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Este informe no está disponible en español. CARIBBEAN BUSINESS Power StruggleWith The Urban Train, The P.R. Coliseum, And Other Electricity-Hungry Megaprojects Coming Online In The Next Few Months, Experts Wonder Whether Prepa’s Power Grid Can Handle The Demand BY MARIALBA MARTINEZ September 11, 2003 Running on empty: Unless Prepa boosts its electrical generation capacity soon, brownouts and blackouts may become the order of the day around the island On Aug. 14, eight states along the U.S. East Coast plus Canada’s Ontario province suffered the worst blackout in U.S. history. It left more than 50 million people without electricity for up to 25 hours. The event immediately raised concern in Puerto Rico about the local power system, with many wondering how long it will be before a similar event occurs on the island. Puerto Rico Electric Power Authority (Prepa) Executive Director Hector Rosario attempted to assure customers that the agency’s capability to generate 5,359 megawatts (MW) of electricity is sufficient to meet the island’s energy needs, with 1,983 MW held as a reserve margin (the unused capability of an electric power system.) In the next 12 months, however, the government will inaugurate several major public projects, such as the Urban Train and the Puerto Rico Coliseum, which will require huge amounts of electricity. The Urban Train alone, once it begins full operation, will require at least 50 MW to operate 16 stations from Bayamon to Santurce’s Minillas. Is the island’s power system ready to handle the increase in demand just around the corner? Will the Urban Train cause more power outages? When the Urban Train began trial runs this year between Bayamon and Cupey, Prepa customers blamed the train for frequent blackouts, electrical surges, and brownouts. A brownout occurs when Prepa reduces the voltage, forcing electrical appliances and lights to use fewer watts. As recently as Aug. 10, four days before the power outage along the U.S. East Coast, Prepa was responding to criticism about the frequency of such outages, particularly near Urban Train stations. Lately, outages have been occurring more in the island’s northern region, which consumes more than 50% of the electricity produced by Prepa. Prepa has explained that two 115,000 kilovolts (kV) transmission lines were damaged, causing three generators at the San Juan and Palo Seco stations, which serve the north, to shut down. Compounding the problem was the scheduled shutdown for maintenance of two Central Aguirre 450-MW generators (two of the biggest in the entire Prepa system). Will the situation worsen when the Urban Train begins operating in December? "Since the start of [construction for the Urban Train], the project has been coordinated with Prepa," said engineer Juan Requena, whose company is a member of Siemens Transit Team Puerto Rico (STTPR), the consortium hired to design, build, and operate the Urban Train. Requena’s company is overseeing the alignment of the Urban Train’s high-voltage power-distribution system. "All substation connections to Prepa’s distribution line are final, except for our link to Hato Rey’s transmission center, which will be changed to Prepa’s Martin Peña station once the station is completed." When asked about the blackouts and brownouts in areas near the stations, Requena said, "We have made the [electrical] connections and are positive they will adequately distribute electricity to the train system. Prepa is conscious that it needs to supply a certain amount of electricity. "But we will have to wait and see the reliability and quality of the service when the train starts operating at full power and whether [Prepa] provides us with the needed frequency and no energy spikes," added Requena. "Because the train system is sophisticated, low voltage will be deadly." What STTPR members are essentially saying is that the power-distribution system that runs the trains will depend on the electricity provided by Prepa. Since 1999, Prepa has known about the Urban Train’s energy needs and should have been preparing, adding substations where needed, verifying where power failures tend to occur, etc. Standing up for Prepa "Prepa is one of the strongest electrical systems, [stronger than some] systems that power U.S. cities," said Rosario during an interview with CARIBBEAN BUSINESS the day after the U.S. blackout. "But Prepa’s power grid can’t be compared with stateside systems because those are interconnected [to power grids managed by private suppliers] and ours is an isolated system." Prepa is Puerto Rico’s only retail provider of electricity. Notwithstanding recent purchase agreements with private electricity-cogeneration plants EcoElectrica LP in Peñuelas and AES Puerto Rico in Guayama, Prepa has a monopoly on power generation, distribution, and transmission on the island. "I control Prepa’s power-distribution grid through a computerized system connected to Monacillo’s Energy Control Center," said Rosario. "Decisions about New York’s system are made