While gubernatorial candidates argue over the future of the Puerto Rico Electric Power Authority (Prepa), with some taking a firm anti-privatization stance, Natalie Jaresko, executive director of the Financial Oversight and Management Board (FOMB), defended the public entity’s agreement with LUMA Energy.
According to Jaresko, the process to transform Puerto Rico’s electrical system involves several pieces.
“The first piece has to be an independent, apolitical, non-political regulator, and the law was passed. It had to be financially stable; it couldn’t depend on someone in the government cutting a check or not. So, we have that. Without that, we wouldn’t have been able to go any further,” she said.
The second piece was separating transmission and distribution from generation, which is exactly what the deal between Prepa and LUMA outlines.
Essentially, the agreement establishes a public private partnership (P3) between the corresponding entities, so that Prepa has jurisdiction over energy generation, while allocating transmission and distribution to the other party. It is not, as has been argued in the political sphere, privatization of the public utility.
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“LUMA went through the P3 process, which is a very strong, legal process in Puerto Rico that’s worked well with the airport, it’s worked well with Metropistas. So, it’s a good legal framework to attract investors. That P3 is underway and they’ll have their transition period where they learn and grow. I think that, for the employees, it will be a good employer with solid pay. It will depoliticize Prepa… Having an entity that focuses on service, that’s incentivized, that is paid because it does well—if not, they don’t get the same pay… I think that every person will see that this will lead to more reliable energy for them, not many shutoffs all the time,” Jaresko said during an interview with economist Gustavo Vélez in “Emprendedores,” a new web series done in collaboration with EL VOCERO, a sister publication of THE WEEKLY JOURNAL.
Jaresko acknowledged that the Oversight Board’s plan for power generation is also to have a P3, and a Request for Quotes (RFQ) process has already started to bring in a private operator.
Jaresko highlighted the need to obtain funds to rebuild Prepa’s infrastructure, adding that “investing those funds is critical because you have to rebuild to get that reliability.”
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Moreover, she underscored that Prepa needs to restructure its debt because as long as the corporation is in bankruptcy, energy rates will be higher for consumers. She explained that every fuel supplier that sells fuel to the public utility has a risk premium, in which they charge more because they are selling to a bankrupt entity. “Simply being in bankruptcy costs everybody more,” Jaresko said.
The FOMB official also discussed green energy as the final transformative stage.
“This is a beautiful island, tourism is part of our DNA; to keep that, we need clean energy. And so, the energy policy, the law that was adopted, has targets, and renewables are the next stage; private renewables… sell their energy to the grid to LUMA and it works in a way that is efficient and gives everyone lower-cost energy, more reliable energy, cleaner energy,” she stated.
Outlook for Puerto Rico
Asked if Puerto Rico is a “failed state,” Jaresko said: “There’s no reason for some of the things that happen here, other than lack of management, sometimes a lack of leadership—many of these problems are fixable; I believe they are fixable. There are solutions. Puerto Rico is not a failure.”
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Regarding getting Puerto Rico back on track, she noted that when the federal Promesa law was written, “they thought it would have happened by now.” Jaresko estimated that the island will need between four to five more years under the Oversight Board’s supervision, given that the federally established entity hasn’t completed restructuring Prepa or the commonwealth government yet. She added that Puerto Rico needs “political leadership.”
“Everyone needs to engage in making Puerto Rico the island of the future. Everyone needs to engage in education, in workforce development, in speaking to the elected leadership and telling them what you are unhappy with, what you want more of… And democratic leaders need to hear it, they need to be reminded, they need to be educated,” she affirmed.
To view the web series, visit El Vocero’s Facebook page at https://www.facebook.com/voceropr and search under Videos.