Puerto Rico’s power grid is still expensive and unreliable after Hurricane Maria
Police offer to stand guard near protesters blocking the entrance to a Luma Energy facility at the Puerto Rico Electric Authority (Prepa) Palo Seco power plant in Toa Baja, Puerto Rico, Friday, June 4, 2021.
Xavier Garcia | Bloomberg | Getty Images
When Hurricane Fiona hit Puerto Rico in September, Felipe Pérez was ready.
Pérez, the owner of local sandwich chain El Meson, has outfitted his self-contained locations with generators and water tanks in case of an extended outage like the one following Hurricane Maria, the devastating storm that tore through island in 2017.
His business was one of the luckiest. Many businesses were forced to close for weeks after Hurricane Fiona hit. And even for some businesses that quickly got power back, “the cost of operations was so high that they preferred to shut down,” Pérez said.
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Puerto Rico’s state power grid has been a sore point for many island businesses and residents, leading to backlash against Luma Energy, the company brought in to operate and improve the grid after the Hurricane Maria.
Luma Energy officially took control of the island’s power grid in June 2021 for the Puerto Rico Electric Power Authority, or PREPA. The company, a joint venture between Houston-based Quanta Services and Calgary-based ATCO, was tasked with operating, maintaining and upgrading the island’s broken network.
It started badly.
A report by the Institute for Energy Economics and Financial Analysis found that during Luma’s first two months of operation on the island, Puerto Rico experienced “longer restore times, voltage fluctuations, and poor customer service.”
Since then, improvements appear to have been slow in coming, with power outages becoming the norm even before Hurricane Fiona, according to locals and media, which appears to be leading to growing discontent with Luma. In September, a Puerto Rican resident told local news channel WAPA TV:Here you blow out a birthday candle and the power goes out.”
“Since [Hurricane] Maria, they just reinstated the cables, they fixed some of the transfer stations, and the basic production system is still the same,” said Tom Sanzillo, director of financial analysis at IEEFA. “That means we’re sort of nowhere. , and nothing has really been fundamentally invested in the network.”
The islanders also protested due to Luma’s services. In July, about two months before Hurricane Fiona hit Puerto Rico, hundreds of residents marched to the home of Governor Pedro Pierluisi in Old San Juan, demanding the cancellation of the Luma contract.
Pierluisi told the local newspaper El Nuevo Dia that he asked Luma to make some leadership changes so that the company could better handle the situation. Luma did not comment on the remarks but said the network – which serves more than 1.4 million customers – had been mismanaged for decades by its predecessor, PREPA, and that “the more than 3,000 men and women of LUMA are focused on restoring power to every customer impacted by Category 1 Hurricane Fiona and building and transforming the electrical system for the future.”
“When we took over about 16 months ago, the power grid was 60% worse than the worst fourth-quartile utility in the country,” said Shay Bahramirad, senior vice president of asset management. engineering and investment programs at Luma Energy.
Bahramirad said that during these 16 months, the frequency of power cuts dropped about 30% to 7.6 per year from about 10.6 per customer. The company also said on October 10 that power had been restored to 99% of guests affected by Hurricane Fiona. After Hurricane Maria, parts of the island were without power for about a year.
High electricity costs
But while most of the island may have power restored, customers still face crippling high energy costs.
The data of the US Energy Information Administration shows that commercial customers in Puerto Rico are paying an average of 29.4 cents per kilowatt-hour in June 2022. That’s more than double the US average of 12.9 cents per kWh. Residential customers, meanwhile, pay an average of 27.68 cents per kWh, while the US average is around 15 cents per kWh.
Bahramirad de Luma said the company had “nothing to do with rising electricity costs”, adding that it was mainly due to higher energy costs around the world. Energy prices have soared this year in part due to Russia’s invasion of Ukraine.
But IEEFA’s Sanzillo thinks that disparity could have been at least mitigated through improvements in network infrastructure.
“If you had changed massive amounts of the system, you would still have high prices — you can’t change everything overnight — but you would have at least been buffered a bit,” Sanzillo said.
Pérez d’El Meson said he had not yet received the electricity bill for September but would not pay for “electricity that has not been consumed”.
All of this comes as Puerto Rico’s economy struggles to recover. FactSet data shows Puerto Rico’s real GDP has fallen in nine of the past 10 years. On top of that, Puerto Rico’s population dropped by 11.8% from 2010 to 2020, while the overall US population grew by 7.4% during that time. according to Census Bureau data.
“The exodus has been huge, especially among the [young adults]”, said Pérez. “The island needs young people who can take on leadership roles on the island.
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