With storm season here, new company running Puerto Rico power grid sees fierce resistance

·12 min read

As a flash storm poured over San Juan on June 1, leaders and members of labor unions huddled under a yellow tent in front of the Puerto Rico Electric Power Authority to denounce LUMA Energy, the new private operator of the island’s power grid.

“There won’t be peace, there won’t be peace, if LUMA doesn’t leave,” the crowd chanted under a golden awning stamped with UTIER, the acronym for the Electrical Industry and Irrigation Workers Union, which represents workers for the electric company.

On that same day, the power authority, PREPA, transferred the operation of its distribution and transmission lines to LUMA Energy, a San Juan-based consortium between North American companies Atco and Quanta Services. Under the new model, PREPA retains ownership of its assets and responsibility for electricity generation.

Awarded a 15-year contract, the private operator promises to modernize the power grid. On an island where residents struggle with routine blackouts and sky-high bills, LUMA is a welcome change for some Puerto Ricans.

But labor unions, officials, social organizations and environmental and energy experts are apprehensive. Some of them oppose LUMA Energy running the distribution and transmission lines of the island’s troubled utility altogether. Their concerns include the conditions surrounding LUMA’s costly contract, fears of privatization of government services, and whether the company has enough workers.

Frustrations have only continued to mount as Puerto Ricans experience blackouts across the island since LUMA’s official takeover —including one outage last week that left nearly 1 million customers without power.

‘Barely the beginning’

Prominent unions kicked off a wave of demonstrations from the first day, threatening a national work stoppage if the LUMA contract is not canceled.

“Fight yes, surrender no,” the crowd repeated, promising another summer of 2019, an allusion to the ousting of former Gov. Ricardo Rosselló two years ago following historic, massive protests.

PREPA faces significant challenges in providing the island stable and safe energy through its outdated, vulnerable energy grid, badly weakened by Hurricane Maria in 2017. It took months to restore power after the storm, and some places were left without electricity for over a year. The company declared bankruptcy in 2017.

Puerto Rico Gov. Pedro Pierluisi, who inherited the contract from a previous administration, hopes the change in management of the transmission and distribution lines will steer PREPA in the right direction.

“The transformation of our electrical system has taken a great step forward. We all want to have a new, robust, reliable and modern system, and that is what we are on our way to,” Pierluisi told the Miami Herald in a written statement. “We want LUMA to be successful because that will mean a better electrical service in Puerto Rico.”

UTIER, a prominent voice on labor rights and the energy company for 80 years, does not support putting government services in private hands. While LUMA’s entry to PREPA is not a full privatization of the utility, the union worries that the contract is a step to privatizing other public entities.

“It’s the only way to guarantee that our people with fewer resources will receive services. The private company… if there is no profit they will not carry the service. The government is obligated to give service to the people for their health and for their life,” said Ralphi Dominicci, UTIER secretary, at PREPA’s headquarters, as the road filled with rain.

UTIER had already been holding demonstrations for months at the steps of the island’s legislature, authorizing a strike vote and marching to the Governor’s Mansion. Walberto Rolón, veteran lineman and UTIER leader, said the union set up camps and organized at generation plants, offices, and storage warehouses on the day LUMA began operations on June 1.

“This will continue. This is barely the beginning,” said Rolón.

Looking for quality

PREPA employees had to reapply to their jobs and interview to join LUMA Energy — which UTIER leadership actively discouraged members and colleagues from doing, asserting the company could not operate without them.

José Pérez, an external affairs adviser at LUMA, said that PREPA employees have priority in the employment process, and that interviewing the utility’s employees helped the private operator offer better staffing placement and identify training needs.

“An interview process had to be carried out to validate and verify, first of all, the interest of the person in continuing to be, for example, an accountant, lineman, lawyer, engineer or whether they wanted to move to other positions,” said Pérez, adding that all PREPA employees who did not join LUMA had guaranteed jobs in the island’s central government

At least 1,000 people who had worked at PREPA accepted job offers. As of mid-June, LUMA said it had about 2,300 of about 4,400 employees PREPA had to handle the operator’s responsibilities — which has raised concerns that the company does not have enough workers to operate the transmission and distribution lines.

