Energy regulator to evaluate temporary rate hike sought by LUMA

By The Star Staff

The Puerto Rico Energy Bureau (PREB) says it will evaluate a petition from LUMA Energy, the private operator of the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution system, that may result in rate hikes.

On Aug. 21 of this year, LUMA filed with the PREB a document entitled “Informative Motion on Preliminary Monthly Reconciliation of FCA, PPCA, and FOS Riders Factors.” Through the motion, LUMA reported that the costs of fuel and energy purchases were higher than initially estimated.

LUMA noted a $45.6 million insufficiency in fuel purchases and an $8.4 million insufficiency in revenues from energy purchases during July 2024. Since there was a deviation between LUMA’s billing and the costs incurred for energy purchases and fuel purchases in excess of $20 million, LUMA informed the PREB, according to another document dated Sept. 6.

LUMA alleged that the high temperatures recorded during July on the island caused the generation fleet to have to produce more energy than expected to meet demand, requiring greater reliance on the system’s most expensive units.

Furthermore, LUMA noted that the San Juan and Palo Seco generating units were out of service and otherwise were not as efficient during the same period.

“The Energy Bureau underscores that the reconciliation of the FCA and PPCA charges is not an automatic process but rather requires an evaluation and approval by the Energy Bureau, the PREB said. “Pursuant to the provisions established in the Permanent Tariff, the reconciliation of these charges must be formally requested by the pertinent entity, accompanied by the information justifying the request.”

The PREB said it will evaluate LUMA’s request under the criteria of prudence and reasonableness established by the Permanent Tariff, scrutiny to which all utility companies are subject both in Puerto Rico and in the United States, to ensure that the costs transferred to consumers for the purchase of fuel and energy are duly substantiated and justified.

The FCA and PPCA clauses contain a provision for accelerated adjustment of the factors, which states that each month after the final fuel purchase cost and power purchase cost are available to PREPA, the utility will prepare a new estimate comparing the estimated recovery of fuel purchase and power purchase for the quarterly period.

“If the estimated fuel purchase and power purchase expenses deviated from the estimates by more than $20 million, the Authority will re-estimate the Fuel Purchase and Power Purchase Charge Adjustment factors to provide an expected value of zero for the quarterly period,” the PREB said.

The process seeks to ensure transparency and fairness in the application of the charges so that any variation in fuel or power purchase prices is not arbitrarily passed on to the consumer.

The evaluation is essential to prevent the transfer of excessive or unjustified costs to consumers and to comply with the objectives of transparency and accountability “established in our public energy policy,” the regulator said.