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U.S. waives federal law to boost diesel supply for Puerto Rico

A house lays in the mud after it was washed away by Hurricane Fiona at Villa Esperanza in Salinas, Puerto Rico, Wednesday, Sept. 21, 2022.
Alejandro Granadillo
A house lays in the mud after it was washed away by Hurricane Fiona at Villa Esperanza in Salinas, Puerto Rico, Wednesday, Sept. 21, 2022.

Updated September 29, 2022 at 12:58 AM ET

SAN JUAN, Puerto Rico — The U.S. government announced Wednesday it would temporarily waive a federal law and allow foreign diesel deliveries to Puerto Rico as it faces a dwindling supply of fuel nearly two weeks after Hurricane Fiona pummeled the U.S. territory.

The announcement comes a day after Puerto Rico Gov. Pedro Pierluisi, the archbishop of San Juan and others requested that U.S. President Joe Biden temporarily suspend the Merchant Marine Act of 1920, best known as the Jones act, which requires that all goods transported to the island be aboard a ship built in the U.S., owned and crewed by U.S. citizens and flying the U.S. flag.

Homeland Security Security Alejandro Mayorkas said he temporarily waived the law "in response to urgent and immediate needs of the Puerto Rican people" so they could have "sufficient diesel to run generators needed for electricity and the functioning critical facilities as they recover from Hurricane Fiona."

Pierluisi had warned diesel supplies on the island were running low in the aftermath of Hurricane Fiona and noted that a British Petroleum ship with 300,000 barrels of diesel has been floating off Puerto Rico's southern coast since Sunday, awaiting entry.

More than 311,000 customers out of 1.47 million remain without power more than 10 days after Fiona slammed into Puerto Rico's southwest tip as a Category 1 storm, sparking an island-wide blackout. Several hospitals also remain connected to generators.

"It is totally unacceptable," said Manuel Calderón Cerame, spokesman for the main opposition Popular Democratic Party.

Fuel disruptions have forced grocery stores, gas stations and other businesses to temporarily close as the demand for diesel to feed generators grows. Hundreds of schools also remain shuttered.

On Wednesday evening, Luma, a private company that operates power transmission and distribution in Puerto Rico, announced it would take at least another week to restore electricity to 90% of customers in the island's southern and western regions.

"Hurricane Fiona severely impacted critical parts of the electric grid and generation facilities across Puerto Rico, especially in the Ponce and Mayagüez regions that suffered severe damage to roads and critical infrastructure," the company said.

Officials have not yet said when they expect the island to be fully energized.

As of Wednesday night, power had been restored to 80% of 1.47 million clients, the majority in the capital of San Juan and nearby areas.

Puerto Rico's Electric Power Authority, which operates generation on the island and is working with Luma to restore electricity, also is struggling to restructure more than $8 billion in debt.

Earlier Wednesday, a federal judge ordered a fresh round of mediation talks aimed at restructuring the company's public debt. U.S. District Court Judge Laura Taylor Swain also allowed a federal control board that oversees the island's finances to go to court to determine how much money bondholders should receive as they seek to recover their investments.

The board warned earlier that any expenses linked to debt repayment would be passed along to the power company's 1.47 million clients.

The board also was ordered to file a debt-restructuring plan for the island's Electric Power Authority by Dec. 1, with a confirmation hearing scheduled for mid-2023.

The board praised the ruling in a brief statement, saying it is calculated to get major disputed legal issues resolved in the shortest possible time: "Simultaneous litigation and mediation facilitates resolutions for all constituencies."

In early March, Pierluisi had announced that his administration was scrapping a proposed debt restructuring deal because it was not favorable to the island's economy or the power company's clients.

Then on Sept. 16, officials announced that mediation talks had failed. In response, a bondholder group that holds or insures 65% of the power company's debt sought to have the bankruptcy case dismissed and a receiver appointed.

On Wednesday, the judge denied their request.

A spokesman for the bondholder group did not return a message for comment.

The power company holds the largest debt of any of Puerto Rico's government agencies, and it is one of two agencies whose debt has not yet been restructured more than five years after the U.S. territory filed for the largest municipal bankruptcy in history.

Puerto Rico's Highways and Transportation Authority still holds $5.8 billion in debt.

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The Associated Press
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