A research brief released today by the Institute for Energy Economics and Financial Analysis (IEEFA) lays out a cautionary tale to policy-makers in Puerto Rico, as they consider adopting a program known as retail choice in the island’s electricity market.
Retail choice is a policy that allows individual customers to select who will supply their electricity. Supporters of the idea, including PREPA’s new executive director Jose Ortiz, point to Puerto Rico’s high costs of electricity, averaging 20.2 cents per kilowatt hour in 2017 (compared to an average price of 12.90 cents per kilowatt hour for the United States) as the main driver for this policy push.
But, according to IEEFA, experience with retail choice in the mainland United States, where one-third of the country has adopted the model since the 1990’s, have resulted in higher, not lower prices, costing residential customers hundreds of millions of dollars in excess charges in several states.
Major findings of the research brief include:
“Retail choice does nothing to address the fundamental challenges that have caused Puerto Rico’s electricity prices to rise to unsustainable levels, including PREPA’s high level of debt; disinvestment in transmission, generation and distribution infrastructure; and extreme reliance on oil-fired generation. These problems have only been exacerbated by the utility’s high level of unpaid customer bills, management corruption, and need to rebuild its system following Hurricane Maria. Retail choice would offer no escape from these realities: indeed, it would likely raise the very high rates that already burden PREPA’s residential customers,” the report concludes.
Full Brief: Retail Choice Will Not Bring Down Puerto Rico’s High Electricity Rates
Media Contact:
Sandy Buchanan: [email protected] 216-688-3433
Authors:
Chelsea Hotaling is an Analyst at Sommer Energy, LLC, a utility-regulation consulting firm. Anna Sommer is an IEEFA energy consultant and President of Sommer Energy, LLC. Williams D. Yates is Director of Research at the Public Utility Law Project of New York, Inc.
About IEEFA:
The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. IEEFA’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.