Oversight board: Gov’t can’t cancel LUMA-PREPA contract
By The Star Staff
The Financial Oversight and Management Board said Thursday that the cancellation of the contract between the Puerto Rico Electric Power Authority (PREPA) and LUMA Energy, as several gubernatorial candidates have proposed, is highly unlikely.
The oversight board said the 15-year contract can’t be cancelled by the island government.
“The LUMA contract is the result of an extensive, legal and careful process that was and still is required under Puerto Rico’s Public-Private Partnership Law,” the oversight board said in written remarks. “It is also the result of the clear need to transform the power sector, as set out in Act 120-2018 and Law 17-2019, and as recognized by the Government and the Fiscal Board. PREPA does not have a legal option to cancel the contract, and the discussions on the cancellation of the contract are not helpful to the clear need to transform the agency and attract private sector investment and job creation to Puerto Rico.”
“Discussions about contract cancellation are also not doing any good to individuals and businesses in Puerto Rico, who deserve more reliable, lower-cost, and cleaner energy,” the board added. “The LUMA transaction will achieve these critical goals.”
PREPA, as it currently exists, and as it has existed for the last decade or more, has not served the people of Puerto Rico very well, the oversight board pointed out. Both the island government and the board concluded that a private operator is essential to achieve a necessary change. Bringing in an experienced operator to transform the electrical grid into one with greater reliability, resilience, and lower costs is vital so that better electricity service can be offered to the people of Puerto Rico, the oversight board said.
“LUMA will operate the network in a more efficient manner than PREPA, offer better service to consumers, and provide better safety standards for employees and the public than PREPA,” the oversight board said. “The global experience of the business partners that make up LUMA, the rigorous safety records and knowledge of Puerto Rico will reduce costs, reduce spending on external consultants, reduce blackouts, and achieve deferred maintenance, including addressing the issue of vegetation management, among others.”
The congressionally mandated oversight board said LUMA will not only be responsible for improving the quality of service to all PREPA customers, but also for strategically investing recently announced funds from the Federal Emergency Management Agency to rebuild and improve the resilience of the electrical grid. Previously, PREPA borrowed $9 billion to build a system that is now failing its customers, the board noted.
Popular Democratic Party gubernatorial candidate Charlie Delgado said that if elected he would be cancelling the 15-year contract. His remarks were echoed by aspiring gubernatorial candidates such as Citizens Victory Movement candidate Alexandra Lúgaro, independent candidate Eliezer Molina and Juan Dalmau, the gubernatorial candidate of the Puerto Rican Independence Party.
New Progressive Party gubernatorial candidate Pedro Pierluisi has said he will review the contract.