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Puerto Ricans Fight Privatization of Energy and Demand Democratic Ownership

The global fight against the privatization of utilities has a new front — Puerto Rico, where protests are raging.

A person waves a flag reading "Fuera Luma" (Luma out) during a demonstration to mark May Day, or International Workers' Day, in San Juan, Puerto Rico, on May 1, 2021.

Neoliberalism is not dead — it’s simply mutating. Austerity politics and privatization have been repackaged as public-private partnerships and forced upon communities without their consent. Growing communal resistance to corporate capitalism has emerged in different ways and in different places. One such place is Puerto Rico.

Puerto Ricans, both on the island and in the diaspora, have been mounting fierce resistance to the privatization of Puerto Rico’s electrical grid. Residents have been experiencing widespread power outages, utility price hikes, voltage fluctuations (power surges that damage appliances) and a plethora of ongoing issues since the start of the public-private partnership between Luma Energy — the U.S.-Canadian company that seized control of the island’s power transmission and distribution system — and the Puerto Rico Electric Power Authority (PREPA) — the island’s public energy corporation, which is in charge of power generation.

On October 15, demonstrators blocked Puerto Rico Highway 18 in San Juan, Puerto Rico, calling much attention to insistent blackouts and the 15-year contract between Luma Energy and PREPA. Despite reports of flagrant disinformation and other peculiar obstructions, thousands of Puerto Ricans marched down the usually busy highway waving flags, carrying banners — one of which read “¡LUMA se va pa’l carajo!” (“LUMA go to hell”) — and illuminating their path with phone flashlights because, for some odd reason, the light posts lining Puerto Rico Highway 18 were not on. (Latino Rebels reported that they “were working fine before the march.”)

Six days earlier, protesters staged a demonstration in Aguadilla and held another one in San Juan on October 1. Residents of Puerto Rico protested again on October 18 at the Capitol of Puerto Rico in San Juan where they demanded an end to the U.S. plan to make cuts to social services, public education and pensions. Back in the mainland United States, Puerto Ricans in the diaspora held solidarity protests. Some gathered in New York City at Union Square and demanded the ouster of Luma Energy. Demonstrators everywhere echoed the popular rallying cry “Fuera Luma,” (Luma Out).

A Doomed Neoliberal Framework

The Fiscal Oversight and Management Board, colloquially known as “La Junta,” has been the driving force behind the contract between Luma Energy and PREPA. In 2016, the Obama administration signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) which created the Fiscal Oversight and Management Board and tasked it with restructuring the island’s $72 billion debt. The result? Brutal austerity measures have gutted the public sector and transformed Puerto Rico into a neoliberal fantasyland — imperiling pensions and foreclosing countless schools to make way for charters. Since its takeover, Luma Energy has imposed four electricity rate increases despite not being able to provide adequate service. At one point, the energy corporation attempted to bill consumers 16 percent more for electricity before the Puerto Rico Energy Bureau declined Luma Energy’s request and approved a 3 percent increase instead.

PREPA itself is shouldering a debt of over $9 billion — hence why the Fiscal Oversight and Management Board forced a public-private partnership onto the people of Puerto Rico. The public corporation, like most publicly owned electric utilities, has relied on a centralized energy system. Many of the power plants in Puerto Rico are located along the southern coast of the island. This means that transmission and distribution lines stretch across long tracts of land to reach mountainous regions and metropolitan areas like San Juan, which is why the transmission and distribution system is vulnerable to hurricanes.

Ruth Santiago, a lawyer and environmental justice advocate based in Salinas, Puerto Rico, analogized the transmission and distribution system in an interview with Truthout: “If you order something online and have it delivered, do you think you should pay as much for delivery as the value of the contents? That’s what the LUMA contract is all about — it’s about paying for energy delivery.”

As of October 18, the Federal Emergency Management Agency (FEMA) stands to fund almost $10 billion toward unsustainable energy infrastructure in Puerto Rico. The contract between Luma Energy and PREPA indicates that the two corporations plan on using the FEMA funds to consolidate transmission projects. This move would be detrimental to the people of Puerto Rico who are already suffering the effects of a failing electrical grid.

In an interview with Fairness & Accuracy In Reporting (FAIR), Columbia University professor Ed Morales — journalist and author of the book Fantasy Island: Colonialism, Exploitation, and the Betrayal of Puerto Rico — described the situation: “And because of the imposition of the Fiscal Oversight and Management Board, it’s taken away so much of the agency of the government itself on the island, because all of its moves have to be approved by the Fiscal Oversight and Management Board.… Democracy has become kind of a joke on the island, because there’s a delegitimization that happens with the Oversight Board.”

The median household income in Puerto Rico is $20,500, and 43.5 percent of the island’s population lives in poverty. In recent years, it has been battered by hurricanes and earthquakes. Puerto Ricans remember the devastation after Hurricane Maria, which killed 2,975 people.

