Puerto Rico’s electric company was already billions in debt before storms struck
Hurricane Maria has dealt a new blow to Puerto Rico’s bankrupt electric company — causing widespread power outages and imposing costly repairs on a utility that was already struggling with more than $9 billion (U.S.) in debt, poor service and skyhigh rates.
And that means more hardship for residents, whose electric rates are already more than twice the U.S. average.
Even before it was hit by hurricanes Irma and now Maria, the Puerto Rico Electric Power Authority (PREPA) said it needed more than $4 billion to overhaul its outdated power plants and reduce its heavy reliance on imported oil. The company filed for bankruptcy July 2.
Now, with Maria toppling transmission lines and knocking out power for most of Puerto Rico’s 3.4 million residents, PREPA faces hundreds of millions of dollars more for hurricane repairs.
The utility’s problems are a key part of the commonwealth’s struggles to restructure about $74 billion in debts, overhaul its economy and stem the outflow of Puerto Rican citizens for the U.S. mainland.
The path of the storm suggested there could be heavy damage to the electric power lines that connect the big power plants on the southern coast of Puerto Rico with the more populous northern part of the island.
It is too soon to know whether Maria inflicted damage on the power plants, the biggest being a pair that burn heavy fuel oil to generate 900 megawatts each, together enough to power 1.3 million homes. The median age of PREPA’s power plants is 44 years old.
Repairing the transmission lines alone could take weeks.
PREPA has also lost 30 per cent of its employees since 2012 due to steady migration out of the commonwealth and retirements. The areas hit hardest have been skilled jobs, including the linemen needed to repair transmission lines.
“PREPA’s current weak financial condition will affect the utility’s ability to quickly repair and restore ser- vice after this natural disaster, highlighting the challenges faced by PREPA, including its reliance on an aging electric infrastructure in need of significant capital improvements,” said a Sept. 11 report by Moody’s about the damage from Irma.
The utility has a poor safety record. An explosion last year knocked out power in many places for four days. Newspapers run photos of poor maintenance, rusting control panels and outmoded controls.
There is little in the commonwealth budget for emergencies. The government set aside just $20 million for disaster relief, forcing it to rely on the Trump administration and Federal Emergency Management Agency (FEMA) for funds and manpower.
The hurricanes could “force the energy department and federal government to come in with massive aid to rebuild new plants quickly.
“You could imagine all the things that get in the way of building infrastructure, such as permitting, would get waived in an emergency,” said one executive who has been involved in debt talks.
“People fear the worst, but also recognize that it might lead to much greater sense of urgency on the part of the federal government.”