Yet another island-wide power outage in Puerto Rico highlights the urgent need for progressive policy reforms that can keep the lights on once and for all in the U.S. commonwealth.
The Puerto Rican Senate is facing an opportune moment along these lines next week as it holds a public hearing on a misguided plan by Gov. Ricardo Rosselló to essentially give up on the Puerto Rico Electric Power Authority (PREPA) and turn it over to private interests.
A report we published just last week explains why privatization is a dead end.
The Rosselló bill, known as the Puerto Rico Electrical System Transformation Act, will not achieve the modernization goals it ostensibly lays out for Puerto Rico’s electrical system, and it fails to address the fundamental drivers of the high price of electricity on the island. All the governor’s bill would do is establish a mechanism to sell off PREPA’s assets and free them of responsible regulatory oversight.
The proposed legislation would specifically prevent the all-important Puerto Rico Energy Commission from reviewing privatization contracts as a way of ensuring that they comply with modernization goals and that ratepayer interests are protected along the way.
The fact that Rosselló wants to allow PREPA to negotiate contracts without independent oversight — despite PREPA’s long history of expensive contracting failures — suggests he has learned nothing from the Whitefish scandal, which was a classic example of an overnight deal made with no public input or regulatory oversight.
The problems facing Puerto Rico’s electrical system are many: high-priced electricity resulting from old and expensive oil-fired power plants; declining electricity demand; a $9 billion debt burden; a fragile grid that is overly dependent on long transmission corridors through the mountains; political interference from Rosselló.
The proposed law addresses none of these challenges. Rather than developing the regulatory framework needed to incentivize private investment in microgrids and distributed electricity generation, for example, the legislation exempts the generation system from any long-term energy planning requirements.
It represents an evisceration of Puerto Rico’s energy planning laws that will likely result in an overbuilding of generation capacity, little true public accountability around the process and an excess capital investment burden that will fall ultimately on Puerto Rico electricity customers.
The bill is strangely silent on PREPA’s debt and does not require privatization to conform to PREPA’s stated budget and debt goals. Nor does it present a vision for a truly 21st-century electricity system built to be more resilient than the current one and cheaper and cleaner as well.
Decades of political interference have contributed to PREPA’s current dysfunction. Yet, this bill creates numerous opportunities for further political interference in a contracting process that is set up to be opaque and unaccountable and does not require competitive bidding (the two agencies that would oversee privatization deals — PREPA and the Puerto Rico Public Private Partnership Authority — are effectively controlled by the governor).
Rather than seizing the day and proposing a visionary plan for transformation, the governor has proposed more of the very same practices that left PREPA hobbled: deals that bring rich fees to consultants and advisors but fail to fix the underlying problems.
The Puerto Rico legislature should reject this misguided legislation. It should instead establish public policy priorities that focus on improving reliability and reducing system costs through increased uptake of renewable energy, microgrid development and providing the Puerto Rico Energy Commission with the resources it needs to effectively regulate PREPA.
Cathy Kunkel is an energy analyst at the Institute for Energy Economics and Financial Analysis.