Puerto Rico Sees First Reduction in Electricity Prices Since 2021

By:
Aug 3, 2022
10:00 AM

Traffic lights are out of service on a street in San Juan during a blackout in Puerto Rico, Thursday, April 7, 2022. (AP Photo/Carlos Giusti)

SAN JUAN, Puerto Rico — After seven consecutive increases, the Puerto Rico Energy Bureau (PREB) has announced the first reduction in the price of electricity since 2021. The decrease went into effect on Monday, August 1.

PREB approved a resolution that reduced the cost of electricity for the average consumer by 2.75 cents per kilowatt hour (kWh) for August and September. For the average residential customer who consumes 800 kWh per month, this reduction will save them $22.03, with the price per kWh coming down from the previous 25.4 cents to 22.7 cents, the agency explained in a press release.

The resolution came about from an accelerated reconciliation process that activates if it is determined, at the end of the monthly billing cycle, that the real purchase prices of energy and fuel were different from what the Puerto Rico Electric Power Authority (PREPA) and LUMA Energy estimated by more than $20 million. According to the resolution, the reconciliation process was activated when LUMA, the private company that controls the transmission and distribution of the archipelago’s electricity, had a deficiency of collections for fuel purchases totaling more than $48 million.

Through the reconciliation process, PREB compensated for the deficiency in three different ways, each of them ending with PREB crediting extra money to the consumer.

In March, the Federal Emergency Management Agency (FEMA) notified PREPA, the government-run agency that controls electrical generation, that it would increase the agency’s federal reimbursement to purchase fuel that had become more expensive.

In July, PREPA notified PREB about the increased reimbursement from 75 percent to 90 percent for fuel mainly used by peaker plants, as a result of the 2020 earthquakes. PREB decided that FEMA’s funds, totaling $34 million, be credited to the customers because the amount had already been billed.

The second credit came from a global reduction in the price of fuel in recent weeks. Due to the drop, PREPA’s estimated costs decreased by $69 million compared to the same point in 2021. Again, PREB decided to credit the amount to customers.

Lastly, PREPA notified PREB that Spanish company Naturgy, which supplies liquified natural gas (LNG) to the archipelago, would pay a penalty for lack of supply to the Costa Sur power plant during April to June 2022. PREB decided to credit more than $14 million to consumers for this penalty.

“The role of the Energy Bureay is to look out for public interest,” said the president of PREB, lawyer and engineer Edison Avilés Deliz, in a statement. “In exercising this function, the Bureau assures that the consumer is only charged for the real costs of producing, transmitting and distributing energy, not a cent less, not a cent more.”

The reduction in the price of electricity comes as a relief to Puerto Ricans, many of whom had been seeing their ever-increasing electricity bill over the last year and began wondering if they would have to start selectively using high-draw appliances, as LUMA Energy recommended on its website—or even worse, stop using electric fans and air conditioners in the middle of a very hot summer.

Most customers have seen their bills skyrocket in the last year, sometimes paying over $200 more than they did just two years ago.

Since LUMA Energy, a consortium made up of the American Quanta Services and the Canadian ATCO, took over in June of 2021, there have been seven increases in the price of electricity and even more major blackouts.

A fire at a power plant in April left more than one million without electricity for five days, causing hospitals to rely on generators to care for their patients. On July 7, more than 38,000 customers were left without power when a so-far unknown system failure caused a plant to shut down.

In the midst of hurricane season, which runs from June to November, worrying about the next blackout has become a part of Puerto Ricans’ day-to-day lives.

Eight percent of Puerto Ricans’ income goes to electricity, almost four times the average that Americans pay across the United States, an Institute for Energy Economics and Financial Analysis (IEEFA) report noted. This disparity is particularly notable because the median household income for Puerto Ricans is $21,058 and 43 percent live below the poverty line. Meanwhile, the median household income for Americans is $67,521 and only 11.4 percent live below the poverty line, according to the U.S. Census.

Puerto Rico consumes about 27 times more energy than it produces. Petroleum accounts for two-thirds of the total energy use, natural gas accounts for one-fifth, coal for one-tenth, and renewables make up the rest. While geological studies have found possible crude oil deposits in a subsea formation on the south of the island, it remains untapped.

But what the island lacks in fossil fuels, it makes up in renewables with access to wind energy, solar power, and hydropower. Under the Puerto Rico Energy Public Policy Act, PREPA must obtain 40 percent of its electricity from renewables by 2025, a deadline less realistic every passing month as the agency has yet to move forward with many renewable energy projects.

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Carlos Edill Berríos Polanco is a freelance journalist, mostly focused on civil unrest, extremism, and political corruption. Twitter: @Vaquero2XL