November 1971
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Water Resources
Authority
COMMONWEALTH OF PUERTO RICO
Government Development Bank for Puerto Rico SAN JUAN, PUERTO RICO
PUERTO RICO WATER RESOURCES AUTHORITY
1950 - Our Growth -1971 Data for the twelve months ended Times
June 30, 1950
Sales of electricity (Kwh) Revenues from sales Customers (number) .
June 30, 1971
Increased
411,727,000
7,268,393,000
17.7
$ 11,170,000 177,000
$ 150,269,000 718,000
13.5 4.1
2,419 65.64
10,305 213.05
4.3 3.2
519,014,000 96,230
8,513,300,000 1,294,500
16.4 13.5
140,560
1,733,840
12.2
Revenues (total) $ 11,317,000 Current expenses $ 5,390,000 Balance of revenues available for debt service . . $ 5,927,000
$ 156,042,000 $ 91,224,000 $ 64,818,000
13.8 16.9 10.9
$
15,520,000
13.2
51,583,000
14.0
Average sales per customer (Kwh) Average revenue per customer
Generation requirements (Kwh) Annual peak demand (Kw) Generating capacity installed (nameplate Kw). .
Contributions in lieu of taxes
$
$
1,178,000
$
Other contractual obligations
3,681,000
Contractual obligations (total)
$ 4,859,000
$
67,103,000
13.8
$ 55,572,000 25,371,000
$ 700,674,000 207,155,000
12.6 8.2
Electric plant (at cost)
$ 80,943,000
$ 907,829,000
11.2
Long term debt and outstanding notes
$ 60,545,000
$ 654,231,000
10.8
Equity of the people of Puerto Rico
$ 24,905,000
$ 196,239,000
7.9
Electrical plant in service (at cost) Construction work in progress
ON THE COVER Linemen working on transmission lines.
Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY
Governing Board Chairman: DR. ANTONIO SANTIAGO VAZQUEZ Vice-Chairman: RAFAEL NEVARES Members; JORGE CAMUNAS
RAFAEL MACHARGO DEL RIO Governor Luis A. Ferre
RAFAEL MARTINEZ GIRALT
Officers
Principal Officers
RENAN COLON
FELIX CORDOVA DIAZ
Chief Engineer
Executive Director JAVIER CUEVAS BENITEZ JULIO NEGRONI
General Manager — Services and Supply
Vice Executive Director RAFAEL REYES GARCIA DR. MODESTO IRIARTE
General Manager — Irrigation Services
Assistant Executive Director — Electrical Planning, Construction and Research
JOSE VILA RUIZ
General Counsel
JOSE ISMAEL DIAZ
ANTONIO BUSCAGLIA
Assistant Executive Director — Finance
CARLOS VELAZQUEZ TORO Assistant Executive Director — Power Operations RAFAEL VAZQUEZ COLON Assistant Executive Director — Industrial Relations
Head, Production and Transmission Division HUMBERTO CORDERO
Head, Distribution and Sales Division WILLIAM CANDELARIO
Head, Electrical Planning and Research Division
and Personnel
JOSE A. MATOS
Head, Power Design and Construction Division JOSE B. CANDELAS
Trustee
Controller
First National City Bank, New York, N. Y.
LOUIS ROIG Treasurer
JULIO C. MUNIZ
Head, Purchasing Division
Consulting Engineers Jackson and Moreland Division
JUAN RAMOS VELILLA Head, Personnel Division
of United Engineers and Constructors Inc.
CARLOS E. LUBE
Head, Industrial Relations Division HECTOR M. MORALES
Auditors
Head, Transportation and Services
Arthur Andersen & Co.
DAVID BRAVO, JR. Public Relations Officer
CARLOS RIVERA ABRAMS
Bond Counsel Mitchell, Petty & Shetterly
Manager, Computer Center and Data Processing
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Puerto Rico
Felix Cordova Diaz Executive Director
Water Resources Authority The supply of electric energy in Puerto Rico's fast growing economy is the responsibility of the Puerto
Rico Water Resources Authority, an autonomous public service corporation and instrumentality of the Government of the Commonwealth of Puerto Rico.
The origin of the Authority goes back to the opera tion of two government agencies which began the development of hydroelectric power in Puerto Rico —the Puerto Rico Irrigation Service, which built its first generating plant in 1915, and the Utilization of
tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur passed that from agriculture. Today over 1,800 new
factories, promoted under the economic development program, are in operation. Such rapid growth and profound change in the basic character of the econ omy has created a continuous and rapid rise in the demand for energy. Throughout the elapsed thirty years since
Water Resources of Puerto Rico, created in 1927. In
the Authority came into being its growth has been steady and most impressive. The comparative figures
1941, the Authority was established by law to replace
shown on the inside of the cover page speak for
the Utilization of Water Resources and ensure a
themselves.
growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's eco nomic development. Subsequently, during the World War II fuel shortage, the two large private electric utilities on the Island were taken over by the United
From its inception the Authority has had to con stantly add new capacity to keep up with, and antici
States Government as an emergency measure and
thority's generating plant has risen from 64,440 Kw to the present capacity of 1,733,840 Kw. Annual capital construction expenditures in recent years have reached as high as $123.8 million.
their operation entrusted to the Authority. In 1944, these systems were purchased by the Authority and, at a later date, the electric facilities of various irri
gation services were integrated into the Authority's
pate, the mounting demand for electric power. New
generating capacity has been added almost every year. Since 1944 total name plate rating of the Au
The capital construction program for 1971-72 is
When the Authority began operations in 1941, the
estimated at $118.0 million. It includes work on the fifth and sixth units of the South Coast Plant
Island's economy was primarily agricultural and heavily dependent on a single crop—sugar. In the
Other important projects included in the program
system.
latter half of that same decade, an industrialization
program for the Island was begun as part of "Opera
which will have a capacity of 410,000 Kw each. are Units No. 1 and 2 of 450,000 Kw each at a new steam plant under construction in Aguirre. In addi-
tion to these fossil units the program includes the first stage of construction of the 600,000 Kw nuclear
plant in Aguirre and several jet and gas turbine peaking units throughout the system.
