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‘No clear path forward’ for PREPA restructuring, H. Calero Consulting says

Puerto Rico needs a successful long-term economic plan to achieve its goal of inexpensive energy, which calls for — among other things — an efficient and resilient Puerto Rico Electric Power Authority, San Juan-based analysis firm H. Calero Consulting concluded in its monthly internal bulletin.

In “Pulse,” the firm also said
while overhauling Puerto Rico’s electrical system is a “top priority,” it also
stated that “littering the island with too many players will not result in
lower rates for consumers.”

“Micro-grids in the highlands
should be built as backup systems, not as competitors of the main utility
company,” the firm noted.

“It is time to stop
finger-pointing PREPA as the only responsible for the dismal situation of the
electrical system. PREPA is also a casualty of an economy in recession and
deindustrialization,” the firm stated.

PREPA is in the midst of
restructuring some $9 billion in debt, which has piled up over decades, drawing
calls for its privatization from public and private sector stakeholders.

“However, a year and a half after Hurricane María, we have a myriad of conflicting policies, fragmented efforts, and some proposals butting heads, instead of a clear path forward,” H. Calero Consulting said.

“Sweet
promises abound, driven by wishful thinking, instead of rationality.
Privatization is already in motion, but it still lacks the appropriate regulatory
framework. This issue analyzes the local energy sector and reviews proposed reform
options,” it added.

PREPA’s
privatization is already underway, with a plan that calls for diversifying
energy sources, pulling away from oil, coal and natural gas. This week, the
utility confirmed it had signed a contract with New Fortress Energy for natural
gas and conversion of Units 5 and 6 of the San Juan Combined Cycle Power Plant,
as this media outlet reported.

The
conversion of San Juan Units 5 and 6 and the development of the micro fuel
handling facility are anticipated to be complete by mid-2019. That contract is
the first of several that are expected to be signed under the privatization
process, utility officials have said.

“However,
privatization is no panacea. First, it will not change the monopolistic nature
of the power utility in Puerto Rico, much less in an economy without a clear vision
of long-term recovery,” H. Calero Consulting said in “Pulse.”

“Privatization
will not cut electricity prices through more competition. Questions remain on
how to handle PREPA’s debt and privatization simultaneously. These pending
issues will affect privatization and future electricity rates,” it noted.

Meanwhile,
the firm expanded on the consensus among stakeholders that Puerto Rico has to
expand the use of renewable sources of energy.

“The
Legislature has set the ambitious goal of 100 percent of renewable energy in
the Island by 2050. However, so far nobody has explained how to conciliate
environmental dreams with the goal of lowering the cost of energy in the island,”
the firm stated. “Some experts say that renewables require sizable government
subsidies.”

Author Details
Business reporter with 25 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other areas of the economy.

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