Why a Canadian CEO could be Puerto Rico’s most-hated man
As the clock hits 11:30 a.m., children spill out from behind the chain-link fence at Escuela Rafael Rivera Otero, joining parents waiting on the sidewalk. The elementary school serves a working-class neighbourhood in the centre of San Juan, Puerto Rico.
There’s little remarkable about the two-storey tan and peach building — except for the fact that it’s been without electricity for more than eight weeks. As a result, when the lunch bell rings, it’s the end of the school day.
“The Department of Education says the only options you have are to either close the school or for the kids to finish in the middle of the day,” says Sandra Vargas, as she waits for her daughter. “It’s been many months. The kids are in school without electricity. Please, however you can help, help us.”
Power outages like this are just part of daily life in Puerto Rico.
The U.S. territory, home to 3.3 million people, has one of the least reliable electrical systems in the developed world. Subject to all manner of breakdowns (in this case a blown substation on school property that triggered a lengthy dispute about who was responsible for the repairs) and liable to entirely collapse when tropical storms and hurricanes roll through.
The headquarters of the company that is supposed to be fixing the threadbare grid is only a 15-minute drive from Escuela Rafael Rivera Otero. LUMA Energy — 50 per cent owned by Calgary’s ATCO Ltd. — has been handed a 15-year, $2-billion contract to manage Puerto Rico’s grid and oversee the modernization of the island’s electrical system.
But the company charged with keeping the lights on has become a lightning rod. Customers complain that blackouts have become more frequent and last longer. And when the power does come back on, voltage surges, frying appliances and causing fires.
There’s a proposed $800-million US class-action lawsuit over an April 2022 island-wide blackout caused by a fire at a substation, which alleges that the company failed to properly maintain the system.
Meanwhile, the cost of electricity has more than doubled, leaving Puerto Ricans paying some of the highest rates in the world.
LUMA’s Canadian CEO, Wayne Stensby, has become a target of derision, heckled when he goes out in public. At one point, the legislature tried to have him arrested for contempt in a legal fight over company documents.
More recently, Gov. Pedro Pierluisi demanded his resignation — to no avail. There are regular demonstrations against the company in the streets. Bad Bunny, Puerto Rico’s global superstar, cursed the firm from the stage during a San Juan concert last summer.
“We have the worst electrical system, I tell you, it’s shit,” the singer said. “I do a tour around the world and the only place I have to put 15 industrial generators is here.”
“LUMA, go to hell,” Bad Bunny shouted as the crowd erupted in cheers, and the band launched into his song El Apagón (The Blackout).
LUMA has been in charge of the grid since June 2021, and the company says progress is being made, pointing to the installation of 3,800 new poles and replacement of 10,000 streetlights.
“People here need to have a stronger system. They need to have more resiliency, have more confidence in their system. And that’s why we’ve been making the investments,” says Mario Hurtado, LUMA’s chief regulatory officer. “Unfortunately, it takes longer than any of us want it to. And certainly longer than customers want it to.”
The company declined a CBC News request for an interview with Stensby.
What little public confidence there was in LUMA seems to have been badly shaken by events of the past hurricane season. On Sept. 18, Hurricane Fiona swept across the western corner of the island, as it began tracking north toward Eastern Canada. The Category 1 storm brought lots of rain and some damaging winds, but barely compared to past disasters, like Hurricane Maria in 2017. Yet the lights went out and stayed out.
“I think we were all shocked,” says Ruth Santiago, a community activist and lawyer. “It was quite a surprise to have what was mostly a tropical storm that was along the southern coast or, you know, south of the southern coast. And then just came in for a bit as a Category 1 hurricane to take down the whole electric grid. That was incredible.”
LUMA officials defend their Fiona response, noting that 90 per cent of customers had power restored within 12 days of the storm. They also point out that they inherited a badly broken system. Puerto Rico’s grid was devastated by Maria, a Category 4 storm that killed thousands and triggered an island-wide blackout that dragged on for almost a year in some communities. And it was hardly in great shape beforehand.
