Puerto Rico Water Resources Authority (July 1966)

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Jidv 1966 A SPECIAL REPORT ON 7fr

PUERTO RICO

*

Cornrrionwealth ojPuerto Rico

Government Development Bank for Puerto Rico San Juan, Puerto Rico

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PUERTO RICO WATER RESOURCES AUTHORITY

1941 - Our Growth - 1966

Data for the twelve months ending Times

June 30, 1941(D

Sales of electricity (Kwh) Revenues from sales Custonoiers (number) Average sales per customer (Kwh) Average revenue per customer

Generation requirements (Kwh) Annual peak demand (Kw)

66,582,000 $ 1,258,000 27,500 2,969 $ 56.11

$

80,749,000 575,000 6,430 144.04

64 21 2 2.6

53 38

29,690

891,220

30

$ $

82,348,000 44,127,000

64 103

856,000

$

38,221,000

25,000

$

$ 1,285,000 $ 429,000 $

Other contractual obligations

26^,000

8,845,000

354

29,583,000

114 135

Contractual obligations (total)

$

285,000

$

38,428,000

Net revenue

$

570,000

$

959,000

Electrical plant in service (at cost) Construction work in progress

54

4,254,855,000 688,500

Balance of revenues available for debt service . . $ Contribution in lieu of taxes

3,604,795,000 $

increased

80,737,000 17,960

Generating capacity installed (nameplate Kw) . .

Operating revenues Operating expenses

March 31, 1966

1.7

$ 9,076,000 4,963,000

$ 429,282,000 57,585,000

47 12

Electric plant (at cost)

$14,039,000

$ 486,867,000

35

Long term debt and outstanding notes

$ 7,919,000

$ 342,904,000*

43

Equity of the people of Puerto Rico

$13,003,000

$ 115,349,000

9

o) Excludes the San Juan and Mayaguez electric systems integrated with the Authority's system in 1942 and pur chased in 1944.

* With the present balance of revenues for debt service, if expansion needs required, the Authority could issue roughly $130,000,000 in additional revenue bonds within the limits established by the Trust Indenture securing these bonds.

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Commonwealth of Puerto Rico PUERTO RICO WATER RESOURCES AUTHORITY

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Governing Board

Officers

Chairman: HON. ROBERTO SANCHEZ VILELLA Governor of the Commonwealth of Puerto Rico Vice-Chairman: HON. FRANCISCO LIZARDI

Secretary of Public Works Member: HON. MIGUEL HERNANDEZ AGOSTO

Secretary of Agriculture

RENAN COLON

Chief Engineer FELIX CORDOVA DIAZ

General Manager — Services and Supply HAROLD TORO

General Manager — Irrigation Services JOSE VILA RUIZ General Counsel

CARLOS VELAZQUEZ TORO

Principai Officers

Head, Production and Transmission Division

RAFAEL V. URRUTIA

HUMBERTO CORDERO

Executive Director

Head, Distribution and Sales Division

DR. MODESTO IRIARTE

WALDEMIRO VELEZ

Assistant Executive Director — Electrical Planning,

Head, Electrical Planning and Research Division

Construction and Research

JOSE A. MATOS

EDUARDO LUBE

Head, Power Design and Construction Division

Assistant Executive Director — Finance

JOSE I. DIAZ Controller

JULIO NEGRONI

Assistant Executive Director — Power Operations

LOUIS ROIG MARTINEZ Treasurer

FERNANDO TORRENT

Assistant Executive Director—Industrial Relations and Personnel

JAVIER CUEVAS BENITEZ

Head, Purchasing Division JUAN F. DOVAL

Head, Personnel Division HECTOR M. MORALES

Head, Transportation and Services HERMANN MUNOZ Public Relations Officer

RAFAEL D. CHERVONI Head, Safety Division Trustee

First National City Bank, New York, N. Y. Consulting Engineers Jackson and Moreland Division

of United Engineers and Constructors Inc. Auditors

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Arthur Andersen & Co.

Bond Counsel

Mitchell, Pershing, Shetterly & Mitchell 1

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Puerto Rico

Water Resources

Authority

The year 1966 marks a very significant milestone in the history of the Puerto Rico Water Resources Au thority. It is the year in which the Authority celebrates its SILVER ANNIVERSARY — 25 years of exis tence as an autonomous public service corporation and instrumentality of Puerto Rico's government.

It was 25 years ago, in 1941, that Puerto Rico's

Legislative Assembly passed the law whereby the Puerto Rico Water Resources Authority, in its present form, was created. However, the Authority's origin dates back much further, to the year 1915, when an other government agency, the Puerto Rico Irrigation Service, built the first government-owned power plant on the island. The Puerto Rico Irrigation Service evolved into another government agency, known as "Utilization of the Water Resources," created in 1927, and the latter in turn was replaced by the present Puerto Rico Water Resources Authority.

