Puerto Rico on track to privatize electricity generation despite widespread skepticism

SAN JUAN, Puerto Rico. The Puerto Rico government is one step closer to privatizing the island’s electricity generation despite widespread skepticism among consumers who are craving a reliable source of electricity after decades of random power outages.

Board members of the Puerto Rico Public-Private Partnership Authority have unanimously approved a contract to operate and maintain units owned by the Puerto Rico Electricity Authority, the public corporation currently responsible for generating electricity in the United States.

Fermin Fontanes Gomez, executive director of Puerto Rico’s Public-Private Partnerships Authority, announced the approval of the contract in a press release on Sunday. Fontanes Gomez did not name the private company that will take over the management of the power units. According to him, the details of the agreement will be made public as soon as it becomes official.

The contract must be approved by the Board of Governors of the Puerto Rico Electricity Authority and signed by Governor Pedro Pierluisi before it can be formally implemented. It is expected that it will be fully approved in the near future.

Units in Puerto Rico average about 45 years old, twice as old as those in the US mainland. Some units were found to be sixty years old. They are mainly dependent on fossil fuels.

Because the contract is not public, Puerto Ricans have more questions than answers when it comes to the future of Puerto Rico’s power grid.

“Everyone knows that most of these power plants are outdated,” Sergio Marxuach, political director of the New Economy Center, a non-partisan think tank based in Puerto Rico, told NBC News in Spanish.

Marksuach wondered if the proposed private company would “just run the existing system until Puerto Rico can produce more renewable energy? It’s not clear.”

Local policy calls for 40% of Puerto Rico’s electricity to come from renewable energy sources by 2025, with the goal of achieving 100% renewable electricity by 2050. Currently, less than 4% of Puerto Rico’s electricity comes from renewable energy sources.

“Secondly, how much will it cost? They will not do it for free,” Marksuakh said. “And third, how will this affect our electricity bills?”

Electricity customers in Puerto Rico experienced seven electricity rate hikes last year, even though people in Puerto Rico are already paying about twice as much as mainland US customers for unreliable service.

Queremos Sol, a coalition of organizations and individuals advocating a sustainable future for Puerto Rico, said officials should learn from the process of privatizing the island’s electricity transmission and distribution system, which was taken over by Luma Energy in mid-2021.

“The same mistake cannot be repeated,” the group said. the deputies said in a letter. Friday.

Luma Energy, a consortium consisting of Atco in Canada and Quanta Services Inc. in Texas, took over Puerto Rico’s transmission and distribution system in June 2021. This system was previously administered by the Puerto Rico Electricity Authority.

At the time, government officials promised Luma Energy that a partial privatization of the grid would improve electricity supply. Instead, residents faced frequent power outages, long service recovery times, poor customer service, and voltage fluctuations that often caused damage to home appliances and other consumer electronics.

The privatization process follows the ongoing problems associated with the bankruptcy of the Puerto Rico Electricity Authority. In 2017, the corporation formerly in charge of the power grid filed for bankruptcy after years of low liquidity, limited access to capital markets and a burden of long-term debt.

A few months later, Puerto Rico was hit by Hurricane Maria, one of the largest and deadliest natural disasters on US soil in 100 years, further deteriorating an already fragile and dead power grid.

Facing Hurricane Fiona in September 2022, the grid was unable to weather the Category 1 storm, resulting in an island-wide power outage that took more than two weeks to resolve.

In the time between the takeover of Luma Energy and Fiona, hundreds of thousands of customers were left without power as a result of numerous fires, with the largest incident occurring in April 2022. In other cases, Luma Energy has blamed the outages on bad weather and sargassum, a type of seaweed.

Luma Energy said it has reduced its outage frequency by 30% over the past year and initiated 251 federally funded projects to permanently rebuild the patched grid following Hurricanes Maria and Fiona.

Keremos Sol’s letter was addressed to two Puerto Rican legislators who were previously opposed to the privatization of power plants but have recently changed their minds. They agreed to support Pierluisi’s push for privatization if the contract included certain conditions.

Some of these include ensuring that any savings generated from the privatization process are reflected in lower electricity bills and prohibiting the company from subcontracting any partners, allies, subsidiaries or other entities associated with the future company, instead giving priority to companies on the island.

It is not clear if this takes into account a contract with a potential company wishing to take over power generation.

Problems with subcontractors associated with the main company have already come to light in connection with the Luma Energy contract, Marksuach said. “That’s how they can make more money.”

Queremos Sol also warned that the privatization of electricity generation could “further delay the transition to renewables” if the company decides to continue “to operate existing fossil fuel power plants.”

The bankruptcy of the Puerto Rico Electricity Authority continues as the public corporation attempts to restructure its nearly $9 billion public debt, the largest of any government agency. It is unclear whether the privatization process will affect such efforts.