Wayne Stensby, LUMA Energy president and CEO, said yesterday that electricity rates will not increase over the next three years after the company starts operating the transmission and distribution systems on June 1, and promised that by the end of that term they will reduce blackouts by 30 percent and the duration of service interruptions by 40 percent.
In May 2020, when Puerto Rico Electric Power Authority (PREPA) most recent operational was published, the public utility registered 0.588 outages per 1,000 customers. Outages lasted, on average, 74 minutes. PREPA has not published its operational reports for the last eight months.
These promises are among the goals that LUMA Energy will present to the Energy Bureau. The company will operate systems that, for some eight decades, have been in the hands of PREPA, a public utility that is bankrupt and with a large part of its infrastructure weakened due to insufficient maintenance, and the earthquakes and hurricanes that have affected the island over the last four years.
Stensby explained that the System Remediation Plan is one of the main documents that the company will file. This plan outlines the steps to update both the system infrastructure and the technology.
“Many of the problems are things we can all see because they are physically damaged and imply imminent risks,” said LUMA’s CEO during a virtual press conference, in which he announced the filing of the documents with the Energy Bureau for evaluation and approval.
This includes, for example, how to repair broken poles, unusable lights, broken insulators, loose wires, cybersecurity issues, inadequate flood prevention systems, among many other problems, some of which were previous to hurricanes Irma and María in September 2017.
The CEO of the private company that will operate PREPA systems explained that the strategy is to give priority to those repairs that would ensure service to the greatest number of customers. This implies, for example, that one of the priorities is to stabilize or strengthen the transmission system, given that a malfunction in this system could imply interruptions in the service to a large number of customers. Afterward, regional aspects of distribution will be addressed until reaching the networks that directly serve residences.
Other goals include reducing waiting time on customer service calls by 40 percent, reducing unanswered calls by 20 percent, and will seek a 50 percent reduction in the number of workplace accidents that have to be reported to the Occupational Safety and Health Administration (OSHA). LUMA Energy’s operating contract is for 15 years, at a cost of about $1.5 billion.
“The current system requires a significant investment for basic remediation and repair of damaged and poorly maintained critical infrastructure ... Our goal is to complete the initial transition as we have planned and enable the deployment of funds that will kick-start the utility’s recovery and transformation,” said Stensby, who was confident that LUMA will be able to overcome transition hurdles and start operations by June 1.
LUMA’s plans include some 600 initiatives that were not detailed at the press conference but would be specified in the documents filed to the Bureau. On the other hand, this is a 10-year plan so many of the works will take time to develop and will be far from being ready for the next hurricane season, LUMA CEO acknowledged.
A large part of these initiatives would be funded through reconstruction funds provided by the Federal Emergency Management Agency (FEMA). Even so, the company assured that by June 1, when they will start operating the electricity distribution systems, customers will be able to perceive what they called “notable changes” in areas such as contact center responsiveness, clearing of vegetation from utility rights of way, inspections of areas experiencing a significant number or size of outages.
Stensby affirmed that all this will be done within the budget limits contemplated in the documents.
“We have to operate within the budget we have,” insisted LUMA executive.
When asked how large that budget would be, Stensby refused to give details and recommended that the media wait for the documentation to be submitted to the regulatory agency.
He also avoided providing details about the personnel recruitment process, in response to reports that very few PREPA employees have applied for the positions that LUMA Energy has announced so far. The company bet that they would inherit a good part of PREPA’s personnel and that has not happened.
This is a critical issue in the transition to the privatization of the electricity transmission and distribution systems. The Electrical and Irrigation Industry Workers Union (Utier) has expressed its opposition to privatization and very few union members have applied for positions. PREPA Governing Board President Ralph Kreil said publicly that before signing the contract with LUMA Energy it was implied that workers would automatically migrate from PREPA to the consortium.
Currently, LUMA Energy has just over a hundred employees and, to efficiently operate the power grid, it needs thousands of employees. Initial reports after the privatization was signed contemplated about 4,400 workers.
“We don’t have the numbers at hand,” Stensby said when asked about staff recruitment. He added that those PREPA employees who do not migrate to LUMA Energy could be relocated to other government agencies since the Single-Employer Act prevents the massive layoff of government employees. When asked what positions they were recruiting for and the priorities in hiring, he avoided answering and urged reporters to take a “tour” of the company’s website.
If LUMA Energy does not absorb a good portion of PREPA’s employees, the government could find itself in the scenario of having to pay the privatizing firm up to $125 million annually for its services, which includes paying LUMA’s payroll, and, at the same time, covering the salaries of those workers who remained at PREPA, which would significantly increase government spending. For fiscal year 2020, PREPA’s payroll was about $372 million, according to data from the Office of Management and Budget. That includes employees in the transmission and distribution areas as well as in administrative tasks and electricity generation.
An increase in government spending would require the approval of the Oversight Board, the body overseeing Puerto Rico’s finances. Recently, the Board warned that to complete the privatization with LUMA Energy, PREPA would need $894 million that it does not have.
Stensby also refused to provide information on the salaries of the company’s executives. He indicated that, although they manage public funds, they are a private company that does not have that responsibility to the public, so they will not inform about the salaries of their staff.