Puerto Rico’s Electricity Nightmare Was Brought to You by Privatization

For years, Puerto Rico has endured a ruthless campaign of austerity and privatization, including a corporate takeover of its once-public power grid. The result: nearly a quarter-million people have been without power for over two weeks since Hurricane Fiona.

A woman waves a flag that reads in Spanish “LUMA Out” during a protest in front of the headquarters of LUMA Energy, the company that took over the transmission and distribution of the island’s electric authority, after a blackout hit the island two days earlier, in San Juan, Puerto Rico, April 8, 2022. (Ricardo Aduengo / AFP via Getty Images)

Over two weeks since Hurricane Fiona’s landfall in southwest Puerto Rico, nearly a quarter of a million people are still without power. In addition to damaged transit infrastructure, Puerto Ricans are experiencing prolonged disruption to utilities like wireless internet, phone service, and clean water. Though water plants, sewers, and phone lines have sustained some damage in the Category 1 hurricane, the primary bottleneck for these disruptions can be traced to one common denominator: LUMA Energy.

Puerto Rico’s energy sector hasn’t been overseen by a government department since 2014. The energy industry is now controlled by the independent Puerto Rico Energy Bureau (PREB), which oversaw the privatization of the formerly publicly owned power grid, approving a fifteen-year contract for LUMA.

The bureau has a directive to carry out the Puerto Rico Energy Public Policy Act, a mandate which requires 40 percent of all energy to be renewable by 2024, among other environmental goals. The Public Policy Act is an important step toward the modernization of the grid, with some experts identifying centralized fossil fuel plants and their resultant miles-long cable network as the root cause of distribution problems. The prudent thing to do, Tom Sanzillo of the Institute for Energy Economics and Financial Analysis argues, would be to expand the grid’s solar capacity through a decentralized user-operator network.

The Puerto Rican grid is already home to one of the largest renewable peaker plants in the world — a web of individually owned solar panels some 55,000 units strong. The Federal Emergency Management Agency (FEMA) allocated almost $10 billion to redo the grid under Donald Trump in 2020, money that could have subsidized per-house panels and batteries to expand the network’s capacity to the entire island. Unfortunately for the Puerto Rican public, LUMA wasn’t interested in prudent solutions. It was interested in profit.

LUMA Rising

The commonwealth lost its ability to meaningfully influence structural decisions with a 2016 Barack Obama–era law called the Puerto Rico Oversight, Management, and Economic Stability Act, known as PROMESA or La Junta. This act allowed the US Congress to infringe on the island’s pecuniary autonomy through the appointment of a Financial Oversight and Management Board (FOMB). Since its formation, the FOMB has enacted severe austerity measures on public services in order to help Puerto Rico “achieve fiscal responsibility and ultimately reestablish access to credit markets,” according to the text of the legislation. La Junta also gives the FOMB authority to deny unionized utility workers their right to strike.

The FOMB’s independence from Puerto Rican lawmakers meant that it could clear the way for Puerto Rico’s public electrical company, the Puerto Rico Electric Power Authority (PREPA), to sell commonwealth assets and outsource services related to the generation and transfer of electricity. In 2018, legislation was passed to enable the placement of Puerto Rico’s energy grid under private management. That 2018 act revealed La Junta’s true purpose: raising the bridge to make way for muck-dredging capitalists who have long lusted after utility contracts in the Global South. From then on it was inevitable that PREPA would seek a public-private partnership in order to improve the public grid. That’s where LUMA came in.

LUMA Energy took charge of the commonwealth’s electrical distribution in June of 2021, after its public predecessor racked up almost $9 million USD in debt. The two now work in a public-private partnership, where PREPA handles energy generation and LUMA handles distribution. LUMA was incorporated specifically for the private management of Puerto Rico’s grid and was granted a fifteen-year contract worth $1.5 billion. In response to the deal, lineworkers with the Union of Workers of the Electrical Industry and Irrigation (UTIER) declared a twenty-four-hour strike.

According to PREB chair Edison Avilés-Deliz, the goal in outsourcing transmission and distribution to LUMA was to “transform the [grid] into a modern, sustainable, reliable, efficient, cost-effective, and resilient electric system consistent with prudent utility practices to increase electric service quality.” That was in October of 2021. Since then, LUMA has received a $71.4 million cash injection from FEMA with more than $12 billion on the way — funds that LUMA has failed to parlay into service even equal to that of its poorly managed predecessor.

Under LUMA’s watch, Puerto Rico has seen an increased number of massive blackouts, including one in April of 2022 that left the entire island without power. In exchange for continued blackouts and poor service, customers are hit with constant price hikes — Puerto Ricans on average now spend 8 percent of their income on electricity. This is a symptom of the grid’s reliance on fossil fuels, which made up 97 percent of energy generated in 2020–21, and LUMA’s resistance to weaning itself from the centralized grid. With little resistance from PREB, the all-important Public Policy Act has seen next to no environmental progress since LUMA took charge.

Worker Mistrust Breeds Corporate Chaos

LUMA’s failure to improve its own fossil fuel–based grid, let alone act on Puerto Rico’s renewable energy mandates, can be partially traced to the bottleneck resulting from labor issues following its takeover.

A report by Ricardo Cortes Chico for El Nuevo Día in May of 2021 found that LUMA, poised to take over in a matter of weeks, had only secured 250 lineworker contracts out of 800 qualified lineworkers with UTIER. UTIER’s previous contract with PREPA was a point of contention for a young LUMA, which forced PREPA workers to reapply for their jobs. This forced reapplication came as LUMA recognized the Insular Union of Industrial and Electrical Construction Workers (UITICE) as the bargaining representative for lineworkers. UITICE offered more concessions and a corporate-friendly attitude at the bargaining table.

This is not how it’s supposed to happen. In a multiunion workforce, the majority-representative union is selected to represent workers in collective bargaining — the important factor here being worker autonomy. Instead LUMA chose for them, stealing their right to determine representation along with myriad hard-won benefits and wage agreements.

This undemocratic move was the first nail in the corporate coffin. It ended up alienating over three thousand PREPA workers who declined to resign for LUMA. It also confirmed workers’ fears that no government bureau would step in to help.

LUMA’s takeover was the subject of its own House subcommittee hearing in October of 2021, with a heavy emphasis on staffing issues. In an interview, LUMA CEO Wayne Stensby stumbled over the question of “how many” blackouts Puerto Rico has experienced under his company’s leadership, admitting simply that “outages happen daily.”

LUMA’s solution to the growing staffing problem was to outsource labor, both to independent contractors on the island and to employees from LUMA’s parent companies: the American Quanta Services and Canadian ATCO Group. This move came with its own set of labor debates, with independent contractors rejecting the International Brotherhood of Electrical Workers (IBEW) labor agreement they would need to sign in order to work with LUMA.

Despite assurances, outsourcing has not improved the situation facing LUMA on the ground. It has only compounded preexisting problems, resulting in the continuing lack of service after Fiona. Municipalities are being forced to step in to fill the gaps, with the mayor of Bayamón planning to engage emergency lineworkers to rebuild poles LUMA hasn’t touched, and the mayor of Auguadilla hiring lineworkers from PREPA. According to Mayor Julio Roldán Concepción, Auguadilla went days without assistance from LUMA after Fiona made landfall.

Private utility management has been imposed by legislators who are prioritizing their commitment to fiscal conservatism over the common good. In the meantime, Puerto Ricans experience regular disruptions to education, food service, transportation, health care, and clean water. Privatization was sold as a solution to Puerto Rico’s energy problems. Instead, it’s been its own kind of disaster.