Fiscal board says will move forward with LUMA Energy reserve account despite legislative opposition

By The Star Staff

The federal Financial Oversight and Management Board has given the island Legislature until Wednesday to adopt a budget that creates reserve account funding for the Puerto Rico Electric Power Authority (PREPA) that would enable LUMA Energy to take over the power utility’s transmission and distribution system, or else it will deem it as approved.

“If the Legislative Assembly fails to adopt and submit a budget that the Oversight Board determines, in its sole discretion, is a compliant budget pursuant to Section 202(d) of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act], the Oversight Board shall certify the Budget for PREPA Reserve Account Funding and it shall be deemed approved by the Governor and the Legislature under section 202(e) of PROMESA,” the oversight board said in a letter sent over the weekend.

The oversight board wrote the letter to House Speaker Rafael Hernández Montañez and Senate President José Luis Dalmau Santiago in response to another letter sent by Hernández Montañez to oversight board chairman David Skeel last Friday informing the board that the Legislature was not going to pass a resolution creating the fund to execute the LUMA Energy contract.

Hernández Montañez said that pursuant to the request, the oversight board was supposed to submit a compliant budget for PREPA Reserve Account Funding to the Legislature by May 3, 2021. The Legislature was then expected to submit a proposed adopted budget by May 7, according to the oversight board. The expected date for the board to certify the budget for PREPA Reserve Account Funding is May 12, 2021.

“We thank you for including us in this process. However, we regret to inform you that these deadlines are unachievable under the constitutional scheme of our legislative process,” the House speaker said. “Besides the constitutional and statutory barriers that impede a joint resolution from being filed, considered, recommended and approved by both Legislative Bodies within three days, there are serious additional legal and political considerations that pose a concrete challenge to any such resolution’s odds of approval within the Legislative Assembly. Frankly, any joint resolution that would enable the start of LUMA’s operations as per the Agreement does not have the required votes in either Chamber of our Legislature.”

Hernández Montañez said all of the political parties in the House of Representatives believe that the agreement should be amended. The House passed a resolution, which was vetoed by the governor, to postpone the start of the contract from its current June 1 start date and there are other resolutions regarding the contract pending approval.

“As you can see, this Legislative Assembly’s public policy regarding the Agreement, and thus that of the People of Puerto Rico, is overwhelmingly clear. This contract was conveniently and unfavorably designed against the Government and the People’s best interests,” Hernández Montañez wrote. “The timeframe in which this Agreement was designed, negotiated and signed without the public’s intervention is one of the most convincing realities leading to this conclusion.”

The House speaker noted the facts uncovered through the ongoing legislative investigation led by Rep. Luis Raúl Torres Cruz, chair of the House’s Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy Committee.

The investigation, Hernández Montañez said, has found that the agreement’s negotiation process was realized under circumstances of a conflict of interest. As a result, public officials have been referred to the corresponding authorities. He said the agreement’s termination provisions undermine the public interest; the resulting contractual scheme has created a climate of job uncertainty among PREPA’s workforce; LUMA’s operation will be supervised by the Public-Private Partnership Authority, instead of the corresponding energy-related entities; and LUMA has situated itself in a situation of potential noncompliance by failing to hire the necessary personnel to begin its operations with less than a month remaining before the agreed upon starting date.

“While we agree that PREPA’s infrastructure requires special care and attention, we disagree on improving it at an unsustainable cost to the people of Puerto Rico,” Hernández Montañez wrote.

The oversight board said that it could at this time, under the process provided for in PROMESA, certify the revised budget for PREPA Reserve Account Funding pursuant to Section 202 of PROMESA and it would be deemed as approved by the governor and the Legislature under PROMESA.

“Instead, the Oversight Board has decided to issue a Notice of Violation, pursuant to Section 202(d)(1)(B) of PROMESA, to give the Legislature a further opportunity to adopt a compliant budget,” the oversight board said in its reply.

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