LUMA insists it will meet June 1 deadline to take control of PREPA’s transmission & distribution
By The Star Staff
LUMA Energy President and CEO Wayne Stensby said Sunday that while there remains “an incredible” amount of work over the next 100 days to complete the front-end transition before the private operator takes full control of the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system, he did not foresee problems in meeting the June 1 deadline.
“We have an incredible amount of work to do but June 1 is our target …” he said. “Will there be challenges along the way? Of course there will be.”
LUMA has a 15-year agreement to manage the utility’s T&D system at a cost of about $5 million a month in fixed fees. The contract is in the front-end transition phase. The firm is slated to start managing transmission and distribution on June 1.
In its progress report for January to the Puerto Rico Energy Bureau (PREB), LUMA Energy wrote that there were ongoing challenges impacting the effectiveness of the front-end transition.
“These challenges showed marginal progress in January; however, most continue to persist with no clear resolution and are becoming a serious concern given the time remaining to achieve the June 1 service commencement,” the utility said.
LUMA is assuming that it will operate under the terms of a portion of its contract titled “supplemental terms of the agreement” as PREPA has yet to file a debt adjustment plan as part of its bankruptcy.
Stensby insisted meanwhile that LUMA is committed to hiring PREPA employees but that ultimately “it will be their choice” if they work for LUMA or not. He could not provide numbers as to how many PREPA workers have been hired by LUMA to work in T&D. PREPA sources with knowledge of the situation said some 3,800 utility workers may end up losing their jobs and moving to the generation division or to other government agencies.
“We are in the middle of the recruitment process, through job interviews; we will then move to making offers to those employees,” Stensby said.
He also said LUMA Energy will not disclose the salaries of the workers it hired. He said the PREB would be the entity in charge of reviewing their costs, virtually removing PREPA from the picture.
Stensby made his remarks at a roundtable where he discussed the company’s goals for the utility.
The meeting came three days before the island House of Representatives is slated to start public hearings on the LUMA Energy service contract, which has been criticized because of its costs.
Stensby said there will be no requests for rate increases for at least the first three years of the contract. All rate increases will have to go through the PREB.
As part of the system remediation plan, which will last three years, the firm will focus on performance metrics and system remediation, Stensby said. LUMA has planned for $4 billion in initiatives as part of the plan and $11 billion in total improvement programs, he added. The Federal Emergency Management Administration in October approved $9.6 billion for PREPA to repair damage to its electrical grid caused by Hurricane Maria in 2017.
The LUMA Energy CEO said that as part of the front-end transition, the firm found that PREPA’s recordable incidents are 200% higher than the next worst reported utility, that its customer service score is 50% lower than the average utility, and that its frequency of power outages is 300% worse than the next worst performer.
Following commencement of service on June 1, the public can expect improved public safety or street lighting, clearing of vegetation, improvement in contact center responsiveness, and walkdowns and inspections of areas experiencing a significant number of outages, Stensby said.
June also marks the start of the next hurricane season, and the height of the season is in September. Stensby was asked if there would be time to replace or fix transmission cables.
“This is a substantial plan that will take a number of years …” he said. “The first few months will be challenging as we work on priorities.”