Analysis of a Long-Term Agreement for the Operation and Management of Puerto Rico’s Transmission and Distribution System

Analysis of a Long-Term Agreement for the Operation and Management of Puerto Rico’s Transmission and Distribution System

Published on August 26, 2020

The service provided by Puerto Rico’s state-owned utility is unreliable, highly polluting, and expensive. The Puerto Rico Electric and Power Authority (“PREPA”) has been a source of private and public corruption in the island. For decades, diverse interests have organized in order to extract undeserved benefits from PREPA at the expense of the rest of the population of Puerto Rico. Thus, PREPA’s transformation is imperative for the future development of the island’s economy.

On June 22, 2020, PREPA and the Puerto Rico Public-Private Partnerships Authority entered into an agreement for the Operation and Maintenance of PREPA’s Transmission and Distribution System with LUMA Energy, LLC, (“ManagementCo”) and LUMA Energy Servco, LLC (“ServCo”, and together with ManagementCo, the “Operator”). The Operator, in turn, is a consortium formed by (1) ATCO Ltd., a Canadian operator of electric systems and (2) Quanta Services, Inc., a Texas-based provider of “infrastructure solutions” for the electric power industry.

This policy brief analyzes important aspects of this agreement; highlights some risks associated with the performance of that agreement; identifies some serious concerns regarding the transaction; and offers some recommendations for its improvement.

Browse our downloads section for the full analysis, executive summary, and its Spanish-language translation.