Puerto Rico group warns power rate hike could deepen energy poverty
A nonprofit economic research group in Puerto Rico is urging regulators to halt a proposed electricity rate increase unless evidence shows that residents and the island’s economy can afford it.
In a motion filed July 25, the Institute for Competitiveness and Economic Sustainability (ICSE, in Spanish) asked the Puerto Rico Energy Bureau to demand that utility companies submit studies on how higher rates would affect consumers, warning that proceeding without such analysis would be “irresponsible.”
“The concept of a ‘fair and reasonable’ rate isn’t possible without the element of affordability,” said Fernando E. Agrait, legal counsel for the institute. “Approving an increase without assessing its economic impact would be irresponsible and dangerous — both for families and the electric system itself.”
The motion comes ahead of an expected provisional rate increase scheduled to take effect on Aug. 1. It targets the island’s public Puerto Rico Electric Power Authority (PREPA), along with LUMA Energy, which manages transmission and distribution, and Genera PR, the private operator of generation assets.
According to the ICSE, LUMA has not provided studies on critical factors such as demand elasticity, employment, inflation or investment impact. The group also argues that the Energy Bureau has not required those studies in the rate review process.
The organization cited warnings from the federal Financial Oversight and Management Board — the entity overseeing Puerto Rico’s finances — which previously argued that households paying more than 6% of their income on electricity would fall into energy poverty.
During bankruptcy proceedings, the board had proposed an increase of 2 cents per kilowatt-hour (kWh) to help repay bondholders, but projections showed that for 23 of the next 28 years, residents would exceed the 6% threshold.
“In the Board’s own words, Puerto Rico would be in energy poverty,” Agrait said, referring to the earlier court filings.
The ICSE warned that steep rate increases could trigger a “death spiral”: higher bills prompt customers to reduce usage or install solar systems, shrinking revenues and driving rates higher still. The result, it argues, could be a financially unstable system vulnerable to collapse.
“The rate-setting process cannot be disconnected from the country’s economic reality nor from the arguments the Board, representing PREPA, has made for years in federal court — to the point of withdrawing its original 2 cent per kWh increase proposal for debt repayment,” Agrait said.
According to the institute, only bondholders have formally opposed its motion requesting evidence on the proposed rate’s economic feasibility — a move Agrait interprets as a tacit admission that the rates may not be sustainable and that if the rates can’t be paid, there’s no assurance that PREPA can exit bankruptcy or regain access to capital markets.
In its filing, the ICSE also floated a more radical option: that the government acquire PREPA’s assets through bankruptcy court and create a new, debt-free public utility.
The institute describes itself as an educational nonprofit focused on promoting infrastructure reform and sustainable economic development in Puerto Rico.
