In the last year and a half, the federal funding landscape for Puerto Rico’s fragile electric grid has undergone a series of dramatic shifts. The second Trump administration has terminated major Department of Energy projects on the island, including the cancellation of the Puerto Rico Energy Resilience Fund, aimed at building distributed energy resources.
Meanwhile, a quieter and more complex battle is playing out over a much larger pool of funding: the more than $10 billion that the Federal Emergency Management Agency committed to rebuilding Puerto Rico’s grid in the wake of Hurricane Maria in 2017.
That particular settlement was negotiated in 2020 in the final days of the first Trump administration, and allocated funds under the Stafford Act, to prevent or reduce future damages from similar events. More than 90% of that funding was set to go to transmission and distribution and substation projects; just 1% went to repairing the island’s largely fossil fuel legacy generation assets.
The funds were structured under FEMA’s fixed-cost, lump-sum framework, which gives Puerto Rico flexibility to complete eligible work, while also making the island’s public electricity utility, known as the Puerto Rico Electric Power Authority or PREPA, responsible for any costs that exceed the approved estimate. In other words, leftover funds can potentially be repurposed within the rules, but overruns are the island’s problem, not FEMA’s.
But nearly six years later, most of those projects remain incomplete. Recovery has been slowed by a tug-of-war between the island’s bankrupt state utility, its private grid operators, and regulators. Hundreds of projects have been deferred or left in regulatory limbo. Global supply chain challenges have complicated things further.
The many players in Puerto Rico’s slow recovery
Hurricane Maria, a Category 5 storm, struck Puerto Rico in September 2017, devastating the island’s electric system and causing the longest blackout in U.S. history. It took roughly 11 months before the final customer was reconnected. When FEMA first finalized the post-Maria settlement in 2020, the island’s grid operators began assembling a large pipeline of projects to rebuild everything from transmission and distribution to water, telecommunications, and generation.
Because FEMA recovery dollars are reimbursed after costs are incurred, an entity in Puerto Rico must front engineering, procurement, and construction expenses before filing for repayment. That process has been a major structural obstacle because PREPA has been in bankruptcy proceedings since 2017, and lacks the cash to finance this kind of work at scale. Today the utility still owns the island’s physical grid assets, but the day-to-day running of the grid has been privatized.
Since 2021, Luma Energy, a private firm jointly-owned by Canadian utility ATCO and Houston-based infrastructure contractor Quanta Services, has operated transmission and distribution. A second private firm, Genera, a subsidiary of natural gas supplier New Fortress Energy, took over generation operations on the island in 2023, with a mandate to manage and ultimately decommission parts of Puerto Rico’s aging fleet of oil-fired power plants.
To allow reconstruction to move forward at all while PREPA remained in bankruptcy, Puerto Rico’s oversight structure created a financing mechanism that allows project costs to be advanced before securing FEMA reimbursement. In theory, grid operators could draw from this fund on a project-by-project basis, pay contractors, and then route the reimbursement paperwork through Puerto Rico’s recovery office and on to FEMA.
The result is a system that is technically flexible, but operationally slow. The process can easily take several months, even when everything runs smoothly, Sergio Marxuach, the policy director at Puerto Rico’s Center for a New Economy, told Latitude Media. It’s extremely common for submissions to be sent back with paperwork problems, he added, which restarts that clock.
Luma originally identified 571 transmission and distribution projects to prioritize for FEMA funding, and went through the agency’s obligation process for more than $5 billion worth of work, including substation reconstruction, pole replacement, and other grid hardening measures.
The funds started flowing, albeit slowly, in 2021. However, by the end of 2024, despite billions of dollars being formally obligated, only a tiny fraction had actually resulted in completed construction.
Getting the necessary supplies was one part of the hold-up. According to Luma’s filings at the end of 2025 to the Puerto Rico Energy Bureau, manufacturing lead times for things like switchgear and panelboards exceeded 40 weeks, and were up to 120 weeks for transformers. In a press release last year, Luma explained that, in order to replace crumbling infrastructure, including operational substation transformers nearly 70 years old and transmission breakers that had been in service since 1938, the company had to order transformers from manufacturers as far away as Turkey, China, and Brazil, with deliveries stretching as far as three years.
And while reconstruction was getting slowly underway, the political climate on the island, and in Washington, started to shift, leaving the original framework of the funding vulnerable to a reordering.
Uncertain pipelines
Last summer, PREPA filed an updated list of reconstruction projects with Puerto Rico’s Energy Bureau, which is the regulator that oversees the various utility players. The filing came at the end of a months-long consolidation effort that, according to PREPA, stemmed from a meeting in early 2025 with the island’s newly appointed energy czar to “align capital projects priorities.”
