LUMA Energy refuses to turn over data on expenditures to energy regulator

By The Star Staff

LUMA Energy, the company hired to privatize the transmission and distribution system of the bankrupt Puerto Rico Electric Power Authority (PREPA) in June of this year in a process that will lead to the dismantling of PREPA as a public entity, has rejected a petition from the island’s energy regulator, the Puerto Rico Energy Bureau (PREB), to turn over information on the costs and expenses incurred in the course of providing front-end transition services.

As part of the privatization contract, PREPA will pay LUMA a fixed annual compensation that will start at $70 million the first year, increase to $90 million the second, and to $100 million the third year. In the fourth year and for the remainder of the 15-year agreement, the annual payment to the operator will be $105 million, but if the operator meets certain metrics and yields certain savings, payments could reach $125 million per year.

PREPA is also required to reimburse the company for other variable expenses such as meals and lodgings. Such expenses had reached $50 million as of January.

The PREB on Feb. 17 ordered LUMA to submit information on the variable expenses, stating that it wanted to ensure that the variable costs were reasonable and to stop the reimbursements in the event that they do not meet that criteria.

LUMA Energy officials asked the PREB to reconsider its ruling, noting that LUMA has filed monthly reports and expenses, the latter of which are not detailed.

LUMA highlighted that the Public Private Partnership (P3) Authority is the administrator of the contract. It also said in a response dated March 1 that disputes regarding the service fee or any of the monthly amounts are to be resolved as a technical dispute under the management agreement.

“This process has not been activated to date as LUMA has complied with the processes and request from the P3 Authority,” LUMA said.

The private operator further told the PREB that under Act 120 of 2018, the PREB has no authority to alter or amend the partnership or sales contract and cannot interfere with operational and contractual matters.

PREB member Ángel Rivera said the issue will be handled by the PREB just like another matter that goes before the panel.

The issue of having transparency on expenditures is important as LUMA also has access to $10.7 billion in Federal Emergency Management Agency funds earmarked to rebuild the utility. Any improvements under the contract will be kept by LUMA, which is allowed to seek rate hikes and to ignore PREPA workers’ collective bargaining agreement. The contract also exempts LUMA from some 15 local laws regulating the use of public funds, which critics say will complicate efforts to obtain information on what the company is doing.

The contract is in the front-end transition phase and calls for PREPA to pay LUMA -- a consortium created by Quanta Services, ATCO and EIM -- $5 million a month plus all variable expenses. LUMA has already invoiced $88.8 million, including fixed fees.

At a hearing on Friday, Puerto Rican Independence Party Rep. Denis Márquez Lebron chided PREPA’s board for approving a contract without reading the fine print, including the fate of current PREPA workers. Officials did not know what would happen with the thousands of workers who could be left jobless.

House Energy Committee Chairman Luis Raúl Torres blasted the board for approving a “complicated” 333-page contract in under 43 minutes. On Tuesday, the House is slated to evaluate a preliminary report from the committee that would refer PREB Chairman Edison Avilés to the Government Ethics Office for his role in the approval of the contract.

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