Case Studies

Puerto Rico

Mismanagement and corruption – two words frequently used to describe the problems with
Puerto Rico’s government-run electric utility.

Puerto Rico’s current arrangement is eerily similar to Pine Tree Power’s proposal to seize Maine’s electric utilities and create a new government-controlled power authority operated by a third-party contractor.

A history of poor decisions and bad practices by the public utility, called the Puerto Rico Electric Power Authority, came to a head in 2017.

First, its $9 billion debt led to a bankruptcy filing that still hasn’t been resolved.

After decades of neglect, its already decimated electric grid was wiped out by Hurricane Maria, leaving the entire island with no power. While no one can predict a hurricane, some customers went without electricity for almost a year.

In 2021, a third-party contractor was hired to operate Puerto Rico’s power grid – at a cost of $115 million annually.

Puerto Rico Electric Power Authority – the only electric utility on the island – still owns the power grid and the government is still in charge of rates. A third-party contractor manages and upgrades the lines and poles.
Just like the Pine Tree Power proposal.

But now things are even worse… Frustrated citizens are protesting recurring blackouts… There’s been very little progress on renewable energy… There are calls for investigations into the third-party contractor…

If only Puerto Rico had known that in this arrangement:

"Rate increases, widespread outages, and generally unreliable service have combined to generate street protests as well as calls by politicians, artists, and other stakeholders for the government of Puerto Rico to cancel or terminate the public-private partnership agreement with LUMA Energy for the operation of the island’s electric grid."

“We are living in a state of eternal fragility.”

— Puerto Rico Rep. Mariana Nogales, Washington Post, September 29, 2022

“Basically, nothing had been done to strengthen the electric grid and other critical infrastructures or increase their resiliency.”

— Center for a New Economy’s policy brief: Puerto Rico Recovery Task Force, September 28, 2022

“The Financial Oversight and Management Board (FOMB), Puerto Rico Electric Power Authority (PREPA) and grid operator LUMA Energy have made little progress in resolving the fundamental problems that have plagued Puerto Rico’s electrical system for decades.”

— Institute for Energy Economics and Financial Analysis, July 14, 2022

“While the rest of the world moves forward with massive amounts of renewable energy Puerto Rico’s managers have been unable to deliver on a low-cost system of electricity production.”

— Institute for Energy Economics and Financial Analysis, July 14, 2022

“…we just proved that one former governor of the PPD party, he was doing some kind of lobbying activities for Luma. Also, different people who worked in top-level positions during the administration – past administrations of both parties are being hired by Luma in top positions.”

— Journalist Eliván Martínez Mercado, National Public Radio, November 20, 2021

“Puerto Rico electric system has been in very bad shape because of lack of investment in the power plants and in the transmission and distribution line. And this is a very important subject because this is a matter of life and death. During the past 30 years, the energy system infrastructure, it’s became outdated.”

— Journalist Eliván Martínez Mercado, National Public Radio, November 20, 2021

“It’s particularly insulting to Puerto Ricans and people who have to deal with all of the problems that have been caused by Luma’s poor service to know that the CEO is making at least $500,000 a year.”

— Cathy Kunkel, energy program manager for the nonprofit group Cambio Puerto Rico, Washington Post, November 16, 2021