Comptroller ‘can audit the contract with LUMA Energy’

By The Star Staff

Although LUMA Energy is a private company, the Commonwealth Comptroller’s Office has the authority and jurisdiction to evaluate the operation and management agreement between LUMA Energy and the Puerto Rico Electric Power Authority (PREPA).

“The commonwealth comptroller can audit the contract with LUMA Energy,” Comptroller Yesmín M. Valdivieso said through her press officer, Lisandra Rivera, in response to written questions. “However, we don’t have a date for such an audit.”

Regarding the possibility that the commonwealth comptroller might audit the operations since LUMA Energy is in charge of PREPA’s transmission and distribution (T&D) system, LUMA Energy President Wayne Stensby said last week that LUMA Energy had to submit yearly financial statements as part of the contract, but did not say if the contract would allow comptroller audits, which are made to ensure public funds are used according to the law.

Before LUMA Energy took over PREPA’s T&D, the energy utility created the public subsidiaries GridCo, which is managed by LUMA, and GenCo, which is managed by PREPA, as part of the 15-year contract with LUMA Energy.

Meanwhile, after the Title III bankruptcy court denied granting a preliminary injunction to stop the LUMA Energy contract as well as a motion for reconsideration, the Electrical Industry and Irrigation Workers Union amended its complaint to invalidate the contract and refiled it on Friday. The amended complaint takes into account that the contract went into effect.

“Now, UTIER is presented with a new challenge, which is the execution of the Puerto Rico Transmission and Distribution System Operation and Maintenance Agreement (O&M) with LUMA Energy on June 22, 2020, meaning the privatization of PREPA’s functions,” the suit says.

As it did in its original suit, UTIER argues that the contract with LUMA Energy substantially impairs UTIER’s members, since it dismantles PREPA and does not recognize UTIER’s collective bargaining agreement (CBA) with PREPA or its members’ vested rights and benefits, and that it does not acknowledge the employees’ position in PREPA.

Also, under the agreement, LUMA Energy will not assume the responsibilities of PREPA as to PREPA’s pension system and will accelerate its insolvency, the UTIER lawsuit claims. PREPA has to pay LUMA Energy’s service fee before contributing to the utility’s pension system.

“Moreover, the O&M Agreement is an illegal transaction which does not pass muster under Puerto Rico or federal law,” the complaint reads.

Similarly, PREPA’s retirement system also refiled its separate amended complaint to take into account the execution of the contract. The suit seeks the payment of some $600 million in pension contributions and also the nullification of the LUMA Energy contract.

For a little over a decade, PREPA has disregarded its responsibility to the pension system, the suit reads.

“In recent years, PREPA has amassed nearly $603 million in debt [to the pension system], which has been aggravated by the numerous austerity measures passed by the Puerto Rico Legislative Assembly. These measures have gutted pension benefits, causing mass retirements, burdening the pension system, and impairing its financial situation, leading it into actuarial insolvency,” the suit states. “Also, these measures violate the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), which requires that the fiscal plans provide adequate funding for the public pension systems.”

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