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Plans to Privatize Puerto Rico Power Hit Snag

Senators on Monday balked at the bill.

Cobra Energy Puerto Rico Ap
AP file

SAN JUAN, Puerto Rico (AP) — Plans to quickly privatize Puerto Rico's hurricane-damaged electrical power system have hit a snag with the U.S. territory's House and Senate at odds over a bill to award concessions for the transmission and distribution system.

Senators on Monday balked at the bill, in part because the House of Representatives amended the measure to cap the price of energy at 20 cents per kilowatt hour — a price that some say may be too low if generation costs rise. The rejection comes more than a year after the governor announced plans to privatize the system, largely to attract investment the debt-laden government itself cannot afford.

Larry Seilhamer, vice president of Puerto Rico's Senate, announced his opposition to dozens of investors and energy experts at a two-day conference on rebuilding the power grid more than a year after Hurricane Maria destroyed it.

"We're about to have a historic project that will define the economic development of Puerto Rico," he said. "I am not going to throw away my shot."

The disagreement comes after Puerto Rico's government recently chose four out of five companies interested in operating the agency's transmission and distribution operations and asked them to submit proposals, said Jose Ortiz, director of Puerto Rico's Electric Power Authority.

The companies are Duke Energy Corporation in Charlotte, North Carolina, Exelon Corporation in Chicago, PSE&G Services Corporation in New Jersey and a consortium composed by ATCO Ltd., IEM and Quanta Services, Inc.

Ortiz said he also opposes the 20-cent cap given Puerto Rico's high reliance on petroleum to generate electricity.

"I think it's a little dangerous," Ortiz said, noting that he doesn't have control over oil prices.

Another concern is how a new rate would affect a potential deal between Puerto Rico's government and bondholders as the bankrupt power company tries to restructure its more than $9 billion debt. Alejandro Figueroa, who is overseeing the power company's transformation for a federal control board supervising the island's finances, said a regulator would ideally set up a rate design to meet everyone's needs, including bondholders.

"Some debt will have to be paid," he said, adding that it would have to be incorporated into a new rate.

The bill does not state who would be responsible for the power company's debt should the privatization deal be completed.

Ortiz said privatization also would make it easier for Puerto Ricans to produce their own solar power because the government had long opposed that, considering it a threat to its revenues. He said the government is helping pave the transition to solar power by installing battery sites in Bayamon, Carolina and Humacao between June and September to meet a goal of producing 20 percent renewable energy by 2025. Ortiz said two natural gas plants also will be operating by 2022. Some of those projects would be funded with help from private investors and the U.S. government, he said.

During the conference, economist Jose Villamil cast doubt on how many projects could be accomplished within the estimated timeframe as Puerto Rico rebuilds from Maria while struggling with a 12-year recession and trying to restructure a portion of its more than $70 billion public debt load.

"We're dealing with a very uncertain, very volatile environment," he said. "There's still a great deal of uncertainty with how much federal funding will come to Puerto Rico, over what period of time and how that funding will be used."

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