Friendly reminder: LUMA can leave PR in case of a hurricane

By John McPhaul

Tomás Torres Placa, the consumer representative to the Puerto Rico Electric Power Authority (PREPA) governing board, said Thursday in a radio interview that the contract that the island government signed with LUMA Energy to manage PREPA’s transmission and distribution system allows that consortium to leave Puerto Rico in the event of a hurricane, among other scenarios, without any penalty being imposed, a fact reported by the STAR on Feb. 28.

“Any resolution and order of the [Puerto Rico] Energy Bureau that they [LUMA] understand to be adverse to their purpose here, they can go,” Torres Placa said in an interview on Notiuno 630 AM. “If the adjustment plan of the Financial Oversight and Management Board and the decision of the federal court [under] PROMESA [the Puerto Rico Oversight, Management and Economic Stability of 2016], does not agree with what they believe, they can leave.”

“This is what the contract says; this is not my opinion. These are the facts,” Torres Placa added. “What happens here is that LUMA, [with] this contract, they hold the entire electrical system of Puerto Rico hostage because if something happens that does not align with the vision of this operator, if they [regulators or other government authorities] do not agree with how this operator believes that things must be, they [LUMA] can go.”

“And what is the problem?” the consumer rep continued. “That this contract, not Law 120, not Law 17, the contract, [determines what happens] to all employees who go above the fixed rate that LUMA is paid plus incentives of $125 million per year. By the way, that $125 million per year, which is a fixed rate plus incentives, is for six executives, a LUMA board -- because the PREPA board disappears, LUMA has its own board -- plus administrative expenses and consultant expenses, so all the employees who are not there then become LUMA employees by reimbursement.”

Torres Placa, an engineer, said the $10 billion in federal funds from the Federal Emergency Management Agency that PREPA will receive to modernize Puerto Rico’s electrical system requires that it “remain a public corporation -- it cannot be privatized.” And to receive federal funds PREPA is not required to make a contract, he added.

“If this contract is executed as written, which would be a serious mistake, especially at the beginning of the hurricane season, since it [PREPA] would practically be handed over to a contractor -- because LUMA is a contractor -- that the Authority is hiring, and it [the island government] cedes all its operating rights of the Puerto Rico Electric Power Authority,” Torres Placa said. “It cedes practically 80 percent of the Electric Power Authority.”

The consumer rep went on to say that “[t]he contract must be amended in three fundamental areas: supervision,” followed by costs -- “this is going to increase the rates and it has not been demonstrated how to lower it -- and third, a continuity of service must be guaranteed through the employees of the public corporation.”

LUMA reacted Thursday afternoon on a written statement.

“Force majeure clauses are standard in business contracts. LUMA is fully invested in the transformation of Puerto Rico’s electric power delivery system and remains focused on a June 2021 service commencement date. During this front-end transition, LUMA has discovered the electric power transmission and distribution system that is very fragile and deteriorating; its transformation must not be delayed. LUMA will be prepared to start delivering on a customer-centric, reliable, and resilient energy system that Puerto Ricans deserve upon commencement, a commitment that includes disaster preparedness in the event of a major storm or hurricane this upcoming season. In fact, LUMA has emergency response equipment on island and ready to deploy in the event of a disaster. It is what we are here to do and what we intend to accomplish over the duration of the 15-year contract period,” the statement reads.

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