A Private Company Provokes an Energy Crisis in Puerto Rico

Many islanders believe that LUMA has badly mismanaged electricity distribution since it was awarded control of the island’s power grid two years ago

A Private Company Provokes an Energy Crisis in Puerto Rico
Protesters in San Juan demonstrate against LUMA Energy in August 2022. (Collin Mayfield)

Near La Fortaleza, a 16th-century fortress converted into the Puerto Rican governor’s palace, the streets filled with tear gas. Members of the San Juan police’s SWAT team ran toward us with shotguns holding nonlethal rubber rounds. Straggling protesters met police-grade pepper spray. Only two were arrested on that particular night in August 2022.

Tear gas and pepper spray don’t just burn the eyes or make breathing difficult. They seep into the skin with a burning itch, and the discomfort lingers long after you’re away from the miserable fog.

The streets were tightly packed and rambunctious but not chaotic. Hundreds of San Juan residents assembled on Fortaleza and Cristo streets, as close as possible to the governor’s palace, for the regularly scheduled protest against LUMA Energy. The common protest spot near the governor’s palace has been christened “la esquina de la resistencia” (“the corner of the resistance”). Protesters contend that LUMA Energy has mismanaged the island’s ubiquitous energy problems. Blackouts and power surges are a day-to-day occurrence.

There have been several hundred anti-LUMA protests in San Juan. They happen mostly at LUMA headquarters or near the governor’s palace. In fact, Puerto Ricans have been demonstrating continually against LUMA Energy since the company bid on and was awarded control of the island’s power grid in June 2021. The protesters believe LUMA has mismanaged electrical distribution — causing power surges, increased prices and the long periods of total blackout that wrack the island. The fact that citizens had no say in who took control of the electric grid only intensifies the anger. Some of these protests are large events with several hundred attendees, while others are “cacerolazos,” at which a few dozen people bang pots and pans at night.

When I was there, orange plastic barricades had been placed in front of the police lines to keep protesters away from the governor’s palace. Only tourists who had rented properties behind the barricade were allowed through. But it was difficult for tourists who needed passage to get the attention of police while stuck amid the throngs of unruly protesters shouting “LUMA, pal carajo” (“LUMA, go to hell”).

I was allowed through the barricade after a brief argument between two police officers over whether to accept my press documents. Ultimately, one policeman escorted me to the Spanish fortress. When I asked why he appeared to break with law enforcement protocol, he expressed sympathy for the LUMA protesters.

“I don’t like LUMA. It’s gotten much worse here [in Puerto Rico]. Before [LUMA took over], I paid $180 a month for power, and now I pay close [to] $320,” my anonymous escort said.

Police sympathizing with protesters isn’t a good sign for LUMA.

Puerto Rico suffers from much higher poverty rates than the U.S. mainland but pays significantly more for electricity: twice as much on average, which translates to about 8% of Puerto Ricans’ income, compared with 2.4% for Americans living on the mainland. This is despite the fact that Puerto Ricans use significantly less power. Prices have nearly doubled since 2020 and continue to rise even as services worsen.

The crisis has grown to the extent that Puerto Ricans from across the political spectrum have united in protest against LUMA. They shout “Fuera, LUMA!” (“Get out, LUMA!”) to the rhythm of drums and banging pots.

Multiple rental properties are within the vicinity of the governor’s palace, so part of the protest strategy is to annoy tourists with loudspeakers and noise. (Puerto Rico relies heavily on tourism.)

Demands from protesters — who include young and old, teachers, former electricity-union workers and local residents — are clear: They want an end to the LUMA contract. Puerto Ricans say they are sick of extended periods of blackouts, power surges, increasing prices and general company mismanagement.

“They are exploiting and taking advantage of us by raising the prices,” the elderly Miguel Rodrigues told New Lines. “We are angry and tired of this. It is not fair. This is abuse. They are not Puerto Ricans. [LUMA] is controlled by American interests. We have been tricked by LUMA and by the United States government.”

