[This is a perfect storm of human events - the effects of Puerto
Rico’s 100-plus years as a U.S. colony; the damage wrought by the
recent privatization of its electric power grid; and the legacy of the
Trump administration’s reaction following Maria]
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PUERTO RICO’S PERFECT STORM – COLONIALISM, PRIVATIZATION, AND
TRUMP  
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Arthur MacEwan
December 20, 2022
Dollars and Sense [[link removed]]

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_ This is a perfect storm of human events - the effects of Puerto
Rico’s 100-plus years as a U.S. colony; the damage wrought by the
recent privatization of its electric power grid; and the legacy of the
Trump administration’s reaction following Maria _

More than a million customers in Puerto Rico remained without
electricity on Thursday (April '22) after the biggest blackout so far
this year across the US territory , Carlos Giusti/AP Photo

 

In September 2017, Hurricane Maria devastated Puerto Rico. Almost
exactly five years later, Hurricane Fiona did it again. The death toll
from Fiona appears not so great as was the case with Maria, but both
times the island was left in darkness, as the electric power grid
failed. The economic recovery from Maria was slow, and the economic
impact of Fiona is likely to match that prior experience.
 
It is easy to view these two tragedies as “natural” disasters,
but, of course, only if one ignores the fact that human-generated
global warming has contributed to the frequency of severe hurricanes.
In any case, the hurricanes’ causes aside, the impact on Puerto Rico
is the consequence of an even greater perfect storm: the effects of
Puerto Rico’s 100-plus years as a U.S. colony (following centuries
of colonial rule by Spain); the damage wrought by the recent
privatization of its electric power grid; and the legacy of the Trump
administration’s reaction following Maria.

Colonialism

Puerto Rico, like other colonies, has been administered in the
interests of the “mother country.” (See “Puerto Rico’s
Colonial Economy,” D&S, November/December 2015.) This has meant, for
example, providing generous tax advantages for U.S. firms operating on
the island, delivering little benefit to Puerto Ricans but substantial
profits for the firms; requiring that goods shipped from U.S. ports to
Puerto Rico go on ships owned and operated by U.S. firms; controlling
Puerto Rico’s economic relations with the rest of the world; and
sharply repressing efforts to build an independence movement on the
island.

But most of all, the colonial domination of Puerto Rico by the United
States has created a dependency that shapes economics and politics on
the island. Policymakers in Puerto Rico look off the island for
sources of investment and for favors from Washington, D.C.
Consequently, Puerto Rico has failed to develop the internal
foundations for economic growth and has no strong business class and
limited skilled labor. As Associate Supreme Court Justice Sonia
Sotomayor put it in her 1976 senior thesis at Princeton University:
The economic growth of Puerto Rico in the 1950s and 1960s “was based
on a negation of self-sufficiency and an acceptance of utter
dependency on the colonial master, the United States.” 

This colonial dependence created a government that was often corrupt
and lacked competence. It was outward looking, and unable to build
structures that would support the internal economy. Most important,
when the hurricanes hit, the electric power system—both before and
after its privatization—has been a costly, poorly operated burden on
the economy.

(The U.S. government has long claimed that Puerto Rico is not a
“colony” but an “unincorporated territory” of the United
States. Yet, by any reasonable definition of the term, the island’s
colonial status is clear. Moreover, the U.S. government’s 2016
establishment of the Financial Oversight and Management Board
(FOMB)—called “La Junta” in Puerto Rico—to oversee the
island’s economy underscored its colonial status.)

Privatization

The Puerto Rico Electric Power Authority (PREPA) was created in the
early 1940s, a state-owned monopoly that controlled the generation,
transmission, and distribution of electricity throughout the island.
In a 2005 paper, Sergio M. Marxuach, policy director at the Center for
the New Economy in Puerto Rico, points out the provisions in the act
creating PREPA: 

[The act] charters PREPA as a vertically integrated, self-regulated,
tax-exempt, publicly owned monopoly with broad powers to issue
regulations that govern its business and to set rates at which its
services must be purchased by its clients. 

While PREPA did have success in supporting economic growth in the
1950s and 1960s and bringing electricity to all corners of the island,
there is little, if any, reason to think that a self-regulated
monopoly would be an effective provider of power. It increasingly
became inefficient, charged high rates, provided poor service, and
lost money. Its borrowing was a major contribution to the Puerto Rican
debt crisis; PREPA declared bankruptcy in mid-2017.

With PREPA’s failures, after the Maria tragedy, the Puerto Rican
government could have, at least in theory, reformed the public
provision of electricity by: overhauling PREPA; breaking the
island’s single grid into a set of separate grids (so a breakdown in
one area would not pitch the whole island into darkness); supporting
green, efficient energy generation; and establishing meaningful,
continuing regulation. This is not what happened.

Instead, the government, backed by the FOMB, turned to privatization,
contracting in June 2021 with LUMA Energy, a joint operation of a
Canadian and a U.S. firm, to take over the management of the power
grid. With PREPA still responsible for electricity generation, the
arrangement is dubbed a “public-private partnership.”

