Sunday, August 25, 2019

[Editorial] Not Your Abuelita’s Utility

By on August 23, 2018

Editor’s note: The following originally appeared in the Aug. 23, 2018, issue of Caribbean Business.

My abuelita once told me the best way to hide something was to put it in the middle of the living room table. Decades later, her observations prove less a sign of senility than a simple declaration based on experience—on display in the Puerto Rico Electric Power Authority’s (Prepa) Fiscal Plan and the Integrated Resource Plan (IRP), where fossil fuels are front and center in the transformation of the bankrupt utility.

Although there was much talk about distributed energy through micro-grids in what was being touted as a more customer-centric model, the preliminary draft of the IRP makes no bones about a heavy reliance on natural gas facilities (see Top Story, p.4). A document that outlines two strategies specifies four scenarios, three of which feature a heavy reliance on natural gas.

Among the options is “a ship-based facility at the port of San Juan with a pipeline to two plants” at a cost of $185 million; a land-based liquefied natural gas (LNG) facility in San Juan with a pipeline to Palo Seco; a $422 million pipeline from Costa Sur to Aguirre in the south that would then traverse the island to San Juan; and the $400 million Aguirre Offshore GasPort (AOGP) and gas facilities in Yabucoa and Mayagüez.

If truth be told, the pipeline that crosses the island conjures the ghost of Vía Verde, a pipeline rife with procedural irregularities and cash outlays of what some have estimated to be $100 million, which was done in by resistance on the environmental front. Then there is AOGP, which most insiders say has little chance of becoming reality because of the considerable challenges on the investment front.

That leaves the IRP with several ship-based facilities as the most viable options in a plan that seems bound and intent to make the shift to natural gas—come Hell or highwater. It is consistent with Prepa’s most recent fiscal plan. Under the headline “Pivoting the Generation Mix,” that user’s guide breaks down the current fuel mix—Oil (45%); Natural Gas (34%); Coal (17%) and Renewables (3%) with a projection to achieve a mix of Natural Gas (57%); Renewables (18%); Coal (22%) and Oil (2%) by 2022.

Prepa’s newly appointed Executive Director José Ortiz, who sought energy independence in a fuel-mix formula that included renewables and propane during his tenure under the administration of former Gov. Luis Fortuño (2009-2012), will oversee a shift to natural gas that runs contrary to some of the tenets he defended months ago. Ortiz was well-acquainted with the importance of renewables underpinning the new energy strategy under Fortuño.

The quest for a new energy paradigm under the Fortuño administration was addressed in a report by Álvarez & Marsal, an energy valuation firm, which called for a hard jog toward natural gas by Prepa, based on the cost of natural gas at $8 per MMBTU (one million British thermal units) in 2012.

During an interview in 2017, Ortiz told Caribbean Business that propane is less expensive than natural gas in Puerto Rico. “In the United States, natural gas is cheaper, but when you calculate the importing and having to freeze it at minus-273 degrees for it to become liquid, the cost rises above $10 per MMBTU. Propane costs you $8—the handling and shipping is much less expensive,” Ortiz said during the 2017 interview.

Unfortunately, the signs of a foolhardy drive to rely on fossil fuels are everywhere. Just glance through the draft bill The Puerto Rico Electricity Modernization Act of 2018 to federalize the privatization of Prepa, which stipulates that “eligible applicants must be producers of fuel,” as one of the conditions to qualify.

And, now that the Puerto Rico Energy Commission (recently renamed the Puerto Rico Energy Bureau, or PREB) has been watered down under the Vanilla Umbrella denominated the Public Service Regulatory Board, U.S. Congress need be concerned that it has created the perfect environment for the masters of disaster recovery hovering above Puerto Rico’s tattered landscape to prey on a utility—tearing it apart to prep it for further pillaging?

A shift to natural gas holds the utility hostage to fossil fuels rather than diversifying to achieve better rates. Keep the “tri-fuel” option available and shoot for the 20 percent renewable target. As it stands right now, energy insiders with skin in this game know they will only have a 10 percent renewable mix in the equation. That is far from the customer-centric benchmarks established and a ruse that the people and the business community can ill-afford.

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