Wednesday, November 21, 2018

Numerous Gaps in Puerto Rico Proposed Energy Policy

By on November 2, 2018

Puerto Rico Electric Power Authority headquarters in San Juan (File)

Editor’s note: The following originally appeared in the Nov. 1-7, 2018, issue of Caribbean Business.

Senate Bill 1121, the most important energy policy measure in decades, will fail to spur an accessible, efficient and reliant power industry and deters integration of renewables, according to critics and supporters.

Among the legislation’s core shortcomings is that it fails to include the Energy Bureau in the process of privatizing the Puerto Rico Electric Power Authority (Prepa). This process would be conducted through public-private partnership (P3) laws, which may prevent public participation in the process. The bill would also allow Prepa or its successor to impose charges on customers who use renewable energy to offset the cost of power drawn from the utility (net metering).

Puerto Rico’s Public Energy Policy proposes a transition to 100 percent renewables by 2050. The bill would eliminate Prepa’s monopoly held for decades by allowing the sale of Prepa’s powerplants while placing the transmission and distribution systems under a private concessionaire. That strategy would begin to shift the power grid from its reliance on oil toward renewables.

Overseeing the energy sector is the Energy Bureau, which ensures private power companies not only improve the infrastructure but allow for new generating systems such as “microgrids,” which would permit clusters of customers to disconnect from Prepa if a storm hits and generate power on their own. The legislation would also establish energy-saving requirements for all agencies.

The issue of transparency and participation in Prepa’s sale is also important for some groups.

Puerto Rico Manufacturers Association President Rodrigo Masses, who backed the bill, noted that the process of privatizing Prepa has to be transparent and guarantee public participation to “ensure there are no surprises.” The legislation does not contain wording to ensure an open process under the P3 law. “While this bill imposes time limitations [on completing] partnership contracts, we believe there has to be citizen participation,” he said.

On the other hand, Luis Alonso Vega, coordinator of the Puerto Rico Coalition for Energy Cooperation, said that although public policy measure has yet to be signed into law, Prepa and the P.R. Public-Private Partnerships Authority (P3A) have already identified investors and companies interested in establishing powerplants that burn gas and in taking over the transmission and distribution systems. “The big business interests already have walked part of the road and rely on support from officials. They have the resources to bid for and win contracts in an open process and for months have been writing their proposals,” he said.

Ángel Figueroa Jaramillo, president of Prepa’s Irrigation & Electrical Workers Union (known as Utier by its Spanish acronym), said the P3A is already negotiating contracts for power generation, including powerplants that run on natural gas in Yabucoa and Cataño, even though there is no energy policy yet. Figueroa Jaramillo said the bill does not tackle the privatization of the power utility’s customer service area. Jaramillo, like other groups such as the Sierra Club, opposes Prepa’s privatization, noting that the bill does not protect workers’ acquired labor rights when many are leaving the power utility. The legislation says Prepa must keep the required number of “needed workers” to implement the P3A contract instead of helping workers make the transition to a renewable energy economy.

The Sierra Club’s Adrianna González said the bill calls for privatization contracts to maximize the use of federal financing. She warned that federal funds are being used to help rebuild the island and should not be used to subsidize corporations but to help sectors that need the incentives, such as communities that wish to set up solar grids.

The Fiscal Agency & Financial Advisory Authority (Fafaa, or Aafaf by its Spanish acronym) suggested certain regulatory instruments that the Energy Bureau would need to regulate private energy operators, including certificates of convenience & necessity, wholesale energy sale regulations, rate processes that allow for additional charges and mechanisms to tackle costs that could impact low-income consumers.

“There are provisions regarding Prepa’s privatization that could be problematic,” said Fafaa Director Christian Sobrino. He noted that Prepa requires separate internal accounting for each asset and function before the transaction can be eliminated. He objected to a provision in the bill that says the P3 for the electrical system’s transmission and distribution system must be completed by Dec. 19. “The provision requiring that 10 percent of the payment for all transactions is sent to a Green Fund could hinder the Title III bankruptcy process,” he said. Prepa is currently in bankruptcy to restructure its $9 billion debt.

While on the one hand, the bill would implement the concept of “prosumers,” it also would allow the utility to impose charges on net metering (NEM) customers, who will also have to pay the costs for installing renewable energy equipment.

“Punishing net metering clients, punishing prosumers with NEM-specific charges is a tactic that renewable energy opposes,” said Javier Rua Jovet on behalf of Sunrun Inc. The organization also said the legislation fails to include language that would forbid unreasonable and arbitrary interconnections and net metering delays for small systems, or those of less than 25 kilowatts, as currently happens.

Jeramfel Lozada Ramírez, vice president of the P.R. Renewable Energy Contractors & Consultants Association (Aconer by its Spanish acronym), asked that small renewable energy systems be exempted from the permitting process. Lozada Ramírez said the Energy Bureau should be required to examine the justification of any net metering charge because it would hinder the use of renewables.

Jesús García Oyola, an Arecibo resident, complained that the bill will allow the construction of a waste-to-energy plant in that town because incinerators are included in the definition of renewables.

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