Governor inclined toward indefinite LUMA contract
By John McPhaul
jpmcphaul@gmail.com
One day before the expiration of the supplementary contract awarded to LUMA Energy, Gov. Pedro Pierluisi Urrutia said Tuesday that he is inclined toward the permanence of the private consortium contracted to operate the electrical energy transmission and distribution system on the island, but his inclination is that it be indefinite.
“Well, that’s that talking point. That is on the table and the board of the Public-Private Partnerships Authority [P3A] continues in session today. This afternoon,” the governor said in response to questions from the press.
The P3A approved the contract later on Tuesday and the Puerto Rico Electric Power Authority (PREPA) will vote on it today.
“What I hope is that at some point tomorrow [Wednesday], I will make more definitive statements on this issue, because it depends on precisely what is being discussed within the board of [the] Public-Private Partnerships [Authority].”
On the extension of the supplementary contract, Pierluisi said: “That is being discussed.”
“There are several undefined options. I’m going to be cautious in my remarks on purpose, because what I want is to give flexibility to the members of the Board to try to reach consensus,” he said. “One option is if it extends until the bankruptcy process is over. Another option would be to put a specific date on the extension. These are two options that, as I said, an option that so far, since LUMA has not embraced it, is that … the period of effectiveness of the contract begins at 15 years, which has different terms, a lower payment for LUMA and a process of bonuses and penalties established in the contract itself based on the metric. Because of that, so far, the only thing on the table is the possible extension.”
Likewise, the governor gave assurances that the Puerto Rico Energy Bureau will promptly publish the metrics for the evaluation and supervision of LUMA Energy.
“Something that is kind of ignored in the public discussion is that the Energy Bureau has jurisdiction to supervise LUMA and to impose penalties, fines to punish if there is any type of substantial breach with the metrics that the Bureau itself establishes,” the governor noted. “The Bureau is in the process of already publishing some metrics. It is not that they are final because they can always be reviewed, but metrics that would be binding. So the Bureau has an important role. But what happens with the supplementary contract is that it establishes a fixed rate for a fixed payment for LUMA for its service. If it were extended under the current terms, there would be no increase, it would be to continue paying the same. That’s what I can say.”
Regarding his request for a change in the management of LUMA Energy, the governor replied that: “Well, I did, I made the demand for a change in management and I am waiting.” “Basically what I have said and I reiterate is that what I do not want to happen and I am doing everything possible so that it does not happen, is that the contract is canceled and that LUMA falls into a period of transition to exit,” Pierluisi said. “I would tell you that’s the most important thing that weighs on me right now, because that scenario is terrible for Puerto Rico.”
“Well, yes, if the supplementary contract is not extended and on the other hand, the one that applies, the 15-year contract, the base contract, is not agreed to, because then we automatically have a termination and a transition period,” he added. “And then, and in the same way, the Public-Private Partnerships Authority is obliged to begin a process of searching for another, another entity that replaces LUMA. That is what I want to avoid by all means and I hope it does not happen. What I said yesterday, I repeat, is this. This, the possible extension, is not a transaction covered by the Energy Transformation Law, that is, Law 120 of 2018, because it is merely an extension that is already provided in the contract itself, which the [P3A] unanimously approved. … How that approval was given in a bipartisan way. So that’s what I’ve said and I reiterate, but I want to be flexible in the process. Let’s see what happens.”
Later on Tuesday, the Financial Oversight and Management Board also approved the contract between LUMA Energy, the P3A and PREPA.
LUMA Energy is the author of the contract.