Consumer rep: PREPA-LUMA deal puts $10.5 billion granted by FEMA at risk

By The Star Staff

The consumer representative on the Puerto Rico Electric Power Authority (PREPA) board, Tomás Torres Placa, said Wednesday that the contract between the power utility and LUMA Energy would put at risk more than $10 billion in Federal Emergency Management Agency (FEMA) funds for the reconstruction of the grid.

“Every time the Public-Private Partnerships [Authority], the Energy Bureau, LUMA itself and the Electric Power Authority refuse to allow this to go to a public process, they put at risk the $10.5 billion in FEMA funds that were recently assigned to Puerto Rico,” Torres Placa said in an interview with Radio Isla 1320 AM.

He was referring to the fact that the Puerto Rico Energy Bureau gave the green light to the contract to manage PREPA’s transmission and distribution system without taking the matter to public hearings. Negotiations between LUMA Energy and the Public-Private Partnerships Authority were also conducted behind closed doors.

“Every day that passes, that this contract is not evaluated by the regulator, as it would have been evaluated in any other jurisdiction in the United States,” Torres Placa said. “Everything is put at risk because we [are] talking about unorthodox practices that are not used anywhere in the world.”

The contract has raised concerns that LUMA Energy may be able to give contracts to its consortium companies, Quanto and ATCO, because it has no restrictions. After it was announced that FEMA was going to give $12.8 billion to Puerto Rico, LUMA Energy said that it brings world-class utility expertise and, through its collaboration with disaster management firm IEM, the experience of successfully administering more than $80 billion in federal disaster funds.

“As part of our operating and maintenance contract, we are putting in place the team, policies and procedures to manage the federal funds announced today with efficiency, transparency and integrity,” LUMA Energy said in a statement. “This is our commitment to Puerto Rico.”

The Institute for Energy Economics and Financial Analysis has said the contract is likely to push the price of electricity from a targeted 20 cents per kilowatt-hour (kWh) to 30 cents/kWh because of the added costs of debt servicing, fuel prices, political patronage and poor contracting. Consultant and oversight fees are expected to rise to $254 million during the current fiscal year, enough to boost electricity rates by 1.6 cents/kWh.

The LUMA contract also encourages the use of natural gas, thwarting the island’s goal of achieving 100 percent renewable energy by 2050 by allowing LUMA to file changes with regulators to the island’s integrated resource plan.