Opinion | Puerto Rico Will Not Go Quietly Into the Dark

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Puerto Rico’s Power Struggle: A Case Study in Failed Privatization

The relentless heat wave gripping Puerto Rico this month has delivered a harsh reality check for the island’s residents. Over 350,000 people, including families and elderly individuals, were left without power, highlighting the ongoing crisis of Puerto Rico’s electricity grid. This follows a pattern of frequent outages and inconsistent service since 2020, when the management of the grid was transferred to Luma Energy, a Canadian-American private company. The situation underscores the consequences of placing essential services in the hands of private entities, especially when the resulting contract is outrageously favorable to the private partner and lacks accountability mechanisms.

Key Takeaways:

  • Luma’s contract is heavily skewed in its favor, granting it a fixed management fee regardless of performance, federal funds for repairs, and the ability to charge PREPA for unexpected costs. This makes it financially advantageous for Luma to prioritize profit over service quality.
  • Luma replaced experienced and skilled line workers with an inexperienced team, leading to poor maintenance and repair, and contributing to the persistent power outages. The company has used external factors like weather and wildlife to deflect responsibility for its failures.
  • Despite the persistent problems, Luma has been able to evade accountability and transparency. Luma’s lack of adherence to performance metrics and the absence of public oversight have exacerbated the crisis.
  • Puerto Rico’s decentralized energy strategy, including rooftop solar systems and community microgrids, holds promise for a more resilient and sustainable power grid, but faces bureaucratic hurdles. The island’s energy future depends on breaking free from the constraints of its current power structure.

A Tale of Broken Promises and Outrageous Contracts

In 2017, after the devastating impact of Hurricane Maria, the Puerto Rico Electric Power Authority (PREPA) declared bankruptcy. The Fiscal Control Board, appointed to manage the island’s debt restructuring and finances, pushed for the sale of public assets, including PREPA. Due to PREPA’s ongoing debt restructuring, the government opted for a public-private partnership (PPP) model with Luma Energy, effectively outsourcing operations while retaining ownership and debt.

This model was intended to bring in private sector expertise and investment while ensuring public accountability for essential services. However, in Puerto Rico, this idealistic vision has collided with a harsh reality: Luma has failed to deliver on its promise of clean, reliable energy. The problems extend beyond mere inconvenience; they impact public safety, economic stability, and the daily lives of Puerto Rican residents.

A Contract Designed for Profit, Not Service

Luma’s contract is a prime example of a "leonine" agreement, meaning it heavily favors the private partner at the expense of the public party. Luma receives a fixed management fee regardless of whether it keeps the lights on, a guarantee of federal funds for repairs, and the right to charge PREPA for unexpected operational costs.

Moreover, Luma has threatened to charge residents more if they seek compensation for appliances damaged due to outages and surges. The current interim contract, in place until PREPA’s debt restructuring is resolved, further increases Luma’s fee to $115 million, nearly double the original $70 million.

A Power Grid in Chaos

The once unified PREPA is now a three-headed monster: Luma handles customer service, transmission, maintenance, and repair; Genera PR manages energy generation; and PREPA remains responsible for compliance and the ongoing bankruptcy process. This confusing structure creates multiple layers of bureaucracy and hinders efficient coordination.

Adding to the complexities, Luma’s performance has been abysmal. Despite receiving hundreds of millions of dollars in allocated funds, Luma has only spent a small fraction on improvements, leaving the grid vulnerable and its future uncertain.

A Workforce Undermined, An Infrastructure Neglected

When Luma took over, PREPA’s skilled line workers were forced into contracts with reduced benefits. Many were forced to leave the profession, opting for lower-paying jobs in different sectors. Meanwhile, Luma replaced them with an inexperienced team, led by executives with extravagant salaries. This lack of expertise has further contributed to the grid’s fragility, while the company continues to blame external factors for the outages.

The Illusion of Accountability

The absence of reliable public data on power outages makes it challenging to judge Luma’s performance. Luma’s own self-reported data has been criticized for being inaccurate and incomplete. The Puerto Rico Energy Bureau, tasked with overseeing the energy sector, has been vocal about Luma’s shortcomings but lacks the authority to enforce change.

The failure of accountability stems from the influence of the Fiscal Control Board, which has blocked initiatives like compensating solar owners for energy sold back to the grid. This underscores the board’s prioritizing of austerity over innovation and sustainability.

A Public Outrage Ignored

The frustration and anger towards Luma have become a cultural phenomenon in Puerto Rico. Jokes, memes, and even songs have emerged to express discontent with the company’s repeated failures. Despite the widespread public outcry, Luma retains its grasp on the power grid, highlighting the insular nature of the island’s power structure.

Beyond Luma: A Systemic Failure

While Luma is the face of Puerto Rico’s power crisis, it is merely a symptom of a deeper problem: the failed approach to privatizing essential services. This trend is mirrored in other sectors, where semi-privatisation and lack of accountability have created a landscape of dysfunction: crumbling infrastructure, faulty voting machines, and cyber-vulnerable toll collection systems.

The Path Forward: Decentralization and Sustainability

The current situation calls for a fundamental shift in Puerto Rico’s energy strategy. A decentralized system with distributed renewable projects, like rooftop solar systems and community microgrids, can create a more resilient and reliable energy infrastructure. This approach is not only environmentally sustainable but also can empower communities to take control of their energy future.

The power struggles in Puerto Rico are not just about failed privatizations, but also about the need for greater transparency, public accountability, and community-based solutions. The island’s residents deserve a power grid that serves them, not the interests of private corporations. As the calls for change grow louder, the future of Puerto Rico’s energy landscape hinges on the ability to break free from the grip of the current, dysfunctional system and embrace a future powered by resilience, sustainability, and community ownership.

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Olivia King
Olivia King
Olivia King is a social media expert and digital marketer. Her writing focuses on the most shared content across platforms, exploring the reasons behind viral trends and the impact of social media. Olivia's expertise helps readers understand the dynamics of online sharing.