[Senate Hearing 115-492]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-492

                     HURRICANE RECOVERY EFFORTS IN 
                PUERTO RICO AND THE U.S. VIRGIN ISLANDS

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION
                               __________

                           NOVEMBER 14, 2017
                               __________

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                       Printed for the use of the
               Committee on Energy and Natural Resources

        Available via the World Wide Web: http://www.govinfo.gov
        
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
28-093 PDF                 WASHINGTON : 2019        
        
        


               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
STEVE DAINES, Montana                AL FRANKEN, Minnesota
CORY GARDNER, Colorado               JOE MANCHIN III, West Virginia
LAMAR ALEXANDER, Tennessee           MARTIN HEINRICH, New Mexico
JOHN HOEVEN, North Dakota            MAZIE K. HIRONO, Hawaii
BILL CASSIDY, Louisiana              ANGUS S. KING, JR., Maine
ROB PORTMAN, Ohio                    TAMMY DUCKWORTH, Illinois
LUTHER STRANGE, Alabama              CATHERINE CORTEZ MASTO, Nevada

                      Brian Hughes, Staff Director
                Patrick J. McCormick III, Chief Counsel
                     Isaac Edwards, Senior Counsel
             Mary Louise Wagner, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                David Gillers, Democratic Senior Counsel


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from 
  Washington.....................................................    15

                               WITNESSES

Rossello Nevares, Hon. Ricardo, Governor, Commonwealth of Puerto 
  Rico...........................................................    17
Mapp, Hon. Kenneth E., Governor, United States Virgin Islands....   125
Walker, Hon. Bruce J., Assistant Secretary, Office of Electricity 
  Delivery and Energy Reliability, U.S. Department of Energy.....   136
Jackson, Major General Ed, Deputy Commanding General, Civil and 
  Emergency Operations, U.S. Army Corps of Engineers.............   149
Ramos, Ricardo, Executive Director, Puerto Rico Electric Power 
  Authority......................................................   187
Rhymer, Sr., Julio A., Executive Director and Chief Executive 
  Officer, Virgin Islands Water and Power Authority..............   194
Roman Morales, Jose, Acting Chairman, Puerto Rico Energy 
  Commission.....................................................   200
Jaresko, Natalie, Executive Director, Financial Oversight and 
  Management Board for Puerto Rico...............................   213

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Cantwell, Hon. Maria:
    Opening Statement............................................    15
Clean Energy Business Network:
    Statement for the Record.....................................   288
Institute for a Competitive and Sustainable Economy in Puerto 
  Rico:
    Letter for the Record........................................   290
Jackson, Major General Ed:
    Opening Statement............................................   149
    Written Testimony............................................   151
    Responses to Questions for the Record........................   252
Jaresko, Natalie:
    Opening Statement............................................   213
    Written Testimony............................................   215
    Responses to Questions for the Record........................   286
Manchin III, Hon. Joe:
    Article by Frances Robles for The New York Times dated 
      November 12, 2017, entitled, ``The Lineman Got $63 an Hour. 
      The Utility Was Billed $319 an Hour.''.....................   176
Mapp, Hon. Kenneth E.:
    Opening Statement............................................   125
    Written Testimony............................................   128
    Responses to Questions for the Record........................   239
    USVI--Cost Summary...........................................   292
    USVI--Request for Disaster Recovery Support..................   293
    USVI--Summary of Tentative CDL Estimates.....................   296
    AECOM Summary of Preliminary Damage Assessments for Task 
      Orders 001 thru 004, dated November 13, 2017...............   297
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
    Photo of a solar field in Puerto Rico........................     3
    Photo of hurricane impact on solar panels in a field in the 
      U.S. Virgin Islands........................................     5
    Photo of damage to apartment buildings in St. Thomas, USVI...     7
    Photo showing the blue tarps in Puerto Rico..................     9
    Photo showing a road taken out by a landslide in 
      Barranquitas, Puerto Rico..................................    11
    Photo of wind turbines in Southeast Puerto Rico..............    13
Ramos, Ricardo:
    Opening Statement............................................   187
    Written Testimony............................................   190
    Questions for the Record.....................................   257
Rhymer, Sr., Julio A.:
    Opening Statement............................................   194
    Written Testimony............................................   196
    Responses to Questions for the Record........................   260
Roman Morales, Jose:
    Opening Statement............................................   200
    Written Testimony............................................   202
    Responses to Questions for the Record........................   261
Rossello Nevares, Hon. Ricardo:
    Opening Statement............................................    17
    Written Testimony............................................    20
    Questions for the Record.....................................   235
Thomas USAF Group:
    Letter for the Record........................................   326
VOCES:
    Statement for the Record.....................................   328
Walker, Hon. Bruce J.:
    Opening Statement............................................   136
    Map of Puerto Rico Electric Power Authority Electric System 
      Operation Division--Transmission Lines 115 kV-230 kV.......   137
    Chart of Palo Seco Generation Plant outlining the 
      installation of temporary generators by the U.S. Army Corps 
      of Engineers...............................................   139
    Photos showing transmission towers on mountainous terrain....   141
    Photo showing damaged transmission towers....................   144
    Written Testimony............................................   146
    Responses to Questions for the Record........................   243