This program also includes general transmission and distribution facilities, rural electrification proj
ects, the acquisition of land and the construction of buildings, and other miscellaneous improvements.
The Authority has grown to become the second largest municipally owned, integrated electric utility
rating of 1,733,840 Kw and a dependable capacity of 1,850,320 Kw. The physical plant presently consists of twenty-four generating stations, of which fifteen are hydroelectric, four are thermalelectric, one is diesel and four are jet peaking units. Thermal-electric facilities now supply about 97 per
cent of the electric energy generated. The Author
ity's four main generating stations had a total in stalled name plate rating of 1,538,000 Kw as of September, 1971.
in the United States as is indicated by the following Thermal-electric Stations
tabulation:
City of Los Angeles Puerto Rico City of Seattle Department of Water Resources Department of Water and Power
Authority
Lighting
As of
As of
As of
Dec,31,1970
Dec. 31,1970
Dec. 31,1970
Net Plant
$1,369,349,073
Electric Revenues .... I 216,783,519
Number of Customers..
1,100,172
702,889
^
oiftfifin
258,880
Present Electric System
The total installed generating capacity of the Author ity at the end of September, 1971 had a name plate
The Palo Seco. Steam Plant, near San Juan was . . io<;ri cinH has an installed placed m service m 1960
canacity of 627,000 Kw in two 216,000 Kw, two
S 500 Kw steam-electric units and two ]et peaking
uSts Kw and 10,000 Kw, respectively. units of ui 20,000 ,' bv a kerosene-
These units, which ate
burning aviation type jet motor. ^ ing and for emergencies, bemg
Two 410,000 Kw units are being added to our South Coast Steam Plant near Ponce to meet the increasing
demand for industrial power in southern Puerto Rico. In the background is the Commonwealth Oil Refining Company.
.-i-
â&#x20AC;&#x201D;.1-'
PUERTO RICO WATER RESOURCES AUTHORITY OOiOOOAVA
■MitrtiY*
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MATMUIZ
4o,ooo«« Otrti
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•00,000 «v
ELECTRICAL
matic synchronization to the line from a cold start in only two minutes. The South Coast Steam Plant, near Ponce, has two 44,000 Kw, two 82,500 Kw steam-electric units
and a 10,000 Kw jet peaking unit. One of the out standing features of this plant is that it can burn either low cost refinery pitch or Bunker C fuel oil.
This plant currently receives its fuel by direct pipe line from the nearby refinery at the Commonwealth
Oil Refining Co. To meet the increasing demand for industrial power in Southern Puerto Rico two 410,000 Kw thermal units are being added to this
plant and are expected to be in service by April 1972 and 1973, respectively. The San Juan Steam Plant has an installed ca
SYSTEM
The Mayaguez Plant is equipped with two gas turbine generators whose rated capacity is 20,000 Kw each. The main purpose of these turbines is to handle peak loads. A 10,000 Kw jet peaking unit was also installed increasing the capacity of this plant to a name plate rating of 50,000 Kw. There is now under construction another steam
plant at Aguirre in the southeastern region of Puerto Rico. Initially, this plant will have two 450,000 Kw units which are scheduled to be placed in service in December 1973 and July 1974, re spectively. In addition to the jet peaking units located at
plant sites, the Authority has in operation five jet power pack units throughout the system. Five additional 40,000 Kw gas turbine generators
pacity of 598,000 Kw in four 20,000 Kw, two
will be installed throughout the system as follows,
44,000 Kw, four 100,000 Kw steam-electric units and two jet peaking units with a combined capacity
two in 1971, two in 1972 and one in 1973.
of 30,000 Kw.
gency purposes on the island of Vieques.
There is a small 1,000 Kw diesel plant for emer
Nuclear Power Station
Construction of a nuclear power plant of 600,000 Kw was started in 1971 at Aguirre in the municipal ity of Salinas at a cost of $140,000,000. The new plant, which can operate continuously without re fueling for periods of more than a year, wiU provide electric energy suiiicient to serve more than 200,000 middle income homes. It is expected that the plant will be in operation in 1976. The nuclear plant does not emit fumes and it is safe and clean in its op erations. Thus, it contributes directly to the con trol and limitation of air pollution. The Aguirre plant has a greater capacity than any other in op eration today and will be the largest in Latin America.
Hydroelectric Stations There are 15 hydroelectric plants with a total in
stalled capacity of 104,840 Kw. Eleven of these plants have reservoirs which permit regulation of plant output by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-ofthe-river flows. Ten of the hydroelectric plants are non-attended and fully automatic. Transmission and Distribution Systems
The Autlrority's transmission system consists of 1,721 circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 138 substations and sectionalizer stations, with a total name plate trans-
A new distribution center located at
Bayatnon ivai designed to provide the required facilities for the technical section of that office.