The purpose of Puerto Rico's Legislature in creat ing the Authority, in 1941, was to ensure a growth in the supply of electricity which would be adequate for the future needs of Puerto Rico's economic develop ment. Subsequently, during the World War II fuel shortage, the two large private electric utilities on the Island were taken over by the United States Govern ment as an emergency measure and 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 irrigation services were integrated into the Authority's system.

When the Authority began operations in 1941, the

Island's economy was primarily agricultural and heavily dependent on a single crop — sugar. In the

tion Bootstrap." By 1956, for the first time in Puerto Rico's history, net income from manufacturing sur passed that from agriculture. Today over 1,000 new factories, promoted under the economic development

program, are in operation with a total direct employ ment of 74,400. Such rapid growth and profound change in the basic character of the economy has created a continuous and rapid rise in the demand for energy.

Throughout the twenty-five years elapsed since the Authority came into being its growth has been steady and most impressive. The comparative figures shown on the inside of the cover page speak for themselves.

From its inception the Authority has had to con stantly build new hydro and thermo-electric plants to keep up with, and anticipate, the mounting demand for electric power. New generating capacity has been added almost every year. Since 1944 total name plate rating of the Authority's generating plant has risen

from 64,440 Kw to the present capacity of 890,420 Kw. Annual capital construction programs in recent years have reached as high as $47,000,000.

The capital construction program for 1966-67 is estimated at $48 million. It includes work on three 100,000 Kw units for the San Juan Steam Plant,

scheduled for completion in August 1966, March 1967 and January 1968 respectively. Other important projects are the installation of three 20,000 Kw and one 10,000 Kw jet peaking units, throughout the system. This program also includes general transmis

sion and distribution facihties, rural electrification projects, the acquisition of land and the construction of buildings, and miscellaneous items. When current

latter half of that same decade, an industrialization

projects are completed, total generating capacity will

program for the Island was begun as part of "Opera

be 1,260,420 Kw.

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South Coast Steam Electric Plant, Guayanilla Bay, has an installed capacity of 263,000 kw in two 44 tnw, two 82.5 mw steam units and a 10 mw jet peaking power pack.

supply about 94 percent of the electric energy gen erated. The Authority's four thermal-electric generat

The Authority has grown to become the second largest municipally owned, integrated electric utility in the United States as is indicated by the following

ing stations have a total installed name plate rating

tabulation:

of 766,000 Kw. City of Los Angeles Puerto Rico Department of Water Resources Water and Power Authority

Net Plant . . . .

Electric Revenues .

City of Seattle Department of

Lighting

As of June JO, 1965

As of Mar. i/, 1966

As of Dec. 31, 1965

$821,742,757 $159,368,362

$403,022,000

$ 80,749,000

$246,330,592 $ 44,150,884

Number of

Customers . . .

1,028,099

Steam-Electric Stations

The Palo Seco Steam Plant, near San Juan, was

placed in service in 1960 and has two 82,500 Kw steam-electric units and one 10,000 Kw jet peaking

unit powered by a kerosene-burning aviation-type jet motor. This unit is used for peaking and for emer Present Electric System

gencies, being designed for automatic synchroniza tion to the line from a cold start in only two minutes.

The total installed generating capacity of the Author ity at the end of March 1966 had a name plate rating of 890,420 Kw and maximum dependable ca pacity of 942,960 Kw. The physical plant presently consists of twenty-three generating stations, of which eighteen are hydroelectric, four are thermal-electric

A desalinization pilot plant has also been inaugurated, to provide 14,400 gallons a day of make-up water for

and one is nuclear. Thermal-electric facilities now

44,000 Kw, two 82,500 Kw steam-electric units and

the main unit boilers. The desalinization process is new and uses waste heat from the turbine condenser system to evaporate sea water in a vacuum.

The South Coast Steam Plant, near Ponce, has two

a 10,000 Kw jet peaking unit. One of the outstanding features of this plant is that it can bum either low cost refinery pitch or Bunker C fuel oil. This plant currently receives its fuel by direct pipe line from the nearby refinery of the Commonwealth Oil Refining

have reservoirs which permit regulation of plant out put by collecting and storing water inflows during the rainy season for utilization during the dry season, and the remaining four operate on run-of-the-river flows.

Eleven of the hydroelectric plants are non-attended

Co.

and fully automatic.

