A long-awaited retail wheeling program could unlock more than $300 million in renewable energy investment and provide large businesses with new options to reduce electricity costs, although energy industry representatives said Tuesday high transmission charges and regulatory limitations could undermine the initiative’s success.
Momentum for wheeling received a boost this month when LUMA Energy submitted a proposal to the Puerto Rico Energy Bureau (PREB) outlining an interim framework that would allow large commercial and industrial customers to purchase electricity directly from independent generators through the island’s transmission and distribution network while regulators continue developing a fully automated system.
At the Solar and Energy Storage Association convention on Tuesday, Cesar Negrette, executive vice president of SolRenew, described wheeling as the transmission of electricity from a generator to an end user through the existing grid, eliminating the need for generation facilities to be located adjacent to a customer’s operations.
The concept could be particularly significant for Puerto Rico’s commercial and industrial sector because many businesses lack the rooftop space or adjacent land needed to install enough solar generation to meet their energy demands. According to Negrette, rooftop systems typically satisfy only 40% to 50% of a commercial customer’s electricity needs, while some pharmaceutical and medical device manufacturers prefer not to install solar equipment on their rooftops.
“The commercial and industrial market, which wheeling is targeting, represents over 54% of the electricity market in Puerto Rico,” Negrette said.
The legal foundation for wheeling dates to Act 57 of 2014, which directed the Energy Bureau to establish a regulatory framework allowing certified retail electricity suppliers to deliver power from independent generators directly to customers over the public transmission and distribution system. Regulators began developing that framework in 2018, creating certification requirements, wheeling service agreements, tariffs and customer protections. Yet more than a decade after the law’s approval, the program has yet to become operational.
According to Andres Palerm Colón, an attorney with McConnell Valdés who specializes in energy and environmental law, much of the delay has been attributed to the absence of technological systems originally envisioned to support wheeling, including automated metering, data management and settlement platforms.
That prompted the PREB on April 15 to order LUMA to develop an interim solution using currently available systems and data. Regulators were concerned that earlier plans could delay implementation until at least fiscal year 2030 and directed the utility to move forward with a more immediate pathway, he said.
LUMA responded on Oct. 14 with a proposal that Palerm described as a limited interim rollout rather than a fully automated wheeling program. The utility would rely on existing infrastructure, documented manual procedures and secure file transfers while broader technological upgrades continue.
Under the proposal, wheeling initially would be limited to commercial and industrial customers with electric demand of at least 250 kilovolt-amperes that are not participating in net metering programs. Participating suppliers would be required to use transmission-connected generation resources with at least 1 megawatt of capacity, and the pilot would be limited to three retail electricity suppliers, each serving up to 10 customers.
Customers participating in the program would receive two bills. LUMA would continue billing for transmission, distribution, and other applicable grid charges, while retail electricity suppliers would separately bill customers for energy under their retail supply agreements.
LUMA says it could begin serving Wheeling customers nine months after the Energy Bureau approves the proposal. Supplier enrollment would begin in the second month after approval, with testing and validation occurring before commercial operations commence. The company said the program can be implemented within the approximately $3.07 million annually already approved by regulators for fiscal years 2027 and 2028.
Palerm cautioned, however, that several hurdles remain before wheeling can become a reality.
Among them is the need to establish a standard retail supply agreement through a public stakeholder process, a requirement contained in the wheeling regulations that has not yet been completed. Retail electricity suppliers also must obtain certification from regulators, and independent power producers participating in the program must already be interconnected to the grid before they can serve customers.
Palerm also noted that LUMA’s existing Wheeling Services Agreement was developed around automated electronic data exchanges, while the interim proposal relies heavily on manual processes and secure file transfers. As a result, the Energy Bureau may need to authorize changes or clarifications to accommodate the temporary approach.
“The PREB’s order and LUMA’s interim proposal offer a pathway forward and a glimmer of hope for the future of wheeling,” Palerm said.
Despite welcoming progress toward implementation, Palerm and Negrette questioned some of the restrictions included in the interim framework.
Palerm noted that several limitations in the proposal do not appear in Puerto Rico’s wheeling regulation itself, including the requirement that participating generation facilities have at least 1 megawatt of capacity and the cap on participating customers. He said the existing regulation only establishes a minimum customer demand threshold of 250 kVA and expressed hope that the additional restrictions remain limited to the pilot phase.
Negrette argued that the biggest challenge may ultimately be the wheeling tariff.
Using the current tariff structure, he said the cost of wheeling power for a typical supermarket customer would be about 13 cents per kilowatt-hour, compared with approximately 3 cents per kilowatt-hour in many U.S. jurisdictions.
“We think that it’s very difficult to conceive that the cost of using the transmission and distribution grid is 13 cents a kilowatt-hour,” Negrette said.
He contended that wheeling rates should be tied more closely to actual transmission and distribution costs and warned that without a stronger financial incentive, Puerto Rico may struggle to attract private investment into the sector.
Negrette also criticized the 250-kVA eligibility threshold, arguing that it limits participation to fewer than 1,000 customers even though Puerto Rico has more than 40,000 commercial customers and average commercial demand is closer to 50 kVA.
Supporters say expanding access to wheeling and establishing tariffs that better reflect actual grid costs could help attract more than $300 million in private investment while reducing electricity costs and improving competitiveness for Puerto Rico’s commercial and industrial sector.
After eight years of regulatory proceedings and more than a decade since wheeling was first authorized in law, industry representatives view LUMA’s proposal as the clearest pathway yet toward opening Puerto Rico’s electricity market to direct transactions between generators and large energy consumers.