Hum
former capacity of 2,660,425/3,977,875 Kva lo
cated at suitable points throughout the system to insure stability of service and provide an adequate island-wide network. The transmission system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the electric system of the island of Vieques to the Authority's system. Distribution facilities include 231
substations
owned by the Authority with a capacity of 1,339,052/1,956,416 Kva which, supplied from the transmission network, convert the electric power for distribution at 2,400/4,160 Y; 4,800/8,320 Y;
and 7,620/13,200 Y volts through istribution feeders which traverse all the island. In addition, there are 251 privately-owned distribution and in
terchange substations with a total capacity of 744,786/861,614 Kva to serve industrial custom
ers, making a total installed capacity of 2,083,838/ 2,818,030 Kva.
by REA for the construction of generation, trans mission and distribution facilities to serve rural cus tomers.
By law, the Commonwealth Government contrib utes to the Authority the annual amounts required to guarantee that the Authority recovers the complete cost of service to customers served under the REA
program, in the case that revenues do not provide an adequate contribution to fixed costs. Financing System Growth
Under its enabling legislation, the Authority has the power to borrow money and issue revenue bonds for its corporate purposes and to secure the payment of these bonds under a Trust Indenture. It also has full
authority to set and collect adequate rates and other charges for the use of its facilities, and has complete control and supervision over its properties and activi ties. Properties may be acquired by the Authority by any lawful means, including the power of eminent domain.
Rural Electrification
Through successive amendments to an original loan contract for $6,376,000, entered into in 1952 be
tween the Authority and the Rural Electrification Administration of the United States, the Authority has borrowed to date $78,040,000 on bonds bearing interest at the rate of 2% under a loan contract now
totaling $79,040,000. These funds have been loaned
For many years the Authority has followed a pol icy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of reve
nue bonds are sold for the repayment of such loans and for the continuance of construction. In this way the facilities producing income for the support of long-term obligations are to a large extent already in
GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1946 Sales Fiscal Year
(June 30)
1945-46
(^ousands of Dollars)
$
Revenue
Maximum Peak
Average
Kilowatt
per
Revenue
(Million
Customers
Load
Load
Hours per
Kilowatt
Kwh)
(End of Period)
(Kw)
(Kw)
Customer
Hour
per Customer
63,000
39,000
$.0223
$ 46.13
124,959
5,764
258.6
185,090
109,000
69,000
2,638
.0266
70.27
314,853
210,000
129,000
2,956
.0271
80.08
2,069
1950-51
13,006
488.2
1955-56
25,216
930.8
1956-57
28,693
1,078.4
338,685
249,000
153,000
3,184
.0266
84.72
1957-58
33,973
1,298.8
363,032
272,000
181,000
3,578
.0262
93.58
92.79
1958-59
35,781
1,421.6
385,592
314,000
198,000
3,687
.0252
1959-60
40,441
1,667.4
408,671
355,000
231,000
4,080
.0243
98.96
1960-61
45,304
1,892.4
435,019
398,000
261,000
4,350
.0239
107.34
1961-62
50,846
2,145.4
459,995
439,000
294,000
4,664
.0237
113.44
1962-63
57,520
2,465.6
487,991
498,000
335,000
5,053
.0233
121.20
1963-64
65,865
2,858.4
517,682
560,000
388,000
5,522
.0230
130.85
1964-65
72,952
3,186.3
552,111
637,000
436,000
5,771
.0229
132.13 144.03
1965-66
83,734
3,771.7
581,369
737,000
506,000
6,488
.0222
1966-67
93,233
4,291.8
608,462
825,000
575,000
7,053
.0217
153.23
1967-68
104,271
4,894.8
635,155
939,000
657,000
7,706
.0213
164.17
760,000
8,585
.0208
178.83
1968-69
118,883
5,707.0
664,770
1,078,000
1969-70
132,773
6,495.3
690,725
1,185.000
861,000
9,565
.0204
195.52
1970-71
150,269
7,268.4
717,996
1,295,000
972,000
10,305
.0207
213.05
SALES OF ELECTRICITY - KWH
Thousands
Uillicns of KBH
NUMBER OF CUSTOMERS
875
I
I Other
â&#x2013;Ą Industrial
E3 Commercial Residential
Fiscal
'62
'63
'64
'65
'66
'67
'68
'69
'70
'71
Years
Source: P.R.W.R.A. Financial Reports
'62
'63
'64
'65
'66
'67
'68
'69
'70
'71
Source: P R W R A Financial Reports
operation by the time such obligations are issued. Bonds outstanding, including the REA issues, amounted to $633,753,000 as of July 31, 1971.
In addition, a substantial amount of the Capital
Improvement Program has been financed directly from revenues of the Authority. In the period from May 1, 1947 to June 30, 1971, a total of $921,205,000 was invested in capital improvements.
Of this amount $678,919,000 has been provided
from the net proceeds of bond issues and bank bor rowings, and $242,286,000 had come mainly from net revenues of and contributions to the Authority.
On June 30, 1971, total net assets amounted to
$928,660,000, operating and appropriated reserves were $42,541,000, contributed capital and unappro priated net revenues were $155,786,000 and out standing debt was $576,614,000. Total revenues for the twelve months ended
June 30, 1971, were $156,042,000. Current ex
Higher costs, including increased fuel oil prices and higher interest rates on bond issues have all had an adverse effect on the financial position of the Au
thority. The Executive Director recommended to the Governing Board inclusion in the Authority s rate structure of adjustment clauses to compensate for in crease in fuel oil prices and the cost of money over
the 1969 averages, and to insure a balance in the Revenue Stabilization Reserve equivalent to 3% of
the Authority's annual gross revenues. On March 27, 1971 the Governing Board appointed three persons
to act as Hearing Officers to hold public hearings and make recommendations on the rate adjustments
proposed by the Executive Director. The Hearing
Officers, after holding public hearings on April 28, 29 and May 12, informed the Board that they were not then in a position to make their final recommen dations on the rate adjustments but recommended
that a temporary increase of 11% applicable to all
penses were $91,224,000, leaving a balance of
rates then in force be made effective June 1, 1971.