By June, FEMA asked PREPA to submit a prioritized project list for the remaining, unobligated balance of funds, which was around $3.6 billion. The sum wasn’t enough to fund all of the projects in the pipeline of proposed reconstruction work, so the public utility submitted a consolidated project list to FEMA in July, which eliminated more than half of Luma’s transmission and distribution projects.
The impact came swiftly: In October, Luma cut 168 positions across engineering and transmission and distribution operations teams — the employees whose job it was to scope and document FEMA project work. In an explanatory memo filed with Puerto Rico’s House of Representatives, Luma drew a direct line between the August deactivations and the staffing reductions: “Adjustments within the engineering and project support functions were limited to areas where the workload has decreased because 224 LUMA projects submitted to FEMA were removed by PREPA from the flow of obligations,” the company said.
The problem, as Marxuach explained, is that PREPA’s priorities for the grid and Luma’s priorities “don’t necessarily match in every respect.” The pair have to work together, because PREPA owns the assets that Luma manages. In practice, however, the deactivation of more than 200 of its already-engineered projects partially sidelined Luma from its work of rebuilding the grid.
Meanwhile, Puerto Rico’s Energy Bureau has been pushing back against the consolidation plan since October. In an order filed in November, the regulator warned that not all Hurricane Maria damages documented by FEMA may actually get repaired under the new plan — and that any unfinished work could become ineligible for future federal disaster aid, sticking ratepayers with the bill. Of the transmission and distribution projects that made the cut last August, 21 of them had not yet incurred any costs, the bureau noted. The 289 deactivated projects, however, represented $402 million in already-completed engineering work.
In February, the bureau established an updated allocation framework, bypassing PREPA’s consolidated list and implementing its own list of 70 priority projects, which totaled $2.35 billion and included several 25 megawatt battery installations. The order specifically targeted projects where the highest amount of money had already been spent, in the interest of minimizing ratepayer exposure.
The bureau ordered PREPA to amend its consolidated list to reactivate these projects, warning that further noncompliance could trigger daily fines of up to $25,000 and recurring penalties of up to $250,000. While PREPA continues to push to maintain the status quo — citing post-audit liability and its precarious financial standing — Luma is preparing a plan to comply with the bureau’s orders, the company confirmed.
Shifting political winds
The entire saga has unfolded against a complex political backdrop. In January 2025, Jenniffer González-Colon, a Trump-aligned politician who campaigned on a platform that included ousting Luma and backing away from clean energy targets, took the governor’s office in Puerto Rico.
Her preferred energy strategy involves replacing aging thermal generation, rather than waiting on a transition to renewables. The island’s existing plants average 45 to 50 years old, and their age and state of disrepair is responsible for roughly as much disruption to service as its distribution and transmission problems.
(Notably, in its November order, the Energy Bureau also questioned whether several categories of projects on PREPA’s consolidated list, including peaking generation units and battery energy storage systems, corresponded to documented damage under Maria, and were even eligible for FEMA funding, despite being in line with the González-Colon administration’s preferences.)
Under González-Colon’s leadership there’s been a broad shift in the island’s energy strategy, Marxuach said. “The governor has made a strong bet on natural gas,” he explained. “She believes that in the short term, it’s probably better for Puerto Rico to build out significant new natural gas infrastructure, rather than accelerating the transition to renewables….She is not very comfortable with massive utility-scale renewable generation.”
In Marxuach’s view, that’s a bet that won’t pencil out in the long-term. “The biggest expense for Puerto Rico right now, in terms of electricity, is fuel,” he said. Substituting imported fuel with low-marginal-cost renewables would “open a lot of space in terms of reducing rates for consumers on the island, but that takes time” he added.
There’s another fossil fuel complication as well. Genera, the company that took over generation operations in 2023, was hired by Puerto Rico explicitly to retire the oil-burning fleet. But Genera is a wholly owned subsidiary of a natural gas supplier. In other words, Marxuach explained, “you’re asking a natural gas company to take out all the fossil fuel generation, when what they do is fossil fuels.”
As the next hurricane season looms this summer, outage duration and frequency have risen sharply in the last few years, Marxuach said, upping the urgency of figuring all of this out. The island has experienced two near-total blackouts in the last 13 months.
As to whether the system could withstand another major story? “The answer is no…if we had another Category Four hurricane, there’s no way,” he said. The grid, he added, is “functional, but very fragile.”