The Fiscal Oversight and Management Board is defunding municipalities and the University of Puerto Rico in the interest of bondholders and Wall Street vulture funds. Unemployment is soaring. Tax incentives are benefiting high-yield individuals, exacerbating inequity, increasing the cost of housing and pushing locals out of Puerto Rico. Funding for Medicaid and Medicare has also dwindled. And the island’s historically public beaches are under constant threat from private interests.

The Insistence of Austerity Politics

A larger struggle is being waged in different ways and different places against the iniquitous push toward the privatization of utilities. Resistance has come in the form of immense demonstrations as well as small-scale protests, both of which have highlighted the structural faults of privately owned essential utilities. Privateers have hollowed out the public sector and sold off public goods in order to secure self-serving windfalls. Privatized services are often insufficient and plagued by corporate malfeasance. Under private ownership, essential utilities are beholden to their shareholders and charge more for services that are not necessarily better than those offered by public enterprises.

Some have raised concerns about this model because public enterprises like PREPA are corporatized and can be just as bureaucratic or managerial as private corporations. Structurally, the corporatized public sector is loosely democratic. However, this does not mean that public enterprises have sufficient community representation. In PREPA’s case, the publicly owned utility has an executive (José Ortiz, whose salary is $250,000, according to The Nation) and mirrors the top-down structure of Luma Energy.

Public utilities typically offer reliable service at an affordable rate, and public ownership has been used for place-based economic development programs, some of which include low-income housing credits and job creation. When Luma Energy came along, the two corporations merged and became a singular monopoly that is now motivated by profit. In other words, it is no longer serving the public interest; Luma Energy is beholden to its investors, not the people of Puerto Rico.

Moreover, publicly owned utilities do not always serve the public interest. PREPA, for instance, could be doing more to implement democratic principles that would allow for true democratic public ownership. “PREPA needs to be radically transformed,” Santiago told Truthout. “People who are vested in public service [and the public interest] should have a voice in PREPA governance.”

Global Resistance

Globally there has been mounting evidence that the push toward privatization of utilities like water and electricity has been characterized by resource extractivism, corporate profits and systemic racism. Resistance in Puerto Rico is only one example of the struggle against austerity politics and private ownership worldwide. Multinational corporations are threatening the public’s access to essential utilities, and communities are coming together to resist capitalist exploitation.

The United States’ electric system is mostly owned by “investor-owned utilities” (for-profit electric distributors) which account for the majority of the nation’s transmission and distribution apparatus. Despite this, state-level campaigns in favor of democratic public ownership have occurred in California, Rhode Island and Maine, among other states, regions and locales.

In Minnesota, Indigenous Water Protectors protesting the Enbridge Line 3 pipeline encountered “corporate counterinsurgency” when the private oil company coordinated with local law enforcement to quell the protests, The Intercept reported. Blockadia activists frequently find themselves at the forefront of conflicts between corporate privateers and communities demanding control of their utilities. On October 11, another front emerged in Washington, D.C. during a week of Indigenous-led civil disobedience dubbed “People vs. Fossil Fuels,” where law enforcement arrested more than 530 climate activists who called on the Biden administration to declare a climate emergency and stop approving fossil fuel projects.

In the United Kingdom, private sector energy suppliers dominate the utilities industry. These suppliers have been reluctant to invest in renewable energy infrastructure. In fact, they only did so when they received public funding, The Guardian reported.

Germany and France have made significant strides toward re-municipalization (also called re-nationalization or re-communalization). Germany established public energy corporations called Stadtwerke and France owns the majority of a nuclear electric power generation company called EdF. Both countries receive two-thirds of their electricity from public enterprise.

In Nigeria, residents of Lagos have been resisting government-led efforts to privatize the city’s water supply. The ongoing struggle has persisted in the face of growing pressure from the World Bank and International Monetary Fund to privatize water in Lagos and throughout the African continent.

On October 13, Our Water, Our Right Africa Coalition demanded that national and municipal governments resist the marketization of water during the “Africa Week of Action Against Water Privatisation.” Anti-privatization activists and Water Protectors from across the continent identified the looming, iniquitous threat posed by water privateers. The World Bank and International Monetary Fund held their annual meetings from October 11 to October 17. Organizers planned the Africa Week of Action during this time frame in an effort to offset the institutions’ support for water privatization schemes across Africa. In doing so, grassroots organizations deepened connections among several countries that have been facing many of the same water supply struggles.

“Corporate capitalism is economically, ecologically and socially inequitable and unsustainable, and we need to move to a new economic model that’s based on different forms of institutions,” Thomas Hanna, research director at The Democracy Collaborative, told Truthout. He is the author of Our Common Wealth: The Return of Public Ownership in the United States. His research has focused on democratic models of ownership and governance in the public sector. Hanna explained that the global re-municipalization movement, which includes campaigns in North America and Europe as well, is more fundamentally rooted in Indigenous resistance to austerity politics and privatization in the Global South following the turn of the century. He went on to say that democratic public ownership is structurally obligated to meet people’s needs.

