Molly Ayala
Puerto Rico has long struggled with an unreliable energy system, with the island experiencing frequent power outages and blackouts. In 2018, the Puerto Rico Electric Power Authority (PREPA), which previously held a government monopoly on electricity generation, distribution, and transmission, began the process of privatization. This led to the creation of private power companies such as LUMA Energy, a joint venture between Quanta Services (USA) and ATCO (Canada), which took over PREPA's duties in 2021. Despite LUMA's efforts to enhance reliability and resiliency, the company has faced criticism and protests from Puerto Ricans due to continued power outages and concerns over increasing costs. The situation highlights the challenges of transforming Puerto Rico's electric grid into a more resilient and renewable energy system.
| Characteristics | Values |
|---|---|
| Electric Companies in Puerto Rico | LUMA Energy, Puerto Rico Electric Power Authority (PREPA), New Fortress Energy Inc. |
| Owner of PREPA | Commonwealth of Puerto Rico |
| Former Name of PREPA | Puerto Rico Water Resources Authority (PRWRA) |
| Year PREPA was Created | 1941 |
| Year PREPA was Privatized | 2018 |
| Year LUMA Energy Began Operating in Puerto Rico | 2021 |
| Year Genera PR Began Operating in Puerto Rico | 2023 |
| Year Puerto Rico's Electric Grid was Destroyed by Hurricane Maria | 2017 |
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What You'll Learn
The Puerto Rico Electric Power Authority (PREPA)
The Puerto Rico Electric Power Authority, also known as PREPA (Spanish: AEE), is an electric power company owned by the Commonwealth of Puerto Rico. PREPA was responsible for electricity generation, power distribution, and transmission on the island. It was the only entity authorized to conduct such business in Puerto Rico, making it a government monopoly. The company was governed by a board of directors, which typically included private citizens representing public interests, along with ex officio public officials such as the Secretary of Economic Development and Commerce.
PREPA was originally named the Puerto Rico Water Resources Authority (PRWRA), created by Act 83 on May 2, 1941, during the governorship of Rexford G. Tugwell. Government-owned, PRWRA unified diverse regional and local electric power companies into one unified electric grid. Over the years, the budget for maintenance has diminished. For example, in 2007, the maintenance budget was $251 million, but this decreased to $202 million in 2014. Throughout its history, PREPA has suffered several outages that have left regions or the entire island of Puerto Rico without power. For instance, in August 2012, 14,000 residents were left without power following Tropical Storm Isaac.
In September 2017, Hurricane Irma left 1 million residents without power, and when Hurricane Maria struck shortly after, nearly the entire island was without power. It took almost 11 months to fully restore power. Many residents bought generators, but electric companies in unaffected areas ordinarily make contracts for speedy assistance to those hit by disaster, yet in this case, negotiations took weeks.
In January 2018, former governor of Puerto Rico, Ricardo Rossello, announced that all assets of the company would be sold in a general privatization of PREPA. On June 22, 2020, a 15-year contract was signed with LUMA Energy, and the takeover occurred on June 1, 2021. Despite LUMA's efforts to enhance reliability and resiliency, the company has faced criticism and protests due to widespread power outages, with customers reporting power surges damaging appliances and voltage irregularities causing fires.
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LUMA Energy takeover in 2021
On June 1, 2021, LUMA Energy officially took over as the operator of Puerto Rico's power transmission and distribution system, as well as customer service and billing. This marked a significant shift in the management of Puerto Rico's electricity infrastructure, which was previously handled exclusively by the Puerto Rico Electric Power Authority (PREPA).
The takeover by LUMA Energy, a private power company, was part of a 15-year contract signed in June 2020 between the Puerto Rican government and LUMA, a joint venture between Quanta Services (USA) and ATCO (Canada). This privatization move aimed to address the longstanding issues with Puerto Rico's power grid, which had been plagued by outages and infrastructure weaknesses.
However, the transition was not without controversy and challenges. Soon after the takeover, Puerto Rico experienced widespread power outages, affecting up to 1 million customers and prompting emergency declarations by multiple mayors. There were also reports of power surges damaging appliances, and voltage irregularities causing fires in some residences. Protests and demonstrations by PREPA workers and unions arose, citing concerns over job security, union rights, and the potential negative impact of privatization on electricity rates and Puerto Rico's self-determination.
Despite these initial hurdles, LUMA Energy maintained that it was working to enhance the reliability and resiliency of the power grid. In 2022, a senior official testified before a U.S. House oversight hearing, highlighting the company's response to Hurricane Fiona and its efforts to restore power to 90% of customers within 12 days. LUMA also emphasized its focus on ramping up renewable energy connections to align with Puerto Rico's goal of achieving 100% renewable energy by 2050.
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PREPA's privatisation
The Puerto Rico Electric Power Authority (PREPA) was a government-owned electric power company that had a government monopoly on electricity generation, distribution, and transmission in Puerto Rico. PREPA was created by Act 83 on May 2, 1941, and was originally named the Puerto Rico Water Resources Authority (PRWRA).
