Power Expectations Challenges PREPA Bid to Dismiss Lawsuit Over Canceled Contract
The company argues federal court has jurisdiction over disputes tied to the utility’s Title III bankruptcy, citing recent precedent; PREPA counters in favor of transferring to Swain
Power Expectations, LLC is challenging the Puerto Rico Electric Power Authority’s effort to dismiss or transfer the company’s federal lawsuit over a terminated 400-megawatt emergency generation contract, arguing that PREPA is attempting to sidestep the very court that has overseen its bankruptcy for nearly a decade.
In a recent filing, the Texas-based power provider told U.S. District Court Judge Raul Arias-Marxuach that the lawsuit filed on September 2 belongs squarely in federal court under PROMESA’s “related to” jurisdiction. PREPA has been in Title III bankruptcy since 2017 to restructure more than $9 billion in debt, and Power Expectations said the contract at issue was executed during that proceeding with approval from the Financial Oversight and Management Board.
PREPA, in its own filing, urged Judge Arias-Marxuach to dismiss the case or transfer it to Judge Laura Taylor Swain, who presides over the Title III bankruptcy proceedings. The utility argued that because Power Expectations claims the matter is related to the bankruptcy, the lawsuit must be filed as an adversary proceeding under the Federal Rules of Bankruptcy Procedure.
Power Expectations explained that PROMESA’s jurisdictional standard mirrors the one used in federal bankruptcy cases. Under First Circuit precedent, a proceeding is considered related to a bankruptcy when it could potentially affect the debtor’s estate by altering its rights, liabilities, options or freedom of action, or by influencing the administration of the case. Courts have stressed that this jurisdiction is broad, and even more expansive in the PROMESA context because of the statute’s unique structure.
At stake in this case is how soon PREPA can install temporary power to complement aging plants like Aguirre in Salinas.
Power Expectations argued that its lawsuit easily meets that threshold because it seeks reinstatement of the Power Purchase and Operating Agreement, damages for breach of contract, and declaratory relief that would directly shape PREPA’s operational obligations and financial exposure while its restructuring remains unresolved.
The company also pointed to a 2025 decision involving LUMA Energy, where the court held that disputes touching PREPA’s contractual rights under post-petition agreements fall within PROMESA’s jurisdiction. In that case, the court found that litigation over PREPA’s operational contracts could affect the utility’s Title III estate and therefore belonged before the federal judge overseeing the bankruptcy.
Power Expectations said the same logic applies here, noting that the PPOA expressly ties PREPA’s payment obligations to the Title III process and requires validation by PREPA’s bankruptcy professionals before any payment becomes due.
Power Expectations further emphasized that the PPOA contains explicit forum-selection provisions directing disputes to the U.S. District Court for Puerto Rico when they relate to PREPA’s bankruptcy or any matter governed by Title III. Article XVIII states that any legal action arising from or affecting the PREPA bankruptcy must be brought exclusively in federal court, and Section 20.1 requires that any dispute relating to the agreement be adjudicated in the same forum. The company said these provisions underscore the contract’s direct integration with PREPA’s ongoing restructuring and reinforce the jurisdictional nexus.
Judge Arias-Marxuach has not yet ruled on whether the case will proceed in his courtroom, be transferred to the Title III court, or be dismissed.
PREPA counters
Taken together, Power Expectations argued, the circumstances comfortably satisfy PROMESA’s “related to” standard. The lawsuit directly concerns PREPA’s contractual rights, liabilities and freedom of action under a post-petition agreement, seeks monetary relief that would run directly against the debtor, and arises under a contract that incorporates PREPA’s Title III proceeding into the treatment of its payment obligations.
The company said that under First Circuit precedent and recent district court rulings, the jurisdictional connection is clear and substantial.
PREPA countered that the plaintiff failed to follow PROMESA’s procedural requirements, including filing the mandatory PROMESA cover sheet, and therefore the court cannot grant the relief sought in its current form.
PREPA also asked the court to suspend all deadlines, including its upcoming response to Power Expectations’ preliminary injunction request, until the jurisdictional issue is resolved. The utility said responding to the injunction before determining the proper forum would be inappropriate.
Judge Arias-Marxuach has not yet ruled on whether the case will proceed in his courtroom, be transferred to the Title III court, or be dismissed.
Power Expectations sued PREPA after the utility canceled the $5.9 billion temporary power generation contract following the Financial Oversight and Management Board’s revocation of its approval, arguing the procurement process was “irreparably impaired” and fundamentally flawed. The Board withdrew its approval based on several severe operational and legal compliance issues.
The most critical catalyst occurred when ERock, Inc., the holding company for consortium partner Enchanted Rock, informed the Oversight Board that it was not a party to the project and that its name and signature had been used without authorization.
New Fortress restructuring transfers control of the island’s power-generation assets to debt holders, raising questions about future PREPA negotiations and policy.
