Hurricane Fiona destroys the power grid

Even after years of political and legal battles over how to revive its economy and fix its basic public services, Puerto Rico continues to spiral from crisis to crisis.

Why is this important: The territory and its 3 million inhabitants are caught in a quagmire of financial and infrastructure challenges with a high human cost – notably a 41% poverty rate last year.

Driving the news: Puerto Rico’s entire power grid – which has been bankrupt for half a decade – collapsed after Hurricane Fiona hit on Sunday. It’s another humanitarian crisis for an island that was supposed to keep the lights on now.

  • Only about 32% of Puerto Rican residents had power restored on Thursday, while about 3 in 4 were still without clean water, according to Jubilee USA Network, an organization that has advocated for Puerto Rico’s debt relief.
  • “Even relatively minor storms can shut down the island’s power grid,” Eric LeCompte, executive director of Jubilee, told Axios. And “the water supply depends in many parts of the island on the electricity network”.

The big picture: Debt reduction has helped Puerto Rico by freeing up money to spend on basic services, but many problems continue to plague the island, including a history of corruptioninsufficient income and the ongoing dispute over the prospect of one state.

  • “It’s not just the power grid — it’s also sewers, it’s also streets, highways, bridges, schools,” University of Puerto Rico economist José Caraballo-Cueto told Axios. “Almost all areas of government infrastructure need updating.

The context: Puerto Rico emerged from the largest municipal bankruptcy restructuring in US history earlier this year – a five-year process that resulted in the loss of the Commonwealth 79% of his debts.

  • But the island’s utility, the Puerto Rico Electric Power Authority (PREPA), remains mired in bankruptcy. The island’s federal supervisory board said days ago it was at an impasse with bondholders over how to restructure the entity’s debt.

Rollback: When Hurricane Maria and Hurricane Irma devastated Puerto Rico in 2017, causing tens of billions of dollars in damage, the territory’s ability to provide electricity to its residents collapsed.

  • It took months to restore power, illustrating the extent of PREPA’s problems, including accusations of cherished offers.
  • In 2021, operational control of the island’s grid was transferred to a private operator called LUMA Energy in hopes of improving the dilapidated system.
  • LUMA “failed miserably,” Caraballo-Cueto says, noting that it led to rate spikes and more outages.
  • Critics – like Sen. Chuck Schumer, the Democratic Majority Leader of the U.S. Senate — lambasted LUMA and island leaders for not putting billions of dollars in federal aid to use in rebuilding the system.

  • Local authorities are now reviewing the deal, the Wall Street Journal reported Monday.

The other side: LUMA did not respond to a request for comment.

  • But LUMA’s public safety officer, Abner Gómez, said in a Thursday public statement that the company “continues to conduct damage assessments, re-powering and power restoration efforts across Puerto Rico” and “will not stop until every customer in Puerto Rico has restored their feed”.

The big question: Would the creation of a state solve the problems of the island?

  • Debate persists — both in Washington and Puerto Rico — over whether the island would be better off as a state or on its own.
  • “If we really want to see permanent or sustained economic growth, a change in the nature of political relations with the United States will be necessary,” says Caraballo-Cueto, who is currently immersed in a study of the potential effects of such a change on Puerto Rico’s economy.

💭 Our thought bubble: Puerto Rico’s financial crisis is sure to continue as long as its population continues to decline. The island has lost hundreds of thousands of people in recent years, most of them moving to the mainland in search of a better life.

  • When they leave, they take their tax money with them – meaning less money for the island to pay its debts and invest in utilities, continuing its destructive cycle.