July 13, 2018

The Regulatory Body Steering Puerto Rico’s Energy Future Is in the Midst of a Makeover

Will the commission remain a “powerful, strong, and independent energy regulator” amidst the changes?

One month after José Román Morales left his position as interim chair of Puerto Rico’s Energy Commission (PREC), the body that regulates its utility and energy policy, his departure looks to mark the beginning of a period of more extensive change for the commission.

Two laws passed in late June will update responsibilities for PREC.

The first law allows selling generation assets now owned by the island’s utility, the Puerto Rico Electric Power Authority (PREPA), to private companies and opens the possibility of a concessionaire running its transmission and distribution systems. It gives the island 180 days to lay out that process. It also keeps regulatory authority of the energy system with the commission but gives it just 15 days to consider private contracts. It also increased the commission’s members from three to five, all to be appointed by the governor. 

Legislation passed days later and now awaiting the governor’s signature, HB 1408, will combine the commission’s authority with the island’s consumer advocate office. Last month the legislature also confirmed a new governor-appointed commission chair, attorney and engineer Edison Avilés Deliz.

It’s a great deal of change for a body that many experts say worked in a system riddled with problems. 

A question of independence

Since Hurricane Maria, Román Morales has emerged as a strong advocate for Puerto Ricans: cautioning against hasty privatization of PREPA and reorganization of the island’s energy regulatory body — both efforts pushed by the governor. His outspoken opinions poked at persistent tensions between the commission, the governor and the fiscal board set up to deal with the island’s bankruptcy, which have led to more than one lawsuit and a power struggle over who ultimately controls Puerto Rico’s fate. 

The continued disagreements indicate that a path forward has not entirely clarified, even as most parties present a vision that includes clean energy technologies and a more resilient grid.  

Now that Román Morales is out, PREC may align itself more closely with the governor’s priorities — especially because he will select its members — and push the changes that Román Morales hoped to avoid. 

Though Román Morales anticipates a more positive relationship between the commission and the governor, he worries about the agency’s independence. 

“I expect the relationship between the commission and the governor should improve — at least there should be more communication,” he said. “But the commission is still an independent entity that has to make decisions based on logic, fact and evidence and follow the law.” 

The new chair, Avilés Deliz, asserted the revamp would not change the commission’s independent mission. 

“At the end of the day, good relationships and the Commission’s independence are not incompatible,” Avilés Deliz said via email. “The Commission’s independence is not subject to its ‘structure,’ but to each Commissioner’s commitment to implement the public policy established by both Fortaleza and the legislature.” 

The new chair declined to comment further on how the legislature’s reorganization plan will shape the future of the commission. He said the commission would wait for the legislative process to determine how the reorganization proceeds. Román Morales also said he’d “have to see where the vision and the direction of the commission” goes based on the new law.

“I sincerely hope that it continues the path that the commission has established to transform the energy sector,” he said.

He remains concerned that tweaking the focus of the commission could compromise its authority. 

“You need a body that is focused only on energy at this time,” said Román Morales. “If this energy bureau is able to focus on energy and is not only independent on its decisions but also being able to fully execute contracts to get the help and the resources that the commission needs, then this transformation will take place efficiently and prudently.”

Budget concerns also haunt Ramón Luis Nieves, a former senator in Puerto Rico who championed the establishment of the energy commission. He said his qualms with the latest law are three-pronged. 

It creates an “administrative layer” on top of the commission that could tighten the budget, and, in offering the governor authority to fill the newly created seats, it undercuts the independence of the regulator.

“If those commissioners don’t know what their role is as an independent regulator,” he said. “We might as well not have one.”

Luis Nieves said he hopes legislators will carefully vet new members to make sure they respect the law that established the commission.

Román Morales reiterated that the commission should continue putting performance for ratepayers first. He wants Puerto Rico to pivot from imported fossil fuels to renewable energy sources and change its infrastructure to make the island’s system more resilient. Under his tenure, the commission published guidance for microgrids.

Avilés Deliz also said he wants to prioritize renewable generation and push forward the commission’s work on microgrids. Like Román Morales, he noted that the Commission needs proper funding to execute its mission and invest in the best staff possible.

“Don’t change horses in midstream” 

The energy commission was created just four years ago, in 2014, as part of a landmark law designed to overhaul Puerto Rico’s energy sector and require accountability from PREPA. At that time, Román Morales said, “the [energy] situation was already dire.”

According to Luis Nieves, “the idea behind the energy commission was to create a powerful, strong, and independent energy regulator that does not respond to any political agenda or governmental or party platform.” 

Though the creation of a fiscal board to oversee Puerto Rico’s bankruptcy has muddied the commission’s authority, both the privatization and restructuring legislation ensure it will ultimately have a strong hand in forming Puerto Rico’s remade power system. 

But because the commission is so new, there is little precedent about replacing interim chairs. And like any executively-appointed position, it makes sense that an administration would prefer to select its own candidate rather than working with a carry-over from a past administration, like Román Morales. 

Luis Nieves noted that, though Román Morales’s term expired, the governor could have chosen to leave him installed or reappointed him — depending on interpretation of the laws controlling the commission. 

While the former chair recognized Rosselló’s authority to fill the position, Román Morales also cited the Abraham Lincoln-attributed phrase, “don’t change horses in midstream.” He questioned the government’s reasons for changing the commission at such a critical time. After Román Morales’s departure, just one of the members that has worked on the commission since its founding remains. 

“If you have someone that knows what’s going on and has the expertise, you don’t bring somebody that doesn’t know yet at the moment and doesn’t have the same kind of experience,” he said. 

The governor’s office did not respond to requests for comment about its decision making behind filling the role.

Though Román Morales is no longer working directly with Puerto Rico’s energy system, and the commission in its current form will soon cease to exist, he said he looks back with pride at what he and his colleagues accomplished.

“It was the first time that there was clear direction in an open, transparent way,” said Román Morales. “We were very adamant that everything needed to be transparent, we needed to explain why we made the decisions we made, we had to gather as much evidence as we could.” 

The lack of transparency and communication about electricity in post-Maria Puerto Rico has been roundly criticized, and not just by Román Morales. The island’s energy authority is still working on re-energizing customers that lost power in September. Atlantic hurricane season began one month ago and tropical storm Beryl has already brought flooding and power outages to the still-recovering island. The U.S. Army Corps of Engineers said this week it would remove some back-up power generators it had supplied. 

Now, without a clear job lined up, Román Morales’ may be faced with a tough choice.

“If no job appears, and I’m not able to get any sort of employment, then I will move to the mainland,” he said. “We are going through so much right now, so we need as much help as we can get. But I have a family to maintain as well.”

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