LUMA cites infrastructure damage and the poor condition of the grid it inherited as reasons for higher prices. Because it is an island, Puerto Rico obviously can’t connect to the continental American grid. Fuel must be imported to generate power. The Jones Act, which heavily taxes non-U.S. ships arriving in Puerto Rico and sanctions Russian and Venezuelan oil, also contributes to high energy prices.

I didn’t expect the first protest to grow heated, but Carnival Cruise Lines did. The company canceled its Aug. 25, 2022, cruise, citing potential unrest. I joked earlier that day that Carnival was scared of elderly Marxists and what looked like a block party, not at all anticipating the tear gas and arrests that would happen a few hours later.

After midnight, the demonstration became violent as protesters and police clashed. Police Commissioner Antonio Lopez alleges that a small group of more militant, mostly young protesters was responsible for escalating the violence by throwing rocks and other objects at the SWAT team. Police responded with tear gas. Lopez claims four police officers were injured.

Direct action against the San Juan Police Department is largely unpopular with the Puerto Rican public and is carried out by individual protesters rather than any specific group. Most anti-LUMA demonstrators and organizations are firmly committed to the ideals of nonviolent resistance, although, when I was there, no peaceful protesters stayed to criticize the more militant protesters clashing with the cops.

Again, most protests are nonviolent, and there is rarely any anti-police sentiment at the protests. Police shake hands with activists at protests from time to time. After all, even some police hate LUMA Energy.

LUMA Energy distributes, or delivers, electricity throughout Puerto Rico, but the company isn’t even Puerto Rican. It’s a joint venture between Houston’s Quanta Services Inc. and ATCO Group of Alberta, Canada. Power was previously distributed by the state-owned Puerto Rico Electric Power Authority (PREPA). But PREPA went bankrupt, abandoning $9 billion of unpaid debts. In 2018, then-Gov. Ricardo Rossello announced that all PREPA assets would be denationalized. The Puerto Rican government, through the Office of Public-Private Alliances, decided to privatize the entire electric grid. Power distribution was the first thing to go.

PREPA itself had been afflicted with power outages, especially after hurricanes Irma and Maria in 2017. The storms devastated the electrical grid and left some islanders without power for an entire year. Unrelenting hurricanes galvanized the government to move toward a more resilient electrical grid distribution as well as increased renewable energy. LUMA CEO Wayne Stensby decided that the company would incorporate solar and wind power into the existing electrical system, but scoffed at the idea of completely abandoning the current grid.

Yet nearly two years after Stensby said the electrical grid would decentralize and incorporate renewables, little has changed. Only about 4% of power distributed is renewable energy. Gov. Pedro Pierluisi has begrudgingly admitted that the island is significantly behind on its goals to transfer to renewable energy. The island is required by the 2019 Puerto Rico Energy Policy Act to reach 40% of its renewable-sources energy goal by 2025 — a seemingly impossible goal. For example, the island’s government recently launched a campaign to provide low-income households with solar panels, but the initiative has made little progress. LUMA hasn’t begun any significant renewable projects either.

In 2021, LUMA won the contract to repair the damaged electrical grid and distribute power. Pierluisi and PREPA signed the electric grid over to LUMA after only a 43-minute discussion about a 300-page document full of legalese. Most Puerto Ricans didn’t know about the electrical transfer, let alone have any say in it. Besides, Puerto Rican finances are directly managed by the U.S. government through the Financial Oversight and Management Board for Puerto Rico, which took control in 2016. Puerto Ricans colloquially call the unelected, mostly white board of bureaucrats the “junta.”

LUMA’s provisional contract of 18 months, which expired Nov. 30, 2022, was intended to provide ample time to restructure PREPA’s debt. The provisional contract was extended indefinitely until the restructuring is complete. The Financial Oversight and Management Board for Puerto Rico released a new fiscal control plan in late June 2023. The new plan is more forgiving to the debt-laden PREPA. It attempts to rescue PREPA from much of its debt, proposing that PREPA repay $2.5 billion rather than the $5.86 billion it owes. The fiscal plan needs to be approved by bondholders, creditors and U.S. District Judge Laura Taylor Swain, who oversees Puerto Rico’s debt. After a successful debt restructuring, the final contract stipulates that LUMA will take control of the electric grid for 15 years. (LUMA doesn’t own the grid or control the power generators themselves — PREPA still owns the grid. But LUMA presides over power distribution and maintenance of the grid.)