The San Juan Steam Plant has an installed capacity of 278,000 Kw in four 20,000 Kw, two 44,000 Kw and one 100,000 Kw steam-electric units and a 10,000 Kw jet peaking unit. Work on three other 100,000 Kw

Nuclear Power Plant

A nuclear power plant with a rated capacity of 16,500 Kw and utilizing a new and advanced type of boiling water reactor and nuclear superheater, located on the western tip of Puerto Rico, was placed in ser vice in January 1966. It was constructed under the terms of a contract between the Authority and the Atomic Energy Commission. The Authority has pro vided the plant site and the conventional generating components; the AEC,the nuclear reactor. This proj ect is giving the Authority the necessary experience to undertake large scale generation by means of nuclear reactors, when such generation becomes economically

units, scheduled for completion in August 1966, March 1967 and January 1968, is under way.

The Mayaguez Plant is equipped with two gas tur bine 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 in stalled recently.

Hydroelectric Stations

There are 18 hydroelectric plants with a total installed capacity of 107,920 Kw. Fourteen of these plants

PUERTO

RICO

WATER

feasible.

RESOURCES

AUTHORITY

ELECTRIC SYSTEM •AtAMON SO,000

KW rXTENSlOW

PALO^SECO

CONSTRUCTlONj

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A CIORA

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LEGEND □ THERMAL PLAMTS

3BKV SUBMARINE POWER CAB.E

30 KV ELECTRIC TRanSUisSiON LINES

joJl NUCLEAR PLANT (BOHUS)

EXISTING 115 KV electric TRANSMISSION LINES

O mtoro electric plants

o 115 KV iLfriRic transmission lines (Unde. Coniifue

iA TRANSMISSION SUBSTATIONS A DISTRIBUTION

SUBSTATIONS

RESERVOIRS

^^^,£QUB5

GROWTH OF THE ANNUAL LOAD OF THE SYSTEM SINCE 1941 Sales

(Million Kwh)

Revenue

Average

Kilowatt

per

Revenue

Customers

Maximum Peak Load

Load

Hours per

(End of Period)

(ICw)

(Kw)

Customer

Kilowatt Hour

Customer

(June 30)

(Thousands of Dollars)

1940-41

$ 3,610

139.0

100,402

18,000

9,000

1,383

$.0260

$ 35.93

1945-46

5,764

258.6

124,959

63,000

39,000

2,069

.0223

46.13

1950-51

13,006

488.2

185,090

109,000

69,000

2,638

.0266

70.27

1955-56*

25,216 28,693 33,973 35,781

930.8

314,853 338,685 363,032 385,592

210,000 249,000 272,000 314,000 355,000 398,000 439,000 498,000 560,000 637,000 737,000

129,000 153,000 181,000 198,000 231,000 261,000 294,000 335,000 388,000 436,000 507,000

2,956 3,184 3,578 3,687 4,080 4,350 4,664 5,053 5,522 5,771 6,453

Fiscal Year

1956-57*

1957-58* 1958-59*

1963-64*

40,441 45,304 50,846 57,520 65,865

1964-65*

72,952

1965-66t

83,618

1959-60* 1960-61* 1961-62*

1962-63*

1,078.4 1,298.8 1,421.6 1,667.4 1,892.4 2,145.4 2,465.6 2,858.4 3,186.3 3,755.7

408,671 435,019 459,995 487,991 517,682 552,111 582,000

per

.0271

80.08

.0266

84.72

.0262

93.58

.0252

92.79

.0243

98.96

.0239

107.34

.0237

113-44

.0233

121.20

.0230

130.85

.0229

132.13

.0223

143.67

* Includes amount recovered through Fuel Oil Adjustment, t Estimate including Fuel Oil Adjustment.

Transmission and Distribution Systems

The Authority's transmission system consists of 1,507 Replacing oil breakers at Monacillos Transmission Center.

circuit miles of 115 Kv and 38 Kv lines, controlled and sectionalized at 116 substations and sectionalizer

stations, with a total name plate transformer capacity of 1,686,875 Kva located at suitable points through out the system to insure stability of service and pro

vide an adequate islandwide network. The transmis sion system also includes a submarine cable 9.5 miles long which was placed in service during May 1963 to connect the island of Vieques to the Au thority's system.

Distribution facilities include 187 substations owned

by the Authority with a capacity of 728,322 Kva which, supplied from the transmission network, con vert the electric power for distribution at 2400/4160 Y, 4800/8320 Y and 7,620/13,200 Y volts

through distribution feeders which traverse 76 cities and towns and nearly all of the rural area. In addition, there are 149 privately owned distribution substations

with a total capacity of 307,882 Kva to serve indus trial customers, making a total installed capacity of 1,036,204 Kva.

I

.Sun Juan ThcrttmeU'clric

Station. The three targe smolcestack.i belong to Units Nos. I to 6. aggregating

168,000 KW. The two tall structures with four small stacks are the new Units

Nos. 7 and 8. rated at

100,000 KW each, now nearing completion.

