SAN JUAN, Puerto Rico — The Puerto Rican government is one step closer to privatizing power generation on the island despite widespread skepticism among consumers who yearn for a reliable source of electricity after decades of random blackouts.
The members of the Board of the Puerto Rico Public-Private Partnerships Authority unanimously approved a contract for the operation and maintenance of power generation units owned by the Puerto Rico Electric Power Authority, the public corporation currently in charge of power generation in the United States.
Fermín Fontanés Gómez, executive director of the Puerto Rico Public-Private Partnerships Authority, announced the approval of the contract in a press release on Sunday. Fontanés Gómez did not reveal the name of the private company that will take charge of the power generation units. He said details of the deal will be made public once it becomes official.
The contract must be approved by the governing board of the Puerto Rico Electric Power Authority and signed by Governor Pedro Pierluisi before it can be officially implemented. It is expected to be fully approved soon.
Power generation units in Puerto Rico are on average about 45 years old, twice as old as those in the continental United States. Some units have been found to be six decades old. They mainly depend on fossil fuels.
Without the contract being 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“Everyone knows that most of those power plants are outdated,” Sergio Marxuach, policy director for the Center for a New Economy, a nonpartisan think tank based in Puerto Rico, told NBC News in Spanish.
Marxuach wondered if the potential private company «will just run the existing system until Puerto Rico can produce more renewable energy. That’s not clear.»
According to local politics40% of Puerto Rico’s electricity must come from renewable energy sources by 2025, with the goal of achieving 100% renewable electricity by 2050. Less than 4% of Puerto Rico’s power generation currently comes from renewable energy .
«Second, how much is this going to cost? They’re not going to do it for free,» Marxuach said. «And third, how will this affect our electricity bill?»
Power customers in Puerto Rico suffered seven electric rate increases last year, despite the fact that people in Puerto Rico already pay roughly twice as much as customers in the continental United States for unreliable service.
we want sunA coalition of organizations and individuals advocating for Puerto Rico’s sustainable future, has said officials should learn from the island’s power transmission and distribution privatization process, which was handed over to Luma Energy in mid-2021.
«The same mistake cannot be repeated», the group told lawmakers in a letter Friday.
Luma Energy, a consortium formed by Atco in Canada and Quanta Services Inc. in Texas, took over Puerto Rico’s power transmission and distribution system in June 2021. Previously, the system was managed by the Puerto Rico Electric Power Authority. Puerto Rico.
At the time, government officials promised Luma Energy that partial privatization of the power grid would improve electric services. Instead, residents experienced frequent power outages, longer service restoration times, poor customer service and voltage fluctuations that often damage appliances and other household electronics.
The privatization process follows ongoing issues surrounding the bankruptcy of the Puerto Rico Electric Power 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 the burden of long-term debt.
A few months later, Puerto Rico was hit by Hurricane Maria, one of the largest and deadliest natural disasters to hit US soil in 100 years, further deteriorating the already fragile and underinvested power grid.
When faced with Hurricane Fiona in September 2022, the grid was unable to withstand the Category 1 storm, causing an island-wide blackout that took over two weeks to undo.
In the time between the acquisition of Luma Energy and Fiona, several fires left hundreds of thousands of customers without power, with the largest incident taking place in April 2022. On other occasions, Luma Energy attributed the outages to bad weather and sargassum, a type of seaweed.
Luma Energy has said it has reduced the frequency of outages by 30% over the past year and started 251 federally funded projects to permanently rebuild the network repaired after Hurricanes Maria and Fiona.
Queremos Sol’s letter was addressed to two Puerto Rican legislators who were previously against the privatization of power generation units but have recently changed their minds. They agreed to support Pierluisi’s privatization push as long as the contract includes certain conditions.
Some of these include ensuring that any savings resulting from the privatization process are reflected in lower electricity bills and prohibiting the company from subcontracting to partners, allies, subsidiaries or other organizations linked to the prospective company, giving priority to companies on the island. .
It is unclear if the contract with the prospective company looking to take over power generation addresses these.
Problems with subcontractors linked to the parent company have already come to light with the Luma Energy contract, Marxuach said. «This is how they can make more money.»
Queremos Sol also warned that privatizing power generation could «further delay the transition to renewables» if the company decides to continue «operating existing fossil fuel-powered plants.»
The bankruptcy of the Puerto Rico Electric Power Authority continues as the public corporation attempts to restructure its nearly $9 billion public debt, the largest of any government agency. It is not clear if the privatization process would have any impact on such efforts.
NBC News reached out to the Puerto Rico Public-Private Partnerships Authority about the new contract, how it might affect Puerto Rico’s transition to renewable energy, and whether it would negatively affect the power authority’s bankruptcy proceedings.