Transfer of ex-PREPA workers carries $200 million annual price tag
By The Star Staff
The transfer of thousands of former Puerto Rico Electric Power Authority (PREPA) employees to other government agencies will cost the government more than $200 million annually, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
The study was presented Wednesday by the Coalition of Community, Environmental and Trade Unions, which supports the “We Want Sun” proposal.
In written remarks, the coalition said the Financial Oversight and Management Board failed to analyze the decision to put PREPA’s transmission and distribution system under private operator LUMA Energy. At a hearing this week, former PREPA workers said they were still in limbo. PREPA, however, must continue to pay the salaries of the former employees in addition to $115 million in management fees it pays to LUMA Energy.
According to the organizations, it was not until Aug. 24 that the oversight board sought information from the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) requesting data on the salaries and benefits of former PREPA employees, the impact of LUMA’s transaction on PREPA’s Retirement System, and information on government positions to which former employees have been transferred.
“The Board has aggressively defended this contract despite criticism and complaints from various sectors,” said Ingrid Vila Biaggi, president and co-founder of CAMBIO. “Now, when the million-dollar cost of this failed implementation is evident, the Board admits that it has no financial analysis of the impact on either the government budget or the retirement system. This is a fiasco and it is unacceptable.”
The oversight board’s letter indicates that “various agencies, some of which have received hundreds of transferred employees, have expressed concerns about labor costs, lack of allocation of funds, required capital investment, and cash flow impacts associated with these transfers.”
“The Oversight Board was very involved from the beginning in the making of the LUMA contract,” said Federico Cintrón Moscoso, executive director of El Puente Enlace Latino de Acción Climática. “Now that the cost impact is beginning to become a reality, the Board is trying to distance itself and blame the government for what was clearly deficient and biased work that lacked rigor, information and analysis.”
According to CAMBIO, Citi, a financial adviser to the oversight board, was actively involved in the bidding process for the contract. Citi’s role included answering all questions from bidders during the request for proposals process, meeting with bidders, and providing an evaluation of the proposals to the Partnership Committee that selected LUMA. The organization claims that the contract between Citi and the oversight board reveals that the board paid Citi an incentive of $9.1 million for the successful consummation of the LUMA contract and that it will receive additional incentives in excess of $7.5 million for the execution of contracts for the privatization of PREPA’s power generation assets.
“The Board played a big role in designing the privatization, approved the contract, threatened the Legislature, ignored its critics, and certified that the LUMA contract would save money,” said Tom Sanzillo, IEEFA’s director of financial analysis. “Now privatization is costing the government hundreds of millions of dollars and the Board is criticizing the government. It is not surprising that Puerto Rico still does not have access to the bond markets after four years. The Board has lost all credibility.”
Contracts for the privatization of PREPA’s generation system are expected to be announced by the end of the year. In what appeared to be a change of policy, the governor said Wednesday that some of the plants may be sold. Public-Private Partnership Authority Director Fermín Fontanés said in September 2019 that the plants were not going to be sold.