$64,818,000 available for debt service requirements and other contractual obligations. The maximum
erning Board that it was imperative that the previous
debt service for any future year on outstanding issues was $35,759,000, indicating a coverage of 1.83 times on present debt. Accruals for contributions to the Commonwealth and municipal governments
in lieu of taxes amounted to $15,520,000 during the same period.
The Executive Director then informed the Gov
rate schedule be increased and the Governing
Board, at meetings held on May 26, 1971 and June 14, 1971, authorized an 11% increase to be ap
plied to all bills for electric energy consumed on
and after June 1, 1971. As a result of this 11% rate increase, it is estimated that 1971-72 revenues
i
txV-'\
The new generating facilities under construction at Aguirre on the southeastern coast will comprise two 450,000 Kw each steam units and a 600,000 X'u' nuclear unit.
will increase by $20,406,000, not including the in crease resulting from normal growth. It should be noted that the balance available as of July 31, 1971 for debt service including the present issue only
New Bond Issue
In November 1971, the Authority proposes to sell $50,000,000 Electric Revenue Bonds for the purpose
The projected revenue increases for the following two years have been calculated to produce some
of liquidating a portion of current bank borrowings and continuing the Capital Improvement Program. Preliminary calculations indicate that the Author ity's maximum annual debt service, upon the comple tion of the financing, will approximate $42,836,000
what less than an 11% increase ($17,052,000 for 1972-73 and $20,278,000 for 1973-74) to provide
and will be covered about 1.55 times by net earnings for the twelve months ended July 31, 1971.
includes the effect of the rate increase since June 1, 1971.
for the possibility of future revision in the rate structure based on the formula of adjustments to
rates as originally proposed by the Authority. Under the terms of Executive Order No. 11615
issued by the President of the United States on
August 15, 1971, further increases in rates were prohibited for 90 days. The Authority cannot predict the impact, if any, of any further regulations which may be adopted by the United States after the expira tion of this 90-day period.
Looking Ahead
Continuous studies of power needs, constantly re viewed and revised by the Authority and its consult ing engineers, now indicate that peak demand of the system will increase from 1,294,500 Kw in 1970-71, 1,679,000 Kw in 1971-72, 2,021,000 Kw in 197273, 2,259,000 Kw in 1973-74 and 2,637,000 Kw in
1974-75. It is expected that about 30,000 new customers will be added yearly. To meet this de mand, the Authority's generating capacity will be raised to a name plate rating of approximately 3,100,000 Kw by 1973.
During the period from July 1, 1971 through June 30, 1975, it is anticipated that the Authority will invest $521,778,000 in further capital improve ments. Of this amount, the sale of bonds will pro vide some $379,836,000. About $136,932,000 or 26% will be derived principally from revenues of the Authority. The remainder of $5,010,000 will be available from previous bond issues.
Under the above Capital Improvement Program, there has been a substantial increase in planned ex penditures for the four year period 1972-75 both to take care of normal expansion and, in addition, to provide power for certain heavy, capital intensive industries, at prices based on the incremental cost of power of the larger units to be installed. Since these plans are expected to be the core of industrial complexes which will foster general economic devel opment, the Authority under special agreements
feasible for the Authority, the Legislature of Puerto Rico approved Law #82 of 1967, as amended by Law 140 of 1968, which guarantees to reimburse the Authority for any part of the annual charges on whatever portion of the extra capacity that remains unsold during the period of 1971 to 1974 up to a limit of $3,250,000 during each of these four years. It also guarantees the reimbursement, (effective after 1974, and for a period of not more than six years), of the resulting difference between the cost of the fuel used to generate the power sold to said industries computed on the average price of the fuel used in our system and that resulting if com puted on the basis of a unitary price of 24 cents per 1,000,000 BTU up to a limit of $3,000,000 during any year of the period. Such amounts would be deducted from the contribution in lieu of taxes pay able to the Commonwealth Government.
with the Commonwealth Government is willing to
The above four-year program compares with capital expenditures actually made during the past twenty-four years, distributed as follows: steam production plant $359,565,000, nuclear production $7,288,000, hydraulic production plant $37,280,000, gas turbine production plant $27,850,000, trans
provide power at prices based on the incremental cost of power of the larger units. In order to make
$253,805,000 and other facilities $124,885,000, for
the construction of the larger units economically
a total of $921,205,000.
mission
plant $110,532,000, distribution
REVENUES FROM SALESOF ELECTRiCITt'
TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES, AND DEBT SERVICE REQUIREMENTS
Millions of Dollars 200
Total Revenues
1
i Balance After Current Expenses
- V////X Debt Service Requirements
Source- P R W R A Financial Reports
Residential Total
plant
Puerto Rico Water Resources Authority
Condensed Balance Sheet June 30, 1971
ASSETS
NET UTILITY PLANT:
Gross utility plant
Less accumulated provision for depreciation
$907,829,375
147,825,746
Net utility plant
$760,003,629
OTHER PHYSICAL PROPERTY
511,379
BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS . . . .
