June 11, 2021

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LUMA attorneys charge more than $ 1,000 per hour and consultants almost $ 5 million to make plans

Façade of the Electric Power Authority, electricity distribution infrastructure in the city and LUMA advertising in Santurce. Photo: CPI / Gabriel López Albarrán.

Hiring a law firm that charges up to $ 1,245 per hour. The outsourcing of foreign companies such as Alumbra, from Colorado, which has billed up to $ 1.3 million in a single month for making plans to transform the energy system without having gone through a competitive process. This is how the first six invoices that LUMA, the company that will manage the transmission and distribution network since June, have already sent to the Electric Power Authority (PREPA).

The public corporation does not have the ability to transparently review invoices, denounced Robert Poe, a member of PREPA’s Governing Board, at a meeting of that body on December 16, 2020. His criticism arises because so far the Authority for Public Private Partnerships (AAPP), which oversees the contract with LUMA, has not allowed it to analyze all the documents to make sure that the expenses are justified.

Similar statements were made by the representative of the consumers before the Governing Board, the engineer Tomás Torres. It reported that, in addition to its monthly flat rate of $ 5 million, LUMA charges an average of $ 7.8 million in reimbursable expenses each month, not including the original record of hours worked, purchase receipts and other information necessary for its evaluation.

The hiring of the Canadian-American consortium LUMA is the outcome of a privatization process that began during the administration of former Governor Ricardo Rosselló, after Hurricane María destroyed the electricity grid and after the bankrupt public corporation’s history of administrative failure. The chief executive officer of LUMA, Wayne Stensby, and the executive director of the AAPP, Fermín Fontanés, have told the Center for Investigative Journalism (CPI) that this public-private alliance will achieve savings in the management of the electricity system and that it will result in business with local companies, so that they also benefit from economic activity related to transformation and recovery. But in the first six months of startup, this has not been the reality, as evidenced by invoices.

Of the twenty companies that have billed the most to LUMA in this period, only one is from Puerto Rico, the insurance brokerage firm Vidal & Rodríguez, according to an analysis done by the CPI.

[GRAFICA: https://public.flourish.studio/visualisation/5092933/]

In September, when LUMA billed the largest amount of reimbursable expenses (more than $ 5 million), local companies were hired mainly for services that resulted in low billing compared to foreign ones. For example, the highest bills of local companies were those of the Triple-S insurer, with $ 26,000 and those of the human resources consultancy BMA Group with $ 21,538.

“In this initial stage, LUMA is coming to Puerto Rico to start up its operation. That is why you are seeing companies from the United States that are working with them ”, justified Fontanés. He alleged that when the transition is completed and the APP begins to manage the network in June, that would be when local companies will be hired. “LUMA is not going to take the money and they are going to do it all,” he said.

In addition to the low participation so far of local companies, there are the high costs of consulting and legal services. Francisco Cerezo, an executive of the multinational firm DLA Piper, which has provided legal and administrative representation to LUMA, billed last September $ 47,475 for 45 hours of service: $ 1,055 per hour. Hariett Lipkin, a partner of the same company, billed $ 9,043 for 7.3 hours of work (less than a workday), charging between $ 1,200 and $ 1,245 an hour. This fee “seems gigantic but it is normal”, since that is “what this type of firm charges,” Fontanés added.

However, this figure is much more than what they earn, for example, the partners of Proskauer Rose ($ 789 an hour), the US law firm hired by the Board of Fiscal Control to lead bankruptcy cases in Puerto Rico.

Still no proof of savings

In the breakdowns of costs and reimbursable expenses for the first six months of company services, Alumbra LLC appears as the subcontractor that has billed the most to LUMA. That professional engineering services company is based in Denver, Colorado. Registered to do business in Puerto Rico in August 2020, Alumbra has billed $ 4.7 million between July and December 2020 for planning infrastructure, technology and processes, vegetation management, customer service, and network management transition.

“So far there is no accountability for LUMA’s savings,” said Cathy Kunkel, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), which since 2015 has studied and published reports on PREPA’s bankruptcy and electricity system. . “One issue that worries is whether LUMA will be depending a lot on short-term contractors, on companies that do not have institutional knowledge of Puerto Rico.

The entry of the company occurs when PREPA seeks a way to get out of an accumulated debt of almost $ 18,000 million in bonds, pensions, fuel purchases and accounts payable, among others, and whose restructuring process is in a kind of limbo undefined.

The CPI asked Fontanés why there was no open competitive process before the award of LUMA service contracts contratos a matter that came up at the PREPA Governing Board meeting in December 一. “They [LUMA] they are bringing the people who understand that they are the best ”, indicated Fontanés. “It is the recipe that they sold us on how they were going to do it … We have to trust their expertise,” he said.

LUMA invoices have a fixed part and a variable expense part, which includes subcontracted goods and services companies. In this, there are games of unique technology products with recognition in the market, such as the human resources management application Workday ($ 985,428 billed so far), used by large companies or even public universities. There are also services from New York-based management consulting firm Alvarez & Marsal Corporate Performance Improvement ($ 1.4 million billed so far). American Relocation

Connections of Virginia, which provides moving services for LUMA executives and employees, has billed $ 792,581.

There are expenses charged by the same companies that make up the LUMA consortium, such as the Canadian ATCO and the Texan Quanta, for executive transfers, tickets and hotels, among others.

Robert Poe, a member of PREPA’s Governing Board since Rosselló appointed him in 2018, said that there is a bureaucracy created by the AAPP consultants who work with invoices, which “has made it practically impossible for us to see variable billing.” , as indicated in the meeting. “Which is crazy because Laws 120 and 17 require us to audit things to meet our financial goals. Then, we received scandalous requests from the AAPP consultants to ask for permission two days in advance. We cannot take photos, we cannot take copies, ”he denounced.

He also mentioned that LUMA has been requesting contracts for the purchase of printers and customer service applications that are invoiced as expenses of PREPA and signed by its executive director, Efrán Paredes. Poe indicated that he opposes these types of expenses that do not follow the purchase process that PREPA has to comply with, so they will request a dispensation from the Fiscal Control Board. Poe indicated that this action is essential to avoid a claim or “bayonet wound” from the Fiscal Control Board, which since 2018 has been demanding open purchase processes in the public corporation.

The House of Representatives and the Senate of Puerto Rico presented resolutions to investigate the consortium in early January, and Governor Pedro Pierluisi created a government committee to analyze that contract with the objective of amending it if necessary. The first meeting will be on February 4 and in this the work plan will be established, reported a spokeswoman for La Fortaleza.

Pierluisi met on January 27 with Ángel Figueroa Jaramillo, president of the Union of Workers of the Electricity and Irrigation Industry (UTIER) and his legal representative, lawyer Rolando Emmanuelli, who reiterated their request for the agreement to be canceled.

LUMA said in a statement that the contract is final, binding and enforceable by the parties, after its ratification by PREPA’s Governing Board and the approval of the Fiscal Control Board, the Puerto Rico Energy Bureau (regulatory entity of the energy system) and the former governor of Puerto Rico, Wanda Vázquez.

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