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 $74,040,000 on bonds bearing interest at the rate of 2% under a loan contract now

totaling $74,040,000. These funds have been loaned

by REA for the construction of generation, transmis sion and distribution facilities to serve rural custom ers.

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 facilites, 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.

For many years the Authority has followed a policy of initially financing the construction of facilities under its Capital Improvement Program with short term bank loans. From time to time, issues of revenue

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 longterm obligations are to a large extent already in oper ation by the time such obligations are issued. Bonds outstanding, including the REA issues, totaled $324,404,000 as of March 31, 1966.

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 March 31, 1966, a total of $466,872,000 was invested in capital improvements. Of this amount $346,283,000 has been provided from the net proceeds of bond issues and bank borrowings,

NUMBER OF CUSTOMERS

SALES OF ELECTRICITY - KWH

Thousands

Millions of KWH

4.000

600

3.000 500

Industrial

Commercial

2.500 â–

-fli Residential

400

2.000 â– 300

200

100

0 Fiscal '!56

Years

'57

'58

'59

'60

'61

'62

'63

'64

'65

'66*

Fiscal '56

'57

'58

'59

'60

'61

'62

'63

'64

'65

'66*

Years * Estimated

Source: P.R.W.R.A. Financial Reports.

and $120,589,000 had come mainly from net revenues of and contributions to the Authority. On March 31,

New Bond Issue

1966, total net assets amounted to $483,127,000,

In July 1966, the Authority proposes to sell $32,000,-

operating and appropriated reserves were $28,288,000, contributed capital and unappropriated net rev enues were $87,062,000 and outstanding debt was $342,904,000.

000 par value Electric Revenue Bonds for the pur

Total revenues for the twelve months ended March

31, 1966, were $83,680,000. Current expenses were $44,293,000, leaving a balance of $39,387,000 avail able for debt service requirements and other contrac tual obligations. The maximum debt service for any

pose of liquidating current bank borrowings and con tinuing the Capital Improvement Program.

Preliminary calculations indicate that the Au thority's maximum annual debt service, upon the completion of the financing, will approximate $17,829,000 and will be covered over 2.20 times by net

earnings for the twelve months ending May 31, 1966.

future year on outstanding issues was $15,907,000, indicating a coverage of 2.48 times on present debt.

Looking Ahead

Accruals for contributions to the Commonwealth and

Continuous studies of power needs, constantly re

municipal governments in lieu of taxes amounted to

viewed and revised by the Authority and its consulting engineers, now indicate that peak demand of the system will increase from 845,000 Kw in 1966-67 to 961,000 Kw in 1967-68, 1,079,000 Kw in 1968-69 and 1,226,000 Kw in 1969-70. It is expected that

$8,845,000 during the same period.

The rapid expansion in facilities and improvement of service over the past decade has been carried out without raising the Authority's rates. Constant in creases in demand have consistently resulted in a

over 30,000 new customers will be added yearly. To

yearly growth in revenues and in substantial reserves

meet this demand, the Authority's generating capacity

adequate to meet the Authority's operating expense

will be raised to a name plate rating of 1,660,420

and contractual obligations.

Kw by June 1970.

Puerto Rico Water Resources Authority

Condensed Balance Sheet As of March 31, 1966

ASSETS

NET UTILITY PLANT:

Gross utility plant Less accumulated provision for depreciation

$486,867,418 83,845,399

Net utility plant

$403,022,019

OTHER PHYSICAL PROPERTY

183,618

BOND REDEMPTION, RESERVE AND CONSTRUCTION FUNDS

16,966,627

CURRENT ASSETS:

Funds and working advances

$ 19 848 238

Accounts receivable — Less Reserve for uncollectible accounts

17,368,098

Materials and supplies

11 913 405

Prepayments, special deposits, etc

868,766

49,998,507

DEFERRED DEBITS:

Debt discount and expense in process of amortization

Other

$11 262 046

li694i512 TOTAL ASSETS

12,956,558

$483,127,329

LIABILITIES

CONTRIBUTED CAPITAL

$ 37,792,183

UNAPPROPRIATED NET REVENUES .

49,269,430

LONG-TERM DEBT: Electric revenue bonds

Notes payable

$324,404,000 18,500,000

342,904,000

6,675,733 3,415,064 2,525,449 6,774,844 5,117,366

24,508,456

CURRENT LIABILITIES:

Accounts payable Customers' deposits and accrued interest . .

Accrued interest on Electric Revenue Bonds .

Accrued contributions in lieu of taxes . . .

Other

DEFERRED CREDITS

365,715

RESERVES: Self-insurance

Injuries and damages Revenue stabilization

Appropriated sinking fund . . .

