The bill amends PROMESA to allow the Commonwealth of Puerto Rico to terminate the Financial Oversight and Management Board (the Oversight Board) by enacting local legislation that designates or establishes a successor entity; termination takes effect the day after that legislation is enacted. It also amends PROMESA’s Title III debtor-representation rules to name the Puerto Rico Electric Power Authority (PREPA), its governing board, or a successor entity (as set out in the Commonwealth law) as the debtor’s representative in Title III cases initiated on or after that enactment date, and by default requires the substituted representative to retain the Board’s existing professionals, advisors, and counsel unless the Commonwealth law says otherwise.
The bill preserves key federal backstops: it does not change PROMESA’s confirmation requirements, does not invalidate fiscal plans certified before the bill’s enactment until modified by a substituted representative or by confirmation of a plan of adjustment, and it leaves exclusive Title III jurisdiction with the U.S. District Court for the District of Puerto Rico. Practically, the measure hands meaningful control over future restructurings to Puerto Rico while attempting to preserve continuity for ongoing processes and professionals retained by the Board.
At a Glance
What It Does
The bill adds a statutory trigger that forces the Oversight Board to terminate the day after the Commonwealth enacts legislation that designates or establishes a successor entity. It also substitutes PREPA (or its governing board or successor) as the debtor representative for Title III cases initiated on or after the legislation’s enactment, and directs that the Board’s hired advisors remain with the substituted representative unless the Commonwealth’s law provides otherwise.
Who It Affects
Directly affected parties include the PROMESA Oversight Board, PREPA and its governing board, Title III creditors and litigants in cases initiated after the Commonwealth law’s effective date, and the professionals and counsel retained by the Oversight Board. The U.S. District Court for the District of Puerto Rico remains the court of competent jurisdiction for Title III.
Why It Matters
The bill creates a clear legal pathway for Puerto Rico to reclaim control over local fiscal governance and certain restructurings without explicit federal action, changing who negotiates and litigates future Title III cases. That shift could alter creditor bargaining positions, investor expectations, and the continuity of restructuring expertise.
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What This Bill Actually Does
The bill modifies two specific provisions of PROMESA. First, it amends section 209 to add subsection (b) that ties the Oversight Board’s existence to action by the Commonwealth: once Puerto Rico’s legislature enacts a law that designates or establishes a successor entity, the Oversight Board must terminate the day after that enactment.
The language creates an automatic, non-discretionary termination trigger tied to Puerto Rico’s own legislation rather than a federal timetable or Board action.
Second, the bill amends section 315(b) to carve out a substitution rule focused on the Puerto Rico Electric Power Authority. For Title III cases initiated on or after the Commonwealth’s enactment of the successor-designating law, PREPA, its governing board, or another successor specified in that local legislation becomes the debtor’s representative.
The statute expressly provides that, unless the Commonwealth law says otherwise, the professionals, advisors, and counsel the Oversight Board had engaged before the substitution will be retained by the new representative, creating a default continuity mechanism for advisory teams and legal staff.A short rules-of-construction section closes predictable lines of attack by stating what the bill does not change: it preserves PROMESA’s confirmation requirements under section 314, leaves certified fiscal plans and budgets intact until altered by a substituted representative or a confirmed plan of adjustment, and leaves Title III jurisdiction with the District of Puerto Rico. Those limits are designed to make the changes prospective and circumscribed, focusing the bill’s force on future Title III cases and on the mechanism for replacing the federal Oversight Board.
The Five Things You Need to Know
The bill adds subsection 209(b) to PROMESA: the Oversight Board must terminate the day after the Commonwealth enacts legislation that designates or establishes a successor entity.
Substitution applies only to Title III cases initiated on or after the date of the Commonwealth legislation’s enactment; it does not automatically displace debtor representation in already-pending Title III cases.
For substituted representation the bill names the Puerto Rico Electric Power Authority, its governing board, or another successor entity specified by the Commonwealth law as the debtor representative for eligible cases.
Unless the Commonwealth law explicitly provides otherwise, the substituted representative must retain the Oversight Board’s professionals, advisors, and counsel engaged before the legislation’s enactment.
The bill’s rules of construction explicitly preserve PROMESA’s section 314 confirmation requirements, keep certified fiscal plans and budgets valid until modified by the substituted representative or confirmed plan, and maintain Title III jurisdiction in the U.S. District Court for Puerto Rico.
Section-by-Section Breakdown
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Short title
Designates the measure as the "Puerto Rican People’s Power Restoration Act of 2026." This is purely formal but signals the bill’s intent to reallocate control from the federally appointed Oversight Board back to Commonwealth authorities using the PROMESA framework.
