How Free Electricity Helped Dig $9 Billion Hole in Puerto Rico

By MARY WILLIAMS WALSHFEB.

A stadium in San Juan, P.R., where free electricity from the island’s power authority lights up baseball games at night. Credit Dennis M. Rivera Pichardo for The New York Times Advertisement Continue reading the main story Continue reading the main storyShare This Page Email Share Tweet Save More Continue reading the main story

A stadium in San Juan, P.R., where free electricity from the island’s power authority lights up baseball games at night. Credit Dennis M. Rivera Pichardo for The New York Times

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“Imagine how much it costs to have an ice-skating rink in the tropics,” said Sergio Marxuach, policy director at the Center for a New Economy, a nonpartisan research group in San Juan.

And that is the catch. What most likely would be the biggest recurring expense for these attractions — electricity — costs Aguadilla nothing. It has been provided free for years by the power authority, known as Prepa.

In fact, the power authority has been giving free power to all 78 of Puerto Rico’s municipalities, to many of its government-owned enterprises, even to some for-profit businesses — although not to its citizens. It has done so for decades, even as it has sunk deeper and deeper in debt, borrowing billions just to stay afloat.

Now, however, the island’s government is running out of cash, facing a total debt of $72 billion and already defaulting on some bonds — and an effort is underway to limit the free electricity, which is estimated to cost the power authority hundreds of millions of dollars.

But like many financial arrangements on the island, the free electricity is so tightly woven into the fabric of society that unwinding it would have vast ramifications and, some say, only worsen the plight of the people who live here.

“If the towns don’t get free energy, they’re going to have to pay for it by increasing their property taxes or something, so the people will end up paying,” said Eduardo Bhatia, the president of the Puerto Rico Senate. Residents of the island are already upset about a recent sales tax increase to 11 percent, from 7 percent, and a property tax increase now would cause an outcry. The last assessment was in 1958.

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