TOTAL LIABILITIES 8

5,558,504 4,121,792 1,129,401 17,477,848

28,287,545

$483,127,329

Puerto Rico Water Resources Authority

Condensed Statements of Revenues and Expenses (For Revenue Fund Purposes per Trust Indenture)

Twelve Months Ending 1962

June 30 1963

June 30 1964

June 30 1965

March 31 1966

$50,845,979

$57,519,700 1,409,175

$65,864,594 1,501,989

$72,952,446

1,284,837

1,644,048

$80,748,876 1,598,981

$52,130,816

$58,928,875

$67,366,583

$74,596,494

$82,347,857

June 30

REVENUES:

Other operating revenues

Total operating revenues

675,433

742,361

970,985

1,182,929

1,331,929

$52,806,249

$59,671,236

$68,337,568

$75,779,423

$83,679,786

$ 7,360,603

$ 8,542,762 $ 9,358,232

Other income Total revenues

CURRENT EXPENSES:

Operation — $10,709,138

$11,572,890

Other current expenses . .

14,104,870 6,104,009 529,768

15,353,872 7,160,923 709,753

18,304,172 8,871,283 879,071

19,894,285 9,339,608 750,520

21,914,210 9,931,207 874,903

Total current expenses

$28,099,250

$31,767,310

$37,412,758

$40,693,551

$44,293,210

Fuel

Other operating expenses Maintenance

Balance of revenues after current ex

penses (per Trust Indenture) . . $24,706,999 $27,903,926 $30,924,810 $35,085,872 $39,386,576 SINKING FUND PAYMENTS:

Interest account (exclusive of interest

charged to construction and reimburse ment from the Commonwealth Govern

ment of Puerto Rico) $ 6,867,883 $ 7,718,486 $ 8,162,797 $ 8,426,525 $ 8,815,351 Bond redemption account (exclusive of reimbursement from the Common

wealth Government of Puerto Rico) .

Reserve account

3,373,776

3,837,000

4,299,656

4,631,960

5,534,742

1,179,206

1,343,538

1,466,002

220,116

155,478

Total sinking fund payments . . . . $11,420,865 $12,899,024 $13,928,455 $13,278,601 $14,505,571 Balance

$13,286,134 $15,004,902 $16,996,355

$21,807,271

$24,881,005

TRANSFERS TO:

General reserve fund — provision for selfinsurance

$

Renewal and replacement fund Total transfers

542,178 $

6,882,337

598,185 $

7,680,380

640,668 $

8,384,582

678,078 $

12,397,814

709,189

14,367,865

$ 7,424,515 $ 8,278,565 $ 9,025,250 $1^^5,892 $15,077,054

Balance available for contributions in

lieu of taxes, etc

$ 5,861,619 $ 6,726,337 $ 7,971,105 $ 8,731,379 $ 9,803,951

PROVISIONS FOR CONTRIBUTIONS IN LIEU OF TAXES

Balance

5,563,099

6,298,353

$

427,984

7,212,100

$

298,520

$

$

149,260 $

213,992 $

$

149,260 $

213,992 $

759,005

7,989345

$

742,034

8,844,970

$

958,981

379,503 $

371,017 $

479,491

379,502 $

371,017 $

479,490

PROVISION FOR:

Transfer to sinking fund reserve account Balance transferred to unappropri ated net revenues

9

Public LighUnii, town plaza, Riiwon.

During the period from July 1, 1965 through June 30, 1969, It is anticipated that the Authority will invest $207,703,000 in further capital improvements.

Resources Authority Sinking Fund. The Authority has covenanted to deposit in this fund a sufficient

Of this amount, the sale of bonds will provide some

amount of its revenues, after expenses for main tenance and operation of its electric properties, to

$117,782,000. About $81,572,000 or 39% will be

pay the principal of and the interest on all bonds

derived principally from revenues of the Authority, compared with an average of 26% accrued from earnings and contributions during the last nineteen years. The remainder of $8,349,000 will be available from previous bond issues.

The above four-year program compares with cap ital expenditures actually made during the past nine teen years, distributed as follows: steam production

issued as they become due, as well as to create

plant $163,341,000, nuclear production plant $5,960,000, hydraulic production plant $36,206,000, gas turbine production plant $11,082,000, transmis sion plant $61,225,000, distribution plant $137,597,-

Indenture to the credit of the General Reserve Fund

000 and other facilities $51,461,000 for a total of $466,872,000.

Security for the Bonds

Bonds issued by the Authority under the Trust Indenture are payable from the Puerto Rico Water

reserves for such purposes.

The Authority has also covenanted that it will at all times fix and collect reasonable rates and charges

sufficient for the payment of maintenance and oper ating expenses and bond principal and interest, and to create certain reserves. Rates must also provide

for the making of deposits required by the Trust and the Renewal and Replacement Fund, and for payments in lieu of taxes to the Commonwealth and

the municipalities it serves.

