This week, ACCES published its Fall 2018 newsletter on the topic of emerging energy developments in Puerto Rico.
ACCES is always monitoring North American markets to identify regions considering (or reconsidering) competitive energy. The most recent territory that may be moving towards restructuring its electricity market is Puerto Rico. Following the catastrophic failure of the electricity grid resulting from 2017’s Hurricane Maria, territorial legislators are considering a bill that would, in addition to creating a competitive marketplace, also move the island to 100% renewable energy by 2050.
The electric grid is controlled by Puerto Rico’s utility monopoly, Puerto Rico Electric Power Authority (PREPA). The devastation of Hurricane Maria in 2017 has destroyed the grid and bankrupted PREPA. Electricity was not restored until August 2018 – eleven months after the storm. It is estimated that fully rebuilding the grid could take up to ten years. Proposed rebuilding efforts include modernizing the grid with renewable generation integration.
In June, Governor Rosselló signed legislation allowing for partial privatization of PREPA – the legislative intent is that this will both lower costs and provide more reliability to the grid. There will be two phases of privatization – first, generation and second, distribution. The Puerto Rico Legislature is tasked with creating an energy plan due to be released in January 2019 that will outline the privatization plan. Puerto Rico’s legislature will maintain control of the process to approve PREPA sales contracts. It remains to be seen whether competition will extend all the way to the retail level, however. While there are not any region-wide instances in the United States of privatizing electrical grids, there are instances of other countries who have privatized as the first step to a modernized retail energy market. Australia partially privatized its grid in the 1990s, with full deregulation following to New South Wales and Victoria. Those against privatization argue that in many cases it ends up raising consumer prices and may hamper reliability in the face of a catastrophic event; for example, another Hurricane Maria.