SAN JUAN, Puerto Rico (AP) — Puerto Rico’s government has sued Luma Energy in the first legal step to cancel its multimillion-dollar contract with the private power company as the U.S. territory battles chronic outages, increases in power bills and the slow reconstruction of a grid razed by Hurricane Maria in 2017.
The lawsuit announced late Thursday comes more than five years after the government awarded a contract to Luma, a consortium made up of
Calgary, Alberta-based Atco and Quanta Services Inc. of Houston. Luma, which took over the transmission and distribution of power in Puerto Rico in June 2021, inherited infrastructure that was crumbling after decades of neglect and mismanagement under Puerto Rico’s Electric Power Authority, which is struggling to restructure more than $9 billion in debt.
“Despite the operator’s expectations and representations, the electrical system has not improved with the speed, consistency or effectiveness that Puerto Rico deserves and that LUMA promised and lied to us about,” Gov. Jenniffer González said.
The ongoing outages, which also have been blamed on Genera PR, a private company that oversees the generation of power on the island, have spooked potential investors. They have repeatedly disrupted life in the U.S. territory, forcing small businesses to close and those with health conditions who require power to scramble to find alternative sources of energy if they can't afford generators.
González noted that Luma has nearly $11 billion in federal funds at its disposal to rebuild the grid, but that it has only been able to recover some $550 million in reimbursements from the U.S. Federal Emergency Management Agency, or FEMA. The agency has been releasing funds to help the U.S. territory rebuild and strengthen its grid.
“This is unacceptable,” González said. “They sold the people of Puerto Rico on the idea that they were experts in handling federal issues, that they were experts working on refunds, and that wasn’t true.”
The governor, who was elected last November, had pledged to oust Luma if she won. She also appointed a so-called “energy czar” to start reviewing Luma’s contract, with the aim of terminating the deal.
The government has said it is in talks with unidentified power companies on the U.S. mainland and has pledged a smooth transition if the contract is eventually scrapped.
Puerto Rico’s government has two main agreements with Luma: one for operation and maintenance, and a supplemental deal which was needed because the island’s power company has not yet started a debt restructuring process.
Both deals were set to expire in November 2022, prompting the government to extend the supplemental agreement via an extension letter.
“This letter granted LUMA indefinite control — without a time limit — over the operation of the transmission and distribution system,” González noted.
She said the extension “was granted in violation of the law and the principles of sound public administration,” and that it bound “the people of Puerto Rico to a perpetual contract, without enforceable performance metrics and without an adequate accountability mechanism for a service as essential as electricity.”
Since it was awarded the contract, Luma has received nearly $5 billion, González said.
Luma said in a statement that it is exploring its legal options while “remaining committed to Puerto Rico’s energy transformation.”
The company said it has cleared vegetation, replaced electric poles, installed new transformers and breakers, maintained substations, replaced damaged transmission lines and invested more than $2.4 billion in federally funded projects.
“We are proud of the measurable progress we have made but there is still much more to be done,” Luma said, adding that it believes the lawsuit is politically motivated.
The lawsuit was filed as Puerto Rico’s Energy Bureau holds key hearings on fee increase requests from Luma and Genera PR.
If the requests are approved, the U.S. territory’s average residential bill could rise by at least 40% on an island with a high poverty rate and soaring cost of living.
Puerto Ricans are fuming over the ongoing increases to their power bills, noting that service is unreliable, with major blackouts hitting the island on New Year's Eve last year and during Holy Week this year.
