Ortiz hands in resignation as Prepa head amid controversy over power outages, contracts
Gov. Vázquez acknowledges pressing governing board to act on her ‘concern’ about utility chief’s performance
SAN JUAN – Just days after Gov. Wanda Vázquez publicly expressed her dissatisfaction with his handling of power outages last week, Puerto Rico Electric Power Authority (Prepa) Executive Director José Ortiz handed in his resignation on Monday.
Ortiz’s resignation, which will go in effect Wednesday, was accepted by the Prepa governing board, which had been at a meeting with Ortiz earlier in the day.
Vázquez said that Ortiz’s resignation was in response to a petition by the Prepa governing board after a discussion of the Prepa chief’s work performance, particularly his handling of the public utility’s response to Tropical Storm Isaias. She said she had met with Prepa Governing Board Chairman Ralph Kreil on Sunday to express her “concern” over Ortiz’s work, including that of “all of the [Prepa] management,” during last week’s emergency.
“I requested a well-aimed and efficient response for all Puerto Ricans,” the governor said in a press conference, adding that Ortiz’s resignation was “consulted” by the utility’s governing board.
“You know that a few days before I had expressed dissatisfaction with [Prepa’s] response to the storm,” said the governor, who had issued Ortiz with an ultimatum to fully restore power by Friday. She said he then had pledged to do so by Sunday, but also failed to meet the goal. “As the days passed, there were still citizens without power, and as a consequence it was also affecting water service in many places.”
Ortiz said in a statement that his resignation “has come at an appropriate moment in the transformation of Prepa into the modern electrical company that all Puerto Ricans deserve,” adding that he had originally made a commitment to serve as the utility’s executive director for two years and that the 24 months had lapsed.
On July 18, 2018, then Gov. Ricardo Rosselló, together with a newly appointed Prepa governing board, announced the selection of Ortiz, an electrical engineer, as Prepa’s new executive director and CEO. He officially assumed command of PREPA on July 23, 2018 after the resignation of Walter Higgins, who had been the object of controversy due to his guaranteed salary of $450,000 that the old Prepa governing board had approved while the island’s electrical grid was yet to be fully restored after being destroyed by hurricanes Irma and Maria in September 2017.
“Throughout these two years, at Prepa we committed to reliability, sustainability, affordability and economic development, as laid out in Act 17 of 2018,” Ortiz said, referring to the Puerto Rico Energy Public Policy Act of 2019, which mandates the transformation, including the breakup, of Prepa and the conversion of the island’s power generation to 100 percent renewable energy by 2050.
Despite assurances given by Ortiz in June that the island’s electrical system was ready to face the current hurricane season, last week’s tropical storm left an estimated 500,000 Prepa customers without power. On Monday morning, some 28,000 customers were still without electricity.
The power outages occur as Puerto Rico temperatures have soared into the 90s and many islanders have relied on energy-dependent computers to do virtual work and students are scheduled to start classes remotely later this month, amid the Covid-19 emergency.
Just a day before the tropical storm brushed the island’s south coast on Wednesday, Ortiz attributed a two-hour outage Tuesday afternoon that left 400,000 without power to sabotage by Prepa workers, calling it “internal terrorism.” However, Electrical Industry & Irrigation Workers Union (Utier by its Spanish acronym) President Ángel Figueroa Jaramillo later said that the blackout was caused by tree branch unhooking work in power lines located in Mayagüez and Aguadilla, and was not intentional. Caribbean Business sources have confirmed the labor union’s version of the blackout’s source, which is under investigation.
In fact, Ortiz acknowledged last week that the outages in the wake of the tropical storm, which caused maximum sustained winds of 52 miles per hour in Puerto Rico, to the contact of power lines with tree branches. Fernando Padilla, director of Prepa’s Project Management Office (PMO), reportedly said that the four private companies that are doing the tree pruning work to clear power lines have only completed 23 percent of the work, although he assured that there was a “significant’ backlog from work from previous years. These companies reportedly had nearly $40 million in contracts to complete such work.
Utier leaders have denounced that while private companies are being hired, the number utility’s tree pruning workers have been cut by two-thirds to just 200.
Figueroa Jaramillo said in a statement on Monday that Ortiz’s resignation “is not reason for celebration because the suffering that the people of Puerto Rico have been through due to his wrong-headed decisions.”
“The resignation of an inept, incompetent, reckless and lying executive director allows us to have the opportunity to newly rethink what [Prepa] we want and what transformation, under the public model, the people of Puerto Rico deserve,” Figueroa said, noting that policies and contracts issued under Ortiz should be reevaluated.
“José Ortiz is leaving, but he concluded millions of dollars in contracts that affect us as consumers. Those contracts must be reevaluated,” the Utier president continued.