The public utility — the Puerto Rico Electric Power Authority (PREPA) — went through a decades-long cycle of cost-cutting, deferred maintenance and rate freezes, all while accumulating $9 billion US in debt. The utility, which remains responsible for power generation on the island, filed for bankruptcy in 2019 and is trying to work out a deal with creditors.
“I would describe the electrical system as fragile and vulnerable. And that’s because of the years and years of mismanagement,” says Alejandro Figueroa, infrastructure director for Puerto Rico’s Financial Management and Oversight Board.
Hopes for a quick fix aren’t likely to be realized, he says.
“I think what a lot of people have thought is you’re going to fix 30 years of mismanagement in 18 months, And I think that’s unrealistic. Getting the system to where it needs to be will take many years, if not decades.”
Warning to mayors
That’s certainly the case in the city of Aguadilla, on the island’s northwest coast, where some neighbourhoods were without power for 45 days post-Fiona.
Mayor Julio Roldan takes a visitor on a tour through narrow alleyways, pointing out listing power poles, festooned with tangles of wire.
He says he spent the first 10 days after the storm on the phone, fruitlessly pleading with LUMA to send repair crews. When they failed to arrive, he formed his own brigades of ex-PREPA workers and sent them into the streets to clear fallen trees and replace downed lines.
“We had to fix everything here, OK? They didn’t come,” says Roldan. “I don’t know what happened, whether they were scared or what’s going on. The federal government gave a lot of money to LUMA to fix the system, to fix everything And we didn’t get any response.”
Instead, Roldan says he received pushback from the company about his ex-PREPA “shark teams,” which escalated to threats of legal action.
“They said they were going to arrest me and I told them I was going to send them my pin location so they could come arrest me right then,” says Roldan. “I love my city. I love my people. And no matter what I have to do, my people have to be OK.”
LUMA disputes Roldan’s account, saying it never threatened him with arrest.
But the company acknowledges it did warn a number of mayors off the idea of trying to fix the damage on their own, noting that they were legally required to co-ordinate all such plans with the utility, saying it was a matter of safety for its employees and the public.
“We made clear to them the dangers of working on the electrical system without certified personnel,” says Hurtado. “Those linemen had to be certified every year.”
“Willy-nilly going about and restoring without certified people, without co-ordination, putting in danger the lives of the people that are actually doing the work … could cause fires and explosions and other problems. That doesn’t help the situation,” he adds.
Workers on the sidelines
The former PREPA workers have become a sore point on the island. LUMA ended up hiring 1,200 of the public utility’s almost 6,000 employees. Its current workforce is one-third smaller than PREPA’s was and less familiar with the quirks of the aging grid.
Robert Garcia Cooper spent 20 years as a metering specialist with PREPA. But like thousands of his colleagues, he says he couldn’t afford to take a LUMA contract with a loss of seniority and increased benefit costs.
“All of the veterans, we left, we said no,” says Garcia Cooper.
After returning to school to finish a master’s degree focusing on microgrids, he took a job as a master electrician with another government agency, only to find his services weren’t required.
“When I reached there, I was told I would be working as a janitor because the electrical work was subcontracted,” says Garcia Cooper. “The government did it this way in order to force us to abandon our benefits.… It was a Catch-22.”
The soaring cost of power is also stoking public anger. Since LUMA officially took over the grid 18 months ago, there have been seven rate hikes. The company says the increases have been driven by the cost of oil and gas burned by the island’s generating stations, a part of the system which it does not control. Rate hikes are reviewed and approved by the Puerto Rico Energy Bureau.
Looking for alternatives
In the mountain town of Adjuntas, Sharon Cedeño and Israel Sierra are struggling to keep their corner grocery store afloat. Their power bills now top $300 US a month, a large expense on an island where the median household income is just $22,000 — almost $50,000 less than the mainland United States. Then there’s the cost of fuel for the yellow generator that sits on the floor in front of the counter — another $30 or so every time the electricity cuts out.
“We are poor people … young people trying to succeed. They make our lives tougher day-by-day,” says Cedeño.
