Monday, November 20, 2017

Puerto Rico industry groups reject sale of electric utility assets

By on September 12, 2017

SAN JUAN – When the Manufacturers Association (PRMA) and MIDA—the Chamber of Food Marketing, Industry & Distribution—advocate for the privatization of the Puerto Rico Electric Power Authority (Prepa), they truly mean opening it up to competition and not its transformation into a private utility.

Their view goes against the plans of the Financial Oversight and Management Board, which a few months ago rejected Prepa’s restructuring support agreement to deal with the utility’s $9 billion debt because it would be a roadblock to making the public corporation private.

“By shifting from a government entity to a well-regulated private utility, Prepa can modernize its power supply, depoliticize its management, reform pensions, and renegotiate labor and other contracts to operate more efficiently,” the board said in a statement at the time.

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Caribbean Business asked PRMA President Rodrigo Masses and MIDA Executive Director Manuel Reyes about the public corporation, considering that the privatization of electric utilities in Latin America, a process that began in the 1970s, led to higher power rates.

Masses said there were examples in Puerto Rico of private utilities that can produce energy at cheaper rates than Prepa, such as Eco Eléctrica, which produces energy at 8 cents per kilowatt hour (kWh). Either way, he stressed the need to have an energy regulator to ensure the system provides power at competitive prices.

“When we talk about privatization, we are talking about opening it up to competition. Privatizing a monopoly will keep the same problems we have as a public monopoly…. Opening the utility to competition is the equivalent of privatizing,” Reyes said.

Masses concurred. He said there were two forms of privatization that include opening it up for competition. “What we think will happen, is the second alternative,” he said, adding that in the end the goal is to have adequate oversight that ensures economic development. “There should not be a transformation without regulation.”

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