 
                     HURRICANE RECOVERY EFFORTS IN 
                PUERTO RICO AND THE U.S. VIRGIN ISLANDS

                              ----------                              


                       TUESDAY, NOVEMBER 14, 2017

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:33 a.m. in Room 
SD-366, Dirksen Senate Office Building, Hon. Lisa Murkowski, 
Chairman of the Committee, presiding.

           OPENING STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Good morning, everyone. The Committee will 
come to order.
    We are here this morning to review ongoing recovery efforts 
in Puerto Rico and the U.S. Virgin Islands (USVI) in the wake 
of Hurricanes Irma and Maria as well as efforts to rebuild the 
electric grids on those islands in a smarter and, hopefully, a 
more resilient manner.
    We are now over two months removed from when Hurricane Irma 
devastated St. Thomas and St. John on September 6, and it has 
been nearly 60 days since Hurricane Maria hit St. Croix and 
Puerto Rico. It was just a little over a week ago that Senator 
Cassidy, Senator Franken and I, along with Senator Carper, who 
was just here, and Senator Harris as well as some of our House 
colleagues, visited both St. Thomas and Puerto Rico.
    I want to thank both Governor Rossello and Governor Mapp 
for your hospitality and the time you gave us during that 
visit. It was incredibly important, I think, for all of us to 
see, to be on the ground, and to be hearing directly from you 
and those you are working with. I know that some other members 
of our Committee have traveled to Puerto Rico previously, and I 
thank them for that as well.
    What I think we certainly observed is that the destruction 
is still very, very evident. When you consider the totality of 
the recovery work that still needs to be done, I think in a 
word it can be said that it is ``overwhelming.'' It is one of 
those ``where do you even begin'' moments, and I think we 
certainly felt that in Puerto Rico. We felt that in the USVI. I 
mentioned when we were in Puerto Rico that I have seen my share 
of natural disasters, but really nothing like this. Nothing 
like the scale that you see when you see an entire island that 
has been devastated.
    As we had an opportunity to be up in the air and fly over 
some of the impacted areas in Puerto Rico, it seemed like we 
never left an area that had not been, not only hit, but 
devastated in terms of the impact.
    We have put some posters up on the dais here. Over to my 
left here is a solar field that we flew over in Puerto Rico. 
You can see, closer to the front, the panels that remained 
intact and, while the resolution is not that good, the impact 
to the arrays in the back. It just looked like somebody smashed 
through them.
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    In front of Senator Cantwell, here, are solar panels--a 
field we saw when we were in the USVI driving by, but again 
seeing the impact there.
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    Right below Senator Cortez Masto, there is a picture of 
some apartments that we drove by in St. Thomas, where the 
buildings had been blasted through from one side to the other--
so a clean sweep through these apartment buildings. It was just 
extraordinary.
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    Below Senator Heinrich there, you can see some of the 
devastation again in Puerto Rico. The blue tarps are certainly 
coming to be a symbol of the devastation that we see post-
hurricane, not just here in the Caribbean, but certainly as we 
have seen the devastation following Harvey in Houston and in 
Florida. I think you can see just how these properties have 
been impacted in a way, and in a manner, that is just, again, 
devastating.
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    Below Senator Franken is an area that we toured where the 
road had been taken out by landslide. Not only did we see this 
particular scene, but another area where the only access to 
some 200 roads had been cutoff by horrible landslides, 
stranding homes on the other side. We had an opportunity to 
visit with a young woman whose home was on the other side and 
she had not been able to visit her home since the hurricane had 
happened--a very, very touching story, one that I think all of 
us will remember for a long time.
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    But I think we also recognize that while we were in Puerto 
Rico looking at the damage from the landslides and appreciating 
that, particularly in the interior where you have such 
mountainous areas, this is still the rainy season. And with the 
number of trees that have been taken down, the slope stability 
during the rainy months is very uncertain. The damage that we 
are seeing today may not be the damage that we are dealing with 
in days and weeks from now knowing that more can happen. So 
again, very, very, very sobering.
    And when you look at this and realize that these pictures 
were taken just last week, it is clear evidence that there is 
much, much, much to do.
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    But as daunting as the recovery effort is, I think it is 
matched by the spirit of those who live on the islands. And we 
saw that; we felt that.
    I don't know whether I am doing some promoting here or not, 
but while we were over there in Puerto Rico, we were reminded 
that there is a resiliency in the people. Members have been 
given a can of soda this morning that was manufactured and 
bottled in Puerto Rico with the hashtag that says, Fuerza 
