Saturday, September 22, 2018

IEEFA: Now Is Not the Time to Roll Back Oversight of Puerto Rico’s Power Company

By on March 21, 2018

Members of Congress have rightly expressed concern over Puerto Rico Gov. Ricardo Rosselló’s incessant campaign to steamroll the Puerto Rico Energy Commission, the progressive regulatory body that is seeking responsible modernization of the island’s backward electricity system.

Just last week, the Puerto Rico Senate approved a bill that contains the governor’s most recent plan to dismantle the commission. The measure, now before the full Puerto Rico Assembly, is essentially a retread of a February initiative by Rosselló that failed. It would consolidate the commission with four other regulatory agencies under a single Public Service Regulatory Board governed by three commissioners appointed by the governor. The new board would have three departments, one of which would deal with energy regulation. The decisions of that department could be revised or reversed by the board.

At issue is the how the bankrupt and mismanaged Puerto Rico Electric Power Authority, or PREPA, proceeds with rebuilding a power grid all but destroyed by Hurricane Maria last year.

Rosselló’s bill attempts to justify the consolidation with the argument that it will streamline administrative functions. But the result — an extraneous layer of review to the commission’s decisions — seems likely to only complicate the process. And while Rossello touts the administrative savings of his proposal — without providing any real basis for his numbers —the purported savings pale in comparison to the costs.

THE ENERGY COMMISION, CREATED BY THE PUERTO RICO LEGISLATURE IN 2014, brought much-needed transparency and accountability to the epic mess that PREPA was in the run-up to Hurricane Maria and the shambles that it is now. PREPA’s long history of mismanagement cannot be corrected overnight, but the commission has systematically taken steps in the right direction.

Specifically, the commission — to list just some of its accomplishments — has rejected PREPA’s long-term energy plan for failing to follow industry standard practices; called for greater reliance on energy efficiency, demand response and renewable energy; ordered the renegotiation of imprudent contracts; exposed numerous areas of poor fiscal management; and drafted regulations to facilitate microgrid development. It is the only entity on the island with the technical expertise to competently oversee Puerto Rico’s electricity recovery.

The commission is the counterweight to decades of political interference behind PREPA’s many levels of dysfunction. The utility, over the course of time, has become a political tool with priorities changing with each new political administration, making sound energy planning and prudent long-term investments all but impossible.

If the governor were allowed to create a new agency controlled by his appointees, it would only invite further disarray. He would also be advancing his misguided plan to privatize PREPA— an idea he has promoted with no underlying rationale of how it would lead to a more resilient, sustainable power system (nor would it address PREPA’s crippling indebtedness).

Permitting the governor to proceed unbridled could invite the very kind of sweetheart deals that put PREPA in its current operational and financial crisis in the first place.

Questionable contracts, mismanagement of funds, and high electricity rates will continue to be the norm so long as the commission is prevented from playing the regulatory role it was meant to fill.

–Cathy Kunkel is an IEEFA energy finance analyst. This column appeared yesterday in The Hill.

Editor’s note: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s stated mission is “to accelerate the transition to a diverse, sustainable and profitable energy economy.”

IEEFA receives its funding from philanthropic organizations, including the Rockefeller Family FundEnergy FoundationMertz-Gilmore FoundationMoxie FoundationWilliam and Flora Hewlett FoundationRockefeller Brothers FundGrowald Family FundFlora Family FundWallace Global Fund, and V. Kann Rasmussen Foundation.

–The views expressed in the Opinion section are the writers’ own and not necessarily the view of Caribbean Business.

Bill that would consolidate Puerto Rico Energy Commission passed by House

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