November 4, 2016 Read More →

Puerto Rico’s Electric Utility Says It Cannot Improve

Gerardo E. Alvarado León for El Nuevo Dia:

The Puerto Rico Electric Power Authority (PREPA) needed 129 pages, supplements included, to establish and try to justify that they cannot comply with the Modified Integrated Resource Plan (IRP) approved by the Puerto Rico Energy Commission (PREC), which details the projects they should carry out over the next five years to improve their grid’s reliability and efficiency.

In short, PREPA—in its motion for reconsideration, submitted on October 13— has requested that the PREC approve the original IRP, which was submitted in July of 2015.

This first IRP was created by PREPA’s restructuring officer Lisa Donahue and personnel from the company Siemens Industry.  But last September 23rd, the PREC rejected this plan because of PREPA’s inability to comply with the “strict standards” for approval. In its final resolution and order, the PREC stressed that for 14 months they had given PREPA “ample opportunity” to comply with the Regulations for the First Integrated Resource Plan, but “they were not able to produce” the document.

Although the PREC accepted PREPA’s motion 12 days ago, this does not mean that the arguments made by the public corporation will be equally accepted. The PREC has 90 calendar days to deal with the motion.

“We respectfully state that the final resolution and order includes two rulings that must be rescinded, because it is not possible for PREPA to comply with them; it includes an additional number of rulings that must be modified or explained in order to comply with the environmental legislation, avoid unnecessary expenses, and improve reliability; and it arrives at a series of conclusions that must be corrected or modified,” reads PREPA’s motion for reconsideration.  

According to engineer Tomás Torres, coordinator of the Puerto Rico Institute for Competitiveness and Sustainable Economy, PREPA is asking the PREC to “dismiss and rescind” the primary elements of the Modified IRP to perpetuate its reliance on oil and its energy inefficiency.

“What PREPA is requesting is basically that we stay the same. We are also seeing that PREPA continues its historical resistance against change and against being regulated by an independent organism,” he asserted.

PREPA argued that it couldn’t comply with the PREC’s order to begin processing the permits for a big combined cycle unit in Aguirre.

The public corporation stated that neither can they comply with the order to issue the permits and initiate a public bidding process to re-power units #1 and #2 of the Aguirre combined cycle, via new turbines with dual-fuel capacity.

The Modified IRP establishes that, on or before December 31, PREPA must present the PREC with a “detailed plan” on how they will execute both power generation projects.

In their own defense, PREPA stated that requiring both permit processes to be carried out simultaneously “is inconsistent” with the laws and regulations. They also reiterated that the permits for the Aguirre Offshore Gasport Project (AOGP) are pending approval.

“These are projects with the same objectives, the same location, affecting the same generator units. The federal and state laws for environmental public policy do not allow for the parallel assessment of two or more environmental documents to the same end, in the same location, and affecting the same generator units,” PREPA explained, questioning whether the PREC carried out the pertinent legal analysis.

Regarding these arguments, Torres stated that they are “excuses” from PREPA, because the permit evaluations could be done by stages. “Opposing new plants is opposing a more efficient generation of power. Energy is currently generated in Puerto Rico by oil, and it is inefficient. But it would be different with the construction of natural gas combined cycles,” he said, while classifying the PREC’s orders as “imperative and unavoidable.”

Another of PREPA’s justifications to disregard the Modified IRP is that the construction of a new combined cycle in Aguirre, as well as re-powering units #1 and #2, “would have a negative impact” on the public corporation’s efforts to comply with the Mercury and Air Toxics Standards (MATS).

Along the same line, PREPA requested that the PREC modify its final resolution and order to approve the construction of the AOGP.  The independent ruling entity disapproved—for the time being—the construction of the floating natural gas terminal, only allowing for the continuation of the permit, engineering and planning processes, subject to a $15-million limit on expenses.  

For PREPA, the ruling by the PREC is “wrong.” They stated that if the PREC insists on not approving the construction of the AOGP and in giving the green light to the new combined cycle in Aguirre, MATS compliance would be delayed by several years. This delay would result in penalty fees of up to $279.8 million, which would end up being paid by the clients through their electricity bills.

Torres remarked that PREPA shouldn’t oppose the terms posed by the PREC, “because the Island’s electrical system is in crisis. We have plants that are old, inefficient, and environmentally non-compliant. PREPA will have to learn to face these obstacles, like all other utilities do.”

On the north coast

Meanwhile, PREPA challenged the PREC’s decree that they have to issue the permits for three small combined cycle units in Palo Seco.  According to the final resolution and order, on or before June 30 of 2017, PREPA must initiate a public bidding process for the acquisition of one of these units.

Besides, PREPA rejected the removal of units #3 and #4 in Costa Sur, #1 and #2 in Palo Seco, and #7 and #8 in San Juan by December 31, 2020. They also stated that they cannot comply with the designation of units #9 and #10 as “limited use.”

As for Palo Seco, they arguedthat building only one out of three units is “premature and impractical,” and it would increase costs as well, creating reliability issues and a potential delay in complying with MATS. PREPA even warned about possible blackouts, which is why they asked the PREC to modify their final resolution and order to allow for the construction of all three units.

As for the removal of units, PREPA requested “flexibility,” since the electrical system must be operated “in a safe manner.” PREPA claimed that the units “cannot be removed” until a new generation is installed in the north coast and transmission improvements are completed.

The public corporation used the same explanations to justify why it cannot designate units as “limited use.”

“PREPA is putting up obstacles against complying, but every problem has a solution. Instead of not complying, PREPA should look for a solution in coordination with the PREC’s parameters,” Torres insisted.

Renewable

Citing “practical and legal” reasons, PREPA requested the elimination of the required independent audit on the existing renewable energy contracts that are not operational. They also requested the elimination of the requirement stating that, on or before June 30 of 2017, the public corporation must initiate a public bidding process to acquire new alternative projects.

PREPA pointed out that they’re already reviewing the renewable energy contracts, which is why the bidding “should not be initiated” until the evaluation is finished and there is a “clear understanding” of their “interconnection limits.”    

According to Torres, the independent audit is necessary, “because PREPA has demonstrated they are inefficient in implementing laws related to renewable energy.” He added that the bidding should be published on the agreed upon date, since these are projects that “could mean additional income for the economy.”  

Pleased

After notifying that the motion for reconsideration had been accepted, PREPA Executive Director Javier Quintana said he was pleased.

“We are pleased by the PREC’s decision to agree to reassess the proposed modifications, since the AOGP is vital for our environmental compliance (with the MATS). We have warned that the Commission’s proposed modifications would delay this compliance by at least 5 or 6 years, which would expose PREPA to penalty fees of up to $93,750 per day per infraction throughout the time we remain non-compliant,” he said.

He also seemed optimistic that the PREC would reassess the conversions to gas in the Aguirre power plant, and he claimed that the permit process for the AOGP “is at an advanced stage.”

The decision by the NMFS (National Marine Fisheries Service) would allow the United States Army Corps of Engineers (USACE) to complete its joint permit evaluation, which would also allow the Federal Energy Regulatory Commission (FERC) to issue its authorization for the construction of the AOGP.

PREPA Unable to Improve Its Infrastructure

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