Hearing focuses on PREPA’s underfunding of operations and emergency reserves, and the resulting impact on electric service for its nearly 1.5 million customers

LUMA CFO’s testimony to reaffirm that the continued underfunding, as well as PREPA’s 10-year, $10 billion unresolved bankruptcy, have severely limited LUMA’s efforts to stabilize the grid and improve service reliability and resiliency.

San Juan, Puerto Rico – November 25, 2025 – Today, as part of the Puerto Rico Energy Bureau’s (PREB) ongoing rate case hearings, LUMA’s Chief Financial Officer, Andrew Smith, starts[AS1]  his testimony that will include among many other topics critical to the recovery of Puerto Rico’s utility how PREPA’s long-standing bankruptcy and underfunding of operating budgets has weakened Puerto Rico’s electric system and limited efforts to improve reliability and resiliency for customers.

Smith’s testimony will explain that PREPA’s financial decision, including its failure to replenish the Outage Event Reserve Account since 2023, have forced LUMA to divert more than 209 million dollars away from planned system improvements to address unplanned outages and emergency response needs. He will also outline how  PREPA’s decade-long, $10 billion unresolved bankruptcy has prevented access to the credit and financing tools that a typical utility would rely on to maintain and stabilize the grid. The lack of access to financing due to PREPA’s ongoing bankruptcy directly hurts customers because all investment in the grid must be paid in full each year, rather than over ten, twenty, or even thirty years as is standard for financially healthy utility companies.

The hearings, which began in mid-November and will continue through December, are intended to help the PREB determine the level of funding required to make responsible, strategic investments that will strengthen the transmission and distribution for the long term.

“After decades of PREPA’s financial mismanagement, the electric system is operating with aged equipment, deferred maintenance, and an empty emergency reserve account,” said Andrew Smith, LUMA’s Chief Financial Officer. “To improve the reliability, resiliency, and overall customer experience that Puerto Rico needs, we must address these structural challenges and invest every cent responsibly. LUMA does not profit from customer rates. All funding goes directly back into operating and improving the grid on behalf of our customers.”

Key excerpts from Andrew Smith’s testimony, as submitted to the PREB, highlight the following:

• On the Outage Event Reserve Account: “Economic challenges are exacerbated by PREPA’s extended failure to adequately replenish the Outage Event Reserve Account as required by the Puerto Rico Transmission and Distribution System Operation and Maintenance Agreement.”
• On the consequences of the reserve account not being funded: (1) “PREPA’s failure to replenish the Outage Event Reserve Account since 2023 has required LUMA to reallocate $209 million in budgeted funds needed for operating and improving the T&D System and to instead spend those funds to respond to outages and other emergencies. In other words, planned work included in LUMA’s approved budget was cancelled or deferred because the funds intended for that work were needed to pay for service restoration following outages caused by acts of God.” (2) “This situation is different from how a utility would typically manage the cost of unplanned outages. This problem is exacerbated due to the currently underfunded Outage Event Reserve Account. The Outage Account was last funded in November 2023, and the account has not been replenished since. There are currently no funds in the Outage Account. Despite the outage account not being funded, LUMA has continued to respond to Outage Events to restore service, including hurricane Fiona and tropical storm Ernesto.”
• On the effect of PREPA’s bankruptcy: (1) “LUMA’s ability to respond to outages or other emergencies is limited by PREPA’s lack of working capital or a revolving credit financing facility due to [PREPA’s] Title III bankruptcy.” (2)“[PREPA] is unable to borrow money due to its ongoing bankruptcy case. It is currently unable to issue bonds at an attractive cost or to issue bonds at all. It is also not currently able to access other sources of competitive financing, such as revolving credit facilities, because of its weak financial condition and ongoing bankruptcy proceedings.” (3) “[Current rates do not] take into account the inability of the utility to access the debt or capital markets to finance the utility with a typical utility capital structure. PREPA remains in Title III bankruptcy.”
• On the condition of the system: (1)“As a result, aged equipment that has not been replaced while LUMA operated under reduced budgets is only older and more deteriorated than it already was in 2017, and maintenance that was deferred has only been deferred that much longer.” (2) “[The transmission and distribution system] is in a state of significant disrepair, significant components on the system are at, or beyond, end of life, and many components of the system operate with decades-old technology-all of which have a significant negative impact on system performance.”
• On PREPA’s reduced monthly funding: “The PREB was informed of the lack of adequate funding of the System over the years, but the liquidity situation became more acute in the first quarter of FY2025 because the monthly funding that LUMA received from PREPA was substantially reduced. Monthly funding from PREPA has remained at depressed levels since then.”

About LUMA

LUMA is a Puerto Rican company that, since June 1, 2021, operates and manages the electric power transmission and distribution system in Puerto Rico. LUMA is a company driven by a mission to transform the electrical transmission and distribution system to provide all Puerto Ricans with the reliable, resilient, cleaner, and affordable electrical service they deserve. As a customer-centric company, LUMA’s entire workforce of over 4,300 employees is focused on safely delivering an exceptional customer service experience to its nearly 1.5 million customers.