LUMA Energy will appeal to the Court of Appeals to claim the review of the performance metrics approved by the Puerto Rico Energy Bureau (NEPR), an agency that modified the consortium’s proposals in a way that the power grid operator considered “capricious” and that, allegedly, undermines its chances of earning the economic incentives provided in the privatization contract.

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LUMA’s notice initially increase in a motion to the regulator on June 25, in which it requested copies of “all pieces of evidence marked and admitted” into evidence during hearings held between February 7 and 10, 2023.

“Whereas the final determination in the June 14 ruling and order introduces amendments to the revised Schedule IX of the T&D OMA (operation and maintenance agreement) that constitute arbitrary and capricious action that materially affects LUMA’s ability to accrue contractual incentives, are not supported by the record, and result in a clear violation of due process requirements, LUMA respectfully advises that it intends to seek judicial review of such determinations,” the company noted in the June 25 motion.

Three days later, in a separate motion, LUMA asked the NEPR to amend the June 14 resolution, arguing that the document had not adequately notified the consortium of the legal remedies it had to challenge the performance metrics determinations, including the term to appeal to the Court of Appeals. The NEPR denied LUMA’s request, arguing that on January 26, when it issued its determination on the metrics, it had notified the company of its legal options.

“Contrary to LUMA’s contention, it was unnecessary to include additional notice in the NEPR reconsideration determination. LUMA is aware of its right to seek judicial review of the determination within 30 days of its reconsideration being ‘finally resolved,’ which it was and was notified on June 14, 2024″, the NEPR noted in a July 10 ruling.

Thus, the 30-day term expires on July 14, although, because it is a Sunday, it would be extended to the following day. At the time of this publication, LUMA had not responded to a request for comment from El Nuevo Día.

In reconsidering the January determination following LUMA’s objections, the NEPR agreed to amend one of the eight points objected to by the company. Specifically, the agency reintroduced the model that allows LUMA to access bonuses if it achieves 25% of the targets set for a certain metric. In its decision earlier this year, the NEPR had concluded that bonuses would start from a 75% threshold.

According to the NEPR, reconsideration on that line was necessary to avoid LUMA “not being as motivated to pursue improvement if the gap between existing performance and the performance associated with the next threshold appeared too large.”

Instead, the NEPR denied the remaining seven requests for reconsideration, including those protesting adjustments to the proportional weight of some indicators and modifications to metric standards, such as those related to outage frequency.

To a large extent, LUMA’s objections were based on the fact that the changes introduced by the NEPR disrupt the parameters contained in Annex IX of the privatization contract, where the incentive scheme is outlined.

“The T&D OMA itself specifies that the metrics provided are illustrative. This designation implies that these metrics serve more as examples or guidelines than as definitive or binding standards. The term ‘illustrative’ indicates that the metrics are subject to review, discussion, and modification as necessary to align them to the particular regulatory frameworks and needs of the energy sector,” the NEPR stressed July 10.

In its June reconsideration, the NEPR also denied all objections from the group constituted as Local Environmental and Community Organizations, which demanded, among other things, that, along with the incentives, a penalty scheme for non-compliance be included.

While the NEPR has made way for the potential incentive tables - which include customer service, technical and financial items - LUMA will only be able to begin claiming them after the Puerto Rico Electric Power Authority emerges from its bankruptcy proceedings. In the first applicable year, LUMA will be able to accrue up to $13 million in incentives, before increasing in stages to $20 million starting in the fourth year, a limit that may be adjusted for inflation.

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REFERENCES:

-LUMA Energy’s motion to the NEPR dated June 25, 2024.

-NEPR Resolution and Order dated June 14, 2024.

-LUMA Energy’s motion to amend filed with the NEPR on June 28, 2024.

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This content was translated from Spanish to English using artificial intelligence and was reviewed by an editor before being published.