by seven or eight energy-control systems with different interests and operating under diverse scenarios. Prepa’s power grid belongs to the government and is controlled by a single entity." There is an important distinction between capability to generate power and capability to meet energy needs. Every day, Prepa’s power generation, transmission, and distribution equipment and machines go out of service for various reasons. There are scheduled-maintenance programs, which make some equipment unavailable for a time. Unexpected mechanical failures also occur. Trees or branches might interfere with high-voltage transmission lines, causing the lines to shut down. Weather phenomena such as rainstorms and hurricanes might cause service interruptions. There are breakdowns from vehicular or construction accidents, the underground installation of cable-TV lines or water pipes, and more. Prepa’s reserve margin is intended to deal with situations beyond the agency’s control, but the regular electricity-generation system must be operating at its expected capacity. This is achieved by providing scheduled maintenance and using the equipment & machinery efficiently. When breakdowns in the electricity-generation line occur, Prepa must bring in power from other plants within seconds, the time it takes to switch on a lamp. What it takes to run the Urban Train The government has invested more than $2 billion in the Urban Train since construction began in 1996, with Germany’s Siemens AG winning the bid to design and build the project. This month, the U.S. House Appropriations Committee approved a $43.5 million construction grant. Designed and built by a team of 11 companies from Puerto Rico, the U.S. mainland, and other countries under the supervision of STTPR, nine of the 16 train stations should be ready by September. The remaining seven should be completed before year’s end. The government has decided to delay the Urban Train’s inauguration until all stations are operational. In an attempt to determine why communities near train stations have been complaining of more blackouts and brownouts, CB spoke with several STTPR members. The Urban Train’s electrical, mechanical, and communications systems were installed by Lord / Mass, a joint venture between Lord Electric Co. of Puerto Rico and Boston’s Mass. Electric Construction Co. (CB July 24). "Lord / Mass installed the Urban Train’s five power substations in Santurce’s Martin Peña sector, Hato Rey’s San Juan Center, Rio Piedras Medical Center, Guaynabo’s San Alfonso sector, and Bayamon’s Jardines de Caparra," said Lord Electric President Roberto Gorbea. "Each power substation works independently to convert Prepa’s 38-kV transmission to 13.8-kV distribution, which is further converted into adequate power needed to run the station and parts of the rail system. "If one of the five power-distribution substations is de-energized, the nearest substation will compensate…and provide power to both stations and rail systems until the problem is solved," added Gorbea. "All the power substations have already been energized by Prepa, and the electricity used in the Urban Train serves the train system exclusively." Lord / Mass’ power-distribution system for the Urban Train is similar to Prepa’s power-distribution system, but it serves only the train. "Prepa’s electrical distribution consists of generating stations, transmission lines, and distribution lines," explained Requena. "The San Juan area is served mainly by the Palo Seco and San Juan plants. The output of these plants is delivered to transmission centers and substations throughout the island via transmission lines operating at different voltages [230 kV, 115 kV, and 38 kV]. Each center and substation is fed from a different generation plant, which together form a [power] grid. In the event of an outage in one line, the load can be transferred to other circuits." STTPR Project Director Robert Jungkind spoke about how the train’s power system affects surrounding neighborhoods. "The [Urban Train’s] five power substations are the only links to Prepa," he said. "When a train goes through a community, it has no impact on that area’s electricity output since our energy comes from one of two substations linked to Prepa." While Jungkind and Requena admit Prepa’s energy output failed on many occasions during the Urban Train’s trial period, they are quick to note that it had nothing to do with the train system’s design. Borrowing from Peter to pay Paul An inside source at Prepa told CB that nothing scares the daylights out of politicians like electricity blackouts. During fiscal year (FY) 2002, Puerto Rico suffered 28 service interruptions because of failures in the generation system, seven more than in the previous year. Each failure lasted an average of 13 minutes in FY 2002 and 14 minutes in FY 2001 with a maximum of 46 minutes and 37 minutes, respectively. Not counted were technical failures, which can be caused by damage to the generation system from car accidents, trees touching power lines, or weather conditions. Such