PDP members: LUMA Energy trying to secure another preferential tax rate; LUMA responds
By Pedro Correa Henry
Special to The Star
Popular Democratic Party (PDP) Senate at-large candidate Juan Zaragoza and PDP Rep. Jesús Manuel Ortiz called on both Gov. Wanda Vázquez Garced and Treasury Secretary Francisco Parés on Thursday to report on the status of a closing agreement that LUMA Energy -- the consortium selected in June by the Public-Private Partnership Authority (P3A) to manage the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system for 15 years at the cost of almost $2 billion -- has with the Treasury to determine a 20 percent income tax rate on additional fees from both front end and back end transition services, which could save LUMA around $30 million.
Zaragoza said that since LUMA Energy entered a concession contract with PREPA, in which he added that the local government is paying for the transition of the T&D system’s management to the consortium, LUMA will already save up to $340 million in 15 years as it has to pay 20 percent in income taxes on management fees. According to the former Treasury secretary, such a rate is much less than what citizens and local businesses pay on the island, which is around 37.5 percent in income taxes.
“To the naked eye, this might be an inoffensive clause, but in this type of contract, there are no inoffensive clauses. When we look at the law and determine what’s behind the request of the agreement with Treasury, where LUMA is getting paid $60 million, plus some hourly charges, which could estimate up to $125 million for just arriving in Puerto Rico and accommodating, not for managing the Electric Power Authority, they’re requesting from Treasury to pay 20 percent in taxes, instead of 37.5 percent like [everybody else], their insatiable appetite has no end,” Zaragoza said. “This is happening in the context of a bankrupt country; what we’re calling for -- from both the governor and the Treasury secretary -- is to know if they signed this agreement because, in the contract, it establishes that this clause is a preceding condition that authorizes LUMA to begin operating in Puerto Rico.”
Meanwhile, Ortiz said they are exposing a foreign company that has the future of thousands of PREPA workers at risk as they are allegedly moving on with other personnel and that an indication that LUMA is “looking to get more out of the pockets of the people of Puerto Rico.” He also called on leaders from the New Progressive Party, including gubernatorial candidate Pedro Pierluisi, to say if they agree with such clauses and “finding other ways of not only giving away $1.5 billion for management, helping them save $350 million more, but [also] providing more concessions and savings, and preventing more income from going to the Treasury with LUMA Energy.”
“We can’t stop looking at this without analyzing the historical context we are living in,” Ortiz said. “It’s all happening in a bankrupt corporation, in a corporation whose adjustment plan -- the Authority’s ABCs -- which is on hold, states [that there will be] three or four increases in the electricity rate for residential and commercial subscribers if this plan is finally approved, at a time when the country is going through its toughest days due to extraordinary events that we all know about, and at the moment when we find out about losing more than $1.8 billion, or 20 percent of our budget, if the credit to foreign companies here in Puerto Rico gets canceled.”
When a member of the press asked if LUMA Energy billing $26 million in the past three months, according to declarations by Electrical Industry and Irrigation Workers Union (UTIER by its Spanish acronym) President Ángel Figueroa Jaramillo, is justifiable, Ortiz said that amount comes from the transition fee agreed upon in the contract.
“What is unprecedented about it is that the country is not only paying them to manage the [public] corporation [PREPA], but they are also getting an initial income to begin its transition; furthermore, executive employees are getting paid -- they will get paid for 15 years for their work and they will get paid once the contract comes to an end,” Ortiz said. “In all of the phases of that contract, according to what this government signed, they are getting sums of money, and now we also see [LUMA’s] intention to not pay the same tax rate as any other corporation in Puerto Rico for those additional fees.”
Zaragoza, for his part, said LUMA Energy “should pick up their bags and go.”
LUMA Energy responds to earlier allegations
As for the income tax rates that LUMA Energy has been allegedly negotiating with the government, consortium spokesperson Olga Lydia Vélez told the Star that “the fees that LUMA is entitled to under the O&M [operation and maintenance] agreement are afforded the same treatment that all P3 participants are entitled to under Law 29 and the Puerto Rico Treasury Department’s administrative determination.”
“As always, LUMA is complying with all Puerto Rican laws and regulations,” she said.
As for the story in Wednesday’s Star in which the UTIER president said in a radio interview that LUMA Energy was violating the contract with PREPA for hiring new personnel instead of the employees that work for the authority, and P3A Executive Director Fermín Fontanés denying that the contract will result in layoffs of current PREPA employees and the loss of acquired benefits, Vélez told the Star that the upcoming event to which the union leader referred “isn’t a job fair.”
“This event, designed exclusively for PREPA employees, will be held by appointment,” Vélez said. “As in everything we do, the health and safety of our employees is a priority. Therefore, we will comply with the strictest security protocols required under the COVID-19 pandemic, especially in controlling the number of participants. At the entrance, we will take temperatures, and we will provide masks and hand sanitizer. There will be enough space to meet the physical distancing necessary for everyone’s safety.”
Vélez added that the event will be held at the Pedro Rosselló Convention Center in San Juan on Oct. 7 and Oct. 8.
The LUMA spokesperson said further that if an employee does not feel safe attending the event, the corporation will have other options available to support them in the application process.
“PREPA employees can call our offices or schedule a virtual appointment through our website at www.LUMAPR.com,” she said. “LUMA is planning to hold similar events in other places on the island. Our focus is on the safety and comfort of employees, as well as the efficiency of our processes.”