The impending privatization of Puerto Rico’s Energy Authority is a plan to shortchange workers
The people of Puerto Rico have suffered in recent years. Hurricanes and earthquakes, the COVID-19 pandemic and the island’s bankruptcy have left many Puerto Ricans struggling. The Puerto Rico Electric Power Authority (PREPA)’s plan to privatize the electrical grid through the LUMA Energy contract threatens to add to that misery. Once again Puerto Ricans are facing a hurricane season with an electrical system that is in disrepair. Now — as a result of the labor crisis caused by the LUMA contract — its workforce is likely to be understaffed and undertrained.
For weeks after hurricanes Maria and Irma, the only parts of the electrical system that kept going were the people who showed up for work every day. But the LUMA contract is dismantling the electrical system’s skilled workforce and creating more costs for the commonwealth. With fewer than 30 days remaining to LUMA’s start date, less than a quarter of PREPA’s current employees have been offered employment with LUMA. Instead, skilled workers are receiving letters notifying them that they are being reassigned to other government agencies to perform jobs like security guard, tailor or even nurse.
These transfers will cost the bankrupt Puerto Rico government about $200 million every year in unplanned labor expenses. This wipes out whatever money could be saved from the LUMA contract. On top of that, the contract will cost the commonwealth $750 million this year to fund reserve accounts that PREPA needs to maintain under the terms of the contract.
Puerto Rico’s fiscal crisis calls for more efficient use of resources and better services. That means initiatives to save money and improve labor productivity. This poorly thought-out contract fails on both counts.
Sadly, the LUMA contract is symptomatic of the failures of the last several years of electrical system reform in Puerto Rico. A recent report from the Institute for Energy Economics and Financial Analysis shows that PREPA and other government agencies have entered into over $440 million in contracts for legal, financial and technical advisors — some charging more than $1,200 per hour — to restructure Puerto Rico’s debt and privatize the electrical system. This consulting bonanza has almost entirely benefited U.S. firms, with only 3 percent of total contracting going to Puerto Rico. It is unacceptable that the federal oversight board has pursued cuts to labor budgets, while failing to take any meaningful action to curb exorbitant fees for professional consultants. We would rather see Puerto Rico’s resident linemen and women and maintenance workers getting paid and serving the people than bloated payments to financial services professionals who accomplish very little. And the results that these consultants have produced — two failed debt restructuring deals and an ongoing series of contracting scandals, including the LUMA contract — do not fulfill the FOMB’s mission of restoring capital market faith in Puerto Rico.
The LUMA contract will not bring savings to the people of Puerto Rico. And many of the issues that have been raised by the Puerto Rico legislature in its investigation of the contract — the flawed procurement process, the careless approach to budgeting and savings, the poorly documented transfers of money between commonwealth agencies — look like more of the same problems that brought Puerto Rico to bankruptcy in the first place.
Puerto Ricans deserve better. The skilled workforce of PREPA deserves better. For this reason, we call on the government of Puerto Rico to delay implementation of this agreement until a fair outcome can be reached for electrical system employees. And we call on the FOMB to utilize their oversight power to help achieve a reliable, affordable, and renewable energy-based electrical system.
Nydia M. Velázquez represents the 7th District of New York and a member of the Natural Resources Committee. Raúl M. Grijalva represents Arizona’s 3rd District and is chairman of the Natural Resources Committee.
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