Puerto Rico power grid deal ‘far from perfect’

The recently signed agreement for the operation and maintenance of Puerto Rico’s power transmission and distribution system is a first step in the transformation of power utility PREPA but far from perfect.

That is according to Sergio Marxuach, policy director at local think tank Center for a New Economy (CNE).

The analyst is critical of the deal signed between the island’s authorities and Luma Energy and is wary of the US territory government’s capacity to manage what he brands as a “complex multilayered process.”

Among Marxuach’s concerns is the risk of “rent-seeking” behavior and that forecast cost reductions could be overestimated, as well as the capital expenditure challenge to modernize the sector.

Luma has estimated that it will generate cumulative net savings of US$323mn during the first half of the 15-year contract.

The CNE analysis highlights that the agreement does not require the operator to make any capital improvements and that financing will depend on federal funding.

Another red flag for the policy director is that liability waiver provisions proposed in the O&M deal are “too broad and favorable to the operator.”

The think tank’s brief is available here.

The Institute for Energy Economics and Financial Analysis (IEEFA) also has been critical of the agreement which IEEFA says fails to address three major challenges: ensuring affordable rates, meeting legislatively established green energy targets, and building labor relations.

Labor unions have blasted the opening of the power sector which workers claim will lead to the loss of jobs and benefits.

RENEWABLE ENERGY RENEGOTIATION

Meanwhile, Puerto Rico energy regulator NEPR approved new amendments as part of renegotiated non-operational renewable energy power purchase and operating agreements.

The changes are to contracts between PREPA and Caracol Solar and Desarrollos del Norte (Atenas Solar Farm) which will save US$120mn and US$130mn, respectively, according to information from the watchdog.

Caracol plans to build a 30MW solar park in Moca and Atenas, a 40MW solar plant in Manatí.

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