Governor: LUMA on probation ‘until I see improvements’
By The Star Staff
Gov. Pedro Pierluisi Urrutia said Monday that LUMA Energy is on probation, but noted that the supplementary contract with the private operator slated to expire Nov. 30 is tied to the Puerto Rico Electric Power Authority (PREPA) reaching a debt deal with its creditors and resolving its bankruptcy.
“LUMA, from my point of view, is on probation,” the governor told reporters. “I am keeping an eye on the changes that were announced the other day and looking out for information from LUMA’s management. They are on probation until I see improvements in their performance, that we don’t have as many power outages and if there are any, that they be dealt with more quickly.”
The governor said he dropped his support for LUMA Energy when he heard the managers acknowledge that recent power interruptions that left thousands without service were the result of a lack of vegetation trimming.
Since the summer of 2021, LUMA Energy has been in control of PREPA’s transmission and distribution system following a one-year transition period. Last week and into the weekend there were protests demanding the contract’s cancellation amid anger over the firm’s inability to reduce power outages.
PREPA, which has been in bankruptcy since 2017, is currently in mediation to work on a new debt adjustment plan to restructure some $9 billion in debt.
Because PREPA remains in bankruptcy, LUMA Energy and PREPA are working under the terms of a supplemental agreement that is slated to expire Nov. 30.
Asked about the supplemental agreement, Pierluisi said that once PREPA reaches an agreement with its creditors, the terms of the formal agreement will then be enforced in all of its aspects.
“Right now, there is a mediation with the main directors of PREPA and it remains to be seen where that mediation ends,” the governor said. “And when that happens, there is no need to have a supplemental agreement. … We have to see what happens with the mediation.”
Earlier this week, lawyer John Mudd said in his blog Muddlaw that the current Sept. 9 deadline for PREPA to finish mediation with creditors and inform the Title III bankruptcy court whether there is a debt adjustment plan will determine the fate of the LUMA Energy contract.
According to the contract, certain conditions must be met for the cancellation to move forward. First, the Puerto Rico Public Private Partnership Authority must have notified LUMA Energy about violations to the contract and given the private operator at least 60 days to make changes.
Second, LUMA must have continuous violations over a three-year period, requiring the government to wait at least three years. Further, LUMA must fail at least three metrics to have the contract canceled. LUMA has been a private operator for 18 months.
The governor said he has no specific date for deciding when LUMA is no longer on probation.
“I put them on probation because I am not satisfied with their performance,” Pierluisi said. “Too little time has passed since those last interruptions occurred for me to say that I am satisfied.”