Energy regulator approves temporary generation contract

Aguirre Central Power Plant in Salinas

By The Star Staff

The Puerto Rico Energy Bureau (PREB) has approved a contract proposed by the Puerto Rico Electric Power Authority (PREPA) for the establishment of up to 800 megawatts (MW) of temporary emergency generation.

The approval comes over a month after it was announced that Power Expectations would provide the needed energy to stabilize the system. The agreement with Power Expectations includes the installation of generating units in Aguirre (600 MW) and Costa Sur (200 MW). It also sets a fixed rate of 19 cents per kilowatt-hour (kWh) for Aguirre and 20 cents per kWh for Costa Sur, with a structure that can last up to 10 years. According to the resolution, “the prices obtained through the Proposed Contract are reasonable.”

However, the original agreement negotiated by PREPA included rates of 25 cents per kWh for the first two years and for the first one-year extension, and 24 cents per kWh for a second optional extension. The PREB conditioned its approval on the modification of those terms to reflect the lower rates offered by the proponent.

The agency said the revised terms come from an alternative proposal submitted by the proponent and concluded that “entering into a longer-term contract based on this proposal would likely provide greater benefits for customers.”

“The only cost PREPA will incur under the Proposed Contract is payment for the energy delivered by the Supplier, according to the established rates,” the document states, adding that, “the Supplier will be solely responsible for all costs required to implement the project.”

The PREB also concluded that the temporary contracting aligns with the approved Integrated Resource Plan and current public energy policy.

The regulator has given PREPA until this Wednesday to report whether it has reached contractual agreements under the most favorable terms or to explain why this was not possible. Otherwise, it warns that “noncompliance with this Resolution and Order, the regulations, and/or applicable laws may result in fines and administrative sanctions of up to $125,000 per day.”