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Retail Choice Will Not Bring Down Puerto Rico’s High Electricity Rates

Retail Choice Will Not Bring Down Puerto Rico’s High Electricity Rates

Full Title: Retail Choice Will Not Bring Down Puerto Rico's High Electricity Rates
Author(s): Chelsea Hotaling, Anna Sommer, and William D. Yates
Publisher(s): The Institute for Energy Economics and Financial Analysis (IEEFA)
Publication Date: August 1, 2018
Full Text: Download Resource
Description (excerpt):

In the wake of the devastation Hurricane Maria caused Puerto Rico’s electrical system, a plethora of
policy and regulatory changes have been proposed to rebuild and provide resiliency for the electrical
grid. Among the more recent proposals is the suggestion that Puerto Rico move to a model of “retail
choice,” where individual electricity customers select their providers. Puerto Ricans currently get their
electricity from a monopoly utility, the Puerto Rico Electric Power Authority (PREPA).

The impetus for this proposal seems to be that it would reduce the high price of electricity in Puerto Rico,
where residential customers paid an average of 20.2 cents per kilowatt hour in 2017, well above the
average price for the United States of 12.90 cents per kilowatt hour.

José Ortiz, the new executive director of PREPA, is a proponent of retail choice. In an August 20 interview
with El Nuevo Dia, he referred to it as a “second step” in plans to transform the electricity system where
“retailers would come on the scene to negotiate kilowatt sales packages” which customers would

About one-third of U.S. states have adopted some version of retail choice over the past two decades,
and their experience indicates how retail choice would affect electricity rates in Puerto Rico. Rather than
proving to be a boon for customers, retail choice has instead cost residential customers billions in excess
charges in several states, and some providers have harmed customers by using predatory and deceptive
sales practices.

With the turmoil in Puerto Rico’s physical electrical system as well as the many regulatory, ownership, and
policy changes coming or likely to be coming, we are highly skeptical that Puerto Rico can avoid the
missteps that have befallen other states that implemented retail choice. Indeed, we think it is highly
unlikely that retail choice, even if implemented perfectly, would do much to address high residential rates.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

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