LUMA argues before high court that voiding extension would cost $1.3 billion
Says gov’t lacks a transition plan
By THE STAR STAFF
LUMA Energy argued before the Supreme Court of Puerto Rico on Monday that declaring the extension of its supplemental contract void would result in some $1.3 billion in costs and obligations, while maintaining that the island government has not identified a replacement operator, the resources to fund a transition, or a concrete plan to maintain the operation of the transmission and distribution (T&D) system.
The position is part of the consolidated brief filed by LUMA, the private operator of Puerto Rico’s electric power T&D system, regarding the legal challenges through which the central government and the Public-Private Partnerships Authority (P3A) seek to invalidate the extension of the interim period approved in November 2022.
LUMA President & CEO Janisse Quiñones submitted a sworn statement along with the filing, quantifying the consequences that, in the company’s view, the termination would entail.
“In my professional judgment and based on my knowledge of LUMA’s operations and the T&D System, the nullification of the Extension and the consequent termination of the T&D OMA would impose approximately $1.3 billion in quantifiable costs -- of which at least $726 million are unavoidable -- with no identified source of funds and without said investment being tied to improvements to the T&D system or customer service,” Quiñones declared under oath.
She added that some $6.177 billion in obligated federal funds would be put at risk, and the Puerto Rico Electric Power Authority (PREPA) could be exposed to claims requiring the repayment of around $2.2 billion already invested in projects.
The breakdown presented by LUMA includes $143.3 million for the contractual termination fee, $117.8 million for a 12-month exit transition, another estimated $117.8 million for the entry of a replacement operator, $588.3 million that PREPA would need to maintain in service accounts, and $347.1 million in accounts payable to suppliers.
Quiñones said four of those items could not be avoided even with a “perfectly planned” transition: the termination fee, the exit transition, the entry transition, and accounts payable to suppliers -- totaling around $726 million.
The CEO maintained that PREPA currently lacks the liquidity to absorb those costs and that current rates do not include funds allocated for a potential nullification of the agreement.
“In my opinion, if these circumstances persist and the Extension is declared null and void, these costs would be borne by the people of Puerto Rico through higher rates, or by taxpayers in general, as public funds from the central government would be diverted from other purposes,” Quiñones stated.
LUMA also maintained that termination would impact the reconstruction of the electrical grid. Quiñones stated that there are some $6.177 billion in federal funds earmarked for future system investments, covering 279 projects.
According to her statement, LUMA has invested about $2.2 billion in federal funds since 2021; a disruption in the conditions under which those projects are managed could lead federal agencies to reconsider approvals, halt disbursements, or demand the return of funds already spent.
Quiñones also estimated that a competitive process to select a new operator could take “no less than 18 months” and that, subsequently, developing projects and securing the necessary approvals and funding obligations could require additional time.
LUMA questions absence of transition plan
One of the central arguments in the filing is that the parties seeking to void the agreement have not -- according to LUMA -- presented a detailed plan to replace the company should the Supreme Court invalidate the extension.
LUMA maintains that no one has been identified to immediately operate the grid, nor has there been a plan for how transition costs would be funded or who would assume functions that currently include contract administration, reconstruction projects, federal fund management and other operational processes.
The company maintained that a judicial ruling of nullity would not, in itself, resolve those questions, and posited that devising the transition falls to the executive branch, not the court.
The filing also challenges the government’s suggestion that PREPA could temporarily operate the system while selecting another operator. LUMA maintains that the public corporation currently lacks the personnel, infrastructure and resources necessary to immediately assume all functions.
