Watt’s Up? Energy Debates in Puerto Rico

Watt’s Up? Energy Debates in Puerto Rico

Published on March 28, 2019

Rosanna close-up
Director, Washington D.C. Office

The discussion around energy in Puerto Rico is intensifying. On Thursday March 21, CNE hosted “Black Start: The Future of Energy Summit.”  The conference provided a platform for participants to rethink Puerto Rico’s energy future.  All speakers emphasized how Puerto Rico could use this opportunity to develop an infrastructure that is based on cutting-edge technologies and more resilient to potential damage from future storms. Local and international experts offered different points of view and engaged in a stimulating, intellectual debate.

All speaker presentations are found at :http://grupocne.org/2019/03/21/black-start-presentations/

A video of the event is found at: https://www.youtube.com/watch?v=jCAxHqlezeU

Meanwhile, Puerto Rico’s Resident Commissioner Jenniffer Gonzalez-Colón hosted the 2019 American LNG Summit in San Juan with other government officials including Governor Rosselló and PREPA Executive Director José Ortiz.  Reports indicate that during the conference, Ortiz affirmed his position on transitioning PREPA’s current infrastructure to allow for more LNG and renewable generation capacity.  He is confident that Puerto Rico will receive a special waiver from the U.S. on Jones Act requirements to allow foreign-flag vessels to transport LNG from the U.S. mainland to Puerto Rico. He also expressed his intention to use the $2 billion of CDBG funding provided to “enhance or improve” any electric power systems damaged by Hurricane Maria as leverage for utility scale renewable energy projects and as a financial guarantee for the new projects.  It is important to note the rulemaking process for the disbursement and use of these funds has not yet been initiated.   

The Integrated Resources Plan (IRP)

An integrated resource plan is a long-term guiding document produced by utilities to map out supply and demand resources and plan for the future.  On February 13, 2019, PREPA filed its proposed IRP.  On March 14, 2019, the Puerto Rico Energy Bureau found the proposed IRP is not in compliance with sections of Regulation 9021. IRP regulations indicate that: 

If the Commission finds that the IRP filing is not in compliance with this Regulation, the Commission will identify the specific areas in which PREPA’s filing is deficient and the information required to correct such deficiency. The Commission shall grant a reasonable term for PREPA to refile its proposed IRP. 

The proceeding, therefore, cannot move forward until PREPA corrects and resubmits the IRP, and the Energy Bureau reevaluates and issues a new order and resolution.  A good summary of this process, and all the other concurrent processes on PREPA’s transformation was provided by the Oversight Board and the Fiscal Agency and Financial Advisory Authority in a joint statement to the U.S. District Court.

How did we get here?

  • Puerto Rico Law 57 of 2014 – Establishes Puerto Rico Energy Commission

In 2014, after decades of mismanagement and no integrated resources plan, Act 57 established a legal framework for energy regulation and management. It created the Puerto Rico Energy Commission (PREC) and an independent office for consumer protections. 

  • Puerto Rico Law 120 of 2018 – Establishes PREPA’s privatization process

In early January of 2018,  the Governor of Puerto Rico announced his intention to privatize PREPA’s generation assets and grant a long-term concession of the grid to a private operator. The law was passed on June 12, 2018.

  • Puerto Rico Energy Public Policy Act of 2019 – Establishes new energy regulatory framework

In June 2018, the Special Committee on Energy of the Puerto Rico Senate, led by Chairman Seilhamer and Ranking Member Bhatia, shepherded the energy policy framework that will govern the permanent transfer of generation assets and long-term concessions of PREPA’s transmission and distribution systems: Senate Bill 1121. On Monday, March 25, 2019, the Puerto Rico Legislative Assembly passed the measure. It now heads to the Governor’s desk for signature.  Despite some opposition from environmental groups on the use and investment on natural gas infrastructure for transitional purposes, Senate Bill 1121 was supported by various NGOs, such as the Puerto Rico Institute for Competitiveness and Sustainable Economy (ICSE-PR), ReImagina Puerto Rico and the Rocky Mountain Institute (RMI).  The bill promotes an effective and rapid reconstruction and modernization of the electrical transmission and distribution system.  Among other things the bill seeks to:

  • Promote the use of distributed generation and allows for the integration of new technologies
  • Distribute smaller generating units by regions to minimize interdependence and build resilience
  • Eliminate the use of carbon-based technologies, such as coal, by 2027
  • Establish natural gas as the transitional resource to renewables
  • Increase the responsibilities and authority of the regulatory commission, the Puerto Rico Energy Bureau
  • Require substituting 100 percent of public lighting with LED or renewable lighting by 2030
  • Increase the Renewable Portfolio Standard to 12 percent by 2020, 50 percent by 2040, and 100 percent by 2050

There are still some outstanding questions that need to be resolved in the near future.  PREPA’s revision of the Integrated Resource Plan must respond and comply with the new requirements set forth in the Puerto Rico Energy Public Policy Act of 2019. Puerto Rico must also clearly establish the roles and responsibilities of market players upon privatization. Finally, financing mechanisms on how to transform the grid need to be clearly defined.  

Upcoming PREPA hearing

It is likely that these questions, and many more will be discussed in an upcoming House Natural Resources Committee hearing on “The Rebuilding and Privatization of the Puerto Rico Electric Power Authority (PREPA)”.  Our very own Sergio Marxuach will be testifying.  Stay tuned for additional updates and his written testimony.