Regulator conditionally approves LUMA System Remediation Plan

By The Star Staff

Twenty-three days after LUMA Energy took over the Puerto Rico Electric Power Authority’s (PREPA) transmission and distribution (T&D) system, the Puerto Rico Energy Bureau (PREB) has approved, but with conditions, the System Remediation Plan proposed by the private operator.

It is one of several plans the PREB has approved but with conditions, including the initial budget plan and the system operation principles. LUMA Energy’s plan that would establish performance metrics got a waiver and will be evaluated later this year.

“This raises serious questions as to whether LUMA Energy was ready to take over PREPA’s T&D,” the consumer representative to the PREPA board said.

In approving the system remediation plan conditionally, the PREB, the island’s energy regulator, ordered LUMA to file reports every two months starting on Sept. 15, regarding the progress of the System Remediation Plan implementation. Those reports, at a minimum, must include actual spending amounts, broken down by spending initiatives, and reflecting in detail any variances from the System Remediation Plan, the PREB said.

Among the highlights of the plan is that LUMA Energy is proposing to move the Energy Control Center in Monacillos to a new location. Two weeks ago, a fire caused by a malfunction at the facility left thousands in the dark.

LUMA said the facilities have “fallen into disrepair.”

“New facilities are sought to house these capabilities and the upgrades proposed to the Energy Management System (EMS),” the company said. “LUMA proposes to replace the obsolete and unsupported EMS and implement an Advanced Distribution Management System (ADMS).”

Failures in the distribution system are typically responsible for over 90 percent of electric power interruptions, both in terms of the duration and frequency of outages.

LUMA has projected $237 million in expenditures for the distribution system in fiscal year (FY) 2022, which begins July 1. Seventy percent, or $166 million, of those expenditures are categorized as System Remediation Plan items and $199 million of the expenditures will be eligible for federal funding. For FY 2023, LUMA anticipates $352 million in total distribution expenditures, with $238 million categorized as System Remediation Plan and $311 million eligible for federal funding. For FY 2024, LUMA projects $518 million of distribution expenditures, with $278 million categorized as System Remediation Plan and $477 million of those expenditures eligible for federal funding.

The plan was created to prioritize safety and rebuilding, and to make the system more resilient by effectively deploying federal funding to restore the grid and improve the resiliency of vulnerable infrastructure.

LUMA’s System Remediation Plan includes a range of high-priority activities and capital spending programs designed to repair and remediate the power system.

The plan’s Vegetation Management Plan was designed to reclaim rights of way and to reduce vegetation encroachment and vegetation-induced outages in the T&D system. Vegetation Management expenditures make up the largest proportion of the plan, with

an estimated total of $320.7 million over the next 10 years.

LUMA indicated that, upon service commencement it is in charge of the overall management of some 3,725 vehicles and four aircraft. This includes 632 bucket trucks or digger derrick trucks, and 509 pieces of heavy equipment, along with more than 2,000 smaller vehicles. The equipment is old and lacks inspections, the plan notes.

The monies obligated toward the reconstruction of the electrical grid are significant. Federal Emergency Management Agency (FEMA) funding available to PREPA amounts to $9.4 billion after deducting private insurance payments and a 10% state matching requirement. The PREB ordered LUMA to submit to the regulator by July 15 copies of the final drafts of the two procurement plans it is developing.

LUMA said Sargent & Lundy found that 37 percent of the 1,453 transmission structures require some level of remediation.

As part of the 80 substations inspected through the FEMA funding process, LUMA said 72 percent of equipment was found to be damaged to some extent. LUMA’s System Remediation Plan includes the inspection, repair and rebuilding of damaged substations.

In the System Remediation Plan, LUMA projects total substation expenditures of $114.8 million in FY 2022, with $63.7 million allocated to the System Remediation Plan, and $89.1 million of those expenditures will be eligible for federal funding. LUMA projects $108 million of total substation expenditures in FY 2023, with $73.8 million designated as System Remediation Plan. In FY 2024, LUMA projects total substation expenditures of $106.9 million, including $72.6 million categorized as System Remediation Plan. For FY 2023 and FY 2024, LUMA projects $80.1 million and $80.6 million in substation expenditures, respectively.

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