Canadian Manufacturing

Constant power outages symptom of Puerto Rico’s crumbling economy

Last year, the U.S. territory reported more than 54,000 power failures; Puerto Rico's government can't provide a cash infusion as it faces major budget cuts and struggles to restructure $70 billion in public debt


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SAN JUAN, Puerto Rico—Shuttered businesses. Spoiled food. Damaged appliances.

A recent increase in power outages is taking a heavy toll on Puerto Rico as the U.S. territory’s heavily indebted public power company struggles to modernize decades-old equipment that is crumbling amid a deep economic crisis.

The frequent loss of power, coupled with rising power bills, is spooking potential investors. It has frustrated business owners who complain of lost revenue and forced homeowners to buy new appliances amid unexpected surges.

“It’s never been worse,” Mariela Aguirre, a 49-year-old sales trainer, said of the weekly outages in her neighbourhood tucked in an upscale suburb near the capital. “This is turning into a Third World country.”

The cycle of homes and businesses being plunged into darkness only to be jolted awake by appliances that beep, whir and hum back to life has become common across the island for tens of thousands of Puerto Ricans such as Aguirre who cannot afford generators to offset the costly interruptions.

Last year, the island of 3.4 million people reported more than 54,000 power failures, a 24 per cent increase compared with 2014. Outages in Puerto Rico overall are up to five times higher than those experienced by customers in the U.S. mainland, according to a report published in November by independent, U.S.-based experts at the request of a local commission charged with improving the power company.

The scathing analysis of more than 200 pages says the power company faces an emergency that must be addressed immediately, warning that its generation and transmission infrastructure is “literally falling apart.”

“(The company) appears to be running on fumes, and in our opinion desperately requires an infusion of capital—monetary, human, and intellectual capital— to restore a functional utility,” the experts wrote.

But Puerto Rico’s government cannot provide any kind of cash infusion. It faces major budget cuts in the upcoming months as it struggles to find revenue and restructure some $70 billion in public debt during a decade-long recession. The Electric Power Authority holds roughly $9 billion of that debt, and has reached a tentative deal reached with bondholders after nearly three years’ worth of negotiations.

The power company hasn’t found new sources of revenue given that Puerto Rico has no access to the capital markets. Meanwhile, outages continue to vex its more than 1.5 million customers.

Edgardo Rivera, the new director of the power company’s transmission and distribution system, blamed the majority of outages on long overdue improvements that require crews to disconnect power for several hours.

“Of course we can do better, that’s our goal,” he said, adding he expects the improvements will reduce outages.

But many Puerto Ricans remain wary, especially after the entire island lost power last September in a three-day blackout affecting 1.5 million utility customers.

A fire at a main power plant caused the blackout, but most outages are blamed on deferred maintenance, bad weather, overgrown trees, crumbling infrastructure and lack of skilled workers, according to the report by independent U.S. experts. The study noted that the power company’s workforce is now 22 per cent slimmer than it was in 2014. Outages also have become longer, now lasting more than two hours on average.

“(The company) is barely able to provide electric service with its present fleet and dispatches its units with software that was developed in 1985,” the experts said in their report. “Its approaches to problem-solving are often improvised, with results that are disastrous as often as they are admirable.”

The company also has been plagued by allegations of corruption and mismanagement and is now struggling with a fresh round of negotiations with bondholders.

More islanders demand that the company be privatized in hopes service will improve, but Puerto Rico economist Jose Joaquin Villamil considers that unrealistic.

“That requires a large investment, and it’s not very likely that a private firm will find this a very attractive proposition,” he said.

Jose Garriga, who owns a large Puerto Rico refrigeration and ventilation company, said the power at his headquarters near San Juan and other nearby properties goes out at least once a week.

“Sometimes you’ll have two transformers explode, one after another,” he said. “Everyone in Puerto Rico needs a generator. The system is broken.”


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