failures could number in the hundreds each year. More worrisome are the brownouts, which can be dangerous situations when the quality of the electricity is affected by a voltage reduction. People usually notice lights growing dimmer, emergency generators or surge protectors kicking on and off at rapid intervals, and electrical appliances that break down frequently. Electricity providers reduce voltage when they have less energy to spare. Brownouts mean higher consumer costs for the maintenance and repair of electrical appliances, for fuel, and for emergency generators. "Prepa authorizes brownouts to avoid blackouts," said our source. "The electricity provided is of lesser quality to avoid an energy shutdown. Brownouts are supposed to be limited to short periods of time. An example would be to stabilize a situation when generation units shut down. The Rossello administration was better organized and reduced blackout rates, and this administration feels it has to live up to that record. "To avoid blackouts, the Rossello administration proposed authorizing cogeneration companies such as EcoElectrica and AES to generate energy, thereby increasing Prepa’s electricity capacity," added the source. "The two cogeneration plants sell Prepa close to 1,000 MW of electricity, which basically constitutes Prepa’s reserve margin. "In addition, this administration has used funds that should have been earmarked for maintenance of equipment and machinery for projects in Gov. Calderon’s special communities, including providing electricity and improving the infrastructure. Municipal governments are responsible for these capital improvements, but Prepa is the cash cow for these projects. It isn’t that these communities don’t deserve electricity but that the funds weren’t destined for such use," said the source. This diversion of funds is causing frequent breakdowns in the island’s electricity system. According to a CB source, as Prepa dips into reserve margins to operate the system, it reduces whatever protection the power grid has in case of a major incident. Announcements such as the one made Aug. 20 that Prepa had managed to supply enough electricity on the day with the highest consumption in the agency’s history could translate into, "We dodged the bullet one more time!" How reliable is Prepa? Prepa’s Rosario has become more visible to the public in the past six months. Situations such as Prepa’s clashes with labor unions over the perceived privatization of the agency (Bill No. 3603 signed into law by Gov. Calderon on Aug. 22) and increasing public attention on power outages, not to mention the upcoming general elections, seem to have fueled Rosario’s public appearances. Rosario’s messages are invariably positive. He talks about his agency’s plan with a lot of confidence. For example, according to Rosario, Law 3603 is intended for Prepa to create independent corporations that develop or participate in revenue-generating business ventures. Yet when CB questioned Rosario about Prepa’s Puerto Rico Information Network (PRIN), a fiber-optic ring that has been in place around Puerto Rico since 2001, Rosario said the project hadn’t been able to operate within Prepa’s regulations and so it couldn’t go forward until Law 3603. According to inside sources, however, PRIN wasn’t implemented because it was initiated by the Rossello administration. The government has been ignoring the fact that the fiber-optic network could be leased to mobile phone and cable TV carriers, generating more than $200 million for the cash-hungry agency. Rosario has also boasted about Prepa’s new investment rating, which Moody’s Investors Service upgraded to "A3" from "Baa1." In addition, the agency recently issued $530 million in Prepa bonds in the U.S. exempt market. As to Prepa’s capital improvements program, after two-and-a-half years of relative inactivity and with elections fast approaching, it is finally taking off with a number of projects. Among them is the $40 million construction of the first two phases of a 115-MW transmission line surrounding the San Juan metro area, which will increase voltage to 13.3-kV and improve power regulation. Prepa has also awarded a $21 million bid to build Martin Peña’s 115-MW / 38-kV gas-insulated substation, which will be linked to the Urban Train’s fifth power substation. In August, Rosario announced the agency had finally begun construction of a $60 million, 230-kV double conductor line between Costa Sur Generation Plant and Aguas Buenas’ Transmission Center, part of a transmission loop around the island begun by the Rossello administration in 1999. Announcements about all of the abovementioned projects were made between June and August of this year. What Prepa is doing to control high electricity costs Prepa generates, transmits, and distributes electricity all over Puerto Rico, serving more than 1.4 million customers. Prepa had revenue of $2.5 billion in FY 2003 (ended June 30), a 14% increase over the $2.2 billion in FY 2002. Operating expenses during FY 2003 were $1.8 billion, 13% more than FY 