Termination trigger for the Oversight Board
Adds a new subsection (b) to section 209 that makes Board termination contingent on Commonwealth legislation that designates or establishes a successor entity; the Board must terminate the day after that enactment. Practically, the provision turns termination into a unilateral local action: Puerto Rico’s legislature controls the timing so long as it passes qualifying legislation. The provision does not prescribe standards for what a successor must look like, leaving that definition to Commonwealth law and creating space for varied institutional designs (a public authority, a different board, or another governance structure).
Substituting PREPA as debtor representative for new Title III cases
Modifies section 315(b) to create an explicit substitution rule: after the Commonwealth enacts the successor-designating law, PREPA, its governing board, or a successor specified in that law becomes the debtor representative for all Title III cases initiated on or after that date. The amendment includes a default continuity mechanism requiring retention of the Board’s advisors and counsel unless the Commonwealth law provides otherwise, which aims to prevent an immediate loss of expertise when representation shifts to a local actor.
Rules of construction preserving core PROMESA features
States three limits on the amendments: (1) they do not change the requirements for confirmation under section 314, preserving the statutory test for plan confirmation; (2) they do not invalidate fiscal plans or budgets certified prior to the enactment of this bill until modified by a substituted representative or confirmed plan of adjustment, which protects existing certified plans; and (3) they do not alter the District of Puerto Rico’s jurisdiction over Title III matters. Those clarifications are deliberate to reduce retroactivity and to signal that the changes are forward-looking.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Commonwealth of Puerto Rico — Gains a clear statutory mechanism to terminate the federal Oversight Board and designate a locally controlled successor, restoring legislative control over future governance and restructurings.
- Puerto Rico Electric Power Authority (PREPA) and its governing board — The bill specifically authorizes PREPA (or its successor) to serve as debtor representative for Title III cases initiated after the Commonwealth law, giving PREPA direct control of its restructuring strategy and negotiations.
- Local policymakers and officials — With authority to establish the successor entity, local leaders can align restructuring and fiscal decisions with policy priorities (for example, rate policy, labor considerations, or infrastructure choices) rather than federal oversight priorities.
- Oversight Board professionals, advisors, and counsel — The default retention clause protects their engagements and fee streams by assigning them to the substituted representative unless local law changes that arrangement.
Who Bears the Cost
- PROMESA Oversight Board — The Board faces an explicit statutory termination trigger that removes its ongoing federal role once Puerto Rico enacts successor legislation, reducing its ability to oversee future fiscal policy locally.
- Title III creditors and bondholders — The shift to local representation and control may increase legal and financial uncertainty about negotiation leverage and recoveries in future cases, potentially affecting valuation and restructuring outcomes.
- Stakeholders in pending Title III cases or negotiations — Even though substitution applies to new cases, the change raises litigation risk about whether the rule should be read to affect existing disputes, increasing legal costs and strategic uncertainty.
- Federal litigants and courts — Courts and parties may face new litigation over the scope of the successor designation, the boundaries of retained professionals’ roles, and whether local legislative action can alter federal statutory frameworks in practice.
Key Issues
The Core Tension
The central dilemma is whether restoring local control over fiscal governance and restructurings—by letting Puerto Rico terminate the federally appointed Oversight Board—improves democratic accountability and policy alignment, or whether it undermines the predictability, technical capacity, and creditor protections that the federal oversight regime was designed to provide.
The bill hands a decisive tool to the Commonwealth—termination by local legislation—but leaves important questions about what counts as an adequate "successor entity." PROMESA currently embeds federal expectations about oversight and fiscal controls; this bill depends on Puerto Rico-defined institutions to fill those roles. That raises implementation questions: will the Commonwealth law create an entity with comparable powers, access to financing, and technical capacity?
If not, the substitution could impair restructuring efficacy and investor confidence.
The statute attempts to limit chaos by making substitution prospective (cases initiated on or after the enactment date) and by protecting existing certified fiscal plans and section 314 confirmation rules. Nevertheless, ambiguity remains about borderline cases: do cases filed shortly before enactment but not yet advanced fall under the substitution?
Might creditors challenge the Commonwealth’s authority to nullify a federally established board by local statute, arguing preemption or that PROMESA’s structure requires federal action? The retention-of-staff default reduces an immediate skills gap but depends on the practical willingness of professionals to remain under new management and on whether the Commonwealth funds their continued work.
Finally, the bill creates a tradeoff between democratic control and predictability for investors. Even with the bill’s limits, markets may treat the possibility of unilateral local termination as increased political risk.
That could affect borrowing costs for Puerto Rico entities, insurance and credit terms for public infrastructure projects, and negotiation dynamics in future Title III cases—outcomes the statute itself does not address directly and that will turn on how the Commonwealth legislates the successor.
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