Puerto Rico Will Not Go Quietly Into the Dark

This month a massive outage left over 350,000 customers in San Juan, P.R., without power, including my 96-year-old grandmother and 75-year-old mom. Amid a record-breaking heat wave, my mom struggled to keep my grandmother cool with a battery-operated fan. The frustration and fear in my mother’s voice as we spoke on the phone was palpable, and when the call ended, I found myself blinking back tears of rage.

In 2020 the Puerto Rican government transferred management of the electric grid to a newly minted Canadian-American private company, Luma Energy. It promised to bring clean, reliable energy to Puerto Rico after the state-owned Puerto Rico Electric Power Authority filed for bankruptcy and Hurricane Maria knocked out the island’s ailing electric grid.

So why is it that four years later, my mom is still cursing in the dark?

Puerto Rico’s power crisis illustrates the consequences of putting essential services in the hands of a private entity. Reliable electricity is not just a convenience; it is essential for economic stability and public health. Yet residents are paying exorbitant rates for a service that repeatedly fails them. Enough is enough. Puerto Ricans deserve a power grid that works for them, not against them.

After Puerto Rico declared bankruptcy in 2017, the fiscal control board, charged with managing the island’s debt restructuring and finances, began pushing to sell off its assets, but since PREPA couldn’t be sold while undergoing debt restructuring, the government opted for a public-private partnership model in which it retained ownership of the assets — and the debt — while outsourcing operations.

In such arrangements, the partners have a vested interest in the project’s success through shared risks, rewards and performance incentives. The upside in this structure is that unlike with full privatization, the public sector retains responsibility and accountability for ensuring that services are delivered properly. But in Puerto Rico, that has not been the case.

The contract awarded to Luma is outrageously generous. It receives a fixed management fee regardless of whether it keeps the lights on, is guaranteed federal funds for repairs and can charge PREPA for any unexpected operational costs. Luma has even threatened to charge residents more if they seek compensation for appliances damaged by outages and surges. Additionally, until PREPA’s debt restructuring is resolved, Luma is operating under an interim contract that raises its fee to $115 million from $70 million.

Puerto Rico’s power authority is now a three-headed monster: Luma handles customer service, transmission, maintenance and repair; another company, Genera PR, takes care of energy generation; and PREPA remains responsible for compliance and the ongoing bankruptcy process.

To date, Luma has spent only a small fraction of the hundreds of millions of dollars allocated for improvements. At this rate, it will take over a century to rebuild the grid — assuming no further disasters. Plus, under a new federal administration those allocated funds could easily disappear. The labyrinth of federal bureaucracy contributes to delays, but it’s only part of the story.

When Luma took over the electric grid, PREPA’s skilled line workers were forced into contracts with reduced benefits. Some were left with little choice but to transfer to jobs mopping floors or cutting grass for other public agencies. Luma replaced them with an inexperienced team led by executives who command extravagant salaries. They blame the island’s weather, vegetation, cats and iguanas for the constant outages.

Since the federal government doesn’t publicly track Puerto Rico’s power outage data, the only performance metric comes from Luma. Public-private partnerships are meant to ensure accountability, but in Puerto Rico the legislature had to issue an arrest warrant for the company’s chief executive just to get basic reports.

In theory, Luma should be accountable to the independent Puerto Rico Energy Bureau, which has criticized it for poor performance, overspending and a lack of transparency. But the bureau is toothless against the Financial Oversight and Management Board, which manages the island’s finances. The board has blocked initiatives like compensating solar owners for energy sold back to the grid, claiming it conflicts with Puerto Rico’s austerity budget.

Hating on Luma has become part of local culture, fueling catchy songs, viral memes, comedy sketches and parody videos. Even Bad Bunny has sung about its epic apagones and has called for the company’s removal. Yet Luma is but a symptom of a broader problem of failed outsourcing and semiprivatization.

No doubt, Puerto Rico’s public agencies need reform, but instead public-private partnerships are maintaining the status quo. The result is a landscape of semiprivatized dysfunction — sparking power lines, roads riddled with potholes, collapsing hospitals, glitchy voting machines, a toll collection system susceptible to cyberattacks. All while costs for these services soar.

Even the fiscal control board acknowledges that Luma’s contract was excessive. It boasts that the new contract for Genera PR includes performance metrics, accountability mechanisms and penalties for poor performance — everything Luma’s contract lacks.

In 2022, as Luma’s interim contract was coming to an end, Puerto Rico’s legislature voted against renewing it. However, Gov. Pedro Pierluisi vetoed the measure, opting instead to extend the contract without any changes, citing the need for stability through the bankruptcy hearings.

The legislature is now making another push for cancellation. Some believe the contract can be terminated without penalty, given Luma’s glaring failures, while others warn of the steep cancellation costs stipulated in the contract. In any case, it seems better to pursue cancellation than to keep throwing good money after bad. Of course, it is the fiscal control board, not Puerto Rico’s people or its elected officials, that has the final call.

But swapping one private provider for another won’t solve the deeper problems. Puerto Rico needs a comprehensive reassessment of its energy strategy. Groups favoring clean energy, like the Queremos Sol coalition, advocate a decentralized grid with distributed renewable projects, like rooftop solar systems and community microgrids, to avoid the failures of centralized power lines that can be brought down by an unpruned tree or rogue iguana.

Puerto Ricans have already ousted one governor, amid large-scale protests. As the fifth anniversary of those approaches, the warm summer nights in Old San Juan reverberate again with the clatter of pots and pans as demonstrators return to the governor’s mansion, La Fortaleza, demanding change.

Yarimar Bonilla, a contributing Opinion writer and a professor at Princeton University’s Effron Center for the Study of America, is the author of “Non-Sovereign Futures: French Caribbean Politics in the Wake of Disenchantment” and an editor of “Aftershocks of Disaster: Puerto Rico Before and After the Storm.”

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