In addition to controlling the distribution, LUMA is in charge of customer service and billing. It also controls money disbursed to PREPA by the Puerto Rican authorities for electrical maintenance and modernization.

After LUMA took over Puerto Rico’s electrical grid, thousands of PREPA employees, mostly line workers, found themselves unemployed. They were either dismissed by LUMA or transferred to other government positions. Some 3,000 PREPA employees, including about 600 linemen, found themselves unemployed after the takeover.

Genera PR — a subsidiary of the New York-based New Fortress Energy, already a major supplier of liquefied natural gas to Puerto Rico — won a bid to take over electrical generation from PREPA in early 2023. While there was some resistance to this, the company took over electrical generation on July 1, 2023.

The Electrical Industry and Irrigation Workers Union, which represents PREPA employees, said many former employees chose not to join LUMA because they considered the new working conditions worse. Workers saw their healthcare plans change, and they lost pension benefits as well as previously earned seniority. However, about 3,000 former PREPA employees remained on the LUMA payroll.

Poor customer service is another source of contention. Customers lament glitches on LUMA’s website and hourslong wait times on the phone. Originally, LUMA didn’t even have Spanish-speaking customer service representatives. It took upward of a month after the takeover for the company to get bilingual representatives on an island where most people don’t speak English. Even now, LUMA will sometimes issue English-only press releases. Spanish is, amazingly, still an afterthought. When representatives do speak Spanish, customers who need electricity restored will often wait hours to reach them, if they can be reached at all.

The opaque nature of privatization was in itself a matter of controversy. The undemocratic, secretive transfer was doomed to be unpopular. Thousands of Puerto Ricans turned out for the initial protests.

Some slashed tires and vandalized company vehicles, though no people were attacked physically. The protesters also spray-painted and broke the windows of LUMA buildings, where they also blocked entrances. In response, LUMA sued the Electrical Industry and Irrigation Workers Union and the Electric Power Authority Retirees Association for damaging its property. The lawsuit requested that the organizations “cease and desist any actions of intimidation, violence, vandalism, or that limit the enjoyment of the property or that disturb the senses in violation of constitutional rights.”

Despite the allegations made by LUMA, there is no evidence that the organizations were themselves behind any of the sabotage. Slashed tires and broken windows came from individuals. Some union supporters have damaged LUMA property, but the union as an organization has not. Meanwhile, LUMA said the suit was not against the right to protest but was, rather, for making demonstrators “take control of their actions.”

LUMA began distributing power in June 2021 and immediately ran into difficulties. LUMA built a website so that customers could pay bills easily and report outages, but the site didn’t work. One representative speculated that this was because of high traffic. Then LUMA claimed there was a denial-of-service attack, though so far no evidence corroborates this.

A shadowy transfer and inoperative websites are the least of LUMA’s problems. After the takeover, LUMA had to contend with the infamous blackouts. The power grid has long been afflicted by mismanagement, corruption and failure to maintain antiquated equipment. A few months after the takeover, Stensby testified before a U.S. House committee, calling Puerto Rico’s electrical grid “arguably the worst in the U.S.”

LUMA pointed blame at the already damaged power grid, tropical storms, hurricanes and sabotage. But even taking into consideration these preexisting problems, the electricity crisis has become much worse. The Puerto Rican government hoped that privatizing the electrical grid would lessen the electrical crisis, but the grid has only deteriorated further.

For example, a transformer exploded at the Monacillos Substation on June 10, 2021, leading to a fire throughout the facility. The Electrical Industry and Irrigation Workers Union estimated that half the island lost power because of the fire — including San Juan, Trujillo Alto, Bayamon and several other municipalities. Outages at water plants left 13,000 without water services. Some 700,000 people were left in darkness.

So far, no evidence of the alleged sabotage has surfaced. Puerto Rico’s secretary of public safety, Alexis Torres, said the fire was the accidental result of a technical error; law enforcement and PREPA also determined that the fire was caused by a technical error. Nevertheless, the Monacillos explosion is under investigation by the FBI.