2002’s $1.6 billion. Net revenue grew 7%, from $627.1 million to $672.5 million. Complaints about spiraling electricity costs harming Puerto Rico’s economic competitiveness top every survey of the manufacturing industry. With poor maintenance, equipment dating to the 1970s, nearly 9,633 employees, and a $444 million payroll (not to mention uncontrollable issues such as rising oil prices worldwide), there is little possibility and even less expectation that electricity rates on the island will decrease. When speaking at the Puerto Rico Manufacturers Association’s August meeting, Rosario announced Prepa’s plans to build a power plant in Mayaguez that would probably run on natural gas. He also revealed Prepa is analyzing the cost-effectiveness of converting the agency’s more expensive fuel-burning plants to use natural gas as the primary energy source. "We have determined the next electricity-generation expansion project should take place in the western region and should have the ability to use liquefied natural gas," said Rosario. "This strategy is in agreement with Prepa’s criteria for fuel diversification, not only as it concerns possible fuels but also geographically. It is also in line with our expansion plan, which requires additional energy-generation capability by 2008 or 2009." Currently, an average 28% of the island’s electricity is provided by coal or natural gas, 71% by petroleum, and only 1% by hydroelectricity. Prepa intends to change those percentages by 2012 to 33% natural gas, 33% coal, 33% petroleum, and 1% hydroelectricity. To EcoElectrica President Ernesto Cordova, Prepa’s choice is obvious. EcoElectrica has already begun preparations to supply natural gas for the next generation of power plants in Puerto Rico. In 2002, EcoElectrica completed construction of a gas pipeline to Costa Sur. The co-generation plant in Peñuelas already has plans (and the land) to build a second 42 million-gallon storage tank for natural gas. "We have taken advantage of our plant’s design to implement certain efficiencies in the generation of electricity," said Cordova. "The investment made to EcoElectrica’s plant includes plans to integrate a second gas terminal to increase Prepa’s gas volume, either for a new plant or for converted power plants." One of the biggest stumbling blocks for telecommunications companies in Puerto Rico is the lack of reliable networks for signal transmission. In April 2000, the Puerto Rico Electric Power Authority (Prepa), under then-Executive Director Miguel A. Cordero, established a fiber-optic telecommunications corporation called Puerto Rico Information Network Inc. (PRIN). One consultant projected PRIN’s annual revenue at $3 million (for as few as 12 fibers leased) to $800 million. PRIN’s objectives were to develop, finance, implement, and administrate a telecommunications system based on state-of-the-art fiber-optic technology. Approximately 400 miles of fiber-optic lines would be installed in Prepa’s high-voltage transmission network of overhead ground wires (extra wires running along the tops of transmission towers that conduct electrical current to the ground without damaging the power lines). Prepa’s revenue from PRIN would be used for a number of purposes. First, Prepa would invest in capital improvements to its infrastructure, replacing machinery and equipment from the 1970s with newer, cost- and energy-efficient units. In addition, fuel-diversification strategies would continue to be encouraged, such as EcoElectrica and AES, two co-generation projects approved and begun during the Rossello administration. More important, the government wanted to address the rising cost of electricity, which has prevented Puerto Rico from being competitive in the global economy. The plan was to fix customers’ electricity rates and create a special fund from PRIN’s revenue to subsidize Prepa’s electricity costs. If fuel prices increased and Prepa’s costs to generate electricity exceeded the revenue from customers’ fixed tariffs, the balance would be paid from the special fund. Potential customers for PRIN included Prepa’s own microwave-based internal telecommunication’s division, as well as Puerto Rico Telephone, cable-TV providers, and mobile phone companies such as Verizon, Centennial de Puerto Rico, TLD, and Cellular One. PRIN and Prepa had agreed PRIN would install the network using a loan from Prepa. Once the network was activated, PRIN would act as a private telecommunications provider, leasing all fiber-optic lines not needed by Prepa to retail telecom companies. PRIN would bill Prepa for maintenance and operation costs, plus 10%. The total cost of the project was estimated at $44 million. PRIN’s development was tied to two of Prepa’s key infrastructure projects: the construction of a 230-kilovolt (kV) transmission loop around the island and a 115-kV transmission loop ringing the San Juan metro region. The island’s electricity-distribution system required these infrastructure improvements to safeguard the transmission loop from breakdowns and increase the effectiveness