Privatization bill will not solve Puerto Rico’s electricity crisis
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Key Findings
The bill fails to set priorities for renewable energy, provide sound energy planning, ensure affordable rates, establish sound debt management policies, restore integrity to the contracting process, protect existing employees and attract new professionals, or improve transparency and oversight.
In some respects, the privatization model being proposed for Puerto Rico resembles the privatization of the Long Island Power Authority. Bad political deals masquerading as energy policy are what brought PREPA to ruin.
Executive Summary
In January 2018, Puerto Rico Governor Ricardo Rosselló announced his intention to privatize the Puerto Rico Electric Power Authority.
The Puerto Rico Electrical System Transformation Act was introduced in the Puerto Rico legislature in March to establish the legal framework for this privatization (P.S. 860 in the Senate and P.C. 1481 in the Assembly). The bill authorizes PREPA and the Public Private Partnership Authority (“P3 Authority”) to undertake a series of contracts to sell or lease PREPA’s generation, transmission and distribution assets to outside parties. The bill’s stated intent is to begin “a process through which our energy system will be transformed into a modern, sustainable, reliable, efficient, cost-effective and resilient one… through the creation of Public-Private Partnerships.”
We recommend the legislature reject this bill. While PREPA’s management requires reform, this can and should be done without privatizing PREPA’s assets.
The proposed law will not achieve its goal of modernizing Puerto Rico’s electrical system because it does not address the fundamental drivers of the high price of electricity on the Island – over-reliance on fossil fuels, high debt burden, decreasing demand, mismanagement and ongoing political interference in the operations of the electrical system. Instead, the bill establishes a mechanism to sell PREPA’s assets via politically driven contracts -- rich in fees for lawyers, accountants, consultants and advisors.
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Press release: IEEFA Report: Privatizing Puerto Rico’s Electric Company Would Be an Impediment to Modernization
