CNE Remarks before the Puerto Rico House of Representatives regarding the contract between PREPA & LUMA
This past Monday, April 12, 2021, Sergio M. Marxuach, CNE’s Policy Director, offered remarks before the Commission for Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy of the Puerto Rico House of Representatives regarding House Resolution Number 136.
In this edition, we share highlights from the hearing summarizing CNE’s remarks. We also include links to each of the major concerns of the contract between PREPA and LUMA that CNE identified in its report and recommendations as to how to approach them.
“Puerto Rico is at a difficult juncture regarding the future of Puerto Rico’s electrical system. On the one hand, we have the Puerto Rico Electric Power Authority (“PREPA”), a bankrupt public corporation with serious administrative and performance problems. On the other hand, the solution that the government of Puerto Rico has proposed, in the form of an operation and maintenance agreement with LUMA Energy, has severe deficiencies that we detailed extensively in a report that the Center for a New Economy published in August 2020,” Marxuach said.
Highlights from the Hearing
Click on the video above for a highlights reel from the public hearing.
Click here to watch the full hearing.
Analysis of the Contract Between PREPA & LUMA
Back in August 2020, CNE published an in-depth analysis of the transaction between PREPA and LUMA Energy, a long-term agreement for the operation and management of Puerto Rico’s transmission and distribution system.
In the analysis, CNE exposed some of the main deficiencies of the agreement with LUMA Energy and offered recommendations on how to address them, including performance metrics, the calculation and auditing of savings, the relationship between LUMA and the two subsidiaries of PREPA that are supposed to enter into a bonafide and arm’s length agreement (see image below), capital improvements by the operator or its affiliates, and coordination with other reforms.
Proposed PREPA Reorganization
CNE Raises the Flag
CNE identified 12 aspects of the agreement that raise important concerns. Click the links below to read CNE’s recommendations as to how to approach them:
- Supplemental Agreement
- PREPA Reorganization into GridCo and GenCo
- Power Supply Dispatch and Management I
- Power Supply Dispatch and Management II
- Power Supply Dispatch and Management III
- Auditing and Tracking Projected Savings
- Capital Expenditures
- Operator-Owned Capital Improvements
- Liability Limitations
- The O&M Agreement is Only One Part of a Larger Process
Since 2005 CNE has vigorously advocated for transforming Puerto Rico’s energy sector. Now, more than ever, the island’s future economic development depends on the reliability and efficiency of our electric system.