Irma could leave Puerto Rico without electricity for months
The island’s government is broke.
Several hours before Hurricane Irma was expected to swipe the Northern coast of Puerto Rico on Wednesday, a huge swath of the island was already in the dark — and could stay that way for months.
At a Wednesday morning press conference, Gov. Ricardo Rosselló told reporters that 20 percent of the public utility company’s 1.5 million users had already lost power. He was upbeat, assuring the public that help was on the way.
“We’ve made it easier for the executive director to send crews to attend to the affected areas,” he said, according to San Juan’s Metro newspaper.
That 300,000 residents of the island lost power even before the storm hit was striking. But even more alarming was the warning that the island’s utility company, PREPA, may not be able to restore power to parts of the island for months.
“If we get pounded by this hurricane as forecasts are predicting right now, we will certainly see blackouts and there will certainly be areas that will be without electricity for three or four months,” Ricardo Ramos, executive director of PREPA, said in an interview Monday with the radio station WIPR.
Of all the Caribbean islands in the path of Hurricane Irma, Puerto Rico’s infrastructure seems the least equipped to handle the flooding and blackouts that would surely come from the winds of a Category 5 hurricane.
It all comes down to money, and the government of Puerto Rico doesn’t have it. The island, which is a US territory, filed for bankruptcy-like protection earlier this summer, and is in the process of restructuring its debt.
The public utility company is in a severe state of financial distress, unable to modernize its system and facing a shortage of high-skilled workers. Even FEMA relief money that Congress will likely authorize will be of limited help in such an environment.
The Puerto Rican government can’t borrow money
For decades, Puerto Rico’s government was largely funded with borrowed money. Because of its special relationship with the United States, US investors got favorable tax treatment when buying Puerto Rican government bonds. American investors kept buying those bonds, and Puerto Rico kept issuing them when it couldn’t pay its bills. The ballooning debt was unsustainable, especially when the economy began to tank.
Puerto Rico’s economy relied heavily on the presence of US companies. To encourage investment on the island, Congress gave huge tax breaks to US businesses with operations in Puerto Rico starting in 1976. As a result, US banks, restaurants, hotels and department stores expanded to the island, creating jobs and boosting tax revenues. Pharmaceutical companies built factories there. But those tax breaks expired in 2006, and pushed Puerto Rico into a deep recession.
As the jobs began to dry up, so did the tax revenue and the workforce. Young Puerto Ricans, who struggled to find jobs, look for work on the US mainland (Puerto Ricans are US citizens). The electric company, PREPA, relied on selling bonds to pay for the imported oil it burned at its power plants. By 2014, it could no longer pay its creditors, and couldn’t borrow more money to buy fuel. The utility company ended up making a deal with its creditors to restructure $5.7 billion of its total $9 billion debt. As part of the agreement, PREPA was supposed to modernize its ancient electric system, which had fallen into disrepair.
But the utility company kept delaying repairs because it didn’t have the money, and the utility company struggled to pay down its remaining debt.
In July, PREPA defaulted on a $170 million interest payment to bondholders. Not only does PREPA not have money to invest in renewable, modern energy systems, it can barely repair and maintain its current system, which is why islanders constantly have to deal with power outages. This brings us to the second reason the electrical system is so messed up.
PREPA doesn’t have enough workers for maintenance — let alone hurricanes
When trees and debris knock down power lines, or when a power plant malfunctions, Puerto Rico’s utility company doesn’t have enough workers to fix the problem right away. The utility company is seriously understaffed. In the past decade, PREPA has lost thousands of workers.
There are a few reasons: Puerto Rico’s aging workforce has been retiring, and there aren’t enough young islanders to fill their jobs. Puerto Rican high school and college graduates have been leaving the island at high rates since the recession began, looking for better paying jobs in the United States. Electrical engineers, for example, make about 27 percent more money on the mainland.
The problem was made worse in April, when 600 workers (about 10 percent of PREPA’s workforce) retired early. They feared that upcoming bankruptcy proceedings would eliminate the pension program for future retirees.
In May, a union representative for electrical workers in Puerto Rico warned about the dire consequences for the island. His comments to a reporter of El Nuevo Día newspaper seem more ominous now than ever:
“In the United States, power plants are highly automatized and require little human intervention,” José Rivera told El Nuevo Día. “But here, we have old, modified power plants that only our people are familiar with. It’s an urgent situation, and we are facing an imminent catastrophe for the electrical system.”