of transmissions from Prepa’s southern plants to the north, where 50% of the energy generated is consumed. The corporation is still active, even though Gov. Calderon recently signed a law granting Prepa the right to create, acquire, or operate corporate subsidiaries related to new-technology development. One of the projects to be developed by this administration is PRIN. Installation of the fiber-optic network in Prepa’s major distribution lines was completed in 2002, but final construction work on the 230-kV loop began only recently. In July 2003, Prepa Executive Director Hector Rosario held a groundbreaking ceremony to announce the $60 million installation and conversion of a double-conductor 230-kV loop between Peñuelas’ Costa Sur Generation Plant, Aguas Buenas’ Transmission Center, and Ponce’s Cerrillos sector. A $35 million, 230-kV line between Yabucoa and Sabana Llana is also under construction. A line between Costa Sur and Arecibo’s Cambalache, which would cost an estimated $40 million, is being evaluated. Energizing the Urban Train The Urban Train system will be 17.2 kilometers (nearly 11 miles) long and will link 16 stations in the San Juan metro area. It will use electric trains that can travel at 55 miles per hour (mph), although the short distances between stations will limit the average speed to less than 20 mph. Most of the Urban Train will run on an elevated guideway energized with 750 volts of direct current from the third rail. One section of the train system will be at-grade and another one, in Rio Piedras, will be underground. The train will release no emissions into the atmosphere, and vibration and noise levels will be within standards of the Federal Transit Administration. The Urban Train will initially operate 74 cars of stainless steel, each 75.5 feet long and accommodating 72 seated passengers. The cars will travel in pairs. To develop, design, build, and operate the Urban Train system, Siemens AG formed a consortium of local, U.S. mainland, and international companies known as Siemens Transit Team Puerto Rico (STTPR). The 11-member team includes Siemens Transportation Systems, a world leader in turnkey rail systems. Other members include Alternate Concepts Inc., a Boston-based consultant specializing in transportation operations with a renewable five-year contract to operate & maintain the Urban Train, and Juan R. Requena & Associates, a local engineering consulting firm overseeing the fixed-facilities design and the alignment of the high-voltage power-distribution system. Lord / Mass, a venture between Lord Electric Co. of Puerto Rico and Boston’s Mass. Electric Construction Co. are responsible for the design and installation of the train’s electrical and mechanical systems, including its power supply, signaling, train control, and communications. Also on the team are Redondo-Perini, two local construction companies that formed a joint venture for the project, and Parsons Brickerhoff, a United Kingdom-based firm overseeing the transit architecture; engineering (civil, systems, and construction interface); and at-grade, tunnel, and aerial facilities. Prepa at a glance The Puerto Rico Electric Power Authority (Prepa) operates as an isolated system and has a monopoly over electricity generation, transmission, and distribution on the island. The government-owned power-generation plants are spread throughout the island, with two sites in the north and three in the south. According to Prepa, the agency spent $203.8 million on operation & maintenance during fiscal year (FY) 2003, of which $90.9 million went to capital improvements. With Prepa’s annual fuel purchases averaging close to $900 million, its program to diversify fuel sources is a cornerstone for development. After being fined by the U.S. Environmental Protection Agency for violating emissions regulations, Prepa has been complying since January with an accord to use Bunker C fuel with lower sulfur content. This translates into an additional $25.4 million in fuel costs to date. In addition, Prepa must invest up to $420,000 to establish air-emission monitoring stations throughout the island. Between January 2001 and July 2003, Prepa’s fuel costs averaged $26.62 per barrel, with total fuel costs estimated at $2.1 billion. The agency has been negotiating purchase agreements with various suppliers, including Vitol SA, Petrobras, FAMM (Chevron Texaco), Shell Chemical Yabucoa, Texaco International Trader, Veba Oil Supply & Trading, Esso Standard Oil, and Lukoil. Since November 2002, Prepa’s much-publicized hedging (insurance) program has covered 1.5 million barrels of Bunker C fuel. Approximately $3.5 million has been spent on hedging agreements with a $6.2 million return. Some of these funds have been used to provide an 11% reduction in the electricity bills of manufacturing companies establishing new operations or expanding in Puerto Rico. Another 8% reduction was approved in April for manufacturing and agricultural operations over a 20-month period. The San Juan metro area is primarily served by San Juan’s