Beatrice Lang
Puerto Rico has faced a series of challenges with its electricity supply, from natural disasters to alleged mismanagement, corruption, and underinvestment. In June 2020, the Puerto Rico Electric Power Authority (PREPA) signed a 15-year contract with LUMA Energy, sparking controversy and legal challenges. PREPA has also been criticised for its handling of the recovery efforts after Hurricane Maria in 2017, which left the island without power. LUMA Energy has faced scrutiny over its performance, with critics questioning its preparedness for severe weather events and calling for improved services. The contract has also faced opposition from unions, with concerns raised about potential violations of local labour laws and the impact on workers. In March 2025, the Puerto Rico Energy Office rejected renegotiations with Genera PR for energy production. Additionally, there have been negotiations with New Fortress Energy and Cobra Acquisitions for energy contracts.
| Characteristics | Values |
|---|---|
| Company | LUMA Energy |
| Type of company | A joint venture between Quanta Services (USA) and ATCO (Canada) |
| Date of contract signing | June 2020 |
| Length of contract | 15 years |
| Value of contract | $1.5 billion |
| Number of companies that participated in the bid | 5 |
| Number of companies that submitted business proposals | 4 |
| Number of employees | 2,200 |
| Number of employees needed | 3,800 |
| Number of claims rejected | 1,828 |
| Number of customers without electricity due to a transformer fire | 700,000 to 800,000 |
| Date of power outage in 2025 | April 16, 2025 |
| Other companies that were considered | Whitefish Energy, Cobra Acquisitions, New Fortress Energy |
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What You'll Learn
The contract between LUMA Energy and Puerto Rico
The controversy surrounding the contract stems from concerns about secrecy and a lack of public input. The contract grants LUMA control over key utilities and includes broad termination clauses for disasters, war, sabotage, and civil unrest. It also allows for contract dissolution with 120 days' notice. LUMA sought immunity from liability, including for negligence or willful harm, but this request was denied. The company has faced criticism for inadequate staffing and long service delays, with customers reporting slow power restoration and long wait times.
The electrical infrastructure in Puerto Rico has been deteriorating due to decades of underinvestment and insufficient maintenance. The system is aging faster than it can be repaired, and equipment failures in one part of the grid can cause outages across wider areas. The Puerto Rico Electric Power Authority (PREPA) has struggled with mismanagement, shady fuel contracts, and corrupt procurement schemes, contributing to widespread dissatisfaction with the energy system.
In November 2024, Puerto Rico’s Court of Appeals ruled against LUMA Energy, upholding the performance measurement system that LUMA claimed violated its right to bonuses. In October 2024, the Special Commission of the Puerto Rico Bar concluded that the contract violated fundamental legal principles and contributed to worsening the energy situation. As a result, they recommended litigation in nullity or a resolution according to the contractual terms.
The contract with LUMA Energy has faced legal challenges, with Puerto Rico's government suing a private power company for damages caused by chronic power outages. Anger against LUMA has been growing, and in July 2025, the Puerto Rico Energy Office rejected the renegotiation of the public-private partnership contract with another energy company, Genera PR. The fragile and deteriorating electrical system in Puerto Rico continues to face challenges, and the future of the contract with LUMA Energy remains uncertain.
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PREPA's $9 billion debt
The Puerto Rico Electric Power Authority (PREPA) has been fraught with financial troubles, mismanagement, and corruption. In 2015, PREPA reached an agreement with a bondholder group to restructure its $9 billion debt, which was a significant step towards alleviating the financial burdens of the U.S. territory. However, this deal was considered a default by credit rating agencies, further downgrading PREPA's credit rating. The agreement allowed creditors to swap their bonds for new notes, receiving 85% of their existing bond claims. This deal was intended to reduce PREPA's debt principal and save millions in principal and interest payments over the next five years.
The financial woes of PREPA are not an isolated incident but are symptomatic of broader issues within Puerto Rico's electrical system and governance. Despite federal oversight and the imposition of the Financial Oversight and Management Board (FOMB) in 2016, Puerto Rico has struggled to balance its budget and address its mounting debt. The electrical system has consistently failed to generate sufficient revenues to cover expenses, resulting in annual budget deficits.
In 2017, Hurricanes Irma and Maria devastated Puerto Rico's electrical infrastructure, leaving millions without power for extended periods. The response to these disasters was criticized for its slow pace and mismanagement, further exacerbating the challenges faced by PREPA. The Army Corps of Engineers, FEMA, and other entities eventually stepped in to assist with restoration efforts, but it took months to restore power to all customers.
In 2020, the COVID-19 pandemic added further strain, and the PREPA debt negotiations had to be reassessed. The pandemic also led to a law that prevented cutting services to clients who couldn't pay their utility bills, which resulted in decreased earnings for the agency.
Amidst ongoing financial struggles, PREPA signed a controversial 15-year contract with LUMA Energy in 2020, giving the company control of the electric grid. This contract has faced scrutiny due to concerns about LUMA's preparedness, secrecy, and lack of public input. LUMA has faced criticism for its response to severe weather events, technical issues, and customer service. Despite these challenges, LUMA has overseen power restoration following Hurricane Fiona in 2022 and Tropical Storm Ernesto in 2024.
The situation with PREPA's $9 billion debt and the broader electrical infrastructure issues in Puerto Rico highlight the complexities of managing a territory with unique challenges. The combination of financial troubles, natural disasters, and governance issues has created a perfect storm, impacting the lives of Puerto Ricans and testing the resilience of the territory.