20,158,037
CURRENT ASSETS:
Funds and working advances Accounts receivableâ&#x20AC;&#x201D;Less Reserve for uncollectible accounts
Materials and supplies Prepayments, special deposits, etc
$ 45,453,838 45,486,180 34,973,581 3,086,485
129,000,084
DEFERRED DEBITS:
Debt discount and expense in process of amortization Other
$ 16,315,862 2,671,266
TOTAL ASSETS
18,987,128
$928,660,257
LIABILITIES
CONTRIBUTED CAPITAL
$ 51,755,083
UNAPPROPRIATED NET REVENUES
104,030,644
LONG-TERM DEBT:
Electric revenue bonds
Notes payable
Lease-purchase obligation, less portion included in current liabilities . . . .
$576,614,000
75,000,000
2,616,549
654,230,549
CURRENT LIABILITIES:
Accounts payable
$ 29,006,606
Customers' deposits and accrued interest Accrued interest on Electric Revenue Bonds Accrued contributions in lieu of taxes
7,430,690 12,926,466 15,519,570
Other
11,219,480
76,102,812
RESERVES:
Self-insurance
Injuries and damages
$ 10,332,301
2,087,580
Revenue stabilization
Appropriated sinking fund Plant improvements TOTAL LIABILITIES 10
29,982,742 138,546
42,541,169 $928,660,257
Puerto Rico Water Resources Authority
Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture) Twelve Months Ending June 30 1970
June 30 1971
June 30 1969
June 30 1968
REVENUES:
Sales of electric energy . . . Other operating revenues . .
$104,270,618 2,111,965
$118,883,451 2,206,614
$132,772,966 2,247,954
$150,269,449 2,899,580
Total operating revenues
$106,382,583 1,781,295
$121,090,065 2,007,086
$135,020,920 2,583,051
$153,169,029 2,873,419
$108,163,878
$123,097,151
$137,603,971
$156,042,448
$ 15,434,275
$ 18,948,372 38,434,344
$ 28,631,826 40,680,954
17,748,857
852,709
20,519,673 1,391,877
Other income Total revenues
. . . .
CURRENT EXPENSES:
Operation—
Other current expenses . .
937,572
$ 15,570,387 33,913,682 15,974,592 985,983
Total current expenses
$ 58,983,457
$ 66,444,644
$ 75,984,282
$ 91,224,330
$ 49,180,421
$ 56,652,507
$ 61,619,689
$ 64,818,118
$ 11,166,209
$ 12,655,428
$ 14,446,737
$ 18,967,304
6,685,000 787,908
7,342,799 1,175,105
8,412,885 1,999,072
9,562,070 2,793,758
$ 18,639,117
$ 21,173,332
$ 24,858,694
$ 31,323,132
$ 30,541,304
$ 35,479,175
$ 36,760,995
$ 33,494,986
$
$
$
Fuel
28,348,610
Other operating expenses
14,263,000
Maintenance
Balance of revenues after current
expenses (per Trust Indenture) . . SINKING FUND PAYMENTS:
Interest account (exclusive of interest
charged to construction and reimburse ment from the Commonwealth Govern ment of Puerto Rico)
Bond redemption account (exclusive of reimbursement from the Commonwealth of Puerto Rico) Reserve account
Total sinking fund payments . . . .
Balance TRANSFERS TO:
General reserve fund—provision for selfinsurance
$
Renewal and replacement fund Reserve for improvements Total transfers
Balance available for contributions in lieu of taxes, etc
Transfer to sinking fund reserve account .
1,096,720 16,662,370 3,678,358
1,226,392 18,895,176 138,546
$ 21,417,109
$ 21,437,448
$ 20,260,114
$ 12,442,797
$ 14,062,066
$ 15,323,547
$ 13,234,872
11,423,274
13,025,787
IN LIEU OF TAXES
PROVISION FOR:
1,002,087 15,164,136 5,250,886
$ 18,098,507
PROVISIONS FOR CONTRIBUTIONS Balance
909,838 13,671,744 3,516,925
$ 1,036,279
^
14,551,153 772,394
$
1,019,523
$
509,762
$
518,140
$
386,197
^
509,761
$
518,139
$
386,197
Balance
15,519,570 ($ 2,284,698) —
($ 2,284,698) 2,284,698
REVENUE STABILIZATION
Balance transferred to unappropriated $
509,761
$
518,139
$
386,197
net revenues
11
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Another gas turbine power block peaking unit under construction at Yabucoa.
Security for the Bonds Bonds issued by the Authority under the Trust
Indenture are payable from the Puerto Rico Water Resources Authority Sinking Fund. The Authority
properties during the same period, must be not less than 150 percent of maximum debt service payable
has covenanted to deposit in this fund a sufficient amount of its revenues, after expenses for main tenance and operation of its electric properties, to
in any succeeding fiscal year on all bonds, including the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds issued prior to 1965 have been retired, this
pay the principal of and the interest on all bonds issued as they become due, as well as to create
percentage will be reduced to 140. The bonds and the income therefrom are, under
reserves for such purposes.
provisions of Acts of Congress now in force, exempt
The Authority has also covenanted that it will at
from Federal and State taxation. These bonds are
all times fix and collect reasonable rates and charges
also legal investments for savings banks and trust funds in the state of New York and for savings banks
sufficient for the payment of maintenance and oper to create certain reserves. Rates must also provide
in California and are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance
for the making of deposits required by the Trust
companies to qualify them to do business in Puerto
ating expenses and bond principal and interest, and Indenture to the credit of the General Reserve Fund
Rico. The bonds are rated "A" by Moody's Investors
and the Renewal and Replacement Fund, and for
Service and by Standard and Poor's.
payments in lieu of taxes to the Commonwealth and
In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub
the municipalities it serves.