Combined Cycle Steam Plant, which operates two types of turbines to meet load demands in the most cost-efficient manner, and by Toa Baja’s Palo Seco Steam Plant. There are two plants in Salinas: a steam power plant and a combined cycle plant. Costa Sur’s Steam Plant is in Peñuelas and Cambalache Gas Turbines Plant is in Arecibo. Prepa also buys electricity from two private cogeneration plants. It gets up to 507 megawatts (MW) from EcoElectrica, which has a liquefied natural gas & combined cycle steam power plant with the ability to burn propane and petroleum as a backup. Up to 454-MW come from AES, which has a coal-based steam plant. So far, EcoElectrica generates about 15% of Prepa’s total electricity demand and AES an average of 17%, both operating nearly at full capacity. While AES’ coal-based plant should make the operation more cost-efficient, the number of federal regulations with which the plant must comply makes operational costs almost equal to EcoElectrica’s cheaper natural-gas facility. Yet both companies’ electricity-production costs are less than Prepa’s. The agency’s long-term goal is to increase private co-generation of electricity, particularly with natural gas, to at least 50% of total demand. Prepa flourishes with EcoElectrica and AES co-generation plants EcoElectrica LP and AES Puerto Rico LP saved the day for the Puerto Rico Electric Power Authority (Prepa) when their private co-generation plants began providing the agency with approximately 1,000 megawatts (MW), representing some 32% of Prepa’s electricity generation and just about all of its average reserve margin. Co-generation is the output of various energy sources such as heat, water, and steam from one type of fuel. EcoElectrica was the first co-generation plant to begin operating in Puerto Rico using liquefied natural gas as the principal energy producer. Since its start in 2000, the company has also burned backup fuels (propane gas or distillate oil) to provide Prepa an average 507-MW of energy, or approximately 15% of Prepa’s electricity generation. EcoElectrica operates two 180-MW gas turbines and a 214-MW steam turbine. Natural gas is one of the safest and cleanest combustible fuels. It is also considered the most efficient since it requires lower operational and maintenance costs than petroleum. Prepa Executive Director Hector Rosario recently announced the agency’s plan to build a new, gas-burning power plant in Mayaguez. The agency is also considering converting its fuel turbines to burn both gas and petroleum. "We have no immediate plans to build a second gas-storage tank before we learn the future of co-generation on the island," said EcoElectrica General Manager Ernesto Cordova, whose Peñuelas plant has ample space for a second tank. "There are several options, including Prepa converting some of its petroleum-burning plants to gas. "According to how similar projects have developed in other countries, we believe the ideal plan would entail building a pipeline from EcoElectrica to a nearby power plant and then developing a ring of pipelines extending toward the San Juan metro area," added Cordova. "But the first pipeline must be connected to a plant large enough to generate sufficient energy to make it worthwhile." Soon to be officially owned by Gas Natural de España, EcoElectrica’s $700 million venture has 77 employees, mostly engineers and technicians who operate the plant 24 hours a day, 365 days a year. The site has a seawater-desalination plant that produces two billion gallons per day, backup fuel tanks, pipelines between EcoElectrica and Prepa’s Costa Sur, and connections to Prepa’s 230-kV transmission loop. The plant also has a tank capable of storing up to one billion barrels of natural gas, or the equivalent of 42 million gallons. The fuel tanks are refilled through pipes from a 1,786-foot-long pier. In 2002, AES de Puerto Rico became the second co-generation project in Puerto Rico. The company operates two boilers that burn coal and power turbines, generating 454-MW of electricity, or 17% of Prepa’s capacity. The process also generates steam sold to next-door neighbor Phillips Core P.R. Experts say the $800 million-plus AES is the second-largest coal plant in the world, after one in Europe, and the world’s cleanest. "Coal’s main characteristics are its price stability, abundance, and low cost; it costs about half as much as or less than petroleum," said AES Vice President Carlos Reyes, a former Prepa director and one of the most respected power experts on the island. "When the government asked Prepa in the 1990s to come up with ways to [alleviate] the island’s fuel dependency on petroleum, Prepa chose natural gas and coal as the best alternatives available. Coal remains a reliable fuel and a renewable source." AES was built on 82.5 acres in Guayama, where the company constructed a pier at Las Mareas harbor to receive coal from Trinidad & Tobago and other countries. This Caribbean Business article appears courtesy of Casiano Communications.
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