From the CPI
Hire a law firm that charges up to $ 1,245 per hour. The outsourcing of foreign companies such as Alumbra, of Colorado, which billed up to $ 1.3 million in one month for making plans to transform the energy system without going through a competitive process. For example, the first six invoices that LUMA, the company that will manage the transmission and distribution network since June, have already been sent to the Electric Power Authority (PREPA).
The public company does not have the ability to evaluate invoices transparently, Robert Poe, a member of PREPA’s board of directors, denounced at a meeting of that body on December 16, 2020. His criticism stems from the fact that the The Authority for Public Private Partnerships (AAPP), which oversees the contract with LUMA, has not allowed to analyze all documents to ensure that the expenditure is justified.
Similar statements were made by the consumer representative on the board of directors, engineer Tomás Torres. It reported that, in addition to the $ 5 million monthly flat rate, LUMA charges an average of $ 7.8 million in reimbursable expenses each month, not including the original number of hours worked, receipts, and other information necessary for the evaluation.
The recruitment of the Canadian-American consortium LUMA is the result of a privatization process that began during the reign of former Governor Ricardo Rosselló, after Hurricane María destroyed the power grid and after the bankrupt public corporation went through a history of administrative failure. LUMA’s chief executive officer, Wayne Stensby, and the AAPP’s executive director, Fermín Fontanés, have told the Center for Investigative Journalism (CPI) that this public-private alliance will deliver 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 start-up, this was not the reality, as invoices show.
Of the 20 companies that billed the most to LUMA during this period, according to an analysis by the CPI, only one is from Puerto Rico, the insurance broker Vidal & Rodríguez.
In September, when LUMA charged the largest amount of reimbursable expenses (over $ 5 million), local businesses were mainly hired for services that resulted in low billing compared to foreign ones. For example, the highest bills of local businesses were those of the Triple-S insurer at $ 26,000 and those of the human resources consulting firm BMA Group at $ 21,538.
“In this first phase, LUMA comes to Puerto Rico to start up its activities. That’s why you see companies from the United States working with them ”, justifies Fontanés. He claimed that when the transition is complete and the APP starts operating the network in June, that would be the time when local companies will be hired. “LUMA is not going to take the money and they are all going to do it,” he said.
In addition to the low participation of local businesses so far, there are high costs for advice and legal services. Francisco Cerezo, a director of the multinational corporation DLA Piper, who has provided LUMA with legal and administrative representation, last September charged $ 47,475 for 45 hours of service: $ 1,055 per hour. Hariett Lipkin, a partner of the same company, charged $ 9,043 for 7.3 hours of work (less than one working day), between $ 1,200 and $ 1,245 an hour. This fee “seems gigantic, but it is normal,” since that “is what these types of firms charge,” added Fontanés.
However, this figure is far more than what, say, the partners of Proskauer Rose earn ($ 789 per hour), the US law firm hired by the Board of Fiscal Control to run bankruptcy cases in Puerto Rico.
Still no proof of savings
In the cost and reimbursable expense breakdowns for the first six months of corporate services, Alumbra LLC appears as the subcontractor who billed the most to LUMA. That professional technical services company is based in Denver, Colorado. Registered to do business in Puerto Rico in August 2020, Alumbra billed $ 4.7 million between July and December 2020 for infrastructure, technology and process planning, vegetation management, customer service and network management.
“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 has been studying and publishing reports on PREPA’s bankruptcy and electricity system since 2015. “One point of concern is whether LUMA will rely heavily on short-term contractors, on companies that have no institutional knowledge of Puerto Rico.”
The company’s entry comes as PREPA seeks a way to get out of an accumulated debt of nearly $ 18,000 million in bonds, pensions, fuel purchases and creditors, among other things, and whose restructuring process is in some sort of undefined limbo.
The CPI asked Fontanés why there was no open competition process prior to the award of LUMA service contracts contratos, an issue raised at the PREPA board meeting in December 一. “She [LUMA] they bring in the people they think are the best, ”said Fontanés. “It’s the recipe they sold us on how they were going to do it… We have to rely on their expertise,” he said.
LUMA invoices have a fixed portion and a variable expense portion, including companies for outsourced goods and services. In it there are games with unique technology products with recognition in the market, such as the human resource management application Workday (billed $ 985,428 so far), used by large companies or even public universities. There are also services from New York-based management consultancy Alvarez & Marsal Corporate Performance Improvement (billed $ 1.4 million so far). American Relocation Connections of Virginia, which provides relocation services to LUMA executives and employees, charged $ 792,581.
Fees have been charged by the same companies that are part of 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 the PREPA board of directors since Rosselló appointed him in 2018, said that a bureaucracy has been created by the AAPP consultants working with invoices, which has made it practically impossible for us to handle variable billing. see. in the meeting. “Which is crazy, because Laws 120 and 17 require us to monitor things to achieve our financial goals. We then received outrageous requests from the AAPP consultants to ask for permission two days in advance. We can’t take pictures, we can’t make copies, ”he complained.
He also said that LUMA has applied for contracts to purchase printers and customer service applications that are billed as expenses from PREPA and signed by the Executive Director, Efrán Paredes. Poe indicated that he opposes this type of expenditure that does not follow the purchasing process that PREPA must comply with, so they will apply for a dispensation at the Tax Control. Poe said this action is essential to avoid a claim or “bayonet wound” from the Fiscal Control Board, which has been demanding open purchasing processes in the public company since 2018.
The House of Representatives and the Senate of Puerto Rico presented resolutions in early January to investigate the consortium, and Governor Pedro Pierluisi set up a government commission to analyze that contract with the aim of amending it if necessary. The first meeting will be on February 4 and the work plan will be drawn up here, a spokeswoman for La Fortaleza said.
Pierluisi met Ángel Figueroa Jaramillo, president of the Union of Workers of the Electricity and Irrigation Industry (UTIER) and his legal representative, attorney Rolando Emmanuelli, on January 27, who reiterated their request to cancel the agreement.
LUMA said in a statement that the contract is final, binding and enforceable by the parties, upon ratification by PREPA’s board of directors and approval from the Fiscal Control Board, the Puerto Rico Energy Bureau (energy system regulatory entity) and the first. Governor of Puerto Rico, Wanda Vázquez.
Responses to [email protected]
This note has been published in Metro thanks to an alliance with the Center for Investigative Journalism. You can access the original version HERE