On January 22, 2018, the former governor of Puerto Rico, Ricardo Rossello, announced that all assets of PREPA would be sold in a general privatisation of the company. This came after years of criticism regarding the company's mismanagement and vulnerability to hurricane-induced outages. On July 20, 2018, permission was granted for PREPA assets and service duties to be sold to private companies.
In June 2020, governor Wanda Vázquez Garced and PREPA signed a 15-year contract with LUMA Energy, a private power company, to take over PREPA's duties. The takeover occurred on June 1, 2021. LUMA Energy is a joint venture between Quanta Services (USA) and ATCO (Canada), created specifically to manage Puerto Rico's power grid.
LUMA Energy's first year of operations in Puerto Rico was marked by widespread power outages, with critics attributing the issue to the company's mismanagement and vulnerability to hurricanes. Protests occurred at LUMA sites, with employees being physically blocked by demonstrators in multiple cities. Despite the criticism, LUMA officials have stated that they inherited an old and vulnerable system, and they are working to enhance the reliability and resiliency of the power grid.
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LUMA Energy's performance and criticism
LUMA Energy is a private power company that took over power distribution, transmission, and infrastructure maintenance and modernization in Puerto Rico in June 2021. The company was created through a joint venture between Quanta Services (USA) and ATCO (Canada) to manage the territory's power grid.
Performance
Since its takeover, LUMA Energy has faced several challenges, including widespread power outages, with one incident in June 2021 affecting up to 1 million customers. The company has cited pre-existing grid damage, weather conditions, and possible sabotage as causes for these outages. However, LUMA has also made progress in certain areas. In its first year of operations, the company reported improvements in customer service and reliability, and it has also attracted significant private investment for renewable energy projects. For example, in February 2025, LUMA announced plans to add nearly 1 GW of renewable energy and over 700 MW of storage capacity, attracting $4 billion in private investment.
Criticism
LUMA Energy has faced significant criticism from various quarters, including protests by customers and employees of the previous power authority, PREPA. Critics have expressed concerns about rising electricity costs, with Puerto Rico already having high poverty rates and a declining economy. There have also been worries about the company's preparedness and response to crises, with the Association of Hospitals warning that power outages were putting patients' lives at risk. Additionally, LUMA has been criticized for issues such as inadequate staffing and long service delays, and a lack of transparency in its contract with Puerto Rico, which grants it control over key utilities and includes broad termination clauses.
Despite the criticism, LUMA officials have defended their efforts, acknowledging the challenges of inheriting an old and vulnerable system. They have emphasized their commitment to enhancing reliability and resiliency, as evidenced by their response to Hurricane Fiona, where power was restored to 90% of customers within 12 days.
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Puerto Rico's renewable energy goals
Puerto Rico has been described as having the least reliable energy system of any place in the US. The island has been hit by hurricanes and storms, which have caused blackouts and power outages. In 2017, Hurricane Maria left Puerto Rico in the largest blackout in US history, with 80% of utility poles knocked down and critical power generators damaged.
In 2018, former governor Ricardo Rossello announced that the Puerto Rico Electric Power Authority (PREPA) would be privatized, and in 2020, a 15-year contract was signed with LUMA Energy, which took over in 2021. However, since the takeover, LUMA has faced criticism and protests due to power outages and voltage irregularities causing damage to appliances and fires.
Despite these challenges, Puerto Rico has committed to ambitious renewable energy goals. The island's government has set a target of 100% renewable energy by 2050, with an intermediate goal of 40% by 2025. This commitment to clean energy is in part to make the grid more resilient to disasters. The transition to renewables will be challenging, as Puerto Rico currently relies heavily on fossil fuels, with petroleum-fired power plants providing 62% of its electricity generation capacity in 2024, followed by natural gas (24%), coal (8%), and renewables (7%).
To achieve its renewable energy goals, Puerto Rico will need to invest significantly in solar, wind, and water energy projects. The Puerto Rico Energy Bureau has approved a long-term energy plan that rejects PREPA's planned gas buildout and directs the utility to invest in solar and energy storage solutions. The Energy Bureau has also allowed PREPA to consider using gas as a resource, but this has faced opposition due to safety risks and the illegal construction of the LNG Terminal.
In February 2025, LUMA announced plans to add nearly 1 GW of renewable energy and over 700 MW of storage, attracting $4 billion in private investment. This indicates that Puerto Rico is taking steps towards achieving its renewable energy goals, despite the challenges and criticism faced by the companies involved.
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Frequently asked questions
LUMA Energy.
The Puerto Rico Electric Power Authority (PREPA) was governed by the Puerto Rico Energy Bureau, or PREB.
Fossil fuels, including petroleum and natural gas.
It is the least reliable energy system in the US, with frequent power outages and high electricity prices.
Hurricane Maria caused a complete blackout in Puerto Rico in September 2017, leaving the entire island without power for nearly 11 months.
