Electricity in Puerto Rico Key to Economic Crisis

Deck: 

Manufacturing Sector Strong But Challenged

Manufacturing Sector Strong But Challenged

Fortnightly Magazine - May 2017
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Puerto Rico has very high electricity costs when compared with the east-southeast region of the U.S. And the costs are high when compared with similar economies in the Caribbean, Central America and abroad. In Puerto Rico, the portion of the electricity tariff to cover the debt service equals the sector-specific tariffs of some states in the U.S. The Puerto Rico Electric Power Authority (PREPA) is currently unable to fulfill its payment obligations.

PREPA is a vertically integrated monopoly. It lacks private investment and depends mostly on an oil-fired generation fleet. Most of its units date from 1959 to 1975. It has poor penetration in terms of renewable and distributed energy.

Puerto Rico’s economy is not negligible. It has a strong manufacturing sector that contributes nearly half the territory’s gross domestic product of over one hundred billion dollars. But high prices for energy are having a direct, negative effect on the economy.

High prices and inefficient service do not allow a much-needed recuperation from nine years of economic contraction. High prices and a contracting economy inevitably produced an energy demand decrease, worsening the crisis at the Puerto Rico Electric Power Authority. This crisis has resulted in unreliable electric service.

The newly created Puerto Rico Energy Commission (PREC) developed three key regulatory proceedings during 2015 and 2016. The proceedings were the Integrated Resources Plan (IRP); the Petition for Transition Charges (Securitization Proceeding); and the first independent Rate Review Process, in 2016 (FY 2017 Rate Case). These proceedings have been subjected to public scrutiny and have created a sense of hope for the restructuring of Puerto Rico’s electric system.

Puerto Rico Electric Power Authority

Since 1941, electricity in Puerto Rico has been generated and provided to customers by PREPA. PREPA is a public corporation and a vertically integrated utility with three major components: generation, transmission, and distribution.

EES North America

The utility generating capacity is approximately 4,878 megawatts. This is comprised of 2,892 megawatts of oil-fired steam units, 846 megawatts of combustion turbines, 1,032 megawatts of combined cycle and 100 megawatts of hydroelectric.

With the exception of 440 megawatts for the San Juan 5 and 6 units, (online since 2008), and peak combustion turbines at Cambalache and Mayaguez, (online since 1997 and 2009), the fleet dates from 1959 (Palo Seco Steam Units #1 and #2) to 1976 (Aguirre Combined Cycle).

To supplement its generation, PREPA holds two Power Purchase and Operating Agreements (PPOAs); 507 megawatts of gas-fired capacity from EcoEléctrica; and 454 megawatts of coal-fired capacity from AES-PR.

The addition of the 961 megawatts from EcoEléctrica and AES-PR brings the total capacity available to 5,839 megawatts. According to PREPA’s daily Generation Report for March 2016, the highest generation peak was 2,704

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