The couple will soon transition to solar energy, with the help of a local community group, Casa Pueblo. The non-profit organization has created a microgrid in the town’s centre. Now the bakery, pizzeria, retirement home and fire hall can all fall back on the sun when the power cuts — something that happens several times each week.
“We want solar power as the primary energy source, and LUMA as the alternative energy source,” says Arturo Massol, Casa Pueblo’s executive director. “The centralized energy system has failed Puerto Rico before, is failing now and will fail in the future. We are building energy self-sufficiency for the community…. Our principle is to break the model of dependency.”
A half-hour drive away, through the lush green mountains, the general hospital in Castañer is also hoping to convert to solar — if only to avoid the voltage surges that seem to come whenever the lights switch back on.
“Every time that the electricity went out or came back, our equipment got damaged,” says Robyn Russell Orama, the hospital administrator.
Patients haven’t been affected, but the costs have been steep for the 10-bed hospital, which serves 12,000 residents.
“We had equipment damage in our imaging system and in our labs,” says Orama. “There, a simple machine can cost you more than $10,000 to $13,000, plus all the reactives and everything that comes with it.”
The switch to solar makes sense. Puerto Rico averages more than 2,800 hours of sunshine every year. But renewable energy makes up just three per cent of the island’s power mix. And the priority remains repairing and strengthening the grid.
It’s a focus that causes activists like Ruth Santiago to despair.
“Areas like Puerto Rico are in this sort of cycle of destruction, repair and reconstruction of these centralized systems like transmission and distribution systems that keep getting knocked down. And we need to learn that lesson,” she says. “And unfortunately, LUMA Energy is the major obstacle in achieving that.”
LUMA says solar is part of its plan, but only after the transmission and distribution network is made safe and reliable. That in itself is a mammoth task. The company’s grid management contract is just a fraction of the estimated $26 billion that it will cost to fully modernize Puerto Rico’s power system, a bill that will be paid by the U.S. government.
Which means lots of opportunities for outside firms — potentially including LUMA’s parents, ATCO and Quanta Services. Puerto Rico’s government recently announced plans to privatize power generation.
Under current rules, ATCO and Quanta Services are unable to bid on that work. But LUMA, which helps determine the winners and losers and oversees all the contracts, can propose changes to those conditions — subject to existing government regulations.
Both parent companies are keeping their options open with regards to future projects on the island.
‘Concealment and deception’
But a recent scandal involving ATCO has raised concerns with some critics in Puerto Rico about transparency and fairness.
Last year, ATCO agreed to pay a $31-million penalty, levied by the Alberta Utilities Commission (AUC), over a 2018 power line project in Jasper National Park. The AUC found the company broke internal and government rules by awarding a sole-source contract to one of its partners — despite having a much lower bid in hand — and later tried to pass on the costs to taxpayers.
Stensby, then head of ATCO’s electric division, approved that contract. And he was among senior management members who “deliberately buried critical information for the purpose of hiding it from the Commission.” The regulators called it “a campaign of concealment and deception.”
CBC News reached out to Stensby and he declined to comment on the AUC decision.
In a statement, an ATCO representative said the company has “learned and improved” from the Jasper project penalty.
“We have acknowledged that we made regulatory and administrative errors,” said the statement. “The reasons for the errors were complex and were not solely attributable to any one person.”
The spokesperson added that ATCO “fully supports” Stensby and his LUMA team and their work in Puerto Rico.
Back in San Juan, outside the Escuela Rafael Rivera Otero, frustrated parents and staff are suffering from much smaller fiscal problems. A school day, shortened to just 3.5 hours while the disagreement continues over who should pay to fix the power problems.
“LUMA came, LUMA left us without power, LUMA passed the responsibility to the Office of Public Building Management,” says Lydimar Garriga Vidal, a school social worker.
A CBC News request to tour the building and speak with the principal was denied. But immediately following that request, the school board hired a private firm to carry out the repairs that LUMA says were never its responsibility. After two months of darkness, the lights were back on the next morning.