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Puerto Rico's new law moves to privatize power grid nine months after Hurricane Maria

“Our objective is simple: provide better service, one that’s more efficient and that allows us to jump into new energy models,” Gov. Ricardo Rosselló said.
Image: Puerto Rico power outage
Victor Vazquez, employee of the Puerto Rico Electric Power Authority (PREPA), during repair work on power lines affected by Hurricane Maria on April 18, 2018 in San Juan, Puerto Rico.Jose Jimenez Tirado / Getty Images

Puerto Rico is officially moving to privatize and upgrade its outdated power grid exactly 9 months after it was flattened by Hurricane Maria.

At a press conference on Wednesday, Governor Ricardo Rosselló signed into law the approved legislation that allows parts of the Puerto Rico Electric Power Authority – known as PREPA in English and by the acronym AEE in Spanish – to be sold to private entities.

“Our objective is simple: provide better service, one that’s more efficient and that allows us to jump into new energy models,” Rosselló said in Spanish.

The power authority has been a monopoly that practically abandoned maintenance of the electrical system's infrastructure over the past decade. Over the last five years, the financially strapped entity was operating with a third of its employees, and these were mostly workers in charge of the grid’s maintenance.

Customers in Puerto Rico have been paying nearly double compared to those in the U.S. for unreliable service that has resulted in multiple blackouts across the island in the past months, even after post-hurricane repairs. Over 5,000 households in Puerto Rico are living without power since Hurricane Maria.

With a $9 billion debt, PREPA is currently the government agency with the biggest share of Puerto Rico’s $72 billion public debt.

During his announcement, Rosselló described Puerto Rico’s current power system as an expensive, oil- dependent, polluting grid that's three decades older than an average U.S. electrical utility. He said a combination of these factors have hurt economic development efforts in the island for years, so he hopes to change the pattern with the newly signed law.

The governor explained that privatization efforts are taking place in two stages: power generation and distribution.

“In terms of generation, we’re going to the market to either privatize it or develop a public-private partnership,” Rosselló said. In terms of the power distribution, he said that ideally “the assets would belong to the state and a consortium of companies would be handling the distribution.”

According to the governor, the law would lower energy costs to customers and push half of the island into renewable energy mechanisms or microgrids.

Several public officials at the conference described the move as a “patriotic effort,” saying that this is the first step towards energy reform in Puerto Rico.

But critics of the energy reform law think that privatization efforts will cause increases in energy costs.

Ángel Figueroa Jaramillo, president of Puerto Rico’s electrical workers union known as UTIER, expressed these concerns at the United Nations on Tuesday during their annual Decolonization Committee hearing on Puerto Rico, which remains as a U.S. territory.

"We consider that access to electricity – as are access to health, food, education and work — is a fundamental human right that facilitates the population's consumption of essential and life-sustaining goods," said Figueroa Jaramillo. "The people have lost confidence in the government of Puerto Rico, a government that hides the real number of deaths due to Hurricane Maria and that hides the true intentions of privatization," he said.

According to Rosselló, the Puerto Rican government has 180 days to "stipulate public policy" that would guide PREPA’s privatization process and detail "the energy model we aspire to have in Puerto Rico".

Puerto Rico’s Legislature is expected to maintain control of the process that would establish and approve PREPA sales contracts. Contracts are set to be evaluated in 45 days or less. Once approved by both senators and representatives, board members of the island’s Authority of Public-Private Partnerships will have the final decision on how will assets be assigned and distributed.