Puerto Rico Public-Private Partnerships Authority Requests Indefinite LUMA Contract Extension

Protesters carry a banner that reads “NO LUMA, NO JUNTA, NO COLONY” during a march in San Juan, Puerto Rico, Sunday, November 27, 2022. (Carlos Edill Berríos Polanco/Latino Rebels)

SAN JUAN — Three days before LUMA Energy’s contract is set to expire, the Public-Private Partnerships Authority (P3) requested authorization from its board of directors to extend LUMA’s provisional contract until the debt restructuring process for the publicly owned and now-defunct Puerto Rico Electric Power Authority (PREPA) is finalized, which could take until the summer of next year, at the earliest.

Even though officials from both LUMA and the Puerto Rico government had denied being in talks about extending the contract that would keep LUMA in charge of the archipelago’s electrical system, a draft of the contract extension and related documents have circulated among board members since at least November 16.

As first reported by El Vocero, P3’s executive director, Fermín Fontanés Gómez, sent a memo to the group’s board of directors alleging that an extension of the contract would not require the vote of the two public-interest representatives on the board —who also represent the Legislative Assembly— since it is an extension of the current LUMA contract and not an entirely new one.

The memo, unlike the draft, is dated November 28, but has reportedly been circulating since at least November 16 as well.

The board is meeting Monday to discuss the request and Fontanés Gómez’s memo.

A man wears a helmet of the publicly owned and now-defunct Puerto Rico Electric Power Authority and dons a shirt that reads “Say NO to Luma” during a march in San Juan, Puerto Rico, Sunday, November 27, 2022. (Carlos Edill Berríos Polanco/Latino Rebels)

Puerto Rico House Speaker Rafael “Tatito” Hernández and Senate President José Luis Dalmau requested a meeting with Gov. Pedro Pierluisi to “avoid litigation.”

“What we are looking for is to have a calm dialogue, with all options on the table, so that we reach a consensus agreement and the people do not continue to be exposed to the uncertainty and instability of our electrical system,” Speaker Hernández said in a written statement Sunday.

“Conversations are being held. Today it will be in front of the P3 board of directors. And tomorrow we will make an announcement,” Pierluisi said at an event in Santurce on Monday. He also confirmed that he would be meeting with both legislative leaders later in the day.

Gov. Pierluisi pointed to the “immense majority” of FEMA projects for reconstructing the electrical grid currently overseen by LUMA. “There’s already 50 projects with FEMA’s blessing and by the end of the year, it could be close to 100,” he said.

“From what I understand, the matter will be taken for consideration by the (P3) board and that the members (that represent the public interest) will be able to express themselves, even though effectively they will not be able to vote,” Pierluisi added.

According to the terms of the contract, both P3 and LUMA would have to consent to the terms of the contract extension.

LUMA Energy did not immediately respond to Latino Rebels’ request for comment.

The government’s extension request through P3 once announce only three days before the provisional LUMA contract is set to expire on Wednesday, and just before an anti-LUMA march took place in Old San Juan on the same day.

Protester holds up a placard that reads “LUMA OUT” during a march in San Juan, Puerto Rico, Sunday, November 27, 2022. (Carlos Edill Berríos Polanco/Latino Rebels)

“That’s part of the problem—the lack of transparency,” Manuel Natal Albedo, former House member for the Citizens’ Victory Movement, told Latino Rebels at the march. “Details that should be discussed openly and are not known. I think that gives rise to a climate of discontent and uncertainty that gives the impression that something wrong is being done. Because if not, they wouldn’t have to do it behind closed doors.”

The Contracts and PREPA Litigation

LUMA currently has a provisional 18-month contract with the Puerto Rican government, which expires on Wednesday. The 15-year contract that the Pierluisi administration wants to sign has certain provisions that do not allow for the contract to go into effect unless PREPA’s debt restructuring process is finished.

“(The indefinite contract) takes the pressure off for the debt restructuring plan to be confirmed by a certain date,” Jessica Mendez Colberg, vice president of Emmanuelli Law Firm, told Latino Rebels. Mendez Colberg represents the Electrical Industry and Irrigation Workers Union‘s retirement system in the PREPA litigation.

According to the PREPA case’s legal calendar, set by New York District Court Judge Laura Taylor Swain, the absolute earliest a debt restructuring plan would be reached by all parties involved is summer 2023—that is, if all goes smoothly during the litigation.

Mendez Colberg is not too sure about the summer date, but says that it is probable that a debt restructuring plan will be reached at some point in 2023.

An anti-colonial Puerto Rican flag witht the words “BORICUA STRENGTH” at a march in San Juan, Puerto Rico, Sunday, November 27, 2022. (Carlos Edill Berríos Polanco/Latino Rebels)

Currently, LUMA charges the government a base rate of $115 million per year under the provisional contract, while the annual salary under the 15-year contract is slightly lower, at $106 million. Since LUMA, a private consortium of Calgary-based ATCO and Houston-based Quanta Services, came to the archipelago, Puerto Ricans have seen seven increases in the price of electricity and multiple outages.

According to Tomás Torres Placas, consumer representative to the PREPA board of directors, LUMA asked for a $7 million increase to its yearly salary, raising it to $122 million.

Dr. José Alameda, who teaches economics at the University of Puerto Rico-Mayagüez, says LUMA has four sources of income —fixed charges, incentives, inflation adjustments, and “implicit” income— which amount to $2.7 billion over the course of the 15-year contract. Additionally, he explains, the social cost of the LUMA contract would cost $792 million more than if the grid were operated by PREPA.

Gov. Pierluisi has previously said that canceling the LUMA contract would be a “nightmare” and bringing back PREPA would be like a “horror movie.”

His administration has repeatedly defended LUMA, even as much of the public and even the members of his own party, the New Progressive Party, have turned on the U.S.-Canadian company. After a string of outages in August, Gov. Pierluisi said LUMA was under “probation.” but held firm that the country needed to sign the private energy company’s contract.

Failure to reach an agreement would set in motion a transitional process to look for another private operator for the archipelago’s electrical grid, as stated by Law 120.

A woman holds a sign describing Gov. Pedro Pierluisi, LUMA Energy, and the Financial Oversight and Management Board for Puerto Rico –known as “la Junta”– as worn-out mafiosos, during a march in San Juan, Puerto Rico, Sunday, November 27, 2022. Her hat reads “LUMA GO TO HELL,” echoing the words spoken by Puerto Rican music star Bad Bunny at a sold-out concert on the island in August. (Carlos Edill Berríos Polanco/Latino Rebels)

“Don’t extend the LUMA contract,” Father Pedro Rafael Ortíz, spokesperson for the civil society group Todos Somos Pueblo, told Latino Rebels at the march. “We’re asking the governor to have that in consideration for the benefit of the country. Secondly, open a space provided by the contract to look for alternatives that give way to a new energy company for Puerto Rico that is coordinated and preceded by the people —by representatives for the people— and with minimal participation of the government.”

A large coalition of Puerto Ricans has come together to repudiate extending the contract that spans public school teachers to New York lawmakers. Anti-LUMA activists have planned a string of protests before the current contract is meant to expire on November 30, including one in Old San Juan on November 29 and a “National Anti-LUMA School Day” on Wednesday.

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Carlos Edill Berríos Polanco is the Caribbean correspondent for Latino Rebels, based in San Juan, Puerto Rico. Twitter: @Vaquero2XL