Puerto Rico’s Governor announces plans to privatize electrical grid

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Photo: Xavier Garcia/Bloomberg News/Getty Images

by Ryan Kresge
Committee on U.S.-Latin American Relations (CUSLAR)

On Monday, January 22nd Governor Ricardo Rossello announced a plan to privatize the Puerto Rico Electric Power Authority (PREPA) after a months-long battle to rebuild the electricity infrastructure on the island in the wake of Hurricane Maria. The privatization of publically owned utilities increases the likelihood of exploitation by the ruling elite. In his televised speech Rossello proposed a three-step process for privatization. The first step will “define the legal framework through legislation,” (translated from Spanish here), essentially opening the floodgates to private companies to propose buyouts of the energy company. In the second step “the offers of the companies will be received, and their technical, economic, and financial evaluation will proceed.” The third step, “the terms of awarding and hiring the selected companies that meet the requirements for the transformation and modernization of our energy system will be negotiated.”

Several critics, such as Angel Figueroa – president of the Unión de Trabajadores de la Industria Eléctrica y Riego, have denounced the privatization of the electric authority as a ploy to sell a not-for-profit public good to the whims of large energy companies who will increase prices without any say from the public or proper regulation. Further, in late December Governor Rosselló proposed the consolidation of several government agencies into one “umbrella” agency, the Public Service Regulatory Board. This would reduce agency’s regulatory capacity in the name of reducing government and spending.

Many Puerto Ricans support the move to privatize PREPA because of a history of mismanagement and poor service, and about 15% of Puerto Ricans are still without electricity – more than 5 months after Hurricane Maria. The sluggish response by the federal government and the logistical nightmare that accompanies the restructuring of infrastructure has contributed to

the public’s perception of the efficiency and reliability of PREPA. It should be noted, however, that these failures stem from a history of neglect, mismanagement, and underfunding. Because of these failures PREPA, before Hurricane Maria hit, was in $9 billion of debt which was the result of a prolonged economic recession on the island that led to diminishing revenues and drove the need to issue bonds to keep the utility running. It should be noted that Puerto Rico has the third most expensive electricity in the US and its territories due to the increasing costs of importing oil.

When one looks to the history of privatization on Puerto Rico it is ripe with examples of privatization failing to provide better prices for consumers and more efficient functioning of the authorities being privatized. One example is the privatization of Puerto Rico’s Aqueduct and Sewer Authority (PRASA) which led to higher prices for water and an increase in environmental contamination. Another example is the privatization of the Puerto Rico Telephone Company in 1998 which led to massive protests by two unions in opposition to the deal. Clearly, privatization rarely leads to the changes Governor Rossello is promising. Rather, it leads to a greater economic burden on an already historically exploited population.

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