documents
and information, and to carry out certain actions with regards to contract projects mentioned in
Part II (a). Among these, PREPA was ordered to submit to the Commission (for prior evaluation
and approval), projects for such types of contracts that PREPA was proposing to grant therein. It
also required PREPA to submit amendments proposed for said contracts, prior to their issuance.
B) Resolution and Order (Resolution and Order) issued on Marh 5th of 2018 in the
matter In re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No. CEPR-
IN-2018-0001, see Attachment II.
The Commission, on March 31st of 2018, initiated an investigation regarding the content
and representations made in the proposal for the Fiscal Plan which PREPA filed before the JSF
this past 24th of January, 2018. Among the objectives of the investigation were (i) to evaluate the
performance, rate structure and resource planning; (ii) examine the potential impact which stated
initiatives might have upon the electrical industry in Puerto Rico and to electric power service
clients, and (iii) determine if the initiatives contemplated within the Fiscal Plan as to the
substantive matter regarding generation, transmission and distribution of electric power service
are consistent or not with the provisions of Law 57-2014 and with regulations and the orders by
the Commission. Through stated order dated January 31st of 2018, the Commission required
PREPA to answer numerous questions related to assorted substantive issues within the subject of
electric power services which had been touched upon within the proposed Fiscal Plan, such as:
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energy generation, transmission and distribution; client service and invoicing; compliance with
environmental regulations; challenges in the aftermath of hurricanes Irma and Maria, and
restoration of electric power services; PREPA’s budgetary needs as to be able to operate and
provide electric power services, and monies requested and received from Federal entities or
programs; the rate structure, rate design and cost distribution among electric service clients; and
Stated questions were not responded by PREPA, and the information required in the
Order dated January 31st of 2018 was not received by the Commission. Notwithstanding, and as
it permeated within the communications media, the JSF this past February 5th, returned to
PREPA its proposal for the Fiscal Plan (of January 24th, 2018), for its review and modification,
htpps://juntasupervision.pr.gov/wp-content/uploads/wpfd/43/5a78d5c643e93.pdf.
The Commission, and in view of stated developments, issued a new Order on the
required PREPA to deliver to said Commission –on or before that same day by 3:00 p.m. – true
and exact copy of the Fiscal Plan proposal which PREPA had presented before the JSF this past
February 12th of 2018, as well as the list of PREPA employees and consultants having
knowledge as to explain the contents of stated Fiscal Plan proposal in detail, and the relationship
between said issues, consultants, or employees. The Commission, in stated Order, explained that
in the Fiscal Plan proposal dated January 24th of 2018 same discussed, among some other
aspects, methods of transforming PREPA’s status quo (i.e., sale of PREPA’s generation units
and granting operation of electrical services transmission and distribution to a third party), and
assumes that the Fiscal Plan’s proposal dated February 12th of 2018 also touches upon said
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issues, since the JSF did not require PREPA to exclude any subject matter whatsoever, upon
As we have explained, it is essential that the Commission, in its capacity as regulator for
Puerto Rico’s electric sector, have access to and examine PREPA’s Fiscal Plan Proposal,
because –in accordance with the proposal of February 24th of 2018 and JSF’s correspondence
dated the 5th of February, 2018- same deals with matters which undoubtedly are under the
jurisdiction of this Commission and that, above and beyond PREPA, affect the reliability and
quality of electric power services, the relationship foreseen between PREPA and other electric
power companies, sources which are planned to be used for energy generation, and operations by
other electric power firms. All the above impacts electric services costs and thus, rates which
consumers pay.
Addressing its mandates under Law 57-2014, the Commission must determine if the
proposed Fiscal Plan is or is not consistent with the provisions of Law 57-2014 and the orders
and regulations by said Commission. Furthermore, upon addressing the contents of the Fiscal
Plan’s proposal dated January 24th of 2017, we assumed that the content in the Fiscal Plan’s
proposal dated February 12th of 2018 bears huge value for purposes of the Commissions
regulatory role over all of Puerto Rico’s electric sector and not just for PREPA’s purposes alone.
