Nearly six years after Hurricane María destroyed Puerto Rico’s electrical grid and triggered the second-longest blackout in world history, Raquel Maria Gonzalez Sparks still loses power weekly, if not daily.
The nonstop outages — which many on the island say worsened after a private company took over the public power system in June 2021 — have left Gonzalez’s life in tatters.
She can’t complete her work as an independent contractor teaching and translating between English and Spanish when she can’t get online, and her income is already down by 25%. Voltage surges destroyed two computers, a refrigerator and a battery system. Grocery prices recently doubled, and the produce Gonzalez depends on as a vegetarian regularly spoils in her busted fridge when her useless stove and microwave can’t cook. Thieves steal all kinds of stuff under the cloak of night without power flowing to streetlights or security cameras.
The transformer down the block explodes at least once every two weeks, knocking out power for her entire neighborhood in a suburb of the sprawling capital city of San Juan. She needlessly burns through fuel as her car sits in traffic jams behind disabled stoplights. Her lungs ache from the air pollution spewed by her neighbors’ diesel generators that switch on during the extended blackouts that occur at least once per week. The roar of those generators all night keeps her from sleeping. The roasting heat on days when air conditioners don’t work raises her risk of heat stroke — as well as the risk for her 86-year-old mother.
And for all that, Gonzalez, like most Puerto Ricans, pays nearly twice the national average rate for electricity — a cruel reality for a U.S. territory with worse poverty than the poorest U.S. state. Businesses pay three times the national rate.
And that’s just according to the latest federal data available, which is from April, before the summer surge in fuel prices. Since the new utility LUMA took over the power system two years ago, the U.S.-Canadian joint venture has repeatedly raised electricity prices to cover the costs of a haphazard reconstruction of the grid.
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Now it’s up to a federal court to decide whether Puerto Ricans should fork over even more money to pay down the debt and interest the state-owned Puerto Rico Electric Power Authority owes to the Wall Street equivalent of loan sharks.
The so-called “legacy charge,” proposed by the unelected fiscal control board that wields veto power over any spending by the territory’s elected government, “will represent over one hundred dollars out of pocket a year for the foreseeable future,” Gonzalez wrote in written testimony filed with the U.S. Bankruptcy Court for the District of Puerto Rico on June 7.
That’s “money I do not have nor have the prospect of getting,” Gonzalez, 56, wrote.
“I am the sole caregiver of my elderly mother who will soon need to move in with me,” she wrote. “I fear for her health and for my future because as I get older and my income continues to shrink there will come a moment, I will not be able to cover the cost of living. I will lose my home and become homeless.”
This Kafkaesque reality is nothing new for Puerto Rico, whose population of more than 3 million mostly Spanish speakers benefit from U.S. citizenship but never received the full protections of the Constitution or federal largesse.
What is different is how broad a cross-section of Puerto Rican society is now rising up to oppose what many see as an attempted shakedown of an impoverished Caribbean island to pay off high-risk investors, pejoratively called “vulture” funds.
In a letter sent in June to the fiscal oversight board, which the U.S. Congress established in 2016 after Puerto Rico defaulted on billions of dollars in debt, at least 50 organizations demanded the overseers abandon a debt-restructuring proposal. They said it would “only weaken an already failing system, in addition to provoking more business closures, layoffs, and outmigration, further imperiling the island’s economic recovery,” according to a copy HuffPost obtained.
The signatories ranged from environmentalists and labor unions to landlords and retailer trade associations. It was a show of unity few had seen in the territory since roughly one-third of the population took to the streets in 2019 to demand the resignation of Gov. Ricardo Rosselló, whose leaked text messages showed the dynastic son of a former governor making crass jokes about the bloated bodies of those killed in Hurricane María.
“This is not political. This is fundamental. Is it just? Is it justo? Is it merited that we give future income from Puerto Ricans who struggle every day to bondholders who don’t have any security?” asked Marimar Pérez-Riera, the president of the Association of Condominium Owners of Puerto Rico. “By definition, they knew what they were buying.”
“This is not political. This is fundamental. Is it just? Is it justo? Is it merited that we give future income from Puerto Ricans who struggle every day to bondholders?”
– Marimar Pérez-Riera, the president of the Association of Condominium Owners of Puerto Rico
The debt crisis traces back to the late 1990s, when then-President Bill Clinton made a deal with Republicans in Congress to revoke a federal tax break that had encouraged manufacturers to set up shop in Puerto Rico, helping to create middle-class jobs and provide an industrial tax base for the territory. As factories closed, successive Puerto Rican governments made use of the island’s high credit rating to issue more and more bonds, borrowing money to hire laid-off workers and make up for the difference in funding for schools and police.
PREPA, as the state utility is known, went deeper and deeper into debt just to pay for the basic fuel to run heavily polluting power plants that depend almost entirely on coal, oil and gas. The power authority failed to make proactive investments in transitioning to cleaner sources of electricity or reinforcing the aging distribution lines.