Puerto Rico, which is ``Puerto Rico Strong''.
    I thought that was pretty cool, that even in the midst of 
all this they were coming together. They were working to remind 
each of us of the resiliency of the people of Puerto Rico, the 
people of the U.S. Virgin Islands, that this is their home and 
to reinforce our commitment to our fellow Americans that we 
need to do what we can to help rebuild these islands.
    Today's hearing will also look at ways to make the electric 
grids on the islands more resilient to future storms. I think 
we all agree that it makes no sense to spend hundreds of 
millions of dollars in Stafford Act funding to rebuild these 
grids to pre-storm conditions, as the Stafford Act currently 
requires. Puerto Rico's electric grid was already antiquated 
before the storms hit. So you really have to ask the question, 
why? Why would we rebuild it to that standard?
    I think that there is broad agreement. I have talked with 
colleagues in the other body and the other side of the aisle 
here. Congress needs to provide greater flexibility in how 
Stafford Act funds can be used. I am certainly going to work 
with my colleagues and the Administration to help implement 
that change.
    We also know that more hurricanes will impact the islands 
in the years to come. We are going to see poles that will 
break, lines that will come down and roads and bridges that 
will wash out. Residents will face flooding and mudslides. 
Communities will be disconnected from each other and from a 
central grid. And, you know, some of that is the reality of 
living on an island in a tropical location.
    But, again, the question that we need to be probing is, 
what can we do about it now? Right now. Right now. Restoring 
electricity is the immediate priority. It has been out for far 
too long, and it is harming the health of both local residents 
and their economy. When I say health, I think about things like 
mental health. Think about being without power for 60 days 
plus. Think about what that means. We see pictures of kids who 
are trying to do their homework using the little flashlight on 
their cell phones. But in Puerto Rico where we were, their 
schools were not open. Schools were not open and have not been 
open for two months now. Think about what happens just from an 
educational perspective.
    So when we talk about health, I think we need to be more 
expansive in our understanding of what the impact to these 
islands has been. These conditions are awful. They are tragic, 
but they are also an opportunity for us to be working together 
to rebuild the grids in a smarter manner, whether through 
microgrids, distributed generation, burying the lines where 
possible, direct current versus alternative or some other 
manner.
    I think we need to be looking at this going forward with a 
few things in mind: making the grid more resilient to future 
weather events; and in case of damage from future storms, 
bringing that timeframe for repair on the grid on par to what 
we see here in the United States. I think we recognize that any 
one of the fifty states here, whether you are on the mainland 
or, like Hawaii or Alaska, apart from the continental United 
States, nowhere would we accept the fact that the people, the 
residents, have been without power for two months, particularly 
the numbers of people that we are talking about. But we also 
need to be working to bring down the overall cost of 
electricity, certainly compared to the pre-storm prices.
    We are fortunate to be joined by a very distinguished panel 
this morning, and we will have an equally distinguished panel 
as this one concludes. These folks are here today to help us 
better understand the conditions on the ground, what more needs 
to be done at the federal level and what a future electric grid 
could look like. All of our witnesses can be part of the 
solution, and I am hopeful that this hearing will be a step in 
that direction.
    I will turn to Senator Cantwell for her opening remarks, 
and I look forward to a very informative discussion this 
morning.
    Senator Cantwell.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Madam Chair, and thank you for 
scheduling this important hearing to examine the hurricane 
recovery efforts in both Puerto Rico and the U.S Virgin 
Islands. I would like to thank all our distinguished witnesses 
for sharing their thoughts today.
    It has been 69 days since Irma struck and 56 days since 
Maria struck, and both the U.S. Virgin Islands and Puerto Rico 
continue to operate in emergency mode. They are struggling with 
even the most basic needs--providing drinking water, turning on 
the lights and delivering adequate healthcare. This is 
unacceptable.
    The United States is a strong nation and it needs to take 
care of its citizens. Approximately 3.4 million United States 
citizens in Puerto Rico and over 100,000 United States citizens 
in the U.S. Virgin Islands face challenges as we speak. The 
Federal Government needs to do more, and it needs to plan in 
advance.
    Inequitable treatment under Medicaid and Congress' 
unpredictable and haphazard treatment of territories under the 
tax code have dramatically harmed these economies. As a result, 
Puerto Rico and the U.S. Virgin Islands have suffered from 
economic contractions in recent years.
    In response to Puerto Rico's debt crisis, Congress passed 
the PROMESA legislation of 2016. To be clear, I did not support 
that legislation. One of the reasons was because it favored 
more of the interests of the hedge fund shareholders than it 