V. Breach by PREPA and Request for Order under Penalty of Civil Contempt in
Assistance of the Commission’s Jurisdiction
A) PREPA has not complied at all with the Order dated November 17th of 2017 in the matter
More than three (3) months have elapsed since the Commission issued the Order on the
17th of November of 2017, and PREPA has not submitted any contract whatsoever for evaluation
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and approval by the Commission. Worse yet, as evidenced by the contracts which are included
as Attachments III, IV and V of this complaint, after the Order of November 17th of 2017 was
issued, PREPA has granted (i) contracts for the purchase of fuel, purchase and sales of energy,
for servicing of the grid, and for infrastructure work with an aggregate value of $10 million or
more, without including the clauses required in Part II(a) of the Order and without submitting
these for evaluation and approval by the Commission prior to granting same. Following we
shall describe the contracts which PREPA has granted, in clear violation of the Order by the
1) Contract No. 2018-P00094 executed between PREPA and BDO Puerto Rico
P.S.C. Same deals with a consulting and accounting professional services contract in the amount
of $450,000.00 which was granted on December 7th of 2017. PREPA did not, prior to its
issuance, submit this contract for evaluation and approval by the Commission. Neither does the
contract contain clauses ordered by the Commission. See Attachment III and Part
2) Contract No. 2018-P00102 executed between PREPA and Horne Federal LLC.
This deals with a professional services contract in the amount of $1,500,000.00. This contract,
prior to its issuance, was not submitted to the Commission by PREPA for its evaluation and
approval. Neither does the contract contain clauses ordered by the Commission. See Attachment
IV and Part II(a)(1)(2)(9) and (11) of the Order which is enclosed as Attachment I.
3) Amendments (B), (C), and (D) of Contract No. 2018-P00028 executed between
PREPA, and Cobra Acquisitions LLC. Same deals with amendments to the contract issued by
PREPA for restoration of the electrical service and system, in the amount of $445,429,800.00 (in
accordance with Amendment (D). None of the amendments executed on December 8th of 2017
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(Contract No. 2018—P00028D) – to wit, all subsequent to the Order of November 17th of 2017 –
were submitted to the Commission for their evaluations and approval. Likewise, none of these
amendments included the clauses required by the Commission in Part II(a) of the Order.
Attachment V.
Registry, the contracts attached herein as Attachments III, IV and V of this Complaint seem to
be only a sampling of the contracts issued by PREPA, in breach of the Commission’s Order.
B) PREPA has not complied with the Resolution and Order issued on March 5th of 2018 in
the matter In re: Puerto Rico Electric Power Authority’s Fiscal Plan, Case No. CEPR-IN-
2018-0001.
The term granted to PREPA by the Commission for it to deliver true and correct copy of
the Fiscal Plan proposal which PREPA presented before the JSF this past 12th of February of
2018, as well as the list of PREPA’s employees and consultants having knowledge as to explain,
in detail, the contents of stated proposed Fiscal Plan, and the relationship between issues and
employees or consultants, has elapsed without PREPA having complied with what was ordered.
In conversations held between PREPA’s and the Commission’s legal consultants, PREPA stated
concerns regarding the alleged confidential nature of certain materials contained in the Fiscal
Plan’s proposal dated February 12th of 2018. As we explain below in Part IV of this Complaint,
there exists no reason that such should be a concern neither for PREPA nor for this Honorable
Court, since due to express provisions within Law 57-2014 (i) the Commission is obligated to
protect confidential information, (ii) PREPA cannot oppose grounds regarding confidentiality or
Commission, and (iii) it is the Commission which has the exclusive primary jurisdiction to
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address confidentiality or privilege issues which PREPA raises regarding documents, materials
Notwithstanding the above, and with the sole purpose of streamlining the delivery of at
least the substantive portion (regarding related subjects, as for example, infrastructure and
reliability of electrical services) of the Fiscal Plan proposal, the Commission then proposed to
PREPA, on the morning of March 5th of 2018, that –insofar as a partial compliance- it deliver
stated substantive part of the proposal and to redact whatever PREPA deemed as confidential.