In order for the Authority to issue additional bonds under the Trust Indenture, the average annual bal ance of revenues from its electric properties for the preceding twenty-four months, after deducting the cost of maintaining, repairing and operating these properties during the same period, must be not less than 150 percent of maximum debt service payable

in any succeeding fiscal year on all bonds, including

the proposed issue. By supplemental indenture, to become effective only when all presently outstanding bonds heretofore issued have been retired, this per centage will be reduced to 140.

The bonds and the income therefrom are, under

Government History

Puerto Rico came under United States sovereignty by

the Treaty of Paris on December 10, 1898. The Con gress of the United States provided for a civil govern

provisions of Acts of Congress now in force, exempt

ment for the island in 1900. It provided for a Gov

from Federal and State taxation. These bonds are also

ernor, an Executive Council which also acted as a Cabinet, a Senate and a Supreme Court Judiciary, all

legal investments for savings banks and trust funds in the state of New York and for savings banks in California and are eligible for deposit by banks in Puerto Rico to secure public funds, and by insurance companies to qualify them to do business in Puerto

Rico. The bonds are rated "A" by Moody's Invest ment Service and by Standard and Poor's.

In the credit history of Puerto Rico, its municipali ties, authorities, agencies and other political sub divisions, there is no known record of default or de

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 develope or 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 Jon^ c , which granted United States citizenship to Puerto Ricans, as well as unrestricted suffrage for loca pur poses. It also provided that members of bot

linquency in the payment of principal of or interest on any obligation, nor has there been any forced or "managed" refunding of maturing bonds to avoid

Executive and Judicial branches remained

default.

trol of Washington through appointment by t e

The growth of imliistfial plants in Puerto Rico requires constantly expanding electric pon'er production.

and House were to be elected by the people, but tne

as Governor. In 1947 the Jones Act was amended to

stitution was drafted by a freely elected constitutional convention, overwhelmingly approved in a special ref erendum, and approved by Congress and the Presi dent. It became effective upon proclamation of the

permit Puerto Ricans to elect their own Governor,

Governor of Puerto Rico on July 25, 1952.

who in turn was empowered to appoint his Cabinet and members of the Supreme Court with the consent

The Commonwealth Government

ident with the consent of the Senate.

No further change occurred until 1946 when the President for the first time appointed a Puerto Rican

of the local Senate.

The next advance toward complete local govern ment occurred in 1950 when, in accordance with the

The Constitution recognizes and assures a separation of powers among the executive, legislative, and judi

wishes of the People of Puerto Rico,the 81st Congress enacted Public Law 600, approved July 3, 1950. This law, which is "in the nature of a compact," became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of the Organic Act which define the political, economic and fiscal relationship between Puerto Rico and the United

cial branches as in the Federal Constitution, and as in

States shall remain in full force and shall be there after known as the Puerto Rican Federal Relations

Act. It also authorized the People of Puerto Rico to draft and approve their own constitution. The Con

those of the States. Both the Governor and the bi

cameral legislature are subject to regular election every four years. The Legislature operates under 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

TOTAL REVENUES, BALANCE AFTER CURRENT EXPENSES, AND DEBT SERVICE REQUIREMENTS

REVENUE FROM SALES OF ELECTRICITY

Millions of Dollars

Millions of Dollars

90

90

H Total Revenues

Residential

~f~n Balance After Current Expenses " ^ Debt Service Requirements

^ _;S ■! I| l| 0 -

•65

Fiscal '56

'66-

Fiscal Years

Source- P.R.W R.A Financial Reports.

12

■! li iilllii

til II I nil

i II 11 11 11 11 11 11 11 1 1 "56

'57

'58

'59

'60

'61

'62

* Estimate - Including Fuel Oil Adjustment.

Source: P.R.W.R.A. Financial Reports.

'63

'64

The Palo Seco Steam Plant

has two generating units in service of 82.5 MW each

and a 10 MW jet powered peaking tinit shown in the foreground dose to the hori zontal tank.

the Supreme Court of the United States, in the same manner and under the same terms and conditions 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

the Water Resources Authority and the Aqueduct and Sewer Authority. Air and sea port facilities are ad ministered by the Ports Authority. The bonded debts of these public corporations are supported entirely by revenues derived from their operations.

sumed by a State government. Municipalities which combine both rural and urban areas are the only local

Improved Commonwealth Status and Plebiscite

political subdivisions and are comparable to counties to levy ad valorem taxes are the Commonwealth Gov

Since 1952, when Congress authorized and Puerto Rico accepted the present commonwealth form of

ernment and the municipalities. There is, therefore, no other overlapping taxation or bonded indebtedness

government, it has been recognized that this being a new concept of political status within the framework

in scope. The only units of government with the right

payable from taxes. The Commonwealth Government assumes responsibility for a number of important functions normally performed by local governments in the Continental United States. Among these are

police and fire protection, education, all major street and highway construction, and public health pro grams. In addition, the Commonwealth Government supervises municipal fiscal affairs to a very substantial extent.

