LUMA & Genera under scrutiny: Energy Bureau demands disclosure of potential conflicts of interest

Scott Hempling, the hearing examiner overseeing the new power rate case before the Puerto Rico Energy Bureau (LinkedIn)

By THE STAR STAFF

The hearing examiner overseeing the new power rate case at the Puerto Rico Energy Bureau (PREB) has ordered LUMA Energy and Genera PR to disclose any potential conflicts of interest between their companies’ self-interests and the public interest.

Scott Hempling, the hearing examiner, issued the order on Monday, expressing dissatisfaction with the companies’ previous denials of any conflicts of interest. He highlighted several factors that suggest the existence of such conflicts, despite the companies’ claims otherwise.

Hempling noted that LUMA, as the operator of the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution system, holds significant influence over the entry of new renewable energy projects. That influence, the hearing examiner said, is compounded by its status as a subsidiary of Quanta, which is also a competitor in Puerto Rico’s renewable energy market. Genera, meanwhile, operates Puerto Rico’s legacy generation fleet, and its parent company, New Fortress Energy, is a primary supplier of liquefied natural gas (LNG) to both Puerto Rico and Genera.

Both LUMA and Genera’s parent companies are involved in the business of supplying and modernizing infrastructure for distribution and transmission (LUMA) and for generation (Genera). Therefore, they have a financial incentive to pursue energy solutions in Puerto Rico that involve infrastructure development.

Additionally, LUMA employs “seconded” employees from its parent companies, Quanta and ATCO.

Hempling pointed out that the amount of ratepayer funds each company seeks for various performance improvement activities can enhance their profitability in several ways: by minimizing potential performance penalties, increasing the likelihood of receiving contractual “incentive fees,” and reducing the chances that the Puerto Rican government might terminate their contracts.

The CEOs of LUMA and Genera are required to submit their pre-filed testimony, labeled “Supplemental Testimony on Conflicts,” no later than Sept. 22. The testimony should address whether the companies recognize any conflicts of interest and describe the measures in place to prevent any harmful actions against Puerto Rico’s electricity consumers.

“It is human nature, and business nature, to seek advantage at others’ expense. If this were not true, we would not need supermarket checkout counters to prevent theft or tax auditors to prevent cheating. We would let utilities set their own rates,” Hempling stated in the order. “The question is not whether one has a conflict of interest; the question is whether one is sufficiently self-aware and honest enough to identify the conflicts and then establish alert systems to prevent acting upon them.”

The rate case, which began earlier this year, aims to determine the revenue requirements and rate design necessary to sustain the operations of the power grid.