Make us your home page
Instagram

Puerto Rico power authority's debt is rooted in free electricity

A skating rink in Aguadilla, Puerto Rico, receives free electricity from the Puerto Rico Electric Power Authority. PREPA gives free power to all 78 of Puerto Rico’s municipalities, to many government-owned enterprises and even to some businesses.

New York Times

A skating rink in Aguadilla, Puerto Rico, receives free electricity from the Puerto Rico Electric Power Authority. PREPA gives free power to all 78 of Puerto Rico’s municipalities, to many government-owned enterprises and even to some businesses.

AGUADILLA, Puerto Rico — To understand how Puerto Rico's power authority has piled up $9 billion in debt, one need only visit this bustling city spread along a bay on the northwest coast.

Twenty years ago, it was just another town with dwindling finances and a less-than-promising future. Then, it went on a development spree, thanks to a generous — and some would say ill-considered — gift from the Puerto Rico Electric Power Authority.

Today, Aguadilla has 19 city-owned restaurants and a city-owned hotel, a water park billed as biggest in the Caribbean, a minor-league baseball stadium bathed in floodlights and a waterfront studded with dancing fountains and glimmering streetlights.

Most striking, perhaps, is the year-round ice-skating rink. Unique in a region where the winter temperature rarely drops below 70 degrees, the rink is complete with a disco ball, laser lights and pop music for after-hours revelry. Signs warn skaters not to wear shorts.

"Imagine how much it costs to have an ice-skating rink in the tropics," said Sergio Marxuach, policy director at the Center for a New Economy, a nonpartisan research group in San Juan.

And that's the catch. What most likely would be the biggest recurring expense for these attractions — electricity — costs Aguadilla nothing. It has been provided free for years by the power authority, known as PREPA.

In fact, the power authority has been giving free power to all 78 of Puerto Rico's municipalities, to many of its government-owned enterprises, even to some for-profit businesses — although not to its citizens. PREPA has done so for decades, even as it has sunk deeper and deeper in debt, borrowing billions just to stay afloat.

The free power dates from 1941, when the utility was established by the last Puerto Rico governor to be appointed by the president of the United States, Rexford Tugwell, a member of Franklin D. Roosevelt's brain trust. He contended that for electricity to benefit the people, it had to be owned by the people, and he created PREPA by nationalizing the handful of private electric companies then on the island.

Now, however, the island's government is running out of cash, facing a total debt of $72 billion and already defaulting on some bonds — and an effort is under way to limit the free electricity, which is estimated to cost the power authority hundreds of millions of dollars.

But like many financial arrangements on the island, the free electricity is so tightly woven into the fabric of society that unwinding it would have vast ramifications and, some say, only worsen the plight of the people who live here.

"If the towns don't get free energy, they're going to have to pay for it by increasing their property taxes or something, so the people will end up paying," said Eduardo Bhatia, the president of the Puerto Rico Senate. Residents of the island are already upset about a recent sales tax increase to 11 percent from 7 percent, and a property tax increase now would cause an outcry. The last assessment was in 1958.

The free electrical power is just one example of PREPA's complex and paradoxical role in the economy here. Today, Bhatia will begin hearings to determine who and what is to blame for the power authority's larger problems, especially its ancient and inefficient power plants, among the last in North America to burn oil. Culprits are expected to include PREPA's secretive purchasing managers, elected officials who wasted money on natural gas pipelines that were scrapped and an institutional hostility to wind and solar power that is hard to fathom on a breezy island where the sun shines most days.

Carlos Méndez Martínez, the mayor of Aguadilla, said the city-owned attractions had turned Aguadilla's onetime deficit into a surplus and generated profits he uses to pay down debt, improve low-income housing and offer free wheelchairs and delivered meals to shut-ins. The profits have also allowed him to keep a 17-year-old promise not to raise taxes. Last year, he even paid a "dividend" to every man, woman and child in the city — a free ticket to the water park, which otherwise costs residents $20.

Puerto Rico power authority's debt is rooted in free electricity 02/01/16 [Last modified: Monday, February 1, 2016 7:26pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, New York Times.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  2. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  3. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  4. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.
  5. 'Garbage juice' seen as threat to drinking water in Florida Panhandle county

    Water

    To Waste Management, the nation's largest handler of garbage, the liquid that winds up at the bottom of a landfill is called "leachate," and it can safely be disposed of in a well that's 4,200 feet deep.

    Three samples that were displayed by Jackson County NAACP President Ronstance Pittman at a public meeting on Waste Management's deep well injection proposal. The sample on the left is full of leachate from the Jackson County landfill, the stuff that would be injected into the well. The sample on the right shows leachate after it's been treated at a wastewater treatment plant. The one in the middle is tap water.