Governor vetoes House resolution that would delay LUMA takeover of power grid

Gov. Pedro Pierluisi

By The Star Staff

Gov. Pedro Pierluisi Urrutia on Wednesday vetoed a House Joint Resolution that sought to postpone the contract with LUMA Energy to manage the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system that is slated to take effect on June 1.

The governor said the measure in itself is unconstitutional because it undermines current contractual obligations.

The measure was approved by the island Legislature following public hearings in which deponents representing various entities said the LUMA Energy contract is costly and onerous because the government was taking all of the risks. House officials also complained the contract violated workers’ rights.

Pierluisi said the House measure is significantly inconsistent with commonwealth and PREPA fiscal plans that call for the transformation of the utility.

Also, he maintains that the contract already has mechanisms to evaluate amendments to the contract. LUMA Energy officials said a steering committee overseeing the contract has not informed them of any amendments.

“I understand that there is no justified cause to postpone the execution of the LUMA contract to January 2022 or any later date, since all the requirements to start said execution have been met or are expected to be met on or before 1 June 2021,” the governor said.

“I reiterate my support for the model of public-private partnerships to modernize and restore the transmission and distribution of energy in Puerto Rico to improve the service to our people, provide more accessible and cheaper energy, and promote the diversification of our energy sources,” Pierluisi said. “Likewise, I understand that the approval of this joint resolution is not necessary since the Public-Private Partnerships Authority and PREPA will be in a position to negotiate any amendment to the LUMA contract that is beneficial to the public interest.”

The governor reiterated that his position has been clear regarding LUMA’s contract.

“I always said that the contract had to guarantee several issues, such as not requesting increases in the electricity rate to compensate for LUMA’s administrative expenses and that Law 120-2018 is complied with so that PREPA employees are guaranteed to be considered for employment with LUMA with the same benefits that they received in the Authority or better, including the pension plan to which LUMA as an employer must now contribute,” he said. “In the alternative, that they be guaranteed a position in the government, either in PREPA or another agency.”

In the same way, the governor had previously indicated that the contract must comply with the standards of services and improvements to the system in accordance with the public policy established in Law 17-2019, that there are measures that avoid conflicts of interest in the awarding of contracts, and that clear and specific compliance and performance metrics are established and met.

“To ensure that these matters are fulfilled, as soon as I started my government I signed Executive Order 2021-012, which created the steering committee chaired by the secretary of State, Larry Seilhamer. This committee may also evaluate and recommend possible amendments. We all want a robust and resilient electrical system, and my government is committed to the energy transformation that leads Puerto Rico toward renewable energy,” Pierliuisi said. “Continuing to do the same [as in the past] is not an option. I am always focused on the best for our people and my actions prove it.”

The contract with LUMA Energy starts at $70 million for the first year and increases to $105 million for each of years four to 15 plus incentive fees that start at $13 million in year one and increase to $20 million for years four to 15. PREPA has been in bankruptcy since 2017 to restructure a $10 billion debt.

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