Dive Brief:

• With Puerto Rico under a restrictive lockdown to slow the spread of COVID-19, the island's utility has seen its reserve margin grow and outages fall and is "operating better than ever," according to CEO José Ortiz.
• And crashing oil prices mean Puerto Rico Electric Power Authority (PREPA) customers will also likely see electricity rates decline significantly this summer.
• Breathing room for the embattled utility comes as the Puerto Rico Energy Bureau (PREB) enters the final stage of review for a controversial Integrated Resource Plan (IRP) that critics say would continue the island's reliance on fossil fuels and place insufficient focus on the growth of distributed resources.

Dive Insight:

Puerto Rico continues to chart a new course, working to strengthen its electric system and comply with a 100% renewables mandate by 2050. While the spread of the novel coronavirus has complicated matters, it has also made some things easier.

"It's amazing to say, but probably we are operating better than ever," Ortiz said last week in a webinar hosted by New Energy Events. "We are comfortable at this point."

On a typical day, PREPA averages 3,500 outages but Ortiz said the lockdown has lowered that to about 400.

The island currently has about 2,700 MW of generation available, with demand peaking around 2,200 MW. And repaired generation coming online this summer could push the reserve margin to 1,000 MW. A request for proposals for emergency generation yielded more than a dozen responses, Ortiz said, but it is not clear those resources will be necessary due to lower demand. 

Peak demand is currently 9-10% lower than average due to the COVID-19 shutdown, and fuel prices have declined about 50%, Ortiz said.

PREPA recently received some reimbursement from the Federal Energy Management Agency related to Hurricane Maria, which destroyed the island's electric grid in 2017. Private insurance payments have also helped bolster the utility's financial position.

Revenues have declined for the utility, due to lower sales and a moratorium on service shutoffs for customers unable to pay. PREPA has about $440 million in the bank, said Ortiz — almost exactly the same as it had before the lockdown.

"Our cash position is OK," Ortiz said. But he acknowledged, "this is not sustainable in the long-run."

PREPA is bankrupt and the process to restructure the utility's debt is on hold, Ortiz said, with a final decision delayed possibly until next year when the financial outlook is more clear. The utility's financial plan for this year and next will need to be amended, he said. PREPA does not expect demand to return to normal until next year.

In addition, customers will likely see a decline in electricity costs, due to significant drops in oil prices. PREPA is billing about $0.216/kWh in April, said Ortiz, but that was based on February fuel costs. From June on, customers should see prices "way lower" than $0.20/kWh, he said.

'Lots of arguments' over PREPA's long-term strategy

The long-term plan for Puerto Rico's utility is still being determined. A final round of comments were due to PREB last week, to assess the utility's IRP and the potential resource contribution of distributed solar, hydroelectric generation, and resources aggregated into Virtual Power Plants (VPP).

In 2019 PREPA issued a 20-year plan to modernize the island's grid, including installing almost 1.4 GW of solar generation and 920 MW of battery storage — along with retrofitting oil-fired plants to burn natural gas as well as diesel. The continued reliance on fossil fuels has drawn criticism, reflected in comments filed April 20 by conservation groups.

Typically, PREB could issue an order within about two months, according to Agustín Carbó, senior manager of microgrids for Environmental Defense Fund. But COVID-19 and the complexity of the proceeding could push that out further.

"The Bureau is one of the few agencies still working right now," Carbó told Utility Dive. "It will take a while. There's a lot of evidence in this proceeding, and lots of arguments."

EDF recommended that PREB ​evaluate rooftop and utility-scale solar "on a level playing field and approve an IRP that optimizes the use of both." The group sees VPPs as a "decentralized, consumer-centric solution."

PREPA also has 21 hydroelectric units at 11 facilities, with an installed capacity of 105 MW — though operational units total 34 MW and run with a capacity factor of less than 20%, according to the utility's IRP. Many of the units were taken offline in favor of fossil fuels years ago, according to EDF.

Carbó said he expects PREB to reject and modify PREPA's long-term plan. "It's just weak," he said. "It's pretty evident from the reliance on natural gas and new assets that I think could become stranded assets and prevent renewable penetration."

PREPA did not respond to a request for comment, but the utility's previous comments maintain that its IRP will transition the island's energy system to "one dominated by renewable energy sources and energy storage."

Generator AES Puerto Rico filed comments arguing that PREB should allow its two coal-fired units on the island to continue generating through 2027 unless the company and utility "reach an agreement on an earlier transition ... to solar or natural gas."

PREPA currently has about 210 MW of distributed solar from homes and business producing their own energy, according to Ortiz. Due to the coronavirus, the interconnection process "is stopped temporarily but we hope it resumes after the lockdown," he said. "It is very important this continues to comply with Act 17," which mandates Puerto Rico shift to all-renewable energy.

The utility is also in the process of identifying a private partner to run the transmission and distribution system. A consortium led by Quanta has been identified as the preferred entity to run the system, but that decision has also been delayed due to COVID-19.

"The planning period is particularly chaotic — yet finishing in an expedited way is critical," Roy Torbert, principal of Rocky Mountain Institute's Islands Energy Program, told Utility Dive.

In January, PREB rejected a petition from the utility to delay the IRP following a series of earthquakes and damage to the island's generation.

"PREB sees the conclusion of the IRP as essential to the people, and shouldn't be delayed," Torbert said in an email. "The plans that emerge need to adjust to a radically different reality, but we don't yet have confidence that they will."