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The bill strengthens the role of the Energy Bureau in its oversight function. (Teresa Canino )

The bill that would establish the new public energy policy and the regulatory framework contemplates a system with lower generation capacity, which could not exceed five generating plants, and establishes the goal to have, by 2050, half of the electricity production through renewable sources.

In anticipating to El Nuevo Día part of the content of the more than 200-page bill that he will introduce  today, Senator Larry Seilhamer also highlighted that the piece proposes to concentrate that generation in the north, that it would lower the cost of electricity and will make the system more resistant.

"The bill has very ambitious metrics. It will be much more than 50 percent of renewable energy by 2050," said Seilhamer, chairman of the Senate's Special Commission on Energy Affairs.

The bill also establishes a percentage target on what should be the generation of electricity based on natural gas, eradicates the use of C bunker fuel, limits the management of the transmission and distribution system to a private entity, and leaves appointments to the Puerto Rico Electric Power Authority (PREPA) or the body that replaces it out of the hands of the governor.

It also strengthens the role of the Energy Bureau in its oversight function.

According to the lawmaker o the New Progressive Party (PNP) majority, the energy cost, which the administration of Ricardo Rosselló Nevares aims to reduce to 20 cents per kilowatt hour (kWh), could be reduced through different means.

One of them is to regionalize the generation in the northern zone in order to shorten the transmission lines and, thus, reduce the loss of energy. That element would be combined with generation through more efficient units, and the emphasis on renewable energy and natural gas.

Noting that he does not perceive interest in the purchase of PREPA assets, Seilhamer said that both generation and transmission as well as distribution would be transferred to private hands through the public-private partnership (PPP) model.

"There is no interest in acquiring scrap," he stressed.

When José Ortiz arrived in PREPA in July, he indicated that, under the Puerto Rico Electric System Transformation Act (Law 120-2018), he was planning to use the PPPs structure to grant the concession distribution and transmission, as well as customer service.

Instead, according to his proposal, generation assets would be sold to five or six companies.

Some officials at La Fortaleza, the director of PREPA and Representative Víctor Parés Otero, who leads the committee that deals with the energy issue, have reviewed the draft copy for several weeks.

Parés Otero said he does not plan to hold public hearings and, separately, said he is confident that the legislation will be ratified before November 8, the last day to pass bills in the Legislature.

Controversial points

The measure contains controversial elements, according to both legislators.

Parés Otero said that intending to have 50 percent of electricity generation from renewable sources by 2050 is very conservative. "By 2050, it should be 90 percent. I understand that we must be more aggressive," said Parés Otero.

He also worries about the economic impact that this could have on certain sectors -which he did not mention- the scope of the bill, and warned that the door cannot be opened to the island "being tied" to the natural gas industry.

"We must remember that this is the public energy policy for the next 50 years," stressed Parés Otero.

During the only public hearing on the measure held at the Senate, in August, the organization ‘Cambio’ and the Institute for Energy Economics and Financial Analysis raised the flag on the emphasis given to the production of energy with natural gas. More than 40 organizations submitted proposals and recommendations.

The bill establishes different dates and metrics, such as reaching 20 percent renewable energy by 2025 and 35 percent a decade later, however Seilhamer warned that these goals are subject to discussion.

Meanwhile, Parés Otero said that the bill is not clear about the future of PREPA and does not specify if it remains as a public corporation.

"There is no clear direction on the situation of PREPA after all the transactions," he said. "Once public-private partnerships are ready, what is left of it?"

Reserves anticipated

Seilhamer said that one of the issues that could generate resistance in La Fortaleza is that around the composition of PREPA Governing Board. With the bill on the regulatory framework, organizations with expertise in energy issues would propose candidates for the governing body. The governor would only select from the lists he receives.

Thus, said Seilhamer, we address those questions by US lawmakers who have criticized the politicization of the public corporation. "I can anticipate that there will be objection," acknowledged the Senate vice president.

Based on a study by the federal Department of Energy, the draft of the bill establishes that the demand for energy on the island will not exceed 2,250 megawatts, when it currently stands at 3,000 megawatts. Seilhamer said that generating units, not counting micro-grids, would not be more than five: two co-generators, Central San Juan, Palo Seco and Costa Sur.

The bill imposes specific terms for privatization companies to transform the units into "highly efficient", but does not detail which plants would close operations. In addition, it leaves the Central Aguirre plant, which works with bunker C fuel and diesel in its combined cycle, on hold.

"About Aguirre, it’s not so specific, but some parameters and criteria are established that will not leave Aguirre out of highly efficient plants," said Seilhamer, on how the bill forces private operators for central plants to comply with the Mercury and Air Toxic Standards (MATS).

Seilhamer warned that PREPA does not comply with these environmental standards and that,  including them in the bill would remove bunker C fuel from the scene.

PREPA operates with bunker C in the Aguirre thermoelectric power plant, which generates over 900 megawatts, in Palo Seco and in the Central San Juan. Daniel Hernández, director of generation of PREPA, clarified that the intention of that public corporation is to convert all the units to natural gas.

Seilhamer also noted that the project "promotes" the installation of units that operate with natural gas, propane and diesel. He said that the measure will maintain the provision contained in Law 120-2018 that prohibits a single provider from generating all the electricity in Puerto Rico. No supplier can exceed 50 percent either.

"We do not want to have a monopoly, and that is safeguarded in the bill," he said.

He said that one of the advances of the bill is that it "breaks with interdependence," in reference to how a breakdown in the Aguirre Power Plant, located in Salinas, can leave residents in the west without electricity.

"It breaks down because there will be more regionalized generation in micro-grids and plants," he said.

Although the issue of the subsidies granted by PREPA -both to private entities, residents and municipalities- was part of the discussion on the bill, those benefits will not change in the "short term".

During the public hearing, it was revealed that, between 2016 and 2018, PREPA granted $ 151 million only among the private sector, in addition to almost $ 200 million a year to the public sector.

During those hearings, it was proposed that subsidies would become part of the new Incentive Code, which is still in the Legislature. Seilhamer indicated that the Incentive Code "won’t do", although in a separate interview, the president of the Senate, Thomas Rivera Schatz, indicated that the Executive branch requested to "revisit" the issue of those benefits in response to questions from the Board and the changes to the fiscal plan.

"In this session, something could be addressed," Rivera Schatz said.

Energy Bureau

Seilhamer indicated that the bill strengthens the Energy Bureau and that it would have additional roles when assessing the concessions of assets.

"The Bureau becomes an independent entity, robust and with lots of participation," he said, in specifying that the entity will participate in the so-called partnerships committees that will evaluate and vote on the proposals of the private sector.


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