Puerto Rico’s power problems continue, with at least two major blackouts in the past week, leading to a rising wave of criticism of Puerto Rico’s LUMA Energy, which may force its departure and could impact the Puerto Rico Electric Power Authority debt restructuring.
LUMA’s future may be influenced by the PREPA debt negotiations. It currently holds a temporary contract, which it has the option of ending if the restructuring is not completed by Nov. 1. The bankruptcy judge has set a Sept. 9 deadline for negotiations but extended the deadline in the past.
Gov. Pedro Pierluisi made his first significant criticism of LUMA— which took over the island’s electrical transmission and distribution system on June 1, 2021— on Thursday, saying he is, “not satisfied with LUMA’s performance” and it must make “changes to its execution plan to significantly improve” service.
While acknowledging “the electrical network we have is fragile and obsolete,” Pierluisi said, “it is LUMA’s responsibility to operate it under the critical and emergency state in which it finds itself.”
LUMA should “speed up pending network reconstruction projects,” Pierluisi said. “One year and three months after taking over the power grid, there is no room or tolerance for excuses or regrets.”
Resident Commissioner Jenniffer González Colón, Puerto Rico’s non-voting representative in the U.S. House of Representatives, on Friday, called for the cancellation of the LUMA’s contract.
U.S. Rep. Nydia Velázquez, D-N.Y., said it is time for the Puerto Rico Oversight Board to stop defending the “failed privatization.”
A power outage Wednesday affected about 17% of customers and led to the loss of about 25% of generated electricity, according to the Associated Press.
A few hours after criticizing LUMA, Pierluisi appointed Francisco Berriós Portela to the new position of Assistant Secretary for Energy Affairs to oversee LUMA and PREPA and all electrical matters.
The Puerto Rico Energy Bureau released a report Thursday showing an increase in duration of outages every month since January.
LUMA Energy CEO Wayne Stensby said the problem goes beyond PREPA and LUMA.
“It is going to take a substantial effort from a number of groups to move PREPA out of bankruptcy and then to get the FEMA funding invested to get the electrical system that people deserve and people want,” Stensby said.
The future of the contract with LUMA depends on those who pushed for it and are in charge of managing it: “the governor and his administration, and the Oversight Board,” said Phillip Escoriaza, senior counsel for Feldesman Tucker Leifer Fidell. He called PREPA and LUMA’s effort to improve reliability over the last 15 months “dismal.”
Pierluisi has repeatedly said electrical prices should be lowered. Bondholders are believed to be seeking higher rates.
“Any parties insisting on higher electricity costs do not see that their proposal is an economic impossibility,” Escoriaza said. “There simply is no economic base to support higher electric bills. Lower, not higher, energy costs is what the island needs if it ever is to return to a modicum of growth sufficient to support bond payments.”
On Friday, U.S. House of Representative Natural Resources Committee Chair Raúl M. Grijalva, D-Ariz., said his committee would hold a hearing on LUMA in September.