Union: Legislative leaders went back on promise to challenge LUMA contract

Electrical Industry and Irrigation Workers Union President Ángel Figueroa Jaramillo

By THE STAR STAFF

The Electrical Industry and Irrigation Workers Union (UTIER by its Spanish acronym), the union that represents most Puerto Rico Electric Power Authority (PREPA) workers, criticized the island’s legislative leaders Monday for going back on a promise to challenge the LUMA Energy contract.

The legislative leaders merely objected to PREPA’s bankruptcy disclosure statement instead of challenging in the Title III bankruptcy court the legality of LUMA Energy’s 15-year contract to manage PREPA’s transmission and distribution (T&D) system, UTIER President Ángel Figueroa Jaramillo said.

When the extension of the LUMA supplementary contract was approved on Nov. 30, 2022, the legislative leaders were very vocal about their intention to challenge the validity of that extension, he said.

“When the extension was announced, legislators said they would challenge said extension for various reasons anchored in the laws that enable this type of public-private partnership,” Figueroa Jaramillo said. “Particularly, they took refuge in the lack of an affirmative vote by the [board] representatives of the public interest. However, this is not what they have done.”

As the STAR reported, Senate President José Luis Dalmau Santiago and House Speaker Rafael Hernández Montañez filed an objection to the disclosure statement last week, arguing that information on T&D system operator LUMA Energy is incorrect.

Contrary to what has been the lived experience of PREPA customers ever since LUMA took over the operation of PREPA’s T&D system on June 1, 2021, the Financial Oversight and Management Board posits that the entity will transform Puerto Rico’s electric system into a more modern, resilient, and efficient one, they said.

While it is beyond dispute that PREPA and LUMA reached an initial agreement to have the latter run the T&D operations for a 15-year period, the lawmakers argued the contract is not yet in effect, as it is contingent upon a “conditional obligation,” on account that it depends on uncertain future events materializing.

One of the conditions that must be met before the “commencement date” comes about is that “[a] final plan for the reorganization of PREPA into GenCo and GridCo shall have been approved by the applicable governmental bodies, and the GridCo-GenCo PPOA [power purchase and operating agreement] shall have become effective,” which the lawmakers said has not happened.

LUMA Energy’s contract with PREPA expired in November 2022, the legislative leaders said. While the oversight board said in PREPA’s disclosure statement that the contract was extended, it wasn’t because it didn’t have the necessary legislative approvals, the lawmakers argued.

Jessica E. Méndez Colberg, vice president of the Emmanuelli CSP law firm, clarified that “unlike a lawsuit, which is what we expected from the Legislature, the objection to the Disclosure Statement does not initiate an adversarial process to challenge the contract.”

“Through this filing, the LUMA contract cannot be affected or invalidated, for various reasons,” she said. “The first of these is that the limited purpose of the objection does not allow the Court to assume jurisdiction or competence to address the arguments regarding the invalidity of the LUMA contract.”

Meanwhile, other entities have objected to the disclosure statement. Feb. 3 is the deadline for objections to the disclosure statement.

PV Properties said in a Jan. 26 objection that the PREPA bankruptcy disclosure statement is inadequate because it fails to disclose that the power utility isn’t buying required renewable energy credits (RECs).

“The disclosure statement is defective as it doesn’t properly address Puerto Rico’s public policy regarding energy and the environmental attributes associated with the generation of electricity utilizing renewable energy,” PV Properties said.

The firm has a $5.3 million claim against PREPA for its “refusal to purchase the RECs generated by PV Properties.”

Puerto Rico’s renewable energy policy act mandates that PREPA must obtain 20% of its energy from renewable energy sources by 2022 “subject to important qualifications,” PV Properties said. But it hasn’t bought any RECs from distributed generators, the firm said.

Also in the PREPA bankruptcy case, bond insurers Assured Guaranty and Syncora Guarantee criticized the oversight board for prioritizing litigation over deals to end the bankruptcy.

Creditors did not object to the mediation team’s request that its termination date be extended to April 28 to allow for additional negotiations between creditors and the board, but they noted that negotiations had not started.