The Federal Emergency Management Agency (FEMA) denied the Electric Power Authority's initial request to install about 500 megawatts in emergency generators after the earthquakes that hit the south of the island and is now waiting for the public utility to submit a new request under the Project Worksheet (PW) process.
FEMA's decision puts a stop, at least temporarily, to PREPA's attempts to compensate for the closure of the Costa Sur power plant after it went out of service in the aftermath of the earthquake that shook Guayanilla and several towns in the south of the island last month.
Yesterday, in an interview with El Nuevo Día, PREPA's Executive Director, José Ortiz, confirmed FEMA's initial rejection and indicated that the public utility must submit the new request for assistance to FEMA through the PW mechanism within two weeks.
With that request, PREPA seeks to avoid what could be a round of selective power cuts this summer. However, under the PW process, PREPA will have to contribute 25 percent of the cost of such generators, Ortiz acknowledged.
"That is the only option we have," Ortiz said, noting that if PREPA does not install those emergency generators, they will have to implement a program of selective blackouts.
"I would have to suspend service to 20 percent or 25 percent of the customers every day," Ortiz said about the scenario Puerto Rico would face without those generators.
Electricity consumption in Puerto Rico shoots up between May and September since Costa Sur is not generating electricity, PREPA does not have enough generating capacity to satisfy that demand.
In 2017, FEMA covered the costs and reactivated Puerto Rico's power grid, through the Mission Assignment mechanism. Under that mechanism, FEMA assigned the Corps of Engineers to repair the power grid and paid over $5 billion for that work.
But this time, FEMA would have ruled out covering the full cost of the power emergency caused by the earthquakes.
Damage to Costa Sur
To questions from El Nuevo Día regarding the assessment of Costa Sur, Ortiz reiterated that the process of analysis, damage, and repair assessment will take at least a year. This is because PREPA conducts geotechnical and mechanical evaluations, among others, before requesting regulatory support and authorization.
"There isgoing to be a request for hundreds of millions of dollars," Ortiz insisted.
However, sources familiar with Costa Sur's operations and the insurance world, told El Nuevo Día that the damage to the power plant will be around $20 million at most and that after the repairs, the plant could start operating within 8 to 10 weeks.
"This is an irresponsible statement that shows a lack of knowledge," said Ortiz when approached by this newspaper about the issue. "It has to be a claim supported by experts in all fields. If we try anything in those facilities and it gets damaged, because of our wrong assessment, we can lose insurance coverage and eligibility in FEMA, resources to which we are entitled today," he added.
According to FEMA, after PREPA delivered a report on the state of its generator fleet on January 23, the parties discussed the method for PREPA to have the generators, either through lease or purchase.
Ortiz said PREPA efforts aimed at leasing the equipment. Once PREPA submits the PW, FEMA will analyze the document, decides to accept it or not and how much the project will cost.
Two years ago, when PREPA needed emergency generation, FEMA paid some $200 million. Now, PREPA's request represents almost seven times the emergency capacity provided then, which is enough to build a new plant.
Costa Sur and the IRP
When El Nuevo Día asked about the investment in emergency generation, Ortiz acknowledged it would be significant. However, he said that building a permanent plant would take at least three years, a period that PREPA does not have due to the emergency and that it cannot implement because of the changes required by the Energy Public Policy Act that must be achieved through the Integrated Resources Plan (IRP).
"Costa Sur was going to be eliminated anyway," said Ortiz, arguing that public energy policy requires PREPA to reduce fossil fuel generation to make way for renewable energy.
Ortiz explained that the IRP establishes that PREPA should renegotiate its contract with EcoEléctrica - including Guayanilla - and that if better terms were achieved, one of those facilities, Costa Sur or the private operator, would no longer be part of the fleet. PREPA, said Ortiz, "reached an agreement with EcoEléctrica, so these operations will continue until 2032, based on the IRP.
"The law is based on the premise that the grid will use renewable energy at seven cents per kilowatt-hour (kWh). In Costa Sur, the megawatt is at 12 and 13 cents per kWh," said Ortiz.
According to Ortiz, given this reality, once PREPA collects its insurance claims or receives financial support from FEMA, the corporation will have to go to the Puerto Rico Energy Bureau (NEPR) todetermine the fate of Costa Sur based on what is agreed in the IRP.
Ortiz will testify today before the NEPR about the document that will decide the future of PREPA over the next two decades.