Privatizing Electricity in Puerto Rico and its Impact!

This week, demonstrators blocked a highway in San Juan to protest the agreement between LUMA Energy and Puerto Rico’s Electric Power Authority (PREPA), which will change the future of power generation in the island for the next 15 years.

LSC SWAG - Protest Against LUMA Energy Privatization Contract in Puerto Rico

The move comes with PREPA struggling with their mammoth debt of $9 billion, the highest debt-ridden government agency in Puerto Rico. But this move towards privatization of energy, just like in the earlier instances, will make the 3.1 million population struggling to meet their electrical expenses, barring them access to the basic need.

So, are the reservations against LUMA Energy simply a nationalistic outcry, or is there a deep-rooted problem that the authorities are not seeing?

With hurricanes, earthquakes, and the Covid-19 pandemic has left the country in a dire state, with Puerto Ricans struggling. And the PREPA privatization plans are only going to add to this misery.


To Privatize or Not to Privatize?

In its definition, privatization is the transfer of any government function to the private sector. In a perfect setup, privatization aims to eliminate the inefficiencies and corruption within the poorly run government entities.

One of the most moving reasons why the public would prefer privatization is accountability. Privately held institutions have systems in place and are focused on quality. Managers of entities are held accountable for their actions and can only exist when expectations are met.

But with these expectations, the expected benefits can later turn out to be negatives. In an attempt to maximize gains and meet unachievable expectations, corporations will venture onto undue practices to fulfill their moves. This process will eventually bring negative consequences to the consumer.

While privatization is viewed as an alternative towards corrupt governance, the PREPA deal with Luma Energy might take the country two steps back.


Puerto Rico Electricity – Lost in the chaos  

Puerto Rico’s geographic location makes it prone to natural disasters. Puerto Rico is susceptible to hurricanes, floods, and earthquakes regularly. The aftermath of these disasters has witnessed people suffering for years, trying to rebuild themselves back.

In September 2017, Hurricane Maria razed through Puerto Rico, causing damages up to $90 billion. The hurricane also had severe consequences on the island’s electricity system.

During the time, nearly 3 million residents had to live in the dark for months or longer. The consequences of the hurricane created a new disaster itself where schools, hospitals had to go without power. The economy was affected adversely, with businesses and factories shut down during this period.

This energy crisis forced over 200,000 residents to move to the mainland, some permanently and a majority temporarily. 

Fast forward to 2021; nearly 30,000 residents remain without power from the aftermath of the hurricane.

Owing to the situation, in January 2018, governor Ricardo Rosselló made indications to privatize parts of the PREPA to fill in the gaps that the local authority couldn’t meet.

Rosselló added that the objective “was to provide a better service, that is more efficient and allows us to jump into new energy models” before stepping down from the position after a historical massive outcry protest from Puerto Rican’s for his resignation (the largest of its kind). The governor then initiated 180 days for the policymakers to develop an appropriate amendment to accommodate the private-public partnership. 

Adding to the misery, in July 2020, another plant in Southwest Puerto Rico halted its operations after a 6.4 earthquake. This disaster was another factor that propelled the Island and PREPA to go ahead with Luma Energy in 2020.


Luma Energy – 2020

In June 2020, there were already plans with Luma Energy amid the pandemic allowing the company to take over the power grid and modernize transmission in the US territory.

Luma Energy came in when the Island’s power generation saw continuous disruptions with a large number of blackouts. The promise was that Luma Energy would reduce the number of blackouts and see a smooth power distribution in the country, promising not to increase the consumers’ bill.

Governor Pedro Pierluisi, who administered the deal, added that the new company has pledged to reduce power interruptions by 30% and the outage periods by 40% and that the consumers’ bill would not be increased.

The company also inherited the depleting power system in the country and the 30,000 customers waiting to get their power back from the outages due to natural disasters.

The contract that was a 15-year commitment allowed Luma Energy to operate and maintain the PREPA’s transmission and distribution system. 

Luma Energy is a joint venture formed between the companies Quanta Services and Canadian Utilities Limited. The valuation of the contract is between $70 million and $105 million a year. The amount is without consideration of the $20 million that comes in excess as incentive fees.

To the outside, the deal with Luna Energy looks revitalizing for the economy who’s struggling to make it work with the continuous blackouts. Luna Energy CEO Wayne Stensby added that his vision for Puerto Rico would be to look at fossil fuel and alternate sources such as win, soar, and natural gas.

The agreement that was inked by the Puerto Rico government and the Federal Board will also see Luma Energy spending billions in repairing the energy grid from the Federal Emergency Management Agency (FEMA).

The Federal Oversight Board, a controversial and arguably inconsistent group of overpaid consultants (salaries that add to the debt of Puerto Rico), strongly believe that this is the best way for Puerto Rico to emerge out of darkness, especially when the world recovers from the pandemic.

“Some people are not happy with it; it is the way forward,” added David Skeel, Chairman of the Financial Oversight & Management Board for Puerto Rico. FEMA will effectively fund roughly $3.85 billion through to 2024 to Luma to revamp the power grid and the distribution system.


But is it the way forward?

