P3 Authority fires off letter listing LUMA’s errors and threatening to cancel contract

Energy Czar Josué Colón Ortiz is the executive director of the Public-Private Partnerships Authority.

By The Star Staff

Hours after LUMA Energy President & CEO Juan Saca blamed the Puerto Rico Electric Power Authority (PREPA) for the deteriorating reliability of the electrical system, Energy Czar Josué Colón Ortiz fired off an 81-page missive listing things the private operator of the utility’s transmission and distribution (T&D) system has done wrong and threatening to cancel its operation and management agreement (OMA).

The letter is a Notice of Disputes, listing 10 disputes and a detailed exposition of the nature of those disputes, together with the corresponding formal demands served upon LUMA.

“Therefore, (the Public-Private Partnerships Authority [P3A]), as the Administrator of the Transmission and Distribution (T&D) OMA, demands the immediate commencement of the Dispute Resolution Procedures concerning each dispute,” the letter states. “Should LUMA fail to remedy these violations within the contractually prescribed windows, PREPA and P3A will pursue every remedy the T&D OMA allows -- including, if necessary, termination of the agreement -- to protect public funds, restore reliable electric service, and hold LUMA fully accountable.”

One of the disputes consists of LUMA exhibiting systemic deficiencies in cash flow reporting, reconciliation of federal expenditures, and timely submission of requests for reimbursements.

Another area of dispute is LUMA’s persistent and material breaches of its contractual obligations, which the letters says have culminated in a liquidity crisis for PREPA and a direct threat to the continuity of public electrical service. Despite being responsible, under the T&D OMA, for securing sufficient revenues and timely reimbursements for federally funded projects, LUMA has failed to do so, the P3A said.

Another area is LUMA’s failure to fix problems caused by outages and yet another is LUMA’s persistent and material noncompliance with its audit and financial reporting obligations.

In response, Saca said “we recognize this step as the formal beginning of a process to address issues that have to be resolved and that we have publicly addressed on multiple occasions.”

“We welcome this structured process and are ready to begin the negotiation period, as set out by the OMA,” the LUMA CEO said. “The tools contained in the contract are designed to resolve these types of disputes in favor of our 1.5 million customers.”

Earlier in the day, Saca had submitted the fourth-quarter fiscal year 2025 report to the Puerto Rico Energy Bureau (PREB) as further evidence of the negative impact that PREPA’s years of underfunding of the energy system has had.

“We have said this on multiple occasions: no electric system can operate efficiently or advance without ongoing investments in critical infrastructure,” Saca said in a written statement. “We urge PREPA and the relevant entities to act immediately and allocate the necessary funds to improve the service our people deserve.”

According to the report, over the past 12 months, customers experienced a 12% increase in the duration of power outages and a 2% increase in frequency, as a result of PREPA’s $190 million to $350 million in operating funds. On Monday, LUMA filed its performance metrics report for the fourth quarter of fiscal year 2025 (Q4 FY 2025) with the PREB. The Q4 metrics report clearly shows the significant and undeniable impact PREPA’s withholding of funds from LUMA’s critical operations accounts is having on two critical metrics: the length and number of service interruptions, Saca said. As highlighted in the report, he said, FY 2025 metrics for outage duration and outage frequency increased by 12% and 2% when compared to the previous 12 months.

“We want to be very clear -- this report is further proof of the profound negative effects on electricity customers due to years of PREPA’s underfunding of Puerto Rico’s energy system,” Saca reiterated. “While our entire LUMA team is determined to build a better energy future that Puerto Ricans expect and deserve, our efforts to address outages and improve the reliability of the grid are being severely limited by the continued lack of proper funding by PREPA.”

Saca went on to detail the consequences of the underfunding.

Over the past 12 months, he said, customers experienced a 12% increase in the duration of outages and a 2% increase in the frequency of outages compared to the previous 12 months (FY 2024). During FY 2025, daily operating accounts funding critical projects were underfunded by an average of more than 70%. PREPA’s continued underfunding of key accounts, and the lack of funds to pay for everyday operations, has resulted in LUMA shifting critical resources away from areas critical to improving reliability, the Q4 metrics report said. For example, starting in January of this year, LUMA has been forced to shift 25% of its operational workforce, whose responsibility is to support outage response, system maintenance and customer complaints. These workers were assigned to FEMA-funded projects, such as the Smart Meter Initiative, streetlight upgrades, and pole replacements. While important, those initiatives do not improve the stability and reliability of the electric system, the official said.

The Q4 FY 2025 performance metrics report and the specific declines in the frequency and duration of reliability are further proof of the need for sustained and additional investment in the energy grid, Saca said. To address this ongoing challenge, LUMA submitted earlier this month a comprehensive investment plan to the PREB which, if approved, would represent the largest investment for the energy system in decades. The new investments would fund significant actions to strengthen system reliability and resiliency. LUMA’s proposed investment plan would result in a reduction in outages, and lead to tens of millions of fewer customer interruption minutes prevented by 2028. Without these critical investments, coupled with PREPA’s continued underfunding of LUMA’s operations, LUMA estimates that the average customer could experience an estimated seven outages per year, with an average duration as high as 20 hours, the CEO said.

Despite confronting an array of challenges, LUMA continues to make progress across key priorities, Saca pointed out.

The private operator of the island’s electric power transmission and distribution system increased miles of vegetation maintenance completed by 12%; increased distribution line inspections by 93%, transmission line inspections by 59%, and substation inspections by 81%; reduced the OSHA Severity Rate, or average number of days lost per incident, by 59%, and the OSHA DART Rate, or average number of days away, restricted or transferred, by 20%; reduced in-person wait times under 8 minutes and maintained an average speed to answer calls of less than two minutes; and connected more than 9,300 rooftop solar customers, adding 74 megawatts of clean, renewable energy to the grid.

LUMA has also installed more than 10,300 grid automation devices on critical infrastructure to make outage impacts smaller and shorter, preventing more than 99 million customer interruption minutes over the past 12 months, Saca noted.