Commonwealth and municipal governments are

relieved of most of the responsibility for constructing

and financing electric, water, and sewer systems by

of the government of the United States it should in due course be subject to improvement. No significant changes were proposed until 1961 when, through

direct vote by Puerto Ricans, and with the approval of Congress (1) control of the Commonwealth debt limit was removed from the Federal Relations Act

and incorporated by referendum in the Puerto Rican Constitution, and (2) appeals of decisions of the Su preme Court of Puerto Rico were to be taken directly to the U. S. Supreme Court, instead of through the U. S. First Circuit Court of Appeals.

On July 25, 1962, the 10th Anniversary of the

Commonwealth, the Governor of Puerto Rico stated that sufficient time had elapsed, and enough experi ence had been acquired, to consider improvement and refinement of the commonwealth concept. Once this was attained, measures could then be taken to hold a plebiscite in which the people could express their preference for a perfected commonwealth status, or for the classical forms of government of statehood or independence. The Legislature of Puerto Rico, by al most unanimous vote, adopted a Resolution petition ing Congress to provide the basis for such plebiscite.

In response to this, a Resolution (HR 5945) was introduced on April 30, 1963, in the United States House of Representatives, and was passed by the House on October 23, 1963 and by the Senate on February 18, 1964. The Resolution provides for the

President of the United States, plus two each selected

by the Senate and the House of Representatives, and six appointed by the Governor of Puerto Rico. The Commission is to render its report to the President

and the Congress of the United States and to the Gov ernor and the Legislative Assembly of Puerto Rico not later than September 1966.

It is expected that this study will result in the basis of a clarification and perfection of commonwealth status in such a manner that a subsequent plebiscite

can express the basic preference and choice of the voters of Puerto Rico as to their future political status.

Rapid Economic Progress For over two decades, economic growth in Puerto

mission on the Status of Puerto Rico" which is to

Rico has been rapid and continuous. Commonwealth gross product has increased over ninefold, from $287

study all factors which may have a bearing on the present and future relationship between the United

income of Puerto Rico has more than kept pace.

establishment of a "United States-Puerto Rico Com

million in 1940 to $2,757 million in 1965. The net

States and Puerto Rico. The membership of the Com

During the same period it rose from $225 million to

mission consists of three persons appointed by the

$2,321 million, registering a 9.6% increase in 1965,

The Shift Supervisor at the Monaciilos Transmission Center distributes the load among the power system plants. To the left the Area Dispatcher controls switching operations on transmission lines.

-y- m

Siifl 0 - - B -.

■ ■

_ -OOdJ -

Qo

-■"■"■IBS

-□□□

:

This high-tension insulator washer, mounted on a truck, is used by the Authority in transmission line maintenance.

™ J B

hobbbbbho^o BIBB BO

mm

■'•OBnj.,?: .

" B

-

JS JiF"

pisQQ,

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%;-ifHp #'QJj

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• i>

Control room,

^ »• BONUS Nuclear Electric

"* ^41

Station (16,500 Station (16,500 kw), kw).

Rincon.

Especially significant, net income per capita after

and has under construction a $22 million plant to

adjustment for price changes has shown an average annual increase for the last twenty-five years of about 5% compounded. In fact, the rate of increase has been accelerating, from 4.2% in the decade 1941-50, to 4.9% in the decade 1951-60, 7.3% in 1961-65, making the Commonwealth's economy one of the fast est growing in the world.

Equally impressive has been the transformation of the Commonwealth's economy from over-depend ence on sugar to a high degree of industrialization and diversification. While net income from agricul ture has expanded from $71 million in 1940 to $195 million in 1965, that from manufacturing has multi

produce alcohol intermediates. Petroleum refineries are operated by Caribbean Refining Co., which recently completed an expansion program, and the Commonwealth Oil Refining Co., which is currently adding a $33 million investment in petrochemical

plied twenty times, from $27 million in 1940 to $540 million in 1965, and now provides 23% of Commonwealth net income. Whereas in 1940, sugar products accounted for nearly two thirds of exports,

in 1965 they provided less than an eighth. Currently more than two thirds of manufacturing income is generated by the production of new types of goods, principally for shipment to the continental United

operations. An addition to Puerto Rico's petro

chemical complex is Puerto Rico Chemical Co., which has constructed a $6 million anhydrous ben

zene bicarboxylic plant. Phillips Petroleum has broken ground for a $45 million refinery which will produce basic feedstocks for a series of additional chemical

plants using petroleum derivatives. The first such

plant to be anounced is a raw nylon plant to be built jointly by Phillips and Rhone-Poulenc, S. A. of France at a cost of approximately $50 million. During cal endar year 1965 some 179 new factories were estab lished on the island as a result of Puerto Rico's in

dustrial development program. Over 1,000 plants promoted or otherwise established under this program are now in existence in Puerto Rico.

