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PREPA chief: LUMA won’t seek rate hike based on blackout losses


Puerto Rico Electric Power Authority Executive Director Josué Colón Ortiz

By The Star Staff


While Puerto Rico Electric Power Authority (PREPA) Executive Director Josué Colón Ortiz offered assurances Monday that LUMA Energy will not ask for a rate increase to pay for losses it sustained due to the islandwide blackout, the private consortium’s documents before the Puerto Rico Energy Bureau (PREB) indicate otherwise.


Colón did not rule out that the operator of PREPA’s transmission and distribution (T&D) system may request a rate hike to pay for the dispatch of energy generated by elevated fuel costs.


“From the point of view of the base rate, that is not going to happen,” Colón said in a radio interview. “From the point of view of fuel costs, the dispatch of energy for the next three months, that will depend on how the operation fluctuates and the costs associated with that generation.”


However, LUMA Energy requested last year, before taking over control of PREPA’s T&D, a full liability waiver, claiming that not having it may result in rate hikes.


Several PREPA clients have said they should be reimbursed by LUMA for damages to their electrical appliances and loss of groceries as a result of the most recent islandwide power outage.


Mario Hurtado, LUMA’s vice president for regulatory affairs, said in testimony to the PREB that proposed terms of service with a limit on economic liabilities was included in the LUMA Energy operation and management agreement.


“They were included as a necessary component of LUMA’s ability to stabilize, recover and transform the operations of the T&D, to remediate the system that, as both the Puerto Rico Legislature and this Bureau have recognized, is plagued with a neglected and unreliable infrastructure and ineffective management processes and is in a state of disrepair due to lack of maintenance and insufficient capital investments, among other causes,” Hurtado said.


The liability waiver, he said at the time, would help prevent a hike in rates and reduce the private grid operator’s insurance premiums. LUMA Energy also argued that it endures additional losses because it is required to provide power service to everyone regardless of risk or ability to pay. It will not be able to choose its customers to eliminate potential risks, the official said.


The PREB rejected LUMA Energy’s petition for a full liability waiver. Instead, the energy regulator approved a liability waiver for ordinary negligence, which is the failure to exercise the level of caution needed for a particular situation.


Under the contract with LUMA Energy, the bankrupt PREPA retains ownership of the T&D system assets that LUMA will manage but must pay for all costs. The 15-year contract, which is being administered by the Public-Private Partnership Authority, is expected to cost $1.5 billion.

LUMA Energy took over PREPA’s T&D system last June 1, following a one-year transitional phase.


Also on Wednesday, LUMA officials refrained from offering a direct apology to the people of Puerto Rico for the blackout, from which the restoration of the electrical system took 88 hours.


“We recognize that it was a very difficult situation and we have started the investigation,” Hurtado said at a press conference. “We are going to see what happened in this situation, how it happened and we are going to take the pertinent steps to prevent this type of situation from happening again.”


“This type of situation has historically occurred in Puerto Rico, there have been other cases and we are here to prevent that from happening again,” he added.


LUMA President & CEO Wayne Stensby limited himself to saying that the situation “has been unfortunate.”

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