This offer by the Commission did not imply a waiver of its faculty to demand the document in
full, rather, a temporary arrangement which would allow that the Commission could begin to
immediately examine the more important content (for the Commission) of the Fiscal Plan
proposal filed before the JSE on February 12th of 2018. In spite of this, PREPA did not submit
any version whatsoever of the indicated Fiscal Plan proposal. Neither did it request additional
time as to comply, nor did it in any way commit to comply with what was tendered.
As we have pointed out in this Complaint, it is imperative that the Commission have
access to and examine the Fiscal Plan proposal as soon as possible, as to thereby be able to
submit its decisions to the JSF regarding all matters within its expertise, before the JSF decides
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to grant such protection in the manner which impacts the public less,
bears transparency, and the right of the parties involved within the
administrative procedures in which the alleged confidential document
has been submitted.
(b) The Energy Commission may, to said effects, provide access To the
document or those portions of the document which are Privileged, solely
to attorneys and external consultants involved In the administrative
proceedings after executing a confidentiality agreement.
(c) The Energy Commission will maintain documents filed before it fully
outside of public scrutiny, only in exceptional cases. In said cases, the
information shall be duly reserved and turned over exclusively to Energy
Commission staff who have a strict need to know about it, under non-
disclosure rules. Notwithstanding, the Energy Commission shall order that
a non-confidential version be provided for public review.
Addressing the legislative mandate established within the quoted Article, PREPA is
barred from refusing to provide the Commission information and documents required in the
orders which, under penalty of civil contempt, compliance with is requested, in assistance for the
Commission’s jurisdiction. If PREPA were to deem that any information or certain document
were fully or partially confidential or privileged, it must provide stated information or document
to the Commission and within that (i) identify what part of the information or document PREPA
deems to be confidential or privileged; (ii) specify in writing what legal grounds and sources in
and (iii) explicitly request that the Commission grant a confidential or privileged status to the
questioned information or document. It is the Commission who has, based on Article 6.5 of Law
privileges which are made regarding information or documents required by the Commission.
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Once such confidential or privileged status is adequately invoked, then the Commission
will address the matter in an expedite manner through a ruling to stated effects. If the
Commission were to deem that no legal grounds exist for the confidentiality rules or the
privilege thus invoked, the PREPA shall have, prior to publication or disclosure of information in
accordance with the ruling, an opportunity to query or rebut the Commission’s ruling at the
judicial forum. All the above would be evidenced within the ruling which on such date the
The supremacy clause contained in Article VI of the United States Constitution provides
that “the laws of the United States […] shall be the supreme law of the land; and the judges in
every state shall be bound thereby, anything in the Constitution or laws of any State to the
contrary notwithstanding.” Congress, under governance of stated clause, may preempt (i.e.
invalidate) a State law through Federal legislation, either implicitly or through explicit provisions
to such ends within a Federal law. Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 1595 (2015),
quoting Sprietsma v. Mercury Marine, 537 U.S. 51, 64 (2002). Moreover, preemption of a
Federal law over State legislation may be, for example, a field preemption, or solely in whatever
measure whereby there exists a conflict between the provisions of the State law and the Federal
Whenever a Federal law controls the field (i.e. field preemption), there exists no space
whatsoever for State legislation within the subject or field in question, independent of whether
such State legislation is or is not consistent with Federal legislation. Id., quoting Arizona v.
United States, 132 S. Ct. 2492, 2502 (2012). To the contrary, conflict preemption exists
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whenever Congress has not occupied the field regarding a specific subject or field, but (i)
compliance with State and Federal law is impossible, or (ii) the State law become an obstacle for
executing and implementing the Federal law. See, id., quoting California v. ARC America Corp.,
In the case of PROMESA, same disposes within its Section 4 that the provisions of stated
Federal law shall prevail over Puerto Rico laws and regulations which are inconsistent with
PROMESA. 48 USC § 2103. (“The provisions of this Act shall prevail over any general or
specific provision of territory law, State law or regulation that is inconsistent with this Act.”)
