Fontanés: PREB is entity in charge of monitoring LUMA’s quality of service

Fermín Fontanés Gómez, executive director of the Puerto Rico Public-Private Partnerships Authority

By The Star Staff

Puerto Rico Public-Private Partnerships Authority (P3A) Director Fermín Fontanés Gómez said Thursday that his agency’s oversight of LUMA Energy is limited to its compliance with the terms of the 15-year concession contract and that the Puerto Rico Energy Bureau (PREB), which just a week ago completed performance standards, monitors the quality of the service provided to consumers.

Fontanés appeared at a hearing of the Economic Development Committee of the island House of Representatives to explain his role as administrator of the contract with LUMA, which has been the target of criticism for failing to maintain reliable service after almost three years as the operator of the island’s electricity transmission and distribution system.

Fontanés said his office depends on the information provided by the PREB, which just this week completed the performance standards to evaluate the private operator. He said he has eight of his office’s 15 employees monitoring the contract, but of those eight, only three focus on compliance.

Asked by one of the lawmakers if he did not think his job is to protect public interest and ensure people have power, Fontanés replied that the PREB is the entity with the technical expertise.

The PREB has not submitted any reports to the P3A about violations to the contract, he said.

Lawmakers asked Fontanés about the cancellation of the contract with LUMA. According to the document, there are at least four events that could lead to such a cancellation. They are LUMA’s failure to comply with a material obligation of the contract; any violation of law by LUMA, as determined by a competent court; LUMA’s failure during a period of three consecutive contractual years with the minimum level of performance in three or more of the key metrics approved by the PREB; and if the conditions precedent for the start of the operation of the transmission and distribution system are not satisfied, including the exit of the Puerto Rico Electric Power Authority (PREPA) from the bankruptcy case under Title III of the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA.

Fontanés said the cost of canceling the contract without cause would be up to $300 million, but he could not specify costs if there was a cause.

Fontanés gave assurances that his agency is conducting an investigation into the recent blackouts on the island whose findings will determine whether the LUMA Energy consortium failed to comply with its contract.

He said Francisco Portela, who is the assistant energy secretary at La Fortaleza and is the person in charge of looking at renewable energy projects, also helps in the monitoring of the contract.

Fontanés, however, revealed that La Fortaleza has not inquired recently about the possible cancellation of the contract.

“Those are conversations we have had in the past, but not over the past two weeks,” he said. “All we are doing is trying to determine the causes of the latest events to determine who is at fault.”

Popular Democratic Party Rep. Jesús Santa Rodríguez questioned the reasons behind having the PREB, which is the island’s energy regulator, oversee the contract, noting that it has the appearance of a conflict of interest. The lawmaker said that while the Ports Authority monitors the concession at Luis Munoz Marin International Airport and the Department of Transportation and Public Works monitors the highway concessions, he insisted the PREB should not be monitoring the contract as a regulator.

However, PREPA is not monitoring the contract.

Fontanés stated meanwhile that he is not satisfied with LUMA’s performance amid the frequent failures in the electrical system, particularly in the island’s southern region, that have occurred in recent weeks.

The P3A chief guaranteed during the public hearing that there is no request from LUMA Energy for a new increase in the customer rate after it emerged that the consortium requested an increase in the electricity bill from the PREB to cover maintenance costs and other services.

“There is no request for a rate increase and, in fact, since LUMA has been here it has not asked for or requested a rate increase,” Fontanés said. “Those increases that the people have suffered have been tied to fuel prices that none of us has control over.”

The official noted that the information arose from a budget request for fiscal year 2025 that will be divided between LUMA Energy, Genera PR and PREPA. He added that there is a “limited pot of funds in the fee,” so the three parties are now “fighting” over those items.