Another outage in June 2021 left upward of 337,000 people without power. Many of them were recuperating from another outage that had happened only days before. Some mayors declared states of emergency and distributed ice and generators to needy citizens. When LUMA said they lacked the employees necessary to repair the grid, local governments outsourced work to other construction crews.

Over 250,000 Puerto Ricans were without fresh water because of power outages at La Plata Dam in July 2021. Pumps that have no power are a common cause for lack of water across the island.

An outage in April 2022 left almost the entire island without electricity after a power plant in Guayanilla caught fire. As a result, many were in darkness for three to five days. Schools were temporarily suspended, and court cases were canceled. Businesses that could not afford to run generators were forced to cut hours, losing revenue. The Mayaguez Medical Center lost power, and the hospital struggled to turn on its backup generator. The intensive care unit lost power, endangering patients who were already in critical condition. Four patients had to be intubated.

Food spoiled, so people dumped their wasted groceries in front of LUMA’s San Juan office. This has become a common form of protest: rotted food and fried, derelict electronics are discarded at LUMA properties. Puerto Ricans call this “basura combativa” (“combative trash”). Several restaurants, including major franchises, sued the conglomerate for over $310 million in damages later that April. Wendy’s, Red Lobster and Olive Garden are among the plaintiffs in the ongoing lawsuit.

When outages aren’t the problem, power surges are. Thousands of appliances have been destroyed by voltage surges, which, of course, are then dumped at LUMA corporate buildings. A fried refrigerator is expensive to replace, especially for someone living on Puerto Rico’s median income of about $21,000. Many unplug their electronics when not in use, both to save electricity and to avoid damage from unexpected power surges.

Despite staunchly defending the company, Pierluisi claimed LUMA was under “probation” after a series of outages in August 2022. He is increasingly frustrated with the company and the public backlash. But he still maintains that the 15-year contract needs to be signed.

Electrical problems are so common that no one is even surprised by them. I was in a cafe in San Juan’s Miramar area when a transformer on the street corner blew up. It startled three Venezuelan tourists seated nearby, and I saw the small blast in my periphery. Our barista shrugged it off.

“Just another day in Puerto Rico,” he said.

A few weeks after I left, LUMA’s already untenable position became worse. Hurricane Fiona hit the island in September 2022. The storm, which hit as a Category 1 hurricane and ended as a Category 4, caused at least 44 deaths across the region. Flooding was devastating in some areas. Roads and bridges were washed out. Some power substations were submerged in floodwaters. Puerto Rico had not yet recovered from Irma and Maria.

Fiona caused an initial island-wide blackout. Fresh water became unavailable; the aqueducts and water stations needed electricity to operate. Sewage pumps failed without electricity, contributing to the filthy water that flooded parts of the island. Some blackouts were caused purely because LUMA failed in its responsibility to trim vegetation around power lines. Downed trees led to outages because they were not cut back in time.

On Sept. 21, 2022, when 70% of the islanders still lacked power, President Joe Biden approved federal relief, issuing a disaster declaration for Puerto Rico. It’s relief, however, that islanders are understandably skeptical about, given the government’s 2017 response to Irma and Maria.

As epitomized by Donald Trump’s paper towel debacle, when the then-president playfully and condescendingly tossed rolls of towels into a San Juan crowd needing relief, federal aid has proven to be a consistent disappointment. Some federal funding allocated after Hurricane Maria hadn’t even been fully disbursed when Fiona hit.

The previous mismanagement of FEMA (the Federal Emergency Management Agency) is also a fresh memory. Few FEMA personnel on the island spoke Spanish, delaying and confusing aid distribution. Bureaucratic forms were sometimes mistranslated, and pertinent information was sometimes available solely in English. Water spoiled and food was left to rot, never distributed to those in need. Power and water were not restored for months after the hurricanes.

FEMA assistance is also provided on a reimbursement basis. After the natural disaster, a bankrupt Puerto Rico was expected to foot the bill until it could be compensated by the federal government. Reimbursement was an incredibly slow process.

Some houses damaged by Hurricane Fiona in 2022 shockingly still had tarps on their roofs from the 2017 destruction.

