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Pierluisi Creates Steering Committee to Oversee LUMA Energy contract

By on January 13, 2021

SAN JUAN – Puerto Rico Gov. Pedro Pierluisi announced the creation of a steering committee to oversee the public private partnership (P3) for the transmission and distribution of electric power granted to LUMA Energy.

Executive Order 2021-012 establishes the creation of the committee to ensure that the “implementation and execution of the contract between the Public-Private Partnerships Authority (P3A), the Electric Power Authority (PREPA) and LUMA does not represent an increase in the electricity rate; that this contract is not used as a basis for the dismissal of any regular employee of PREPA and that they keep their benefits; that the necessary contributions be made to PREPA’s Employee Retirement System for employees who transfer to LUMA and decide to continue contributing under that System; that there are measures to avoid conflicts of interest in the awarding of contracts and that clear and specific metrics of compliance and performance are established and met, reads the press release issued by the governor’s office.

Prepa Governing Board Chairman Ralph A. Kreil Rivera welcomed the steering committee, noting that board members suggested the idea to the governor because it would help manage a complex transition process involving the largest P3 in the island’s history and the first for the public utility. 

The 15-year, $1.4 billion transaction, announced in June, would transfer to LUMA, a U.S.-Canadian consortium, the management and operation of the public utility’s power transmission and distribution (T&D) system as well as its customer service and billing components. The consortium is scheduled to take over these operations and rebrand Prepa starting in May.

LUMA, which was incorporated locally in January, is the first private venture to directly manage and operate Prepa infrastructure since the public utility was established 79 years ago. The company is a joint venture between ATCO Ltd., a Canadian operator of electric systems; Texas-based Quanta Services, a provider of “infrastructure solutions” for the electric power industry; and Innovative Emergency Management Inc. (IEM), a U.S. firm dedicated to securing disaster relief funding. 

The LUMA deal requires that Prepa be split into two operating companies: GridCo, which retains ownership of the T&D system and GenCo, which retains ownership of the utility’s aging powerplants. Both are required to enter into a power purchase and operating agreement (PPOA)—the “GridCo-GenCo PPOA”—with LUMA acting as agent of GridCo, providing for expense reimbursement, power delivery and other services related to the generation, sale and purchase of power and electricity from Prepa’s generation assets.  

“It is a very complicated institution… It is the first P3 of this size,” Kreil told Caribbean Business. “We want to make sure that everything is tied up together and works best for the consumer.” 

LUMA issued a press release in which it welcomed the creation of the steering committee. 

“We are pleased that Governor Pierluisi has formed this working group to ensure that the main objective of the agreement, the transformation of Puerto Rico’s electrical system into a customer-centric, reliable, sustainable, and affordable one, is met,” LUMA President and CEO Wayne Stensby said in the release. “Transparency is a fundamental value for LUMA, especially because a better electricity system will improve the lives of all Puerto Ricans, and we intend to collaborate with the Committee in its task of safeguarding the best interests of the people of Puerto Rico.” 

Stensby said LUMA is in the process of hiring thousands of employees to achieve the “comprehensive transformation” of the island’s electrical system.  

“To that end, Prepa employees are receiving priority in recruitment and can currently apply for roles at LUMA prior to others. No Prepa employees will lose their jobs as a result of this transaction,” the LUMA executive assured. “Those who do not join LUMA will have the choice to stay with Prepa, or transfer to other government agencies within Puerto Rico. This framework is established in Act 120, and the agreement does not and cannot attempt to change that law. Those employees will also retain their rights and benefits in accordance with the law.” 

Employees who transfer to LUMA may choose to continue contributing to Prepa’s retirement plan or enroll in the 401K plan that LUMA offers its employees, Stensby said, stressing that LUMA employees will have access to additional benefits, including a health plan with pharmacy, vision and dental coverage, disability insurance and life insurance, paid in full by the company. 

Regarding electricity rates, LUMA clarified that, as established by the Puerto Rico Energy Transformation Act, it is the responsibility of the Puerto Rico Energy Bureau to evaluate, set and approve the electricity service rates paid by consumers on the island. 

“These were the concerns that I had raised publicly regarding the LUMA Energy contract,” the governor said. “It is important that all these points are addressed, and if some of them are not met, the necessary recommendations are made to amend it if necessary. I am in favor of the energy transformation and that Puerto Rico has a resilient and reliable electrical system, and at the same time we have to safeguard the labor rights of our public servants and make sure that the energy service improves and its cost is fair and reasonable for all.”

The steering committee will be chaired by the secretary of State and composed of the following officials: the executive director of the Fiscal Agency and Financial Advisory Authority, the executive director of the P3A, the executive director of Prepa, the executive director of the Central Office for Recovery, Reconstruction and Resilience (COR3), the secretary of the Department of Labor and Human Resources, and the secretary of the Department of Housing.

As established in the executive order, the committee will make recommendations, suggestions and comments “to guarantee the execution of the contract and will recommend measures that guarantee compliance with the public energy policy set forth in Act 120-2018 and Act 17-2019,” the release reads.