Wednesday, March 29, 2023

The minefield in Puerto Rico Electric Power Authority privatization

By on October 3, 2019

Low appetite for generation, unfunded pension liabilities hard to digest.

Is it food yet at Prepa Diner?

The transformation of the Puerto Rico Electric Power Authority (Prepa), a work in very slow progress two administrations in the making, is a path lined with mines that threaten to blow the entire process to kingdom come. The bankrupt utility has a fiscal plan that establishes as priorities overarching goals of “reforming the energy sector” through transactions related to transmission & distribution (T&D) and generation assets; delivering a revised integrated resource plan (IRP) and the finalizing of a preliminary restructuring support agreement (RSA) with Prepa’s various creditor groups.

All this is yet to take place against the backdrop of creditor constituents who claim a lien on their assets, while Prepa seeks $14 billion—seemingly $9 billion is a more realistic number—in reconstruction funds from the Federal Emergency Management Agency (FEMA) to storm-harden and overhaul the fragile grid.

The utility had already secured the passing of the Puerto Rico Energy Public Policy Act in March 2019. Although that law set a rather ambitious renewable energy target of 100 percent by 2050, Prepa’s use of renewables in 2019 is a mere 2 percent. Many indicators suggest a move to natural gas, with renewables a mere afterthought to be kicked down the road for future administrations.

Naturally gas

“We are bringing in natural gas to be the dancing partner of the growth of renewables because it’s the cheapest and cleanest [fuel apart from renewables],” Prepa Executive Director José Ortiz told Caribbean Business during a recent interview. “You have to bring in natural gas while you eliminate oil-fired units. With today’s technology, it’s very difficult [to aggressively bring renewables into the mix], but in 30 years I have no doubt that you will be able to operate 100 percent with renewables with the technology that should be developed by then.”

Suscribe to read the rest of this report here, in the Oct. 3 issue of Caribbean Business.

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