Puerto Rico energy bill: A step toward renewables or another scandal waiting to happen?

Last week, leading Puerto Rico senators introduced a major energy policy reform bill for the island, and a hearing on the bill is scheduled for Friday. The bill makes some noteworthy commitments to renewable energy, but unfortunately would do little to shut down the rush for natural gas development in Puerto Rico that threatens to crowd out actual investment in renewables.

On the one hand, the bill significantly strengthens Puerto Rico’s renewable portfolio standard to 50 percent by 2040 and 100 percent by 2050. Gov. Ricardo Rosselló backs the move — and took credit for the measure in a tweet last week. The proposal is consistent with the Puerto Rico Electric Power Authority’s (PREPA) fiscal plan, which reduces the fossil fuel budget by $400 million to $500 million per year in order to bring the authority out of bankruptcy.

{mosads}While this is an important policy statement, it’s worth remembering that Puerto Rico has never complied with a renewable portfolio standard enacted in 2010. That existing standard called for 12 percent renewable energy by 2015. PREPA is now at 2 percent. In addition, PREPA is mismanaged and bankrupt — a weak place to start on such an ambitious agenda.

Other commendable goals in the bill include:

• A program to reduce energy use, including a 30 percent energy efficiency target by 2040 and a directive that the Puerto Rico Energy Bureau (formerly commission) — whose budget would be significantly increased by the legislation — develop energy efficiency and demand response programs for the island.
• Provisions to make it easier to install rooftop solar by streamlining the interconnection process.
• The elimination of all coal-fired generation by 2028, the date at which PREPA’s contract with the island’s only coal plant expires.

However, the bill continues to support investment in fossil fuels by mandating that all oil-fired power plants that are not retired in the next five years be converted to dual-fuel capacity (meaning that they could also run on natural gas) and that any new fossil fuel plants also be dual-fuel. In practice, this will mean bringing natural gas not just to the San Juan plant (which PREPA is already planning), but potentially to multiple other sites around the island. In its grand vision, the bill supports renewable energy. In the details — where it counts — Puerto Rico will be marching forward with another generation of fossil fuel projects.

The bill also does little to amend the privatization law passed and signed by Rosselló earlier this summer. That law established a privatization process in which PREPA would sell off its power plants, enter into long-term contracts to buy power, and lease its transmission and distribution systems to a private concessionaire.

PREPA’s independent regulator, the Energy Bureau, is almost entirely written out of the contracting process, with no say over the design of request for proposals or the negotiation of contracts. The bureau is given only a few weeks to review final contracts for an up-or-down vote. Ramming projects through a regulatory process is just another example of business as usual.

The design and negotiation of contracts will instead take place through a non-transparent process controlled by PREPA, the Puerto Rico Public-Private Partnerships Authority, and the Puerto Rico Fiscal Agency and Financial Advisory Authority, all effectively under the control of the governor. Given PREPA’s and Puerto Rico’s long history of politically-driven contracting scandals, this structure promises more of the same.

In short, the proposed new energy law appears to be setting in motion a process whereby the short-term push for natural gas and politically-driven contracts will come into conflict with the longer-term goals for renewable energy and energy efficiency. As a result, essential goals to reduce the fuel budget will not be achieved and the natural gas path will lead to costly litigation on energy planning and contracting that will likely take years to resolve.

A different approach is needed. Rosselló’s privatization model should be scrapped and replaced with a commitment to professional energy planning that prioritizes renewable energy, particularly distributed resources.

Political interference in PREPA should be minimized by restructuring the PREPA board to reflect the interests of multiple sectors of Puerto Rican society and by giving the Energy Bureau the authority to appoint a receiver to manage the agency in a competent manner. This path would be more likely to avoid the overbuilding of fossil fuel generation, expensive contracts and high cost energy, and the continued dysfunction that Rosselló’s plan is likely to ensure.

Cathy Kunkel is an energy analyst at the Institute for Energy Economics and Financial Analysis.