Private company takes over Puerto Rico power utility service

FILE - In this Oct. 19, 2017 file photo, Puerto Rico Electric Power Authority workers repair distribution lines damaged by Hurricane Maria in the Cantera community of San Juan, Puerto Rico. Private company Luma Energy took over the transmission and distribution operations of Puerto Ricos power authority on Tuesday, June 1, 2021. (AP Photo/Carlos Giusti, File)
FILE - In this Oct. 19, 2017 file photo, Puerto Rico Electric Power Authority workers repair distribution lines damaged by Hurricane Maria in the Cantera community of San Juan, Puerto Rico. Private company Luma Energy took over the transmission and distribution operations of Puerto Ricos power authority on Tuesday, June 1, 2021. (AP Photo/Carlos Giusti, File) (Copyright 2017 The Associated Press. All rights reserved.)

SAN JUAN – A private company on Tuesday took over the transmission and distribution operations of Puerto Rico’s power authority, which has struggled with blackouts and bankruptcy, corruption and mismanagement.

The takeover by Luma Energy under a 15-year contract coincided with the beginning of the Atlantic hurricane season, with many across Puerto Rico worried about the transition and whether the new company can handle a severe storm. The U.S. territory is still struggling to recover from Hurricane Maria, which destroyed most of the power grid in September 2017.

“It is extraordinarily fragile and in very poor condition,” warned Wayne Stensby, CEO of Luma, a consortium made up of Calgary, Alberta-based Atco and Quanta Services Inc. of Houston.

However, Stensby said the company, which will serve all of the island's roughly 1.5 million clients, has enough resources to handle a Category 2 hurricane and can bring in more equipment and workers if a stronger storm hits.

The agreement approved by the territory's government and a federal control board calls for Luma to spend billions of dollars in upgrading the battered system — with most of that money coming from the U.S. Federal Emergency Management Agency — while receiving hundreds of millions of dollars for managing the system.

Officials are betting the private operator can do better than the island's Electric Power Authority, which has struggled to restore the storm-battered electrical grid and keep power flowing while trying to cope with $9 billion in debt — more than that of any other government agency in Puerto Rico.

Even with privatization, most analysts expect the government and control board will be forced to agree to an eventual power rate increase to meet the demands of bondholders.

Meanwhile, the new company will inherit unresolved blackouts, with more than 30,000 customers left without power in recent weeks.