Puerto Rico has dealt with its share of disasters in recent years. You may know its entire energy grid also qualifies as something of a disaster. Now, despite billions of U.S. tax dollars, there's concern the system is on the verge of a total collapse, prompting the U.S. territory to declare a state of emergency.
Hurricanes Maria and Irma destroyed most of Puerto Rico’s power system in 2017. But it wasn’t much to begin with.
Manuel Laboy: Maria was essentially a huge wake up call.
Manuel Laboy heads up the island’s Central Office for Recovery, Reconstruction and Resiliency.
Sharyl: You’ve had many hurricanes before, but that was the one that seemed to really trigger this realization that we'd better fix all of this.
Laboy: So it is kind of a blessing in disguise, certainly. The silver lining opportunity is that we went through a very, very tough time. It cost us a lot, including lives, and moving forward, looking forward, now we have the chance to address something that we knew that 20 years ago, 30 years ago, it's something that we needed to address.
With Puerto Rico in bankruptcy, a financial oversight board approved hiring an American-Canadian consortium called LUMA Energy to deliver on the island's energy makeover. The company took the reins June 1st.
But before that, billions of your tax dollars had already gone toward Puerto Rico’s electric grid through the Federal Emergency Management Agency or FEMA. It was part of the most expensive disaster relief effort in U.S. history.
Don Cortez is a LUMA executive.
Sharyl: The biggest single lump sum of money that had gone out the door, as of about 2019, was $5 billion for the electric grid. What happened to that money?
Don Cortez: It was put into what was the emergency repairs after Maria. That's where that money went. Then FEMA allocated $10 billion, which is what we're now going to spend on upgrading the grid. So the 5 billion went into just the emergency repairs, paying the contractors that came, whatever equipment they used and poles, whatever they did to restore service at the time. What the new allocation from FEMA is, $10 billion, that's going to upgrade the grid.
Cortez says updating doesn’t mean burying the power lines, but building modern concrete, steel and composite poles that can hold up under an average 160 mile an hour winds. They’re also doing major conversions to solar, wind and battery sources.
Alberto Martinez: People don't have any high expectations in general about what's going to come about from LUMA.
Alberto Martinez, a history professor at University of Texas at Austin, was born in Puerto Rico and has analyzed its many phases.
Martinez: The main impression on the island is that prices will go up. They're already projected to go up from roughly 20 cents in the past two years per kilowatt hour, to 30 cents. So that's going to be a 30% increase. In terms of the improvement of services, there the popular impressions are split, because there are so many people who were grossly dissatisfied with the world-class disaster that was our electric company and its perennial mismanagement, that they do see some hope in having this American/Canadian firm, combination of these two firms, come in and try to do things in a different way.
LUMA’s already been hit with a negative review. An early analysis claims the company's first months of service were marred by “delays, damages and poor service,” which LUMA denies.
After a fourth hike in their electric bills this year, residents began taking to the streets in protest.
At a recent Congressional hearing, Puerto Rico Power officials described matters as “critical.”
Josué Colón/Executive Director, Puerto Rico Electric Power Authority (October 6) : The system was repaired after the hurricane, but not restored.
Wayne Stensby/ CEO, LUMA Energy (October 6): That’s why it’s so critical that we continue on with repairs on generation and repairs and restoration on transmission.
Meantime, the entire project is operating in the shadow of a corruption scandal. After Maria, the FBI charged two FEMA officials in a bribery scheme. They allegedly steered $1.8 billion to a company called Cobra Acquisitions to repair Puerto Rico’s electric grid. The head of Cobra was also charged.
Sharyl: One of the biggest corruption cases had to do with the contract for electric. So what's your comment on that?
Cortez: There is quite a bit of overview and control over where you're going to spend the money, by FEMA, by the local government, and by the regulator. All of this has to be approved before you spend it, and then you have to prove how you spent it, and prove that you just spent it where you say you spent it.
Sharyl: How long, according to your plans, is it going to take before you have really big, meaningful change?
Cortez: I would say it's going to take five to 10 years to make a very, very big difference. Now, there are going to be people will ask me, "Well, am I going to have to wait five years?" No, we're going to make a difference. Every day that we're here, we're going to make a difference. But when you say a big difference, I would say, it's going to take five to 10 years. We're trying to prudently and recently spend $10 billion.
Sharyl: And then, in 10 years, if all goes well, if a big hurricane rips through here, what will happen?
Cortez: Two things will happen. Number one, it'll be far less damage. There will always damage from a hurricane because of the strong winds and tornadoes and things like that. But number one, there'll be much less damage. Number two, we're going to have the manpower to quickly restore service here, equivalent to any best restoration utilities in the mainland.
Sharyl (on-camera): LUMA gets paid not on electricity sold but through a management fee amounting to close to a billion dollars over 15 years. That brings the total investment in Puerto Rico’s energy grid to somewhere north of $17 billion for an island the size of Connecticut.