In order for the Authority to issue additional bonds
divisions, there is no known record of default or de
under the Trust Indenture, the average annual bal ance of revenues from its electric properties for the
linquency in the payment of principal of or interest
preceding twenty-four months, after deducting the
"managed" refunding of maturing bonds to avoid
cost of maintaining, repairing and operating these
default.
on any obligation, nor has there been any forced or
THE COMMONWEALTH OF PUERTO RICO General
Puerto Rico is the fourth largest of the islands in the Caribbean area. It is about 100 miles long and 35 miles wide, having an area of 3,423 square miles and a population of 2,690,000 according to 1970
census figures. The topography is characterized by a fertile coastal plain rising to interior mountains which run mostly from east to west. San Juan, capital of Puerto Rico, lies some 1,690 miles south east of New York, 3V4 hours by jet plane, and 1,000 miles southeast of Miami, 2V4 hours by jet plane.
Under its compact with the United States, the Commonwealth of Puerto Rico exercises virtually the same control over its internal affairs, and with
the same general procedures, as do the fifty federated
government for the Island in 1900. It provided for a Governor, a Cabinet, a Senate and a Supreme
Court Judiciary, all appointed by the President of the United States; only a House of Delegates was elected by the People of Puerto Rico.
Over succeeding years strong feeling developed for a more autonomous form of government and in favor of United States citizenship. The original Act
was superseded in 1917 by the Organic Act or Jones Act, which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for
local purposes. It also provided that members of both Senate and House were to be elected by the
people, but the Executive and Judicial branches re mained under control of Washington through ap pointment by the President.
No further change occurred until 1946 when the President for the first time appointed a Puerto Rican
States over theirs. It differs from the States primarily
as Governor. In 1947 the Jones Act was amended
in its relationship to the Federal Government. In brief, residents of Puerto Rico do not vote in the
to permit Puerto Ricans to elect their own Governor, who in turn was empowered to appoint his cabinet
national elections and are represented in Congress
and members of the Supreme Court.
only by a Resident Commissioner who has a voice
The next advance toward complete local govern
but no vote in the House of Representatives. On the
ment occurred in 1950 when, in accordance with the
other hand. Federal taxes do not apply in Puerto Rico except by mutual consent, such as social secu rity taxes. No Federal income tax is collected from
gress enacted Public Law 600, approved July 3,
Puerto Rican residents on income earned in Puerto
pact," became effective upon its acceptance by the
wishes of the people of Puerto Rico, the 81st Con 1950. This law, which is "in the nature of a com
Rico and Federal excise taxes collected on exported
electorate of Puerto Rico. It provides that those sec
Puerto Rican products, such as rum and tobacco, are
tions of the Organic Act which define the political,
returned to the Commonwealth Treasury. This rela
economic and fiscal relationship between Puerto Rico and the United States shall remain in full force and
tionship with the Federal Government is defined through the medium of the compact entered into by Congress and the People of Puerto Rico, and is further described hereinafter.
shall be thereafter known as the Puerto Rican Federal Relations Act. It also authorized the people of Puerto Rico to draft and approve their own con
stitution. The Constitution was drafted by a freely elected constitutional convention, overwhelmingly ap Government History
proved in a special referendum, and approved by
Puerto Rico came under United States sovereignty
Congress and the President. It became effective upon proclamation of the Governor of Puerto Rico on
by the Treaty of Paris on December 10, 1898. Th^ Congress of the United States provided for a civil
July 25, 1952. 13
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The Commonwealth Government
The Constitution recognizes and assures a separa tion of powers among the executive, legislative, and judicial branches as in the Federal Constitution, and as in those of the States. Both the Governor and the
bicameral legislature are subject to regular election every four years. The Legislature operates xmder standard parliamentary and legislative rules. Writs of error and appeals from judgments of the District Court of the United States for Puerto Rico may be taken to the United States Court of Appeals for the First Circuit and to the Supreme Court of the United States and writs of error and appeals from judgments
of the Supreme Court of Puerto Rico may be taken to the Supreme Court of the United States, in the same manner and under the same terms and condi
tions as writs of error and appeals may be taken from other Federal and State courts.
Governmental responsibilities assumed by the Commonwealth are greater than those normally as sumed by a State Government. Municipalities which combine both rural and urban areas are the only local political subdivisions and are comparable to counties in scope. The only units of government with the right to levy ad valorem taxes are the Commonwealth Government and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness payable from taxes. The Commonwealth Government assumes responsibility
for a number of important functions normally per formed by local governments in the Continental United States. Among these are police and fire pro tection, education, all major street construction, and
public health and welfare programs. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent. Administration of Government
The operation of the executive branch of the gov ernment is similar to that in state governments in
general, with separate departments responsible for
major activities, each headed by a secretary who as a group form the Governor's cabinet and who are
appointed by the Governor subject to Senate ap proval. In addition, Puerto Rico has made substantial use of public corporations or agencies which are largely autonomous in their operations in providing specific services. Each is headed by an executive director or president who reports to a board of directors which in turn is appointed by the Governor.
Among the departments is the Department of State, whose Secretary becomes acting Governor or succeeds to the governorship in the absence or death of the elected Governor. Other departments include those of Treasury, Justice, Education, Public Works, Public Health, Commerce, Labor, Agriculture and Social Services. AU activities of the departments are financed out of the General Fund of the Com
monwealth Treasury, in accordance with an annual budget prepared under the direction of the Governor and approved by the Legislature. The staff agencies of the Office of the Governor comprise the Bureau of the Budget, the Planning Board and the Office of Personnel.
