Yesterday, the government of Puerto Rico took a crucial step into directing the restructuring and the necessary strengthening of the island's power grid by adopting the law that makes possible the privatization of assets of the Electric Power Authority (PREPA).
Once this step has been achieved, it is necessary to ensure the proper execution of the statute, so that it can fulfill its important mission in the complex process of transformation, focused on building a sustainable system. To this end, the grid has to be strengthened and made more resistant to atmospheric phenomena, incorporating renewable energy sources, as well as providing affordable rates for residential and commercial consumers.
The new law signed by Governor Ricardo Rosselló limits the sale of assets to power plants. Meanwhile, it mandates the implementation of the Public Private Partnerships (P3) law for hiring concessionaires for the operation of systems such as transmission, distribution, billing and measurement, that now operate centrally under the Authority. These are provisions that pave the way for a greater injection of private investment funds through a regulated participation in the future development of the power grid, essential for the revitalization of the economy of Puerto Rico.
The fiscal plan of the public company, approved by the Oversight Board last April, contemplates an investment of $ 12 billion for improvements, maintenance and new initiatives in the coming years. Out of that total, 23 percent would come from the private sector and another 19 percent from rates and the sale or rental of the electrical infrastructure to private entities, according to the estimates included in the document.
In this new stage, the fact that the Law for the Transformation of Puerto Rico´s Power Grid recognizes the role of the Energy Commission in the evaluation of privatization proposals and the process in general is crucial. The role of the regulatory body has become increasingly important in private systems around the world and it is vital on the island, above all, to achieve efficiencies that benefit consumers.
The most recent report of the US Department of Energy (DOE) on the island’s grid, for example, highlights the role that the Commission must have in the formulation and implementation of regulations. On one hand, it recommends to establish requirements for interconnection and transfer of energy and operating standards on microgrids in collaboration with the Authority. On the other hand, it proposes to establish - together with the Telecommunications Regulatory Board (TRB)- safe load requirements for the posts that carry electricity and telecommunications together as a preparedness measure in the face of hurricane recurrence.
The new law, on the other hand, provides employment guarantees to the workers of the Authority, which would allow retaining a a valuable source of expertise in the agency.
However, the adoption of the public energy policy and the legal framework for privatization instances within the next 180 days is still pending.
A regulatory framework is key to establishing the basis of healthy and fair competition for the energy market that will open its doors on the island. A clear transparency and accountability policy on transactions will be essential to achieve the control of public assets.
Changes in the agenda need citizens support and the collaboration from actors that are going to influence a novel process on the island. Their chances of success are closely related to the degree of commitment and responsibility in the next step regarding the approval of the regulations adopted by the Legislative Assembly.
In a few weeks, the US Department of Energy must present a comprehensive plan to guide the reconstruction of the grid. And requests for funds for these purposes are before the consideration of the federal authorities.
The privatization law marks the beginning of an essential transformation on the road to recovery and economic development that Puerto Rico and its people deserve.
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