Chorus grows for termination of LUMA Energy contract
By The Star Staff
New Progressive Party (NPP) as well as Popular Democratic Party (PDP) legislators separately on Monday demanded the cancellation of the contract with LUMA Energy, the private operator of the Puerto Rico Electric Power Authority’s transmission and distribution (T&D) system.
Their demands came after Resident Commissioner Jenniffer González Colón asked the Justice Department to evaluate the contract’s cancellation amid the high number of blackouts impacting consumers. Gov. Pedro Pierluisi Urrutia, who has defended the 15-year public-private contract signed in 2020, is now telling LUMA Energy on firmer terms that it needs to take action.
The NPP lawmakers on Monday demanded the cancellation of the contract with LUMA Energy for having subcontracted the company Centurion Group LLC for $60 million.
The company is owned by former LUMA Energy vice president Todd McLaren.
Reps. José “Memo” González, Wanda del Valle, Yazzer Morales, Wilson Román and Ángel Morey signed a resolution that orders the Public-Private Partnership Authority to cancel the LUMA Energy contract for violating Act 2 of 2018 when it hired Centurion Group.
“We recognize the problem of electricity service and we can discuss that, but the reality is that LUMA violated the laws of Puerto Rico,” said González, who represents House District 14 (Arecibo and Hatillo), in a written communication. “It is obvious that with the contracting of the Centurion Group, several laws were violated, since there was privileged information from the Government of Puerto Rico that helped one of its highest executives obtain juicy profits. That cannot be done and that is why we are requesting the termination of the transmission and distribution network management contract currently held by the LUMA consortium.”
“Transparency in the performance of the service contract with LUMA Energy should have been complete; that also applies to avoiding any conflict of interest or selective business practices for the benefit of others, which clearly happened in the Centurion Group case,” the NPP lawmaker added.
“The government of Puerto Rico and all its instrumentalities respect business practices,” Morales added. “Our government system, a democratic one, has free competition in the private sector as its axis, but it is no less true that the Centurion contract, in addition to violating the law, also inflicts a blow on this postulate of free competition.”
Román said LUMA engaged in a conflict of interest because Centurion may have obtained information about the need for the contracted service.
“Mr. Todd’s change of company from LUMA to Centurion raises our flag and the fact that when he moved to Centurion he was awarded the contract,” said Román, the representative for House District 17 (Aguadilla and Moca).
Independent Rep. Luis Raúl Torres Cruz and PDP lawmakers said in a separate news conference that Pierluisi should end the contract and, if not, the public should demand it.
Torres Cruz and PDP Reps. Jorge Alfredo Rivera Segarra, Sol Higgins Cuadrado and José “Cheito” Rivera Madera, along with Puerto Rican Independence Party Rep. Denis Márquez Lebrón and fellow minority lawmakers Mariana Nogales Molinelli, Lisie Burgos Muñiz and José Bernardo Márquez Reyes gathered to demand the cancellation of the contract, also raising concerns about conflicts of interest as LUMA is subcontracting companies it has created to perform the work, which is paid for with public funds.
U.S. Reps. Raúl Grijalva (D-Ariz.) and Nydia Velázquez (D-N.Y.) are also demanding an end to the contract.
Burgos Muñiz noted that the LUMA Energy contract requires LUMA to have operational bank accounts for whatever it needs. The government must then repay it.
She noted that the Financial Oversight and Management Board took $750 million from the budget to repay LUMA Energy, leaving several agencies without funding.
Nogales Molinelli said LUMA Energy CEO Wayne Stensby and another executive opened up Atco Infrastructure in Puerto Rico as LUMA Energy is, meanwhile, managing public funds.
“The fact that they are hiring firms that they also manage goes against the law and the Constitution,” she said.
Senate Government Committee Chairman Ramón Ruiz Nieves asked the governor to set a date for LUMA Energy to leave as the operator of the island’s energy transmission and distribution system and conduct an orderly transition.
“The entire country is clear on this, it is no longer the Electrical Industry and Irrigation Workers Union [UTIER by its Spanish acronym] that is calling for the departure of LUMA,” the PDP senator said. “The legislators, mayors, citizens, the chairman of the Puerto Rico Energy Bureau, and even his colleague, [Resident] Commissioner Jenniffer González, can no longer stand any more mediocrity.”
Ruiz Nieves argued that all the metrics of the energy consortium that Pierluisi has defended from day one indicate that the company is not complying with the contract.
“You talked about lowering rates, do you remember?” he said. “And they have already increased them four times; the outages are worse than ever. Accept it and put a face to the exit of LUMA Energy.”
Ruiz Nieves said appointing a deputy secretary at the governor’s office to deal with energy issues is simply a distraction.
“It is not about putting a person on the payroll; it is about complying with the contract, which is the responsibility of Fermín Fontanés, executive director of the Public-Private Partnerships Authority [P3],” he said. “The service is terrible, and approving changes to the established metrics or standards would be another insult to the country.”
P3 Authority Director Fermín Fontanés said that while he was not satisfied with the performance of LUMA Energy, there is no cause to ask for the cancellation of the contract.
The P3 Authority is the entity in charge of supervising the contract.
“There are some areas that have to improve, but we have to look at the whole situation,” Fontanés said. “There are some areas where they have done a very good job; in the area of customer service they have shown that they have made a substantial improvement compared to what we had before. They are answering calls in less than a minute, 77% better than [PREPA].”
Without the benefit of having the results of an investigation into LUMA’s performance, he said, LUMA is in compliance with the contract.
“We definitely want more speed and they have to do a lot more,” Fontanés added. “We have to wait for these results of the investigations to arrive, which are many, because there have been many events, and when we have that information, then we can enter into discussions as to whether or not there is non-compliance.”
The official said he does not know if the results of the energy regulator’s investigations will be ready before Nov. 30. On that date, the supplementary contract that allowed LUMA Energy to take over PREPA’s T&D expires. LUMA Energy took over the T&D system under a supplementary contract because PREPA is still in bankruptcy.
LUMA Energy, meanwhile, released a statement that said it “shares the frustration that all of our clients feel because of the reliability of the electrical system in Puerto Rico.”
“The 3,000 men and women of LUMA share one goal: rebuild the system and reduce the number of service interruptions that affect so many of our customers,” the company said in a statement. “To be clear, we have launched countless efforts to fundamentally transform the way in which the electrical system of Puerto Rico operates and serves the people of Puerto Rico.”
LUMA went on to note that it has taken real steps to improve the power grid in the coming months and years, including: starting 209 Federal Emergency Management Agency (FEMA) projects to transform and modernize the electrical system; receiving FEMA awards for 27 projects that represent over $117 million in federal funds; launching a historic Street Lighting Initiative to improve security, resilience and energy efficiency in communities on the island, and launching a modernization and improvement initiative that will transform over 300 substations throughout Puerto Rico, starting with $24.4 million in FEMA funds to modernize the Cataño substation.
“Regardless of the challenges or obstacles we face, our team at LUMA is determined to do better for the people of Puerto Rico,” the company said. “We are not politicians. We are public service workers, and we we will remain focused on building a better energy future for the people of Puerto Rico, which will serve future generations.”