Among the public corporations are the Water Re sources Authority which provides essentially aU elec tric power on the island, the Aqueduct and Sewer Authority which provides all water and sewage ser vices, the Ports Authority responsible for seaport and airport facilities and the Highway Authority
which is charged with building all major road and highway constructions, all of whose borrowings are secured by revenues produced by the entities, or by gasoline taxes in the case of the Highway Authority. The Government Development Bank and the Indus trial Development Company likewise are autonomous agencies which, after receiving substantial capital contributions from the Treasury originally, have
subsequently augmented their funds by borrowing on their own credit.
Among other public corporations are the Urban Renewal and Housing Corporation and the Public
Buildings Authority, which provide housing facilities for persons of low and medium incomes and office space for government departments and agencies, respectively. Bonds of each are guaranteed by the Commonwealth government but they are self-sup-
porting in the first instances through receipts of mortgage payments or rentals in the case of low and middle income housing, and from lease payments
from government departments or agencies in the latter case.
Political Background
In 1938 a political party emerged in Puerto Rico which was to emphasize economic development to
improve the welfare of the people. From 1940 until the elections in November, 1968, as the Popular Democratic Party, it was in control of the govern
ment of Puerto Rico, and was instrumental in estab15
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New 230 Kv lines are under construction
to serve the power needs of large industrial consumers.
lishing the present Commonwealth political relation ship. Since 1948 there have been two major thrusts in
Progressive Party which he organized in 1967 after leaving the Statehood Republican Party. He cam paigned on the basis of a need for change and for
political life in Puerto Rico towards close association
more effective government through new leadership.
with the United States and a minor one in favor
Political status did not receive emphasis as an imme
of independence. The trends are illustrated in the following data on election results by parties in recent
diate issue. He received 45.0% of the vote in the
years. 1952
1956
1960
1964
1968
64.8%
62.5%
62.4°/
59.4%
41.8%
_
_
—
—
10.0%
Commonwealth
Popular Democratic Party Peoples Party
12.9% 25.0% 34.3% 34.6%
New Progressive Party
—
Socialist Party
3-3%
Independence Party Christian Action Party
also gained control of the House of Representatives, although the Popular Democratic Party retained con trol of the Senate, thus definitely establishing a two party system of Government.
Statehood
Statehood Republican Party
recent election, compared with 41.8% of the vote received by the candidate of the Popular Democratic Party. Tn the Legislature, the New Progressive Party
19.0%
12.5%
_
_
0.2%
3.3%
2.7%
3.0%
—
3.3%
—
As a general comment, it is obvious that desire for close and permanent ties with the United States has become an inherent ingredient.
Governor Luis A. Ferre, a prominent and highly successful industrialist, as well as a leading philan
thropist, was the candidate in 1968 of the New
Three factors pertaining to elections in Puerto Rico are worthy of mention. There is strong public interest in government affairs and a high degree of voter participation in elections. In the 1968 elections,
79.3% of those registered actually voted. Second, in order to reduce pressure from special interests, Puerto Rican law limits political contribu
tions from any one person or corporation to $300 in any one election year and $100 annually in other years. Yet, recognizins the need for funds to bring
issues to the attention of, and to inform the voters, each recognized political party receives from the Commonwealth Treasury a contribution of funds to carry out its political campaign. This contribution is according to a formula based primarily on the party's percentage of votes cast in the most recent
In response to the petition, the Congress ap proved a bill in 1964 providing for the establishment
of a United States-Puerto Rico commission to study all the factors involved. The membership of this commission consisted of three persons appointed by the President of the United States, two each selected
to elect candidates to the Legislature, then, under certain circumstances that body is increased in size
by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission concluded that the people of Puerto Rico should be consulted with regard to the status they preferred and, in December, 1966, the Puerto
by formula to assure minority representation. The
Rican Legislature passed an act providing for the
Municipal Law (Act No. 142, approved July 21, 1960) also assures minority representation in the Municipal Assemblies since at least three members
holding of the plebiscite.
election.
And third, Puerto Rican law provides that if a
minority party receives a substantial vote, but fails
of each of these bodies have to be elected from the
minority parties.
This plebiscite, held July 23, 1967, strongly re affirmed the overwhelming desire of the Puerto Rican people to maintain permanent and close ties with the United States. Of the over 700,000 ballots cast (66.3 percent of all registered votes) 99.4 percent were
1967 Plebiscite
for either Commonwealth or Statehood and only 0.6
In 1962 the Legislature of Puerto Rico petitioned
percent for Independence.
the Congress of the United States requesting a plebiscite by the voters of Puerto Rico through which an expression of preference could be demonstrated
Political stability, one of the prime requisites of a sound, attractive investment climate, is outstandingly demonstrated in Puerto Rico. Only a relatively small small minority party favors independence. Both major parties hold maintenance of permanent ties with the United States as a basic principle, and differ only as to the form which that future political relationship should take.
for either a continuation of the existing common wealth relationship with the United States, or the attainment of Federated Statehood in the United
States, or the establishment of Puerto Rico as an independent country. Gas power block peaking unit located at Vega Baja. This 40,000 kw unit is presently undergoing performance tests and is expected to enter into commercial operation
by the end of 1971.
m
Expansion and Diversification of the Economy of Puerto Rico Economic growth in Puerto Rico has been very
rapid. Gross product has increased more than 6 times over its 1950 level and has nearly tripled
during the past ten years. In the year ended June 30, 1970 gross product totalled $4,607 million, an increase of 11.7% over the prior year.
