PREPA’s transmission & distribution officially under private management
By The Star Staff
The Puerto Rico Electric Power Authority’s (PREPA) board of directors approved on Monday in a divided vote the contract that would put the energy utility’s transmission and distribution (T&D) system under private opera- tor Luma Energy following a process that took almost two years and was kept under wraps. “I have mixed feelings because what seems to be a good project did not have public participa- tion,” saidTomásTorres, the public representative on the PREPA board. “It was supposed to have public participation before the [Puerto Rico] Energy Bureau.”
Torres, who announced he will be issuing a written vote, noted that the contract with the private operator may have a negative impact on the utility’s debt restructuring process.
On May 18, the Public-Private Partnership (P3) Authority, which negotiated the contract on PREPA’s behalf, filed a request with the Puerto Rico Energy Bureau (PREB) for a certificate of compliance for the T&D management contract. The record of that request was not made public because the PREB had agreed to designate the contract and other documents as confidential, a move opposed by the PREPA workers union, which had recently found out about it.
Under the contract, PREPA remains the owner of the utility’s T&D system. The certificate means the preliminary contract complies with Puerto Rico’s energy policies.
Although details of the contract were not made public, Omar Marrero, head of the Fis- cal Agency and Financial Advisory Authority, described the contract as good for the people of Puerto Rico.
The move by PREPA’s board came after the PREB last week approved the certificate of compliance for the contract in a divided vote without analyzing the impact it will have on consumers’ electricity rates.
PREB Commissioner Ángel Rivera came out against issuance of the certificate, arguing that the information on record could not help him make a determination on whether the contract violates public policy that all rates be fair and reasonable.
“It is important to note that there is no documentation on the administrative record of the instant case regarding the impact the preliminary contract will have on rates,” Rivera said in a dissenting opinion. “Neither is there a cost-benefit analysis specific to the preliminary contract.”
“Even if the transfer of the operation of the T&D System is mandated by law, such transfer must meet the public policy of estab- lishing just and reasonable rates,” he added. Rivera also charged that the contract removes the PREB from the annual budget review process of PREPA that helps determine if budgets are consistent with rates.
He said the contract establishes that the P3 Authority -- the entity that negotiated the contract with the private operator on PREPA’s behalf -- and not the PREB will conduct the budget review and make rate determinations. “This provision essentially removes the Energy Bureau from the annual budget review process, limiting its visibility to the budgets that will be in effect during any given year,” Rivera said.
The majority opinion of the PREB, how- ever, says provisions in the contract that seek to limit its authority are unenforceable.
The contract will not be “construed, in any way whatsoever, as to impair, restrict, relinquish or abridge the scope of the Energy Bureau’s administrative powers; statutory and regulatory jurisdiction and/or authority; statu- tory and regulatory oversight and enforce- ment powers; rights; duties; and obligations, all in accordance with the applicable laws and regulations,” the PREB said.
Under the agreement, LUMA Energy will operate, manage, maintain, repair, and restore PREPA’s transmission and distribu- tion system to help the transformation of PREPA into a modern power company able to deliver reliable, clean, and more afford- able electricity to Puerto Rico’s households and businesses.
“This transformation is important to every individual, every business and every potential investor,” said the Oversight Board Chairman José Carrión.
“The people of Puerto Rico deserve a power system that can withstand hurricanes to ensure they are safe in their homes, and Puerto Rico’s businesses deserve to open every day without relying on backup genera- tors to ensure they can serve their customers. Puerto Rico deserves manufacturing and the service industry jobs created by investors who don’t turn away because its electric power system is unreliable and antiquated.”