Biden visited the island in October 2022, a few weeks after Fiona made landfall. He announced $60 million in aid to the island and stressed that Puerto Ricans would receive “every single dollar promised.” Biden made clear that this federal response would not be like the Trump administration’s response to Hurricane Maria. Biden also stressed, in an official statement in Ponce (Puerto Rico’s fourth-largest city) that this federal response would have adequate Spanish-speaking personnel, in contrast to the Trump administration’s response.

Biden further promised “a supercharged effort” to repair the power grid through the newly created “Puerto Rican Grid Recovery Modernization Team” under the Department of Energy. The team is directed by Augustin Carbo, the first chairman of what is now the Puerto Rico Energy Bureau.

According to Washington, the modernization team will work with the Puerto Rican government to identify and solve problems in the electrical grid and provide “clean, reliable, and affordable power.”

After Fiona, LUMA’s director of renewable energy, Daniel Hernandez, said that the company’s primary focus was on restoring power to the most important recipients, “hospitals and other key infrastructure.” Yet much key infrastructure continued to lack power, and dozens of hospitals were still relying on dilapidated backup generators for weeks after the hurricane.

Ponce was devastated by Fiona. When LUMA workers didn’t arrive to restore power, Mayor Luis Irizarry Pabon hired his own electrical brigades. The mayor alleges that LUMA employees threatened to call the police on line workers and file charges against the municipalities for interfering with LUMA’s power distribution. Three other mayors also claimed to be threatened. LUMA denies this.

LUMA claimed to have restored power to the entire island, but this was disputed by local governments. Mayor Gregory Gonsalez of Penuelas Municipality claimed that 125 homes were still without power as of last November.

“We still see that there are poles and lines on the ground,” the mayor said. LUMA staff, he alleged, said that “the emergency situation has basically gone into the background,” and it is no longer a priority for the company. Other municipalities, such as Mayaguez and Ponce, recount similar experiences.

As of last December, LUMA claimed power had been completely restored. But 800 customers said they still lacked electricity. It seems there are always some customers without power.

The Puerto Rican Senate is largely against the new contract and fought to cancel the deal. In early November, the Senate voted to approve House Joint Resolution 315 (HJR 315) to cancel LUMA’s contract. HJR 315 would have forced PREPA and American Public Power to end their contract with LUMA, but the bill failed to advance in the House of Representatives. Had it advanced, Pierluisi would have vetoed it.

The governor has said that reneging on the deal and going back to PREPA control “would be a horror movie.” Instead, Pierluisi proposed a continued audit of LUMA. He has also vetoed six legislative measures regarding PREPA and LUMA.

The governor’s office and LUMA initially stalled and declined to answer whether the provisional contract would be extended or whether the 15-year contract would be signed. The two parties denied privately discussing the extension of the contract, despite a leaked draft of the contract extension that has been circulating since Nov. 16, 2022.

Last fall, it became increasingly clear that PREPA’s debt would not be restructured in time. On Nov. 29, 2022, the government confirmed that a contract extension had been approved by the “junta” and the Public-Private Partnership Authority. The extension will last until the debt is restructured.

Pierluisi defended the extension as an alternative to jumping into the final contract. In a news conference, the governor declared that “the extension of LUMA’s supplementary contract is in the public interest.” Despite LUMA’s troubles, the governor continues to regard the private company as Puerto Rico’s best chance at electrical recovery.

Protests from citizens and lawmakers failed to end the contract, and activists are now demonstrating against its extension. Many of LUMA’s opponents want a return to PREPA control.

The island’s path seems dismal, and power outages will likely continue. Now, an extended provisional contract reigns and, if PREPA’s debt is restructured by 2023, LUMA and Genera PR will control the grid for the next 15 years.

At this point, it is quite unlikely that any other entity will be asked to distribute power. But whether LUMA stays or goes, two things are certain: People will suffer under blackouts until the power grid is adequately repaired, and Puerto Ricans will continue to protest what they view as corruption, mismanagement and neglect, which are, in their minds, the legacies of the colonial relationship between the island and the U.S. Such reminders of colonialism are the cornerstone of the resistance.

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