Preliminary figures for the year ended June 30, 1971 indicate that net income has increased from
$1,355 million in 1960 to $4,228 million. Measured in current prices, the average increase during the last five years has been 10.8% compounded annu
ally. Per capita net income is now $1,556 compared to $582 in 1960, almost a threefold increase. The Commonwealth Government's program of industrialization has aided the economy to shift
from a base that was principally agricultural to
greater diversification between industry and agricul ture. Concurrently, with the expansion in net agri cultural income from $149 milhon in fiscal 1950 to
$196 million in fiscal 1971, manufacturing income increased from $89 million to $994 million in 1971.
Puerto Rican manufacturing has become increas
ingly diversified during the last two decades. In fiscal 1940 the manufacture of sugar products accounted for 35% of manufacturing income, while
in 1967 only 4.5% of manufacturing income re sulted from this industry. Manufacturing income is
now generally derived from the production of new types of manufactured products, principally for
shipment to the United States. Such shipments amounted to only $33 million in 1950. By 1971
they had reached a total of $1,500 million.
Arrival of a 544,000 Kv power auto transformer to be installed at the Bayamon Switchyard Center.
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Puerto Rico's west coast is experiencing
industrial growth. Shown here is the Foreign Trade Zone near Mayaguez.
Underlying Puerto Rico's growing and changing economy there has been a steady expansion in in vestment. Average gross fixed domestic investment during the last five consecutive fiscal years, 1966-70,
Great progress has been achieved over the years in education at all levels. Institutions of higher leain-
ran at a rate of 22% of gross product. It has
ing have expanded rapidly. University and college enrollment, which was only 12,000 in 1950, icached 57,000 students in 1970. It is significant that the
increased from $112 million in 1950 to $1,404
Commonwealth Government has in recent years
million in 1970. Inflowing long-term U. S. capital
directed approximately 50% of its expenditures to
rose from $31 million in postwar 1947 to an estimated $774 million in 1970.
education and health.
The Puerto Rican people have benefited greatly from the economic expansion achieved since 1950.
Life expectancy has increased from 61 to 70 years
Credit History
and the death rate has declined from 10.5 per thou
The debt paying record of Puerto Rico is clear of
sand to 6.5 per thousand at present, which is now
default or delinquency. There has never been any
has declined from 39.5 per thousand in 1950 to 24.9
forced or "managed" refunding to avoid default. A similar debt record exists for all municipalities
per thousand in 1970.
and instrumentalities of Puerto Rico.
about the same as the U. S. average. The birth rate
The first section of the ttew San Jiian-Ponce superhighway, from Ponce to Jiiana Diaz, inaugurated last September. This expressway, the first toll road on the Island, will link the two largest commercial and industrial centers, stimulating industrial growth and the demand for electric power.
STATISTICAL DATA CONCERNING THE ECONOMY OF THE COMMONWEALTH OF PUERTO RICO
Fiscal Years Ending June 30
1950
1955
1960
1965
1966
1967
1968
1969
1970
Population 2,200,000 2,240,000 2,340,000 2,552,000 2,568,000 2,573,000 2,600,000 2,664,000 2,690,000 Gross product—$ millions 755 1,142 1,681 2,748 3,039 3,354 3,738 4,124 4,607 Net income—$ millions .. 614 960 1,355 2,314 2,542 2,789 3,092 3,422 3,821 Exports—$ millions 235 353 622 974 1,155 1,321 1,449 1,606 1,729 Exports by new factoriest —$ millions 33 132 380 643 804 926 1,014 1,156 1,210 Bank debits—$ millions .. 319 418 835 1,661 1,893 1,841 1,715 2,123 2,548
Bank loans—$ millions ....
128
217
450
1,010
1,210
1,220
1,362
1,670
2,041
270
323
562
1,207
1,349
1,556
1,830
2,216
2,561
51
77
152
298
304
346
407
486
553
28
32
63
127
141
162
186
220
250
14
21
32
40
44
48
49
53
58
$ millions Average family income—$
459 1,500
982 2,194
1,643 2,864
2,503 4,292
2,828 4,662
3,150 4,908
3,448 5,254
3,851 5,590
4,066 6,132
Motor vehicles—number ..
61,000
105,000
180,000
319,000
380,000
421,000
470,000
538,000
614,000 672,000
Bank deposits (including governmental)—$ mil
lions Private savings accounts—
$ millions Income tax collections—$
millions Property tax collectionsi
—$ millions Assessed valuation* (real & personal property)—
^
Enrollment in public day
schools
^
431,000
529,000
567,000
618,000
631,000
652,000
659,000
669,000
36
55
132
226
240
228
262
294
324
199 340
253 710
200 1,822
163 3,656
238 4,192
194 4,847
127 5,644
258 6,397
22U 7,32U
Estimated value of build
ing permits issued — $
099
millions Electricity generated§ — millions hours
of
kilowatt-
Hydro Thermal
* As of January 1 of preceding fiscal year.
t Promoted by the Economic Development Administration. Does not include exports of other new factories. $ Commonwealth and Municipal. § Includes purchased power.
Note: Figures shown above are subject to revision from year to year. Source: Puerto Rico Planning Board.
ASTRA
1311 Ponce de Leon Avenue, San Juan, Puerto Rico 00908 / 45 Wall Street, New York, N. Y. 10005