LUMA placed the total number of linesmen, who repair and restore electric cables, at 350 in late May. That’s compared to the about 800 linemen PREPA historically had. The number of linemen who transitioned into LUMA is unknown, although about 120 linemen quit PREPA, according to a recent public hearing.

“Linemen, [customer service,] secretaries, meter readers, people who monitor and measure, those are the kinds of people they have moved, ‘‘ said Dominicci, the UTIER secretary. “It’s people with highly technical skills and many years of experience.”

Pérez, the LUMA external affairs adviser, countered that the company has more than 1,300 field workers, enough to run the grid. He added that two or three people could make up a brigade to handle “ordinary situations.”

“The maximization of the resources is not necessarily in the quantity, but in the quality of what we are doing and the training that we are giving to our employees,” said Pérez. He added that staff numbers were growing daily and that the “the doors are open” for any former union members who want to join LUMA.

Pérez cited a fire still under investigation at a San Juan substation on June 10 that left almost a million customers without electricity as an example that LUMA could handle emergencies. The widespread blackout plunged much of the island, including San Juan, into darkness.

“The fire that occurred last week in Monacillo, in less than three hours service started being distributed and transmitted,” said Pérez.

The outage was one of many that have struck Puerto Rico since LUMA took over operations. On Wednesday, more than 330,000 people were left in darkness after failures in the grid. LUMA has said it has been working around the clock on the outages as they come up, and has previously acknowledged that its platforms were overwhelmed in the first days of operations.

But many municipal mayors have raised the alarm as constituents face inconsistent services, declaring states of emergency and repairing problems in service without LUMA’s assistance.

In the eastern town of Humacao, the mayor sent a private team to fix the electrical service in an elderly community, according to local daily El Vocero. The mayor of Aguada, a town in the west, told that outlet that LUMA management had said it didn’t have enough personnel to handle all reports. LUMA released a statement asking municipal authorities to refrain from repairing power problems on their own.

‘A wasted opportunity’

The contract’s start coincided with the beginning of hurricane season. Cathy Kunkel, an energy analyst at the Institute for Energy Economics and Financial Analysis, worries that LUMA is missing out on critical technical and institutional knowledge that PREPA employees who did not join the private operator could provide, particularly in emergency situations.

“They lost a lot of human capital and real knowledge of the system and real training to work on it,” said Kunkel, “and that just seems like a huge waste.”

A May 31 report from the Puerto Rico Energy Bureau evaluating LUMA’s initial budgets revealed that PREPA had “worker safety gaps and deficits.” The bureau is an independent public agency that regulates energy policy. The private operator’s own assessments, the report said, uncovered “major challenges” to predicting the gravity of storm damages and difficulties ensuring people and resources could be mobilized after a storm.

The company has said it has the staffing and resources to prepare for up to a Category 2 Hurricane. Pérez said that LUMA had also signed mutual aid agreements with organizations in the U.S. mainland that could assist should a storm strike and all inventory is used up locally. Many Cat 3 and above hurricanes have struck Puerto Rico before.

Advocates and experts on clean energy say decentralizing electricity generation and distribution using wind and solar power can help make the island more resilient in the face of climate change and future disasters. Puerto Rico law sets out a 100% renewable energy goal by 2050. In the fiscal year 2020, only about 2.5% of the island’s power came from clean sources.

Ruth Santiago, a lawyer and member of the White House Environmental Justice Advisory Council, said that repairing the transmission and distribution system as planned will lead to the same issues, and won’t get the island any closer to its clean-energy goals.

“There is already a completely different way of providing energy and it is based on something much more localized, much closer and renewable,” Santiago said. “A [power] line can go to the ground for any reason — a strong wind, whatever. Solar is much more resilient.”

