Sunday, April 22, 2018

Economist: Puerto Rico utility’s privatization will raise electric bill

By on April 13, 2018

SAN JUAN – Commissioned by the Puerto Rico Electric Power Authority’s Irrigation & Electrical Workers Union (Utier by its Spanish acronym), economist José Alameda conducted a study in which he concluded, among other things, that contrary to what the government alleges, the public utility’s privatization would result in higher residential bills.

“On average, citizens would be paying on average $986 per year. Commercial customers would pay $13,600 more and industrial customers would spend $827,000 more per year,” Alameda said during a recess of the Joint Committee on Economic Development, Planning, Telecommunications, Public-Private Partnerships, Energy and Government of the House of Representatives.

Alameda also mentioned that the decrease in energy demand, whether due to newer electrical equipment using less power or the island’s population decline, does not help reduce the cost of generating electricity in Puerto Rico.

IEEFA: Privatizing Puerto Rico’s electric company would impede modernization

“This happened in the Dominican Republic and Argentina. In Argentina, the system was privatized, but since revenue did not reach private companies, the state subsidized private enterprise. When that subsidy was eliminated, rates increased by 788% in two years,” he said.

Another of the University of Puerto Rico professor’s arguments was that, if the island were divided into sections, the private sector would have problems recovering its investment since, for example, it is not the same to sell electric power in the metropolitan area of San Juan than in the mountainous countryside.

Utier President Ángel Figueroa said in the public hearing that he favors, under a public model, that investment is made through Public-Private Partnerships but that, unlike what is currently happening, the private sector invests and Prepa pays for it in a set period of time.

The union leader also argued that the private model clashes with Gov. Ricardo Rosselló’s proposal of promoting that citizens produce their own energy.

Committee Chairman Víctor Parés then assured the bill would establish that citizens who decide to leave the power company’s grid will not be penalized.

“We have discussed that anyone who has an interest in leaving the system is not penalized and we agree. In fact, we are going to make this happen and we are going to put it in writing in the bill, and it is important that this is very clear,” the lawmaker said.

He added that specific language on a formula on the cost per kilowatt-hour will be included so the price is established according to market price and does not negatively affect the consumer.

Parés mentioned that only one public hearing over Prepa’s privatization bill is left. Likewise, he agreed with Senate President Thomas Rivera Schatz’s arguments to include the energy policy, the regulatory framework and for the Legislative Assembly to perform a final review in the process of the sale or concession of the utility’s assets.