Road to privatization (horizontal-x3)
(GFR Media)

The fiscal plan of the Puerto Rico Electric Power Authority (PREPA) does not have the slightest information on its current finances, it seems to be aimed at dismantling the Puerto Rico Energy Commission (CEPR, Spanish acronym) and advocates reconsidering the rate structure that was rejected by that regulator.

Similarly, although there are no estimates of the demand for electricity consumption in Puerto Rico in the future, the plan emphasizes that when designing a new rate, a charge could be established for those who, seeking for other energy alternatives, decide to be disconnected from PREPA.

Although PREPA's fiscal plan does not include consumption data or an estimate of the billing and infrastructure losses caused by Hurricanes Irma and María, the document indicates that restoring the Island's power grid would require $ 17,606 billion in federal funds.

The figure comes from a report prepared by a working group created by the Governor of New York, Andrew Cuomo, to assist the Island and that included technicians and experts from the federal Department of Energy and electric companies such as Long Island Power Authority and Consolidated Edison, among others.

"In the absence of substantial federal funds for the recovery effort, the recommendations of the Energy Resiliency Working Group cannot be implemented," reads the document that the Fiscal Agency and Financial Advisory Authority (FAFAA) submitted to the Board.

"The final cost estimates require multiple engineering studies and an updated Integrated Resource Plan (IRP)," is added in a footnote. The document indicates, on page 75, that "the timing and amount of federal funds" that could be received is "uncertain."

The IPR can be described as a master document that establishes the infrastructure, maintenance and operational needs of an electric company, in order to comply with regulatory standards and satisfy the electricity demand of its customers in a certain period of time. This analysis allows estimating the investments needed and the most appropriate technologies or processes to meet energy demand.

El Nuevo Día requested FAFAA an interview to discuss the content of PREPA’s plan, but, yesterday, those who could attend the request for information were not available.

The 79-page document gives a statistical account of PREPA's assets and details the steps it has taken to restore service after the cyclone.

Then, the document notes that the hurricanes "devastated the liquidity position" of PREPA and claims that the situation requires an "urgent, deep and permanent transformation" of the energy sector on the Island.

Privatized PREPA

As part of this transformation, the plan proposed by PREPA contemplates leaving the transmission and distribution network in the hands of "a single private operator", through a public-private partnership (3P).

According to the plan, the network operator's contract could be extended for about 25 years or reach an agreement of 10 to 15 years, depending on the model chosen and the way in which the operator will charge for its services.

Meanwhile, for generation, PREPA considers "selling" the units in San Juan, Palo Seco, Aguirre, Costa Sur and "others" and allowing "new generators" or incorporating a concept of "franchises" with these PREPA units.

 That transformation, according to the plan, would have to be accompanied by the tariff rejected by CEPR and a new structure that regulates the operation of PREPA.

PREPA dictates the rules

In the plan, PREPA suggests the changes that would have to take place in that new entity that would supervise it.

"PREPA and future private owners will require a reasonable regulatory process," the document reads. "CEPR” consistently tries to exercise direct and excessive operational control of PREPA, beyond the traditional rate and the revision of the IRP."

According to the document, CEPR acts against the provisions of the PROMSEA Law in the case of PREPA.

However, the federal PROMESA Law establishes in section 503 that, when considering energy projects, the Board must contribute "to support CEPR in achieving its objective of reducing energy costs and guaranteeing energy rates that are affordable for consumers and businesses."

Regulator is crucial

For the president of the Manufacturers Association (PRMA), Rodrigo Masses, dismantling CEPR when considering the incorporation of private players is a contradiction.

For Masses, although "an electricity revolution" is needed in Puerto Rico, this has to be clear and transparent, with open bids, which would allow the arrival of new players.

"It would be a big mistake to change CEPR ," said Masses.

For his part, Stephen Spencer, advisor to the Ad Hoc-PREPA group of bondholders, said it would not be appropriate to alter the functioning of the regulatory entity that was created under the 2014 energy reform law, just when it is proposed that private entities enter into energy generation or distribution activities on the Island.

He explained that CEPR has been beneficial for all parties interested in PREPA, including the Puerto Rican consumer, by creating an environment of transparency and decisions based on logic and expert knowledge, instead of "political influences."

Spencer added that an independent regulatory entity is part of the solution Puerto Rico needs to address its energy problem, particularly at a time when thousands of US citizens still suffer the longest electricity service suspension in the history of the United States.

"Priority should turn on the lights," said Spencer, who indicated that PREPA should pass into the hands of a team of experts in electrical systems and free of government intervention.


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