Therefore, in tune with the jurisprudence quoted by the United States Supreme Court, there
exists no doubt that PROMESA does not occupy any field whatsoever, rather, that it shall only
invalidate laws and regulations in Puerto Rico insofar as such laws and regulations are
In closing, the orders by the Commission, execution of which assistance from this
Honorable Court is being sought, are not in any way incompatible with any of PROMESA’s
provisions, nor hinders the enforcement of such Law.1 Quite the contrary, PREPA’s compliance
1
Section 201(b)(1)(A)(i) of PROMESA, 48 U.S.C. § 2141 requires that PREPA’s Fiscal Plan include income and expense estimates in
accordance with agreed accounting practices, and that same be in conformity with applicable legislation. Law 57-2014 is the applicable
legislation since, and as an example, same establishes a mandate upon the Commission so that it review and approve PREPA’s rates, and insure
that same are “fair and reasonable”, and that it “guarantee payment of stated public corporation’s debt to the bondholders”. Considering such
mandates, regarding the investments that PREPA needs to make as to comply with the Integrated Resources Plan approved by the Commission as
to thus improve the quality and reliability of electric power services within the rate review process and in accordance with its expertise within
such subject area, the Commission establishes the revenue requirement (i.e. revenue needs) for PREPA. Stated in another manner, in exercising
its duties under Law 57-2014 as the regulator for Puerto Rico’s electric power industry, it is the Commission which determines what capital
improvements are needed so that consumers in Puerto Rico are able to receive reliable electric power services at reasonable rates.
Upon considering such a scenario, as well as those provisions in PROMESA which circumscribe JSF’s authority in mostly fiscal issues, the
provisions of law 57-2014 which delegate comprehensive faculties to the Commission as to regulate and oversee Puerto Rico’s electric power
industry, and the provisions of PROMESA which acknowledge the existence and expertise of the Commission under law 57-2014, there exists no
doubt whatsoever that the orders, and execution of which the Commission requests the assistance of this Honorable Court, represents no conflict
whatsoever with PROMESA, nor with the faculties delegated upon the JSF. More so, when as we have alerted, none of the orders subject of
this Complaint has any impact at all over PREPA’s finances or estate, nor in any way hinders that JSF exercise its faculties over PREPA.
Regarding JSF’s (FMOB) primary fiscal authority over PREPA, see Sections 101(a): (“The purpose of the oversight board is to provide a method
for a covered territory to achieve fiscal responsibility and access to the capital markets.”); 104(i)(1)(B); 201(b)(1) (“A fiscal plan developed under
this section shall, with respect to the territorial government or covered territorial instrumentality, provide a method to achieve fiscal responsibility
and access to capital markets”); 201(b)(A)(1) through (J); 203(d)(2)(A) (“[W]ith respect to covered territorial instrumentalities at the sole
discretion of the Oversight Board – (A) make reductions in non-debt expenditures to ensure that the actual quarterly revenues and expenses for
the covered territorial instrumentality are in compliance with the applicable certified Budget or, in the case of the fiscal year in which the
Oversight Board is established, the budget adopted by the Governor and the Legislature or the covered territorial instrumentality, as applicable”);
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with these orders shall facilitate that the Commission, through its expertise regarding subjects the
electric power industry and its services, collaborates and assists with the Fiscal Oversight Board
in tasks relating to PREPA’s Fiscal Plan, and its restructuring. Likewise, measures of prudence
and sane management advanced through the Order of November 17th of 2017 regarding
PREPA’s contracts, are totally aligned with PROMESA’s objectives and mission.
