CNE: Rewiring Prepa doesn’t require ‘reiventing the wheel’

Written by  //  May 24, 2012  //  Biz Views  //  No comments

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Author Mike Soto-Class is the president of the Center for the New Economy (Credit: © Mauricio Pascual)

Editor’s Note: Consumer Affairs Secretary Luis Rivera Marín, who had halted the certification process, on Thursday cleared Agustín A. Irizarry Rivera and Juan E. Rosario Maldonado to assume their positions as the people’s representatives on the Prepa Governing Board.

The surprising paralysis of the certification of the representatives of the public interest in the Puerto Rico Electric Power Authority’s governing body is the most recent example of an arbitrary system that has taken power with impunity and that self-reproduces at the expense of the best interests of the people.

If anything has become clear these days is that Prepa’s governance system does not work. It’s time to make profound changes, opening Prepa and its Board to public scrutiny, increasing the transparency of its processes, and making it once and for all respond to the island’s best interests.

Currently, Prepa and its Board operate a self-regulated monopoly through a hermetically sealed system that is controlled by several interest groups who live and benefit from the system. All of them — internal groups, contractors, bondholders, and the political godfathers — feed from and protect each other, and exclude the rest of us.

Prepa — and its stakeholders — can not continue to regulate the market, dictating the parameters to their competitors, and unilaterally dictating what they charge consumers, all this behind closed doors and responding to a Governing Board that has been taken over and clearly has become part of the problem.

Doing this requires three key reforms. First, changing the composition of the Governing Board to give representation to various sectors. This way each group serves as a counterweight and watches over the others.

Second, Prepa should be stripped of its market regulatory duties, forcing it to concentrate on operating the electrical system, making it comply with clear parameters to enforce efficiency, transparency and productivity, and make it respond to an external body to watch out for the public interest.

The Governing Board should be responsible only for matters of Prepa’s internal governance, such as naming the senior management of the corporation and overseeing its operations.

It's time to bring the Power Authority to a new era of modernity where its governance system complies with the basics of sound public administration and a fair and equitable representation of its clients and the citizen sector. (Credit: © Mauricio Pascual)

Third, an Independent Regulatory Board must be created to be responsible for safeguarding the interests of consumers, set the ground rules for all players in the market, establish and revise rates, and ensure that Prepa implements a long-term energy strategy. In this way we ensure that important issues, from capital investment to the calculation of the infamous fuel adjustment formula that disrupts the family budget every month, is not decided in dark rooms.

To achieve this we do not have to reinvent the wheel: what we at the Center for the New Economy propose is based on guidelines developed by the Organization for Economic Cooperation and Development for the governance of public corporations, which are used in most of the developed and democratic world.

The objective is that they respond to public interest and not to political interference or private interests, separating the function of governing the corporation from the function of regulating the market, establishing mechanisms for the implementation of public policy, and ensuring transparency and effective representation mechanisms.

It’s time to bring the Power Authority to a new era of modernity where its governance system complies with the basics of sound public administration and a fair and equitable representation of its clients and the citizen sector.

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