Private company takes over Puerto Rico power utility service

Jun 1, 2021, 7:31 AM | Updated: 10:15 am

SAN JUAN, Puerto Rico (AP) — A private company on Tuesday took over the transmission and distribution operations of Puerto Rico’s power authority, which has struggled with blackouts and bankruptcy, corruption and mismanagement.

The takeover by Luma Energy under a 15-year contract coincided with the beginning of the Atlantic hurricane season, with many across Puerto Rico worried about the transition and whether the new company can handle a severe storm. The U.S. territory is still struggling to recover from Hurricane Maria, which destroyed most of the power grid in September 2017.

“It is extraordinarily fragile and in very poor condition,” warned Wayne Stensby, CEO of Luma, a consortium made up of Calgary, Alberta-based Atco and Quanta Services Inc. of Houston.

However, Stensby said the company, which will serve all of the island’s roughly 1.5 million clients, has enough resources to handle a Category 2 hurricane and can bring in more equipment and workers if a stronger storm hits.

The agreement approved by the territory’s government and a federal control board calls for Luma to spend billions of dollars in upgrading the battered system — with most of that money coming from the U.S. Federal Emergency Management Agency — while receiving hundreds of millions of dollars for managing the system.

Officials are betting the private operator can do better than the island’s Electric Power Authority, which has struggled to restore the storm-battered electrical grid and keep power flowing while trying to cope with $9 billion in debt — more than that of any other government agency in Puerto Rico.

Even with privatization, most analysts expect the government and control board will be forced to agree to an eventual power rate increase to meet the demands of bondholders.

Meanwhile, the new company will inherit unresolved blackouts, with more than 30,000 customers left without power in recent weeks.

“We don’t wish to go into June 1 with a large backlog of outages, but it’s going to be what it’s going to be,” Stensby said.

Puerto Rico chose Luma in June 2020 to operate and modernize the island’s transmission and distribution system.

Gov. Pedro Pierluisi said the company has pledged to reduce power interruptions by 30%, the length of outages by 40% and cut workplace accidents by 50%.

“We’ve had a bankrupt … (and) incompetent public utility for too long,” he said. “The transformation that is underway will make a difference.”

But critics have called on the government to cancel the deal. A Texas-based nonprofit, the Institute for Energy Economics and Financial Analysis, complained that Luma would not be penalized for failing to save money or meet renewable energy goals.

It said the control board “is turning a blind eye to some of the same fiscal practices that led the commonwealth into bankruptcy,” wrote Tom Sanzillo, the nonprofit’s director of financial analysis. “These include politically driven contracting processes, poorly documented cash transfers between commonwealth entities, lack of clarity and accountability for budgetary savings initiatives, failure to prioritize renewable energy and costly and shortsighted labor management.”

The Puerto Rico-based Center for a New Economy, a nonpartisan think tank, also criticized the deal, saying, “There are no guarantees that the process to modernize and transform (the electric authority) will be successful.”

In addition, some 20 unions representing thousands of Puerto Rican workers ranging from teachers to truck drivers announced on Tuesday that they would go on strike if the Luma contract is not rescinded.

Stensby, Luma’s CEO, said he was perplexed by that development: “What are they fighting against? … How can you fight against better customers service and better electricity?”

Meanwhile, the federal board said the effort must go forward. If the Electric Power Authority is not transformed, the economy will shrink, said David Skeel, the board’s chairman.

“Some people are not happy with it, but it is the way forward,” he said of the contract. “It is absolutely essential, in my view.”

Puerto Rico’s power generation units average 45 years old, twice those of the U.S. mainland, and a fiscal plan approved by the federal board foresees Luma spending some $3.85 billion through fiscal year 2024 to revamp the grid’s transmission and distribution system.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Chinese spy balloon flies above in Charlotte NC, United States on February 04, 2023. The Pentagon a...
Associated Press

US downs suspected Chinese spy balloon off the Carolina coast

The United States on Saturday downed a suspected Chinese spy balloon off the Carolina coast after it traversed sensitive military sites.
16 hours ago
A man works at an avocado orchard in Santa Ana Zirosto, Michoacan state, Mexico, Thursday, Jan. 26,...
Associated Press

Route to Super Bowl dangerous for Mexico’s avocado haulers

SANTA ANA ZIROSTO, Mexico (AP) — It is a long and sometimes dangerous journey for truckers transporting the avocados destined for guacamole on tables and tailgates in the United States during the Super Bowl. It starts in villages like Santa Ana Zirosto, high in the misty, pine-clad mountains of the western Mexico state of Michoacan. […]
16 hours ago
Associated Press

Iraqi currency crash halts after meeting with U.S. official

BAGHDAD (AP) — Iraq’s currency ended its nosedive after a meeting between the Iraqi Central Bank head and a top U.S. Treasury official. Under Secretary of the Treasury for terrorism and financial intelligence Brian E. Nelson said in a statement Saturday that he had met with Central Bank of Iraq Governor Ali al-Allaq in Istanbul […]
16 hours ago
Associated Press

Gas prices dip in NJ, around nation as cold weather returns

TRENTON, N.J. (AP) — Gas prices dipped in New Jersey and around the country at large as cold weather descended on parts of the nation following an unusually warm January. AAA Mid-Atlantic says the average price of a gallon of regular gas in New Jersey on Friday was $3.42, down three cents from last week. […]
16 hours ago
Associated Press

Kansas police responding to overdose call shoot, kill man

KANSAS CITY, Kan. (AP) — Police in Kansas say an officer shot and killed an armed man after he fled from the scene of an opioid overdose on a bicycle. The Kansas City, Kansas Police Department said in a news release that officers spotted the man pedaling away Friday night from a home where they […]
16 hours ago
FILE - A Tesla Model Y Long Range is displayed on Feb. 24, 2021, at the Tesla Gallery in Troy, Mich...
Associated Press

Tesla hikes price of Model Y after US alters tax credit rule

DETROIT (AP) — Tesla has raised prices on its Model Y in the U.S., apparently due to rising demand and changes in U.S. government rules that make more versions of the small SUV eligible for tax credits. The Austin, Texas, electric vehicle company bumped up the price of the Model Y Long Range version by […]
16 hours ago

Sponsored Articles

(Desert Institute for Spine Care photo)...
DESERT INSTITUTE FOR SPINE CARE

Why DISC is world renowned for back and neck pain treatments

Fifty percent of Americans and 90% of people at least 50 years old have some level of degenerative disc disease.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
...
Quantum Fiber

How high-speed fiber internet can improve everyday life

Quantum Fiber supplies unlimited data with speeds up to 940 mbps, enough to share 4K videos with coworkers 20 times faster than a cable.
Private company takes over Puerto Rico power utility service