WHEREFORE, the Puerto Rico Energy Commission respectfully requests that this
Honorable Court GRANT this Complaint and, consequently, order PREPA to immediately
comply with the two (2) orders by the Commission provided as Attachments I and II of this
Complaint, under penalty of civil contempt upon its Executive Director and any other
responsible official therein, and grant any other remedy proper under law and which this
RESPECTFULLY SUBMITTED
Sgd./MARIANA I. HERNANDEZ-GUTIERREZ
RUA Number 16721
Hernandez Gutierrez Law, PSC
1519 Ponce de Leon Avenue
First Federal Building, Suites 713-715
San Juan, PR 00909
mhernandez@mihglaw.com
(787) 460-5715
www.mihglaw.com
203(e); and 209 (“An Oversight Board shall terminate upon certification by the Oversight Board that – (1) the applicable territorial government
has adequate access to short-term and long-term credit markets at reasonable interest rates to meet the borrowing needs of the territorial
government; and (2) for at least 4 consecutive fiscal years –(A) the territorial government has developed its Budgets in accordance with modified
accrual accounting standards; and (B) the expenditures made by the territorial government during each fiscal year did not exceed the revenues of
the territorial government during that year, as determined in accordance with modified accrual accounting standards.”)
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CERTIFICATION
CERTIFIED: That the attached document(s)
is (are) true and correct translation(s) of the
original document(s) from Spanish into English .
Carlos T. Ravelo
AOUSC Certification # 95-063
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DPR MODIFIED PROMESA B1040 (FORM 1040) (05/17)
CAUSE OF ACTION (WRITE A BRIEF STATEMENT OF CAUSE OF ACTION, INCLUDING ALL U.S. STATUTES INVOLVED)
Removal from Puerto Rico Court.
NATURE OF SUIT
✔
PROMESA Title III Petition PROMESA Title VI Application for Approval of Modifications
Other Federal Question ✔ Adversary Proceeding Demand $ __________
If Adversary Proceeding is checked, number up to five (5) boxes starting with lead cause of action as 1, first
alternative cause as 2, second alternative cause as 3, etc., below:
FRBP 7001(1) – Recovery of Money/Property FRBP 7001(7) – Injunctive Relief
11-Recovery of money/property - §542 turnover of 71-Injunctive relief - imposition of stay
property 72-Injunctive relief - other
12-Recovery of money/property - §547 preference
13-Recovery of money/property - §548 fraudulent FRBP 7001(8) Subordination of Claim or Interest
transfer 81-Subordination of claim or interest
14-Recovery of money/property – other
FRBP 7001(9) Declaratory Judgment
FRBP 7001(2) - Validity, Priority or Extent of Lien 91-Declaratory judgment
21-Validity, priority or extent of lien or other interest
in property FRBP 7001(10) Determination of Removed Action
✔
01-Determination of removed claim or cause
FRBP 7001(5) – Revocation of Confirmation
51-Revocation of confirmation Other
02-Other (e.g. other actions that would have been
brought in state court if unrelated to bankruptcy case)
TITLE III CASE IN WHICH THIS ADVERSARY PROCEEDING ARISES
NAME OF DEBTOR CASE NO.
Puerto Rico Electric Power Authority 17-4780 (LTS)
DISTRICT IN WHICH CASE IS PENDING DIVISION OFFICE NAME OF JUDGE
District of Puerto Rico 3 Laura Taylor Swain
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DPR MODIFIED PROMESA B1040 (FORM 1040) (05/17)
THIS FORM IS TO BE USED EXCLUSIVELY FOR FILINGS RELATING TO THE PUERTO RICO OVERSIGHT MANAGEMENT AND ECONOMIC STABILITY
ACT (PROMESA). FOR ADMINISTRATION PURPOSES ONLY, THE PUBLIC DOCKETS FOR PROMESA PROCEEDINGS UNDER TITLE III AND
ADVERSARY PROCEEDINGS WILL BE MAINTAINED ON THE CASE MANAGEMENT/ELECTRONIC CASE FILING (CM/ECF) SYSTEM OF THE UNITED
STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO. THESE CASES ARE UNDER THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO.
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Exhibit A
Supplement to Cover Sheet
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The Puerto Rico Fiscal Agency and Puerto Rico Electric Power Authority
Financial Advisory Authority
Mariana Hernández-Gutierrez
Hernández-Gutiérrez Law, PSC
1519 Ponce de León Ave.
First Federal Bldg., Suites 713-715
San Juan, PR 00909
mhernandez@mihglaw.com
Tel. (787) 460-5715