Neither in the years following Maria nor in the period since LUMA’s
engagement have there been moves to break up the grid into separate
grids and no action to move from imported fossil fuels to green
energy. However, according to an article in The Americano’s Floricua
newsletter on June 30, 2022, “Since the company [LUMA] took over
operations on the island one year ago, rate increases and blackouts
have been constant.” The rate grew by 17% over a year of LUMA’s
operations: 

As of July 1, Puerto Ricans will pay even more for electricity, after
Puerto Rico’s Energy Bureau approved LUMA Energy’s seventh
consecutive rate increase... With the new increase, a household that
consumes 800 kilowatt-hours, will be charged a rate of 33 cents per
kWh. According to the U.S. Energy Information Administration, the
average rate for electricity in the U.S. is 14 cents per kWh.

According to a September 2022 report by the Institute for Energy
Economics and Financial Analysis: 

Five years after Hurricane Maria, the electrical system appears to be
no closer to emerging from bankruptcy. LUMA Energy and the Puerto Rico
Electric Power Authority disagree publicly over major issues. They
have failed to make progress on reducing prices, improving the dismal
track record of implementing savings initiatives, and producing a
better budget. Service delivery has been noticeably worse, and the
various financial and accounting problems that led up to the
bankruptcy remain largely in place. 

So much for privatization. Whether a public monopoly, or a private
monopoly, or a “public-private partnership” monopoly, without
effective oversight and regulation, this virtual disaster is what one
would expect. The popular outcry in Puerto Rico should be no surprise.
(See sidebar.)

Trump

Former President Donald Trump’s disdain for Puerto Rico is
well-known, exemplified in 2017 by his throwing rolls of paper towels
to a Puerto Rican crowd. Presumably he thought they could use the
towels to mop up the mess left by Maria. Then there was his,
apparently serious, suggestion that the United States trade Puerto
Rico for Greenland (which had the side-impact of making it clear that
Puerto Rico was a U.S.-owned colony, if anyone still doubted it). Then
there was President Trump’s claim that there were relatively few
deaths resulting from Maria, while reliable estimates reported 3,000
or more deaths.

Less well-known, however, was that it took three years after Maria,
until September 2020, for the Trump administration to approve the $9.6
billion of federal funds that had been allocated to rebuild Puerto
Rico’s electrical grid. (About $3.4 billion has been added since.)
This funding delay, along with the privatization and generally poor
operation of the colonial government, virtually assured that the grid
would not be ready when Fiona struck the island.

Still, while President Trump took the United States’ Puerto Rico
policy to an extreme nadir, the U.S. government, through many
administrations, has not treated the island well. None have given
emphasis to removing Puerto Rico from its colonial status.

A Final Comment

Puerto Ricans are U.S. citizens, yet living in the colony of Puerto
Rico, they do not vote for the U.S. president and have no voting
representatives in the U.S. Congress. While the island remains a
colony, regardless of what the U.S. government calls it, the people of
Puerto Rico will continue to experience the economic deprivations and
indignities that have been their lot for centuries. 

_[ARTHUR MACEWAN is a professor emeritus of economics at
UMass–Boston and a Dollars & Sense Associate.]_
 
SOURCES: Mivette Vega, “Puerto Rico’s Energy Bureau Approves
LUMA’s Seventh Rate Increase,” Floricua, June 30, 2022
(theamericanonews.com [[link removed]]); Sergio M.
Marxuach, “Restructuring the Puerto Rico Electricity Sector,”
Center for the New Economy, August 22, 2005 (grupocne.org
[[link removed]]); Tom Sanzillo, “Five Years After Hurricane
Maria Progress is Being Made by People—Not Institutions,”
Institute for Energy Economics and Financial Analysis, Sept. 13, 2022
(ieefa.org [[link removed]]); Laila Kearney, “Explainer: What has
happened to Puerto Rico’s power grid since Hurricane Maria?”
Reuters, Sept. 19, 2022 (reuters.com [[link removed]]); James
Baratta, “Puerto Ricans Fight Privatization of Energy and Demand
Democratic Ownership,” Truthout, Oct. 19, 2021 (truthout.org
[[link removed]]); Gloria Gonzalez, “Fiona’s outages
rekindle anger over Puerto Rico’s privatized electric grid,”
Politico, Sept 19, 2022 (politico.com [[link removed]]);
Representatives Nydia M. Velázquez and Raul Grijalva, “The
impending privatization of Puerto Rico’s Energy Authority is a plan
to shortchange workers,” The Hill, May 14, 2021 (thehill.com
[[link removed]]); Catalina M. de Onís and Hilda Lloréns,
‘Fuera LUMA’: Puerto Rico Confronts Neoliberal Electricity System
Takeover amid Ongoing Struggles for Self-Determination,” Georgetown
Journal of International Affairs, June 21, 2021 (gjia.georgetown.edu
[[link removed]]).

_Reprinted with permission of the publisher._

* Puerto Rico; Hurricane Maria; The Puerto Rico Electric Power
Authority; US Colonialism;
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