When it became clear that Puerto Rico’s credit rating did not match its actual solvency, bondholders sold to high-risk investors whose strategy is to buy distressed debt at a fire-sale price, then pour money into lawsuits to force as close to full repayment as possible.
By the time Puerto Rico stopped paying its creditors, the territory had more than $120 billion in debt and unfunded pension obligations, nearly seven times the $18 billion Detroit owed in 2013 when the city declared the largest municipal bankruptcy in U.S. history. PREPA’s bonds are worth $8.5 billion in par value.
In June 2016, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act — known as PROMESA, the Spanish word for “promise” — and created the fiscal control board tasked with turning over the proverbial couch cushions to find money wherever it could in Puerto Rican society.
Almost exactly 15 months later, Hurricane María made landfall as a Category 5 storm, leaving the island so devastated that thousands of Americans, stranded far from doctors and unable to get refrigerated medicine or clean water, died medieval deaths.
Scorned by critics as “la junta,” a noun typically used to describe Latin American military dictatorships, the fiscal control board quickly became the focus of political activism, especially by left-wingers who saw the imposition of the unelected panel as a particularly egregious manifestation of U.S. colonialism on an island Washington conquered in 1898 as part of an overt attempt to create a European-style empire.
But the fight over the rate hike “goes above and beyond the political spectrum,” said Pérez-Riera, who typically votes for the New Progressive Party, a right-leaning coalition built largely around advocating to make Puerto Rico the 51st U.S. state and known by its Spanish acronym PNP.
“You have people on the far left and the super far right all marching under the same premise,” said the condo association chief, who headed PREPA’s board of directors from 2011 to 2012 under conservative former Gov. Luis Fortuño.
“I’m one example. When I served this term on the PREPA board, it was no secret I was appointed by a PNP governor,” she added. “But I am marching in the front lines and helping actively in what started probably as a leftist movement.”
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Gov. Pedro Pierluisi, a fellow member of the pro-statehood party, has said Puerto Rico’s post-storm recovery is going “as well or better” than New York after Superstorm Sandy or New Orleans after Hurricane Katrina, and defended the move to give “sophisticated players” in the private sector control over the power system. (While LUMA took over electricity distribution in 2021, the New York-based liquefied natural gas company New Fortress Energy assumed command over PREPA’s power plants on July 1.)
Still, the governor told Politico Pro deputy energy editor Gloria Gonzalez last month that the state of the territory’s grid is “one of the few things that keep me awake at night every now and then.”
U.S. Energy Secretary Jennifer Granholm, who has made frequent visits to Puerto Rico as the Biden administration distributes billions in rebuilding funds, returned to San Juan on Monday to announce the federal agency’s plans to spend $450 million on rooftop solar across the island.
If power services worked well, “there’d probably be less opposition,” said Cathy Kunkel, a San Juan-based energy consultant with the Institute of Energy Economics and Financial Analysis, which has published numerous reports criticizing the privatization of Puerto Rico’s grid and advocating for more solar panels, which have tended to keep the lights on — at least during the day — in certain parts of the island even when blackouts occur.
“The idea of raising rates more to pay for services that are so dysfunctional is really infuriating,” Kunkel said.
As opposition grew, the fiscal control board withdrew its debt-restructuring proposal last month. It has yet to present its latest plan to U.S. District Judge Laura Taylor Swain, who previously handled the Bernie Madoff Ponzi scheme and other big criminal cases before taking on Puerto Rico’s debt litigation in 2017. While legal proceedings began last month, negotiations between the board and lawyers representing Puerto Rico’s creditors could stretch on for months.
But “whatever number over 1 cent for these bondholders is directly affecting the pockets of Puerto Ricans and their lifestyles and livelihoods,” Pérez-Riera said.
“Remember: the U.S. does not have the protections that — let’s say, Belgium — has with vulture funds. So these vulture funds, that’s their job. They knew what they were buying and they bought it at dirt cheap and now they want a premium. They want par for bonds that Puerto Ricans had to sell at 30 to 40 cents per dollar. That just sounds really, really onerous,” she added. “My sympathies to the judge.”
For Gonzalez, even a small increase would be devastating, she told the court. Unlike the condo owners Pérez-Riera represents, who don’t control their rooftops in high rises, Gonzalez installed solar panels on her home. But the photovoltaics don’t produce enough electricity to run any major appliances. And since an electrical surge from the faulty transformer fried her batteries, she can’t even store the extra power to use at night.
With no pension, no 401k package and no extra income to put in savings, she can’t imagine ever retiring.
“This means I will continue working for the foreseeable future, being completely dependent on reliable electricity in my home, not only for appliances and such, but for my livelihood itself,” she wrote in her court filing. “As the situation continues to deteriorate, my income will continue to be increasingly impacted.”