LUMA president objects to postponement of T&D contract
By The Star Staff
LUMA Energy President Wayne Stensby objected Thursday to a resolution in the island House of Representatives that would delay for one year the consortium’s June 1 takeover of the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system, and opposed amendments to the privatization contract.
Stensby cautioned that data obtained during the front-end transition phase, which began last summer, shows PREPA’s grid is deteriorating rapidly.
“The data is showing that the reliability and state of PREPA is degrading every month,” Stensby said at a news conference. “We need to begin operations. We need to stop the decline of reliability and start improvements; the best thing for customers is [for us] to start improvements.”
The House Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy Committee has proposed a resolution that would postpone LUMA’s takeover for a year because of concerns the contract may hurt utility customers. The House already voted to refer Edison Avilés, chairman of the Puerto Rico Energy Bureau (PREB), to the Government Ethics Office for ethical conflicts because he participated in the negotiations that brokered the contract but also certified it as a member of the PREB.
Amending the contract will hinder Puerto Rico’s ability to attract investors willing to work with the government, Stensby said. He said LUMA Energy’s parent companies, Quanta Services and ATCO, have invested significant resources and negotiated the contract for 18 months.
“In order for a P3 [public-private partnership] to work, it has to convince the world that you are going to follow the rule of law and that you follow a rigorous process, all of which happened,” he said. “Companies will only do that if they believe the process reaches good and certain outcomes and all parties fulfill their obligations of the contract.”
LUMA Energy, a private consortium, signed an agreement in June 2020 with the Puerto Rico government for a P3 to operate, maintain and modernize PREPA’s T&D system. The 15-year contract, along with a 12-month transition process, includes an annual fee that starts at $70 million and increases to $105 million over time, plus a yearly incentive fee that starts at $13 million and increases to $20 million over time.
The contract, however, has been criticized for being too costly. PREPA filed for bankruptcy in 2017 to restructure about $9 billion in debt.
Documents from the federal Financial Oversight and Management Board (FOMB) show PREPA requires $894 million in funds from the island government to execute the contract with LUMA Energy. Critics have also said PREPA currently has a unionized workforce to help rebuild the grid but the contract calls for eliminating labor protections, including existing labor unions, that protect wages, benefits and pensions.
“LUMA does not believe contract amendments are needed,” Stensby said. “The contract is lawful and was ratified by the P3A [Public-Private Partnerships Authority], PREPA, the FOMB and the PREB.”
Stensby said some 13,000 applicants from outside PREPA have applied for jobs in LUMA as of today. He said 1,342 PREPA workers have applied for jobs but declined to provide a number as to how many have been hired. On Sunday, he said 3,800 workers are needed to operate PREPA’s T&D system. The company put out an ad a week ago seeking a human resources director.
The STAR saw an offer made to a PREPA worker who said that as a lineman, he is only getting one dollar more per hour. The salary offered to the worker, who has 15 years of experience, was $29.33 per hour.
Another concern raised against LUMA Energy is the company’s refusal to provide information. Today, Stensby insisted the company will not reveal the names of LUMA’s board of directors and that he will not provide information on his salary, which is paid with public funds.
On Thursday, Popular Democratic Party Rep. Luis Raúl Torres, chairman of the House Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy Committee, asked House Speaker Rafael Hernández Montañez to delay the confirmation of Secretary of State-designate Larry Seilhamer to force the government into postponing the LUMA Energy contract. He also requested a caucus meeting to discuss the findings of his committee regarding the contract.