Why Puerto Rico Has Struggled to Stabilize Its Electricity Grid

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Hurricane Fiona battered Puerto Rico earlier this month, knocking out power to nearly half of the island’s 3.3 million residents. Full power hasn’t been restored as of Thursday.

The Category 1 storm on Sept. 18 hobbled Puerto Rico’s still-fragile recovery from the twin disasters of Hurricanes Irma and Maria in 2017. Maria was the storm that first exposed the island’s vulnerable and outdated electricity grid, which the federal government has spent $12.8 billion to modernize over the past five years.

Yet even before Fiona’s punch — which left 1.5 million residents without power — customers complained about frequent outages, high energy prices, and overall unreliability.

“It’s sad,” House Natural Resources Chairman Raul Grijalva (D-Ariz.) said in a recent interview. “Seems like just when people on the island start to stand up a little bit, something else comes and hits them.”

Grijalva’s committee oversees insular affairs, including US territories. The panel postponed a Friday hearing on reconstruction and the power grid with Puerto Rico Gov. Pedro Pierluisi and energy officials because of scheduling conflicts as well as due to Hurricane Ian, which caused catastrophic damage to southwest Florida.

What’s the current energy situation?

The commonwealth’s energy grid depends almost entirely on fossil fuels, according to the US Energy Information Administration.

LUMA Energy, the island’s primary energy provider, has restored power to roughly 81% of its island customers, or 1.2 million people, according to the latest statistics on the company’s website.

Puerto Rico is made up of six regions. The company estimated that electricity will be restored to 90% of the last two of them—Ponce and Mayagüez —between Oct. 4 and Oct. 6, more than two weeks after Fiona landed.

Who manages and maintains energy supply?

LUMA Energy is a joint venture between Canadian company ATCO and Texas-based Quanta Services. It took over management of Puerto Rico’s energy grid in 2021 from the government-run Puerto Rico Electric Power Authority. Years of mismanagement, and eventual bankruptcy, led to PREPA largely ceding control to the private sector.

LUMA received a lucrative 15-year contract but has struggled to maintain reliable service and affordable rates for its customers. Puerto Ricans spend approximately 8% of their income on electricity, compared with the 2.4% the average US mainland citizen spends, according to the Institute for Energy Economics and Financial Analysis. The median annual income on the island is $21,000, according to the US Census Bureau. The company has increased rates on consumers seven times since it took over in June 2021.

The independent Puerto Rico Energy Bureau regulates and enforces the island’s energy policy, which sometimes put it at odds with PREPA, the utility that has traditionally relied on fossil fuels to power the grid. PREPA had a monopoly over the power grid before 2020, when the utility selected LUMA as its operator for the next 15 years in a public-private partnership.

Related: Puerto Rico Bankruptcy Judge Grants Litigation for Utility (1)

What hampered building the grid after Irma and Maria?

Red tape, federal agencies’ delays in releasing funding, PREPA’s bankruptcy, and a lack of resources to build more resilient infrastructure all contributed to the island’s still-shaky energy grid. The fossil fuel-dependent electricity grid also relies on above-ground transmission lines that are particularly vulnerable in bad weather along Puerto Rico’s mountainous terrain.

Damage from Irma and Maria caused the longest blackout—11 months—in US history, according to the Government Accountability Office. GAO in 2019 dinged the Federal Emergency Management Agency and the Housing and Urban Development Department for providing inadequate guidance on grid recovery efforts—and the federal government overall for failing to coordinate well among various stakeholders.

The watchdog also reported that as of August, the Puerto Rican government has spent just $5.3 billion, or 19%, of the roughly $28 billion it has received in federal public assistance, which includes money for utilities.

What role do Congress and the administration play?

Grijalva’s House Natural Resources Committee, along with the Senate Energy and Natural Resources panel led by Joe Manchin (D-W.Va.), have jurisdiction over the five US territories, including Puerto Rico. Congress is 2016 passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) creating an oversight board for the commonwealth to manage its debt restructuring and help approve critical infrastructure projects.

Grijalva, however, described the grid modernization effort at this point as “failed” and said the island still needs “a public utility that is independent, ethical, and has real strong oversight.”

The New York congressional delegation, including Rep. Nydia Velazquez (D), who is Puerto Rican, and Senate Majority Leader Chuck Schumer (D), have called for more money to help Puerto Rico’s recovery. House and Senate Democrats, including Velazquez, wrote House leaders and top appropriators Sept. 26, urging Congress to pass an emergency supplemental bill this year, including at least $2.9 billion for Puerto Rico disaster relief and recovery.

“Congress needs to meet the moment and help the people of Puerto Rico,” Velazquez tweeted on Sept. 27. The continuing resolution to fund the government Congress is poised to pass on Friday would allow FEMA flexibility to spend more from the Disaster Relief Fund between now and Dec. 16 to respond to declared disasters, including Fiona as well as Hurricane Ian, which pummeled Florida.

House Energy and Commerce Democrats are demanding answers by mid-October from LUMA on its management of the grid over the past two years, and recovery efforts.

Earlier: Puerto Rico Grid Operator Says Fiona Damage Could Hit $1B:Report

Earlier this week, the Department of Homeland Security granted a temporary Jones Act waiver to expedite fuel shipments to Puerto Rico to aid in electricity restoration. The Jones Act prohibits non-American ships from delivering goods between domestic ports.

What about moving to renewables?

The 2019 Puerto Rico Energy Public Policy Act establishes a renewable energy target of 100% for the island, phased in over the next 30 years. The measure mandated that Puerto Rico obtain 40% of its electricity from renewable sources by 2025. Renewables, however, comprised just 3% of Puerto Rico’s energy mix in fiscal 2021.

The Energy Department has provided technical assistance and guidance to Puerto Rico over the last five years to help the island shift to a more resilient energy grid that helps it meet the renewable energy goals outlined in the law.

Solar-powered microgrids set up across the island reportedly helped keep the lights on for some Puerto Ricans after Fiona hit. But it’s unclear how the island will get to its 2025 target, let alone more ambitious plans.

To contact the reporter on this story: Kellie Lunney in Washington at klunney@bloombergindustry.com

To contact the editors responsible for this story: Anna Yukhananov at ayukhananov@bloombergindustry.com; Robin Meszoly at rmeszoly@bgov.com

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