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The 2017 Puerto Rico hurricane damage
In September 2017, Hurricane Maria caused widespread damage to Puerto Rico, leaving the entire island without power and causing a major humanitarian crisis. The hurricane made landfall on the island on September 20 as a high-end Category 4 hurricane, bringing storm surges, heavy rains, and wind gusts of over 100 mph (160 km/h). It flattened neighbourhoods and crippled the island's power grid, causing an estimated 2,982 fatalities and $90 billion in damage.
The Puerto Rico Electric Power Authority (PREPA), which supplies the island's electricity, was heavily criticised for its handling of the hurricane's aftermath. PREPA's power plants had a median age of 44 years, and the company had a poor safety record, with inadequate maintenance and outdated control systems. The company's infrastructure was vulnerable to storm damage, and its response to the crisis was slow. In the two weeks following the hurricane, power had been restored to about 10% of customers. Full restoration took months, and even by November 2017, about 88% of the island was still without power.
PREPA's management of the power grid was not the only issue. The company was also criticised for its financial mismanagement and shady fuel contracts. By 2020, PREPA's debt had reached $9 billion, and the company filed for bankruptcy. Investigations revealed that, from 2010 to 2018, the company had mismanaged $192 million on projects without utility.
In June 2020, the Puerto Rican government signed a contract with LUMA Energy to manage the island's power grid. The $1.5 billion contract is set to last for 15 years and can be renewed if both parties agree. However, LUMA's contract has also sparked controversy. Critics have questioned the company's preparedness for severe weather events, especially since the contract was signed at the start of the hurricane season. There have also been concerns about LUMA's staffing levels, with the company employing only 2,200 people instead of the required 3,800. In addition, workers' unions have expressed disapproval of the contract, citing concerns about local labour laws and retirement funds.
The aftermath of Hurricane Maria highlighted the vulnerabilities of Puerto Rico's infrastructure and the failures of its government and management boards. It also led to increased scrutiny of the island's power sector and the companies involved, with calls for improved grid reliability and better preparedness for severe weather events.
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The 2025 energy supplier dispute
In July 2025, Puerto Rico was hit by a wave of energy-related issues, sparking a dispute between the local government and energy suppliers. The Caribbean island, which is prone to tropical storms and hurricanes, has faced long-term challenges with its electrical infrastructure due to decades of underinvestment and insufficient maintenance. This has resulted in widespread dissatisfaction among residents, who have experienced frequent power outages and a lack of clean water.
The dispute arose when it was revealed that New Fortress Energy, a key energy supplier, had halted a planned delivery of liquefied natural gas to Puerto Rico. The company accused the local power authority, known as PREPA (Puerto Rico Electric Power Authority), of failing to settle an unpaid balance of approximately $12 million, including interest dating back to 2020. As a result, 10 out of 14 temporary generators were left offline, causing concerns about a potential "blackout threat".
In response to the energy supply disruption, the Puerto Rico Energy Office rejected renegotiations with Genera PR, another energy supplier, for a public-private partnership contract for energy production. This decision further exacerbated the energy crisis on the island. Governor Jennifer Gonzalez Colon had previously modified the contract with Genera PR in March 2025 as an act of taxation.
Adding to the dispute, the Puerto Rico government faced legal action from residents. In July 2025, the government was sued by citizens who experienced appliance damages due to chronic outages caused by the fragile and deteriorating electrical system. The lawsuit specifically targeted LUMA Energy, the private power company operating under a 15-year contract with the government since 2020. LUMA Energy has faced criticism for its handling of power restoration after severe weather events and for its inadequate maintenance of the power infrastructure.
The energy supplier dispute in Puerto Rico in 2025 highlights the complexities of managing energy infrastructure in a region vulnerable to natural disasters. The dispute has led to increased scrutiny of the local government and energy suppliers, with residents demanding improved reliability and accountability in their power supply.
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The 2020 contract controversy
In June 2020, governor Wanda Vázquez Garced and the AEE/PREPA signed a 15-year contract with LUMA Energy, giving the company control of the AEE/PREPA electric grid. The contract, which was over 300 pages long, was approved in a meeting that lasted only 43 minutes. This decision sparked controversy for several reasons.
Firstly, the UTIER and other unions expressed disapproval of the contract, citing potential violations of local labour laws. They organised strikes and submitted amendments to the contract. Secondly, there was criticism regarding the secrecy of the deal and a lack of public input. The Puerto Rico House of Representatives called for postponing the contract until 2022 and launched an investigation. In addition, there were concerns about LUMA Energy's preparedness for severe weather events, especially given that Puerto Rico is prone to tropical storms and hurricanes. The timing of LUMA's takeover in June, coinciding with the start of hurricane season, raised further doubts.
LUMA Energy faced additional challenges, including complaints about estimated bills, staffing shortages, and a cyberattack on their digital systems. The company pledged to address these issues and improve its services. However, the controversy surrounding the contract continued, with the Special Commission of the Puerto Rico Bar concluding in October 2024 that the contract violated fundamental legal principles and worsened Puerto Rico's energy situation.
The controversy surrounding the 2020 contract with LUMA Energy highlights the complexities and challenges faced in Puerto Rico's electricity sector. The controversy also underscores the need for transparency, public involvement, and effective management of the island's power infrastructure.
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Frequently asked questions
LUMA Energy was awarded the contract to manage Puerto Rico's power grid in 2020.
The contract is set to last for 15 years and can be renewed if both parties agree.
The contract is worth $1.5 billion.
Five different companies participated in the bid, but only four submitted business proposals.
Yes, the contract has sparked controversy due to concerns about LUMA Energy's preparedness for severe weather events, as well as accusations of secrecy and a lack of public input. There have also been complaints about estimated bills, and the company has faced scrutiny over power outages and equipment failures.
