Energy Commission Issues 5-Year Plan for PREPA

The Puerto Rico Energy Commission issued a five-year plan for the island's electric power authority, saying the utility had failed to come up with an acceptable alternative.

"The implementation by [Puerto Rico Electric Power Authority] of the new Modified Integrated Resource Plan … will put the public corporation into a better position to meet the expectations of reliability and security as well as its financial obligations and its responsibility to provide services at the lowest possible cost," the commission said in a press statement Monday.

The "Final Resolution and Order on the First Integrated Resource Plan of the Puerto Rico Electric Power Authority" came about 14 months after PREPA first submitted a draft Integrated Resource Plan in July 2015.

Its release came as PREPA was completing the restoration of power after a blackout last Wednesday, and as the island was awaiting the first meeting of a federally appointed fiscal control board on Sept. 30.

PREPA, with more than $8 billion in bond debt, has been in debt negotiations with its creditors for more than two years. The negotiated agreement includes an exchange of its debt for new debt of lower value and allows PREPA to decide how to invest the savings.

Since PREPA first submitted a draft Integrated Resource Plan to the commission in July 2015, it has failed to present a version of the IRP the commission has found acceptable. The commission said that Puerto Rico had urgent energy needs, but that PREPA had proved itself incapable of presenting an acceptable plan. So the commission chose to issue the Modified IRP for the next five years.

The commission has ordered PREPA to take steps that "include the modernization of generating units to increase efficiency and reliability of service, such as replacement units in Palo Seco and removal of obsolete units in San Juan." the commission said in a press statement. "In addition, the commission expects a new combined cycle unit and the repowering of units 1 and 2 in Aguirre, which would reduce the probability of events such as occurred in recent days."

According to the commission's "Final Resolution," since July 2015 "Together with its chief consultant, Siemens Power Technologies International, PREPA disregarded our rules, failed to use standard planning techniques, delayed the production of required information and displayed insufficient appreciation of the potential for energy efficiency and demand response.

"These behaviors led PREPA and Siemens to reach conclusions that overemphasized costly construction, while under-emphasizing the roles of renewable energy technologies and consumer behavior as ways to achieve the energy independence envisioned by Act 57 [Puerto Rico's 2014 electricity law].… The commonwealth needs PREPA and its energy system to be flexible, nimble and cost-effective. PREPA has a great distance to go."

PREPA said the commission's plan will allow it to go forward with most of its capital spending plans. It also said that financial hurdles and the authority's goal of lowering consumer rates will make it difficult to integrate renewable energy into the system.

A Siemens spokesman said in an email: "Siemens PTI has over 40 years of experience developing and providing independent guidance on Integrated Resource Plans for U.S. and global clients. We strongly disagree with these assertions and stand by our comprehensive analysis, which included several power mix scenarios for PREPA and the development of a practical plan that balanced a multitude of objectives."

The "Final Resolution" indicates that the commission's release of a Modified IRP for PREPA will affect the authority's electrical rates. While the commission's summer approval of provisional rates assumed the build out of the Aguirre Offshore Gas Port, the Modified IRP doesn't make this assumption, taking a more cautious approach to this major PREPA capital project. With less capital spending approved, there may be less revenue needed, and this may affect the rates the commission requests PREPA to charge its consumers, said commission Chairman Agustín Carb-.

Carb- said that the commission and the authority are considering the use of private-public partnerships and having private companies bid for the right to operate some of PREPA's generating facilities.

The modified IRP directs PREPA to spend no more than $15 million on the Aguirre Offshore Gas Port, which is expected ultimately to allow the transfer of natural gas to the Aguirre power plant in southeast Puerto Rico. The plant currently burns oil.

Puerto Rico's Act 4, approved this past winter, requires Puerto Rico's governor to use a professional firm to replace six of the nine members of PREPA's governing board, Carb- said. This replacement was supposed to have been completed by Sept. 1 and will be done soon.

Puerto Rico Sen. President Eduardo Bhatia Gautier said the commission's plan is "a great leap forward. Nevertheless, I continue to believe that changing the culture of PREPA will require transformation beyond that of an independent board of directors."

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