“The great benefit of public ownership is that it’s an inherently flexible ownership form really can be set up and established for whatever purposes or community or a policy wants,” Hanna said. “You’re just never going to get there with private ownership, [it does not] have the same incentive structure.”

Energy Democracy

Johana Bozuwa, former comanager of the Climate and Energy Program at The Democracy Collaborative, wrote that energy democracy “seeks to take on the political and economic change needed to tackle the energy transition holistically.” She believes “a democratic energy approach powered by renewables … would distribute wealth, power, and decision-making equitably.” This approach emphasizes the need for public ownership because publicly owned utilities can be democratized — owned and operated by local residents.

Bozuwa asserts that broad participation is possible in a democratic and decentralized energy system, arguing that multi-stakeholder groups of workers, grassroots organizers, local officials and members of the community can pave the way toward shared governance that gives all voices a seat at the table. She believes that this model, which seeks to center transparency and equity, would also make avenues for decision-making widely accessible.

“It’s a balancing act,” Hanna told Truthout. “You have to balance decentralization with the need for higher levels of coordination and planning and control.”

Grassroots organizations like the environmental justice coalition Queremos Sol (We Want Sun) have voiced their support for a rapid transition to decentralized, renewable energy infrastructure. This transition would involve a widespread democratization of Puerto Rico’s energy system. Decentralizing the electrical grid in Puerto Rico would bypass the structurally flawed transmission and distribution system and eliminate transmission costs. This, in turn, would “provide ratepayers with accessible, reliant and resilient energy,” according to a legal testimony co-authored by Santiago.

Queremos Sol outlined the viability and advantages of rooftop solar:

The use of the sun is technologically and economically viable in Puerto Rico. Priority should be given to this “rooftop resource” at the residential, commercial and industrial level, which with distributed and adequate storage, will create no grid-interconnection problems…. Where roof space is not available, large-scale solar facilities can be constructed in suitable areas.

Suitable areas include parking lots and contaminated lands known as “brownfields,” both of which offer the open space needed for the construction of solar arrays. The Queremos Sol proposal features a number of strategies that would help facilitate decentralization. One of these strategies is providing technical assistance with microgrid development. Microgrids are decentralized groups of energy sources that can operate autonomously from a centralized electrical grid. They tend to be most efficient because of their ability to function in the absence of a transmission system, which is structurally vulnerable to climate-related grid disruption events like hurricanes and earthquakes. Another strategy involves establishing financial and legal structures that support local ownership of solar power. Queremos Sol has also proposed progressive equity initiatives that would provide opportunities for low- and middle-income individuals to establish solar communities.

In an article about FEMA’s responsibility to “avoid a multi-billion-dollar mistake,” law professors Patrick Parentau and Rachel Stevens wrote that, “investing in solar and wind power and energy efficiency could transform Puerto Rico’s electrical system into a resilient grid,” citing a 2015 study by the Institute for Energy Economics and Financial Analysis.

During a House Committee on Natural Resources hearing on October 6, Congress probed the public-private partnership’s failures to provide reliable electricity to residents of Puerto Rico. Two congresswomen pressed Luma Energy CEO Wayne Stensby about the company’s highest salaries to no avail. Stensby has refused to disclose the salaries of employees (more so executives) making more than $200,000 and $500,000 despite repeated calls to do so; Luma Energy executives make $325 per hour, according to Puerto Rico-based journalist Bianca Graulau.

Santiago told the House Committee on Natural Resources that PREPA could use the allocation from FEMA to acquire rooftop solar, which would provide “life-saving resiliency” to the people of Puerto Rico — something that the current energy system simply cannot offer.

“Primarily, the LUMA contract right now is the largest obstacle we’re seeing for integration of renewables,” Santiago said at the October 6 hearing. “[Luma Energy wants] to rebuild the old 20th-century transmission system that will be knocked down by the next hurricane, and that’s taxpayer money to the tune of $9.6 billion or more that will be wasted.”

Moreover, the Queremos Sol proposal aligns with the Biden administration’s Build Back Better agenda. FEMA funds are “already earmarked for the electric system, but not for specific projects yet,” Santiago told Truthout. “The Biden administration has the opportunity to weigh in on whether the projects … comply with [its] policies.”

Although re-nationalization seems to be on the rise, transferring privately owned utilities to public hands is a narrow reform compared to what is necessary to usurp the prevailing neoliberal order. There are a multitude of fronts where this pushback is taking place. The people are resisting the privatization, corporatization, liberalization and marketization of essential utilities. They are defending basic human rights, urging governments to act swiftly on climate change and reclaiming democratic control.

This collection of global voices is reverberating at the highest levels — challenging an economic model that continues to subject the public to maldevelopment, colonization and exploitation.

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