States. Such shipments have jumped from $23 million

Food processing has also been a significant growth area in recent years. Two rice mills and a large flour

in 1949 to $640 million in 1965.

and feed mill supply an important share of Puerto

These new products cover a wide range such as apparel, petroleum derivatives, and electronic prod ucts. Large, heavily capitalized manufacturing opera

Rico's food requirements. Four large tuna canneries

tions have shown a significant increase in recent

years as compared to those labor-intensive operations promoted during the early part of the industrialization program. These include the Union Carbide & Chem ical Corp., which operates a $28 million glycol plant

are now in operation; and, with two additional plants under construction, the island has become one of the leading suppliers of canned fish in the United States

market. A soya bean processing plant, producing cake for the growing cattle and dairy industry and oil for the domestic market and for the tuna canneries, com

menced operations recently. A subsidiary of Libby,

McNeill and Libby has established a plant for the can ning of tomato sauce and juice produced from local crops.

Further, many of the plants are branches or sub sidiaries set up by such firms as General Electric, Consohdated Cigar, U. S. Rubber, American Can, Phelps Dodge, Sperry Rand, Daystrom, Carborun dum, Sprague Electric, Van Camp Sea Food, General Foods, Van Raalte, Hooker Chemical, B. V. D., Bell & Howell, International Shoe, and W. R. Grace. One significant addition to Puerto Rico's blue chip roster is Ford Motor Co.'s $15 million ball bearing plant, one of the most modem facilities of its kind in the world.

Helping to bring about such extraordinary changes in Puerto Rico's economy has been the Common wealth Govemment's comprehensive development program, especially those phases directed at encour aging manufacturers in the continental United States to expand and locate their new plants in Puerto Rico.

As a result, annual direct investment in Puerto Rico

from extemal sources has increased from $8 million in 1947 to $174 million in 1965. The cumulative total of such investment in the Commonwealth as of June

30, 1965 was estimated at $1,328 million. Other types of investments have also been encouraged with the consequence that continental investors hold about

$790 million in long term obligations of Puerto Rico govemmental units and around $609 million in pri vate and public housing obhgations. Other invest ments total approximately $517 million. Total ex ternal investments in the Commonwealth were valued

at $3,244 million at June 30, 1965.

The Puerto Rican people have benefited greatly from the economic expansion achieved since 1940.

Life expectancy has increased from 46 years to 70 years, and the death rate has declined from 18.4 per thousand to 6.9 per thousand. Personal income per family has risen from $611 to $4,244. Public and private day school enrollment has increased from

297,000 to 689,000. University and college enroll ment has grown from 5,000 to 37,000.

Monacillos Transmission and Distribution Center — The building at the left, with the tower, houses the system load dispatchers. Other faciiities shown include electrical and transformer shops, warehouses and metropolitan area distribution offices.

•Si.. ■ 't

PUERTO RICO WATER RESOURCES AUTHORITY San Juan, Puerto Rico

The Community We Serve An Expanding Economy: 1940

Fiscal Years 1965(1)

% Increase or (Decrease)

Gross Product — $ Millions Net Income — $ Millions

287

Personal Income Per Family — $ . . .

611

2,757 2,321 4,244

Debits — $ Millions

73

1,661

Private Savings Accounts — $ Millions

17

298

$ Millions Income Tax Collections — $ Millions . .

312

2,503

702

2

127

Power Generation — Millions of KWH .

166

3,819

6,250 2,200

1,869,000 39.0 18.4 46 286,000 5,000

2,626,000 30.9 6.8 70 626,000 37,000

225

861 931

595

Banks:

2,175 1,652

Assessed Value of Taxable Property —

A Healthier, Better Educated Population: Population Birth Rate - Per Thousand Death Rate — Per Thousand Life Expectancy — Years Public Day School Enrollment University and College Enrollment

41 (21) (62) 52 119 640

A More Balanced Economic Life:

Percentage

Per cent of Net Income from:

Change

Points

Manufacturing Agriculture

Commonwealth and Municipal Government Trade Other

Per cent of Exports from: Exports by New Factories"-' Sugars (Raw and Refined) Other

o Preliminary figures.

Promoted by the Economic Development Administration.

Does not include exports of other new factories.

Source: Puerto Rico Planning Board.

12

23

31

8

11

(23)

8

13

5

12

17

5

37

39

2

68

68

62

11

38

21

(51) (17)

AO ASTRA PCR