Nearly five years to the day after Hurricane Maria left much of Puerto Rico without power for months, something eerily similar has happened again. Hurricane Fiona, a Category 1 storm, hit the island last weekend and knocked out power for the whole island. As of Tuesday morning, power was out in almost 1.2 million homes. How quickly and how many more homes, hospitals, and businesses get their power back on will depend a lot on LUMA Energy, a U.S.-Canadian company that just bought the right to handle Puerto Rico’s electricity transmission and distribution.
The idea was that privatizing Puerto Rico’s electricity would fix all of the problems with the grid on the island. But so far, it hasn’t lived up to that promise. Instead, the privatization of the electrical grid has been a way for companies to make money off of basic services, just like a number of other privatization plans that were sped up after Hurricane Maria.
Fiona’s hard hit on Puerto Rico is a failure on more than one level. Since Hurricane Maria, only $40 million of the $9 billion in federal money meant to fix Puerto Rico’s power grid has been used. Fiona doesn’t seem to have done as much damage as Maria, which took out a lot of the already fragile transmission and distribution infrastructure on the island. This time, there doesn’t seem to be much damage to transmission lines. Most of the damage seems to be in the south and in the mountains. Still, since LUMA took over the power lines from the public Puerto Rico Electric Power Authority, or PREPA, last June, there have been more outages and not much has been done to fix structural problems.
Energy experts have said for a long time that federal funds should be used to build a more reliable grid that uses less expensive fossil fuels from other countries. Not only because of concerns about the environment, but also because of a simple mechanical problem: Electricity from fossil fuels has to be made at centralized power plants, which is still PREPA’s job since it is still in charge of making electricity. Most of the plants are in the south, so electrons have to be sent over the mountains in the middle of the country to the places where people live in the north. Queremos Sol (We Want Sun), a platform for clean energy development and climate justice backed by a number of environmental and community groups and unions across the island, has pushed for a more decentralized and renewable grid that can be turned back on even after it has been severely damaged. Even though a green energy law passed in 2019 with the goal of adding more clean energy to the grid, this hasn’t happened yet.
To understand why these popular, expert-backed changes haven’t been made, you have to look at the bigger picture. Even though Puerto Rico is a territory, it is best thought of as a colony of the United States. Spain gave it to the U.S. after the Spanish-American War in 1898. Like other colonies, it has been used for a long time by politicians and business people to try out new ideas. When a series of generous tax breaks for businesses ran out in 2006, the island fell into a long depression, which was made worse by the global financial crisis not long after. Each government borrowed money to stay in power and pay for basic services, and in the end, they owed more than $70 billion. How that debt was gotten is still a bit of a mystery. Some critics have said that banks came up with ways to go over their borrowing limits and charge high underwriting fees. Investors in “distressed assets” or “vulture funds” are some of the biggest bondholders. These investors buy “troubled assets” for cheap in the hopes of getting big payouts in the future by fighting hard in court. Some of the same funds that bought Puerto Rican debt also bought polluting fossil fuel assets around the world that bigger companies wanted to get rid of to look like they cared less about the environment.
Puerto Rico can’t officially file for bankruptcy like companies or U.S. states that can’t pay their debts. So, in 2016, Congress and the Obama administration put in place the Fiscal Oversight and Management Board, also known as “La Junta.” Its job is to oversee the debt restructuring process and the island’s finances, and it has the power to stop plans made by the democratically elected government. The law that made the board, called PROMESA, doesn’t say that most of its members have to be from Puerto Rico or live there. David Skeel Jr., a law professor and one of the board’s intellectual builders, is in charge of it. He has always said that indebted governments would be better off without democracy.
The model isn’t really brand new. Skeel and his followers were partly influenced by the fiscal control board that the state put in place in New York City in the 1970s as a response to the city’s budget crisis. This was one of the first places where large-scale neoliberal reforms were tried out in the name of being responsible with money. More recently, Michigan’s former Republican governor, Rick Snyder, put emergency managers in charge of cities with mostly Black populations that were having trouble paying their bills. Former Michigan budget director John Nixon is a member of La Junta. He was one of the people who hired the emergency manager who told engineers to fix Flint’s broken water system as little as possible. The board sued the Puerto Rican government earlier this summer to stop it from enforcing a law that would give private-sector workers more vacation and sick time, overtime pay, and meal breaks. The board said that the law would slow down economic growth.
Like the structural adjustment packages that the International Monetary Fund forces on low- and middle-income countries around the world, La Junta promised to bring Puerto Rico back from the brink of financial ruin in exchange for a series of reforms, usually under the guise of creating a good investment climate to get better access to financial markets. Some of these suggestions have been to privatize a lot of public services, cut pensions and benefits by a lot, and cut the number of people working in the public sector by a lot. Right-wing politicians there have often supported these ideas wholeheartedly. The push for privatization has been a good place for con artists to try to make a quick buck. Before PREPA was fully privatized, its leaders tried to get a number of bad contracts with the private sector. The one that got the most attention was given to Whitefish Energy, a new company in Montana, to rebuild power lines after Hurricane Maria. As I wrote in 2020, Milwaukee Bucks owner and private equity billionaire Wes Edens has built his business around the growing demand for methane gas in the Caribbean, including Puerto Rico. Edens started and is CEO of New Fortress Energy, which was given a $1.5 billion contract. This meant that ratepayers had to pay for burning more expensive imported fuel, which was sold as a way to make energy cheaper.
Already building up, anger at LUMA is now boiling over. In the wake of Fiona, many people have asked Governor Pedro Pierluisi to cancel the company’s contract before November 30. If he doesn’t, the island could have to pay a $1.5 billion penalty for breaking ties. The Wall Street Journal says that public officials there are thinking about it.
Companies came to the island in the weeks, months, and years after Hurricane Maria, looking for good contracts and cheap assets they could sell for a profit. In the wake of Fiona, the vultures might start to circle again.
