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Puerto Rico Electric Power Authority: The Energy Moving Puerto Rico’s Economy

By ELISABETH ROMAN of Caribbean Business

July 7, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

With the demand for electrical energy projected to double over the next 25 years, it’s certainly a positive sign to see the Puerto Rico Electric Power Authority (Prepa) is working to help reduce the island’s dependence on oil to fuel its power plants. To meet the island’s demand for energy in the near future, Prepa has begun investing $2.1 billion in capital-improvement projects, new plants, and alternative-fuel sources by 2009. These efforts are certainly a step in the right direction.

Prepa’s 1.4 million clients have watched their electric bills skyrocket over the past year, at a time when the local economy is struggling to get back on track. Prepa projects to spend (and pass the cost on to consumers) over $1.7 billion on fuel, which is double the $864.7 million spent in fiscal 2004. This mostly is due to higher fuel-oil prices, since Prepa’s energy-production levels actually declined during fiscal 2004. The higher cost of fuel translates into capital that isn’t invested in Puerto Rico’s economy in the form of jobs or expansions.

With the price per barrel of oil climbing to over $60 and projections of even higher prices on the horizon, the Commonwealth must continue the energy-diversification plan begun during the administration of former Gov. Pedro J. Rosselló. Thanks to that energy-diversification plan, which led to the construction and operation of the EcoEléctrica and AES cogeneration plants, today, 27% of the island’s energy is derived from coal and natural gas. In the past, 99% of Puerto Rico’s energy was derived from oil-fueled power plants; today it is down to 73%.

It is vital for Puerto Rico’s future economic growth that Prepa work closely with the private sector to continue diversifying its power plants. The new power plant proposed for Puerto Rico’s western region should be left in the hands of the private sector since the experience with EcoEléctrica and AES has been a positive one and has helped reduce, somewhat, the impact of higher oil prices on the energy bills of island consumers and industries.

Energy prices in Puerto Rico, however, are still far from being reasonable. The island’s electricity rates are higher than the rates in 49 states and are taking a heavy toll on residents and businesses, as well as Puerto Rico’s ability to compete. Prepa also is facing allegations by the Puerto Rico Comptroller’s Office of overcharges in its billing for electricity, an issue that must be addressed as soon as possible if clients are to continue having confidence in the public utility.

Prepa officials also will have to address the issue of increasing costs as they begin negotiations on three collective-bargaining agreements with union leaders. It’s important both sides keep in mind while negotiating that Puerto Rico’s consumers and industries already pay for a $500 million payroll. With the island’s economy experiencing a growth of barely 2%, Prepa’s employees must be careful not to exert excessive economic pressure on its clients by forcing them to finance an unreasonable increase in salaries and benefits. It’s time for everyone in Puerto Rico, particularly public-sector employees, to tighten their belts.

Another major concern for Puerto Rico residents and industries is Prepa’s ability to keep the lights lit during what is anticipated to be an extremely active hurricane season. Prepa’s executive director says they are prepared to weather any storm, but it still remains to be seen.

Protecting Puerto Rico power plants and energy distribution system from major storms or security threats has to remain high among Prepa’s priorities. The island’s residents and businesses are counting on Prepa’s new leaders and officials to manage the public utility with a great deal of responsibility and efficiency. Puerto Rico’s economy depends on it.

This Caribbean Business article appears courtesy of Casiano Communications.
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