IEEFA reviewed the first two months of the implementation of Puerto Rico’s contract with LUMA Energy, the private operator hired to manage the island’s electric transmission and distribution system. The privatization of the grid, first announced in 2018 by former Gov. Ricardo Rosselló, is a key element of the Financial Oversight and Management Board (FOMB) plan to transform the island’s electrical system. In this report, IEEFA finds that since the June 1 takeover:
- Puerto Ricans have experienced significant problems with the implementation of the contract, including longer service restoration times, voltage fluctuations and poor customer service. High-level government officials have acknowledged that service has worsened under LUMA, which already has been paid almost $180 million.
- LUMA’s problems stem from its shortage of experienced employees. It has hired fewer than 30% of the former Puerto Rico Electric Power Authority (PREPA) workers. LUMA has been trying to operate the system with about 60% of the number of PREPA employees who did the same work.
- LUMA has refused to provide information requested by the Puerto Rico Legislature, and no oversight documents related to LUMA’s performance in the last two months have been made public.
- Implementation problems can be directly traced to flaws in the contract, including its treatment of PREPA’s workforce and its weak oversight provisions.
LUMA was selected for this contract by an opaque procurement process that raised red flags about the due diligence conducted by Puerto Rican officials in charge of the contracting process.
The FOMB was charged with improving the effectiveness of government contracting and restoring public faith in the contracting process. However, the board has failed to demand greater transparency and stronger oversight of contracting processes. In this case, the board has aggressively defended a privatization contract that so far has resulted in worse service for the people of Puerto Rico.
Please view full report PDF for references and sources.