Kunkel, who along with Santiago belongs to Queremos Sol, or We Want Sun, a Puerto Rican clean energy alliance, submitted a scientific study looking at the island’s potential use of solar energy to the Puerto Rico Energy Bureau.

The March 2021 investigation determined that, using federal funds already available, Puerto Rico could generate 75% of its energy from the sun if every house was set up with solar panels, along with some commercial buildings. In turn, the researchers concluded, this would increase disaster resiliency while significantly bringing down carbon dioxide emissions and electricity costs.

LUMA agreed with the study’s aim, saying that reaching renewable energy targets is critical and acknowledging that solar panels and batteries could be used to achieve Puerto Rico’s energy goals. However, the company said there were technical, contractual and policy considerations that need to be addressed before pursuing the study’s ambitions.

“It really looks like a wasted opportunity in terms of what we could be doing to make the system more decentralized to invest in like rooftop, solar and storage that would help bring real resiliency to people’s homes after a storm,” said Kunkel.

An October 2020 report from the Institute for Energy Economics and Financial Analysis, where Kunkel works, determined that “the actions of PREPA and the contract point LUMA to highly centralized natural gas generation as priority.” The Puerto Rico Energy Bureau said in a May 31 resolution that while LUMA mentions clean energy and grid modernization in its initial budget and proposals, its “specific programs for the achievement of these goals are sparse,” and requested that LUMA submit detailed regular progress reports on how it will achieve them.

Pérez, the LUMA adviser, said the company is “100% pro-environment,” and that clean energy was part of the ongoing programs and plans submitted to the island’s energy bureau.

‘Excessively expensive’

There is widespread agreement on the island that reforming the island’s energy company is a priority. But changes to the utility, whether through public or private means, must be well executed, said Tomas Torres Placa, the consumer representative before the governing board of PREPA.

Torres Placa is one of many who have expressed hesitations about LUMA’s service contract, for reasons ranging from high costs to oversight.

While PREPA is in bankruptcy, LUMA will be given an annual fixed payment of $115 million. When PREPA is out of bankruptcy, LUMA will be paid a service fee made up of two parts, a fixed fee and a service fee that will increase during the 15-year-contract period. An annual fixed fee starting at $70 million will gradually increase to $105 million in year four. An annual incentive tariff — contingent on achieving success on goals in the contract — is at $13 million in year one and will go up to $20 million from years 4 to 15.

LUMA has promised to not raise rates for the next three years for Puerto Rico’s residents. But Torres Placa said that the high costs of the contract will add pressure and that the savings LUMA has promised are not evaluated by the benchmarks laid out in the contract.

“Don’t you think it’s a contract that’s excessively expensive?” said Torres Placa. PREPA employees who chose not to move to LUMA had the option to join the island’s central government, a policy Torres Placa estimates will add millions a year in payroll costs.

Pérez, the LUMA analyst, said that the company will reduce costs for the island’s government, explaining that “it is more expensive to sustain the utility as it was than the payment that LUMA will have to operate the grid.”

But Torres Placa worries that PREPA cannot hold LUMA accountable because the Puerto Rico Public–Private Partnerships Authority, AAPP for its Spanish acronym, is the contract administrator.

“The fact that the AAPP is the contract administrator is a roadblock to PREPA having a successful oversight role,” said Torres Placa. LUMA caused an uproar when it proposed a liability waiver that granted the company immunity from gross negligence and willful misconduct.

“If that had gone through the normal supervision of a governing board that has knowledge of the subject, it does not reach first base,” he said.

The Puerto Rico Energy Bureau, following public outrage and discussion, denied the request.

Pierluisi, the island’s governor, has asked Puerto Ricans to give LUMA time to adjust. But Torres Placa said the company had a year since the contract was awarded to prepare for the role, and that the transitional process did not justify the challenges.

“The scale of problems we are having with LUMA is another scale than the one we had with PREPA,” Torres Placa said. “This became a problem on a larger scale. We have to address it.“

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