From the CPI
Hiring a law firm that charges up to $ 1,245 per hour. Outsourcing foreign companies such as Colorado’s Alumbra, which billed up to $ 1.3 million in one month to make plans to transform the energy system without going through a competitive process. This is the first six invoices that LUMA, the company that will manage the transmission and distribution network in June, has already sent to the Electricity Authority (PREPA).
The public corporation does not have the capacity to transparently review invoices, denounced Robert Poe, member of the PREPA board of directors, at a meeting of this body on December 16, 2020. His criticism appears because so far the Authority for public-private partnerships ( AAPP), which oversees the contract with LUMA, did not allow it to review all documents to ensure that the expenses were justified.
Similar statements were made by the consumer representative to the board, engineer Tomás Torres. He reported that in addition to its fixed monthly rate of $ 5 million, LUMA charges an average of $ 7.8 million in reimbursable expenses each month, not including the initial recording of hours worked, purchase receipts. and other information necessary for its evaluation.
The hiring of the Canadian-American consortium LUMA is the result of a privatization process that began during the administration of former governor Ricardo Rosselló, after Hurricane María destroyed the power grid and after the history of the administrative bankruptcy of the public corporation. LUMA Executive Director Wayne Stensby and AAPP Executive Director Fermín Fontanés told the Center for Investigative Journalism (ICC) that the public-private partnership will save on electricity management and result in business with local companies. , so that they also benefit from the economic activity related to transformation and recovery. But in the first six months of the start, this was not the reality, as the bills show.
Of the twenty companies that invoiced the most to LUMA during this period, only one is from Puerto Rico, the insurance brokerage firm Vidal & Rodríguez, according to an analysis made by IPC.
In September, when LUMA billed the largest amount of reimbursable expenses (more than $ 5 million), local companies were hired primarily for services that resulted in reduced billing compared to those abroad. For example, the highest bills from 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 comes to Puerto Rico to start its activity. That’s why you see companies in the United States working with them, “Fontanés said. He argued that when the transition is complete and APP begins managing the network in June, then local companies will be hired. “THE WORLD will not take the money and they will do everything,” he said.
In addition to the low participation so far from local companies, there are high costs of legal advice and services. Francisco Cerezo, an executive of the multinational company DLA Piper, which provided legal and administrative representation to LUMA, billed in September last year 47,475 USD for 45 hours of service: 1,055 USD per hour. Hariett Lipkin, a partner in the same company, billed $ 9,043 for 7.3 hours of work (less than a day’s work), earning between $ 1,200 and $ 1,245 per hour. This tax “seems gigantic, but it is normal,” because that is “what this type of company charges,” Fontanés added.
However, this figure is much more than it earns, for example, partners Proskauer Rose ($ 789 per hour), the American law firm hired by the Board of Fiscal Control to file bankruptcy cases in Puerto Rico.
There is still no evidence of savings
In the breakdown of costs and reimbursable expenses for the first six months of the company’s services, Alumbra LLC appears as the subcontractor that invoiced the most to LUMA. This professional engineering services company is headquartered in Denver, Colorado. Registered to do business in Puerto Rico in August 2020, Alumbra had a turnover of $ 4.7 million between July and December 2020 for infrastructure, technology and process planning, vegetation management, customer service and network management transition.
“So far there is no responsibility 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 the bankruptcy and electricity system of PREPA. “One issue of concern is whether the WORLD will depend heavily on short-term contractors, on companies that have no institutional knowledge about Puerto Rico.”
The company’s entry comes as PREPA seeks a way out of a nearly $ 18 billion accumulated debt on bonds, pensions, fuel purchases and accounts payable, among others, and whose restructuring process is in a way of indefinite language.
The CPI asked Fontanés why there was no open competitive process before the award of LUMA service contracts, an issue that arose at the PREPA Board meeting in December 一. “They [LUMA] I bring the people I understand to be the best, ”Fontanés said. “It’s the recipe they sold us on how they were going to make it … We have to trust their expertise,” he said.
LUMA invoices have a fixed part and a variable part of expenditure, which includes subcontracted goods and services companies. In it, there are games of unique technology products with market recognition, 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 management consulting firm Alvarez & Marsal Corporate Performance Improvement ($ 1.4 million billed so far). American Relocation Connections of Virginia, which provides relocation services for LUMA executives and employees, billed $ 792,581.
There are expenses charged by the same companies that make up the LUMA consortium, such as Canadian ATCO and Texan Quanta, for executive transfers, tickets and hotels, among others.
Robert Poe, a member of PREPA’s Board of Directors since Rosselló appointed him in 2018, said there was a bureaucracy created by AAPP consultants working with invoices, which “made it virtually impossible for us to see variable billing,” as indicated. in the meeting. “Which is crazy, because laws 120 and 17 require us to check things to achieve our financial goals. Then I received outrageous requests from AAPP consultants to ask permission two days in advance. We can’t take photos, we can’t take copies “, he denounced.
He also mentioned that LUMA has requested contracts for the purchase of printers and customer service applications that are billed as PREPA expenses and signed by its CEO, Efrán Paredes. Poe indicated that he opposes this type of expenditure that does not follow the purchase process that PREPA must comply with, so they will request a waiver from the Fiscal Control Council. Poe indicated that this action is essential to avoid a claim or a “bayonet wound” from the Fiscal Control Council, which since 2018 requires open procurement processes in the public corporation.
The Puerto Rican House of Representatives and Senate tabled resolutions investigating the consortium in early January, and Governor Pedro Pierluisi set up a government committee to review the contract with a view to amending it, if necessary. The first meeting will be on February 4 and the work plan will be established, a spokeswoman told La Fortaleza.
Pierluisi met on January 27 with Ángel Figueroa Jaramillo, president of the Union of Workers in the Electricity and Irrigation Industry (UTIER) and his legal representative, lawyer Rolando Emmanuelli, who reiterated his request to cancel the agreement.
LUMA stated in a statement that the contract is final, binding and enforceable by the parties, after its ratification by the PREPA Board of Directors and the approval of the Fiscal Control Board, the Puerto Rico Energy Bureau (the energy regulatory body) and former Puerto Rican Governor Wanda Vázquez.
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This note is published in Metro due to an alliance with the Center for Investigative Journalism. You can access the original version HERE