Skip to main content

IEEFA Update: Puerto Rico’s Hidebound Electric Company

December 15, 2017
Cathy Kunkel and Tom Sanzillo

The Puerto Rico Electric Power Authority continues to oppose constructive efforts to build a resilient new power grid driven by renewable energy investments. The agency, known as PREPA, remains wedded instead to an outmoded system dependent on expensive imported fossil fuels vulnerable to price volatility.

That’s the gist of PREPA comments filed with the Puerto Rico Energy Commission in the commission’s investigation into how to improve reliability and develop a new energy model for Puerto Rico in the aftermath of Hurricane Maria.

PREPA clings to its ways of doing business despite the fact its system is still operating at only a little over 50 percent of capacity almost three months now after Hurricane Maria. The agency itself remains in the dark, so to speak, as solar industry companies continue to respond to the island’s humanitarian crisis with small demonstration projects that have gotten the lights back on faster than PREPA has.

Agency officials persist in their insistence that the Energy Commission lacks authority and that a fiscal-plan process unfolding under the oversight of the Federal Oversight and Management Board is the appropriate venue for deciding the future of the island’s grid (the FOMB is currently revising PREPA’s 10-year fiscal plan, with a final proposal expected by mid-January).

PREPA MISSES WHAT THE COMMISSION IS SEEKING TO DO: transform the electricity system of Puerto Rico, not simply transform PREPA. The commission, in its own words,  “is trying to develop the vision and the roadmap to evolve our energy market into a modern, flexible and cost effective one.”

If power company officials can’t think beyond the past, we know the outcome already.

In the near-term, the commission is identifying regulatory actions to facilitate the development of microgrids and other distributed-generation technologies. Its approach—reimagining the system and creating an environment that encourages the deployment of private and public capital to make the transformation happen—is fundamentally different from most of the policy discussion in Puerto Rico, which is essentially “how do we fix PREPA?”

PREPA will have none of it, insisting that PREPA and PREPA can orchestrate its recovery. Yet the agency lacks the professional expertise and standards to do it. PREPA is in shambles, by its own admissions (See all of the public comments received by the commission here). We think the agency’s weak adherence to professionalism is because it is treated primarily as a political project with management staffed by cronies.

The Energy Commission’s forward-looking work, by comparison, is similar to processes undertaken by regulatory agencies in various states, including New York, where the Reforming the Energy Vision initiative was begun in the aftermath of Hurricane Sandy.

Many parties have submitted comments largely supportive of the commission’s process and respectful of its important and unique role in guiding Puerto Rico toward a more sustainable electricity future. Several mainland U.S. organizations with deep technical expertise in microgrids—including the Pace Energy and Climate Center, the New York State Smart Grid Consortium and HOMER Energy—have offered technical services.

If PREPA officials can’t think beyond the past, we know the outcome already.

Gov. Ricardo Rossello has spoken publicly of the opportunity presented now to turn Puerto Rico into a modern, resilient and a global electricity-generation leader. We await an expression of support from him for the Commission and his instruction to PREPA to do the same.

Cathy Kunkel is an IEEFA energy analyst. Tom Sanzillo is director of finance.


IEEFA Update: The Puerto Rico Electricity ‘Privatization’ Discussion Is a Distraction

IEEFA Update: Puerto Rico’s Solution—a Microgrid System Supported by Solar Energy

IEEFA Update: Politics Is the Main Barrier to Solar Energy Independence in Puerto Rico

Cathy Kunkel

Former Energy Finance Analyst Cathy Kunkel has written reports and given expert testimony on the finances of Appalachian natural gas pipelines and drilling; electric utility mergers, rates and resource planning; energy efficiency; and Puerto Rico’s electrical system. She has degrees in physics from Princeton and Cambridge.

Go to Profile

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

Go to Profile

Join our newsletter

Keep up to date with all the latest from IEEFA