Saturday, March 23, 2019

[Editorial] Wheeling and Dealing

By on March 8, 2019

Editor’s note: The following was first published in the March 7 – 13, 2019, issue of Caribbean Business.

Cooking up the legislation enabling the regulatory framework for the overhaul of the Puerto Rico Electric Power Authority (Prepa) has not been an easy recipe to follow; there just are no Goldilocks solutions—this one is too cold, this one is too warm, this one is just right. To be certain, the many special interests—producers of fuel, the manufacturers of solar and battery storage units—jockeying for position in the Prepa 2.0 Sweepstakes have added layers of complexity to the drafting of the law. Kick a trash can in the hallowed halls of el capitolio and a lobbyist pops out.

This is all playing out against the backdrop of bankruptcy proceedings under Title III of the Puerto Rico Oversight, Management & Economic Stability Act (Promesa) where balkanized creditor camps—fuel line lenders, monoline bond insurance companies and retail bondholders—are fighting mightily to keep their shirts during the sale of those assets.

The back and forth over the language in Senate Bill 1121, which will set the ground rules for the new energy paradigm in Puerto Rico, hinged on rates and a crusade that could be titled “Renewables or Bust.”

As this newspaper was going to press, the Senate and House agreed on concurring amendments that seemingly will have regs in place three months after the original deadline in December 2018. One bone of contention on rates, which the House insisted had to be capped at 20 cents per kilowatt-hour because it had been stipulated as such in Prepa’s fiscal plan, was dropped on an argument set forth by Sen. Larry Seilhamer, who insisted the rate structure belonged under the purview of the Puerto Rico Energy Bureau (PREB).

 

The house also demurred on the composition of the Prepa governing board, abandoning its stance to have five members appointed by the government (three appointed by the governor and one each appointed by the Senate and the House). In addition, the governing board would have had one member picked at the governor’s discretion, and one elected member representing customer interests.

As the Senate bill reads now, three of the board members will be selected by the governor from a list prepared by the private sector: One will represent the private sector and two will represent the public interest.

“The final version of the bill also eliminated language that would have permitted the fast-tracking of solar projects by allowing their permits without a location consultation,” according to a previous report by Caribbean Business. Although that is an amendment designed to keep new energy developers from running amok, the insertion runs headlong against the tenets of Promesa’s Title V, for the fast-tracking of critical projects.

Thus, the philosophical disagreements underpinning a move to 100 percent renewables by 2050 seems an ambitious goal that ignores the contentious politics playing out between Puerto Rico’s government and the Financial Oversight & Management Board (FOMB). Is it lost on the Rosselló administration’s advisers that the First Circuit Court of Appeals in Boston recently declared that Promesa violated the Appointments Clause of the U.S. Constitution, but failed to invalidate its actions and in fact gave it more power over locally passed legislation.

At this writing, Prepa’s restructuring brigades are moving in tandem with the foot soldiers in the field attempting to lay thegroundwork for a 21st century grid. Reportedly coming down the pike is final FOMB approval of agreements for construction to begin on offshore natural gas terminals to feed Unit No. 5 and Unit No. 6 at Central San Juan. The final contract with New Fortress and looming discrepancies over wheeling regulations seem inconsistent with the solar fairy tale that is being sold. Here’s why.

Wheeling, which allows utilities with a surplus of energy to transmit their excess power to utilities with too much demand, is being touted by the Puerto Rico Energy Bureau as “a key element in the process of transforming Puerto Rico’s power system into one that is modern, efficient, resilient and environmentally friendly. The purpose of the regulation is to facilitate the introduction of competitive pressure into the generation sector, ensure that competitive generators have open and nondiscriminatory access to the transmission and distribution infrastructure.”

Are we to understand that wheeling is essential for the new distributed energy paradigm—of microgrids and minigrids—to be financially competitive and that without it, big users, whether pharmaceuticals or multinationals, will pay dearly for sanctuaries off the old grid?

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