Figueroa said that the pruning contracts “put in private hands the maintenance of the electrical lines,” noting that Tuesday’s blackout was likely caused by their work. He also called for the cancellation of the 15-year, $1.4 billion public-private partnership contract between Prepa and the LUMA Energy LLC consortium concluded by the government in June to run the utility’s grid and customer services, saying that it will lead to an increase in electricity rates “as soon as December.”
“These nefarious contracts that José Ortiz signed must go with him,” Figueroa said, adding that the new Prepa executive director “must put the interests of the people of Puerto Rico ahead of the economic interests of intimate friends.”
Ortiz defended the LUMA Energy deal, as well as the controversial New Fortress Energy contract to convert the key San Juan power plant generators to run on natural gas, during a U.S. House Committee on Natural Resources hearing held last month on the transformation of the troubled public utility.
While the Prepa chief such contracts are vital to modernize the island’s electrical grid and ensure a “stable” transition to renewable energy, committee Chairman Raúl M. Grijalva (D-Ariz.) expressed his concerns over privatization of Prepa functions, saying that they should be centered on “guaranteeing the best way Prepa would be rebuilt so it could withstand future extreme weather conditions, provide the residents of Puerto Rico with reliable, inexpensive and clean power, and prevent the displacement of Prepa’s workers.”
Grijalva said that nearly three years after hurricanes Irma and Maria and billions of dollars spent by the Federal Emergency Management Agency and the U.S. Army Corps of Engineers “to turn the lights back on, Puerto Rico’s electric grid, unfortunately, remains fragile and vulnerable.” The U.S. lawmaker said that while “everyone agrees that reforming Prepa is necessary” to provide clean and low-cost electricity, he noted that it is still uncertain whether the course the public utility has embarked on will achieve those goals..
A report released in June by the Institute for Energy Economics and Financial Analysis (IEEFA) argued that the New Fortress contract process was plagued by irregularities that provided unfair advantage to the company, which had limited experience in Puerto Rico. The Federal Energy Regulatory Commission (FERC) has begun a probe into why the company did not seek permits for a San Juan Harbor facility to bring in liquefied natural gas to the San Juan Power plant.
Nevertheless, Prepa Chairman Kreil said in a statement Monday that while the governing board “accepted” Ortiz’s resignation, it was “grateful” for his work at the helm of Prepa. He said Ortiz took over the utility when “not even the Integrated Resource Plan (IRP) had been completed and we were struggling to develop a working relationship with the Puerto Rico Energy Bureau (PREB) and the Puerto Rico Financial Oversight & Management Board (FOMB).”
Kreil credited Ortiz with the development of three Prepa fiscal plans that were approved by FOMB and getting the utility through PREB’s IRP hearings.
“Working hand in hand with Ortiz, we have developed a solid work relationship with Washington D.C., achieving credibility with the federal government,” Kreil said in a statement.
The Prepa governing board chairman credited Ortiz with creating the Projects Management Office, noting that it has “been fundamental” in getting the Costa Sur Unit 5 generator back in service after being damaged by the January earthquakes. He also credited Ortiz with the signing of the LUMA contract “to improve transmission and distribution services to our customers,” and renegotiating the power-purchase contract with the privately owned EcoEléctrica natural-gas powered plant to “improve reliability and reduce [electricity] costs.”
Moreover, Kreil attributed to “Ortiz’s vision” the conversion of San Juan generation units 5 and 6 to natural gas, adding that the Prepa chief “resolved renewable energy issues, and took “most of the active projects one step forward to become a reality for Puerto Ricans. Ortiz also implemented a “more transparent purchasing process discipline at Prepa,” the utility governing board chairman said.
“Although Ortiz and the Board may have had different points of view on occasions, we have always been able to find a way to work together positively in the best interest of our citizens. All the members of our Board wish him the best success in his personal and professional future,” Kreil said.
Neither Ortiz’s nor Kreil’s statements made reference to the governor’s intervention with the Prepa governing board and her stated dissatisfaction with the Prepa chief’s performance.
Before his stint at Prepa, Ortiz served as executive president of the Puerto Rico Aqueduct and Sewer Authority from 2004 to 2007. Soon afterward, he served as director of the Puerto Rico Infrastructure Authority between 2009 and 2012. He chaired the Prepa governing board from 2011 to 2013.
In a statement issued on Monday following Ortiz’s resignation, LUMA Energy said it is “working in close collaboration with Prepa and will continue to work with the person who is named executive director, the Prepa governing board and the [Public-Private Partnership Authority] to remain focused on our objective to transform the energy supply for the people of Puerto Rico.” The consortium stated that it is in a transition phase that will last until May 2021, after which the company will fully be in charge of Prepa’s grid and customer services.
“During this phase, our team will continue to work to evaluate and prepare a detailed plan to transform the electrical transmission and distribution system to improve its sustainability, reliability and overall resilience,” LUMA said in the statement.