In 2016, consultants from the Puerto Rico Bureau of Energy warned that PREPA’s production budget had “not been consistent with the operation of a safe and reliable system since at least fiscal 2014”.
On Wednesday, the U.S. House of Representatives’ natural resources committee will hold a watchdog hearing on Puerto Rico’s power system and the LUMA Energy grid privatization contract.
Since LUMA Energy resumed operations of the island’s transmission and distribution system on June 1, electrical service in Puerto Rico has deteriorated further, including unacceptably long breakdown repair times and power surges that damage equipment and devices that were analyzed last month by the Institute for Energy Economics and Financial Analysis (IEEFA).
The problems stem from LUMA Energy’s failure to hire thousands of former qualified electrical system workers from the Puerto Rico Electric Power Authority (PREPA); workers have since been transferred to other government agencies to perform self-employment.
Compounding the problems with the power system, there have been periodic blackouts in recent weeks resulting from power plant outages, due to the continued and growing inability to adequately finance the maintenance of the power plants owned and operated by PREPA.
In 2016, consultants from the Puerto Rico Bureau of Energy warned that PREPA’s production budget had “not been compatible with the operation of a safe and reliable system since at least fiscal 2014”.
Still, the production maintenance budget has not increased since that warning, remaining just under $ 100 million in recent years. In the most recent quarter, PREPA spent only $ 16 million (or an annualized amount of $ 64 million).
Protests are expected in the coming days and weeks due to power outages resulting from the combination of production issues and LUMA Energy’s inability to properly manage the transmission and distribution system.
On top of that, LUMA Energy recently requested a tariff increase of 2.5 cents per kilowatt hour due to fossil fuel costs, which was partially granted. Despite all the talk about renewables after Hurricane Maria, Puerto Rico continues to get 97% of its electricity from fossil fuels.
Oil and natural gas prices continue to rise, which is compounded by production issues that have led to the use of more inefficient and more expensive units.
The October 6 Natural Resources Committee hearing on Puerto Rico’s power system and the LUMA Energy contract is timely. This hearing must be the start of a thorough investigation into LUMA’s performance, how they were chosen for this contract versus more qualified bidders, and their ability to handle billions of taxpayer dollars destined for the system. electric from Puerto Rico.
Members of Congress should also be wondering why federal funds have not been earmarked for renewable energy, despite the obvious need to move past Puerto Rico’s expensive and unreliable oil and gas plants. Here are five questions IEEFA would like to answer on Wednesday:
- Why has the privatization of LUMA resulted in the assignment of thousands of skilled electricians to other government agencies where their skills are wasted, and what are the plans to put this human resource back to work in repair and reconstruction? of the electrical system?
- Given that service has deteriorated in the months since LUMA took over operation of the PR network, what oversight steps are taken to ensure LUMA is capable of handling billions of dollars in federal funds?
- What are the plans to maximize solar power development in Puerto Rico, including using federal resources to invest in rooftop solar power?
- Why is there continued pressure to increase the amount of natural gas in the system when prices are so volatile?
- Will the government of Puerto Rico impose an independent private sector inspector general within PREPA to end the agency’s long history of waste, contract scandals and misallocation of funds?