While the deal poised to change Puerto Rico’s energy crisis looks too good on paper, it also gives Luma Energy the free hand to get work done and face zero penalization.

While the Luma Energy deal fixes the lapses in the infrastructure, it still doesn’t drift away from the fundamental problem of centralization within the Island’s power system.

Experts such as energy expert Orama Exclusa have mixed feelings about the move. Speaking to Spectrum, he added that the Luma deal lacks transparency and will repeat the missteps after Hurricane Maria.

Experts add that the Federal Oversight Board’s is turning a blind eye to some of the practices, and with the privatization, the government will be forced into a power rate increase to meet expectations.


And that’s already happening.

Several users took to social media to share their experiences just one day following Puerto Rico’s energy was privatized. Neither the website nor app was properly setup for payments and at already a week into the takeover, the customer service has a lot to aspire to. 

The LUMA website is both slow or sporadically working and is currently not setup to report power outages. 

The wait times to reach a LUMA customer service representative on their dedicated 1-800 phone line is a minimum of 1 hour if they even pick up, most of the customer service agents do not speak Spanish and surprisingly neither does the Director of the Customer Service Centers on the Island. With the great majority of the Island speaking only Spanish this is a metric that clearly reads this change is for the worse. 

Moreover, the twitter account fails to announce major outages or updates in service requests, the Twitter account being the only account which is remotely active. In fact, it is PREPA (@AEEONLINE) that is tweeting about outages instead of LUMA. 

An email to LUMA provides an auto-response stating “The LUMA Customer Experience team has received your request and our goal is to provide you a response in no more than 2 business days.” With all of the outages since LUMA has taken over on June 1st, the cries of thousands of Puerto Rican’s without power go utterly unheard as LUMA’s confirmed that they have no way of tracking the % and or precise amount of persons suffering outages from either the PREPA nor their own systems.

The June 3rd protest in San Juan resulted from the recent developments, with the public helpless in this move towards privatization.

Contrary to what Puerto Rican’s were told, that the LUMA takeover would result in a decrease in their bill (an electric bill which in comparison to the U.S. is already higher than rates in 45 of the 50 states). In an interview with Wayne Stensby by WAPA TV, he mentioned that an increase was very possible after 3 years and shockingly said that he wished he had a “magic wand” to ensure this would not be the case. But as President of LUMA, if you do not have the power, then who does?

Whilst a resistant people, with a population that is already at an almost 50% poverty rate, can the Puerto Rican people of the Island afford another increase without an increase in wages to match today’s inflation?


PREPA Employees in a quandary

While the public remains helpless in this deal poised to take Puerto Rico out of debt, employees of PREPA have been caught in the mix of the shuffle and are at risk of losing their jobs.

The contract clauses of Luma Energy required all PREPA employees to re-apply for jobs in Luma. But several unions have voiced their concerns that it will leave the majority of the workforce with fewer options in terms of employment.

At the end of May, a spokesperson for Luma Energy added that they had already hired 250 linesmen and 250 electrical technicians under contract while there is interest to hire more, according to Bloomberg.

If Luma does not take these PREPA employees, the state will have to reshuffle these employees to government offices, which will further burden the rising debt. This move will also lead to several lay-offs increasing unemployment and poverty.

Luma already hired around 2,000 PREPA employees according to, Stensby, CEO at Luma. But even with the 2,000 number, concerns are raised if it would be sufficient to repair the damages and prep the grid as the hurricane season has started as the LUMA Career page currently has 22 pages of unfilled positions.

Various organizations outside of the UTIER have come together to show their support in solidarity on the streets requesting justice for over two weeks.

LSC SWAG - Women Protest Against LUMA Energy Privatization Contract in Puerto Rico

LSC SWAG - Protest Against LUMA Energy Privatization Contract in Puerto Rico


Senate Lawsuit Against the LUMA Contract and Jurisdiction

A lawsuit filed by the Puerto Rico Senate to nullify Luma privatization contract for electric transmission and distribution in Puerto Rico’s court moved to Title III court. Puerto Rico’s Senate weighing whether to challenge that since the cause of action relates solely to local law. But, will it hold as the court has jurisdiction since it is arising under Bankruptcy?


LSC Swag’s Take

Electricity is one of the most primitive needs in current society for consumers and businesses. As a cruelty-free brand operating out of Puerto Rico, we understand the value of uninterrupted power for families and businesses.

Over the years, we’ve seen several stoppages and blackouts that have affected the economy and resulted in an economic downfall.

One of the main objectives of privatization is to remove the inefficiencies and corruption in the system. Luma Energy’s move to take over the power grid will be a great move if it provides relief for the consumers.

Rising costs of electricity during a current pandemic is not the right move as it allows only a minute percentage of the public to afford it.

As an inclusive brand, we believe every local citizen has a right to benefit, especially with something essential such as electricity. 

If Luma Energy can succeed in doing so, the move will be welcomed on the Island. It’s now been a week and it is concerning that so far it seems for the worst. We will continue to monitor to allow time to provide the proper data for more accurate evaluation.

But until then, we at LSC Swag will continue to voice our opinions until justice is met.



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