did the U.S. taxpayers.
    But by far the most far-reaching, debilitating impact of 
the hurricane damage is to our electricity grid. And this 
Administration, which has been responsible for restoring the 
electricity grid, along with local partners, needs to do more 
for the people of Puerto Rico.
    I welcome Mr. Walker today here. I supported your 
nomination and I am sure you are the right man to help, but you 
should hear, loud and clear, that we need to do more.
    The Whitefish contract in Puerto Rico raised particular 
concerns. In addition to the GAO reviewing the matter, the 
Inspector General and the Department of Homeland Security are 
reviewing the matter and, according to a Wall Street Journal 
report, the FBI is also investigating. According to a New York 
Times report, the Florida electrical workers subcontracted by 
Whitefish were paid $42 an hour, linemen, $63, and yet 
Whitefish billed the government and utility $319 an hour. Even 
if that figure is abnormally high because it included 
exorbitant charges for room and board, why would a contract 
specify a separate charge for room and board?
    The welfare of the Puerto Rico people, to rebuild the 
island, is my number one concern, but I will not stop making 
sure that the U.S. taxpayer is not gouged in this process.
    Let's be very clear about this. My state has many storms 
and many natural disasters. The reason why you have mutual aid 
contracts is to rebuild at cost. That is what a mutual aid 
contract is, rebuilding at cost. So the notion that someone 
comes in there to gouge the Puerto Rican government and the 
U.S. taxpayer, charging them an exorbitant rate and then 
writing a contract so that it cannot be reviewed properly was a 
great injustice to the U.S. taxpayer.
    When you look at how the situation occurred, we must 
understand that the Federal Government here also needs to 
change its process. I have seen this time and time again in my 
state, whether it is fire or a mudslide, where failed 
communication systems can't even be restored to communicate to 
the public because someone is saying, who will pay for this?
    So, in the gap, Puerto Rico made a decision to go with an 
entity that gouged the U.S. taxpayers. It should have been 
clear from the very beginning that FEMA and the U.S. Government 
would pay on those contracts and it should have been done with 
mutual aid at cost.
    We are going to get to the bottom of this, if it takes a 
long time. Why? Because we never want to see this happen again. 
We do not want to be a country where interests of the private 
sector are patrolling the U.S. economy looking for a disaster 
and then saying, I'm going to go in there and capitalize on it.
    People should read and understand case law. Case law on 
price gouging has this very instance. In a blizzard in the 
Northeast, someone came in and tried to charge more for snow 
blowers. Why? Because they knew people had to buy them.
    So we are not going to put up with this kind of behavior in 
the United States of America. When people are in a crisis, in a 
disaster, the U.S. Government should have responded and should 
have said they would be there to restore the utility grid and 
do it at cost. We will have lots of time for questions.
    There is a fundamental problem with removing the authority 
of the grid from the people and handing it over to an unelected 
oversight board. This is what was brought up in a court case 
yesterday. The mission of the board is to achieve fiscal 
responsibility and access capital markets which means playing 
nice with bondholders. This is not what our priority is which 
is getting the lights back on and preventing a continuing 
humanitarian crisis.
    Those are the things that we must understand as this debate 
continues. Only a strong, independent regulator can assure that 
the grid operates efficiently, consumers pay low prices, 
utilities move toward a sustainable business model and that 
will be a very long process.
    I know our colleagues here want to talk about how we 
modernize this for the future. I do, too; but in the meantime, 
I am going to make sure that the U.S. taxpayer is well-
protected and that we do everything we can to flatten any kind 
of process that exists between bureaucracies and the government 
of Puerto Rico to make sure that they are not having to play 20 
questions about financial assistance and aid. The answer from 
the U.S. Government should be yes, and we should be doing it at 
cost.
    Thank you, Madam Chair, and I look forward to hearing from 
our witnesses.
    The Chairman. Thank you, Senator Cantwell.
    Our first panel this morning will be led off by the 
Governor of Puerto Rico, the Honorable Ricardo Rossello 
Nevares. He will be followed by the Governor from the U.S. 
Virgin Islands, the Honorable Kenneth Mapp. We welcome you. Mr. 
Bruce Walker is the Assistant Secretary for the Office of 
Electricity Delivery and Energy Reliability at the U.S. 
Department of Energy (DOE). I will note that he has been on the 
job here for about a month, I believe, and as soon as he was 
sworn in he was sent to Puerto Rico, or he volunteered to go to 
Puerto Rico, and has been there on the ground for much of the 
time. I think he will have a great deal to share with us this 
morning. We are also joined by Major General Donald E. Jackson, 
Jr., the Deputy Commanding General for the Civil and Emergency 
Operations for the U.S. Army Corps of Engineers that has been 
tasked to address the grid system there in Puerto Rico.
    Gentlemen, we welcome you to the Committee. Governors, we 
certainly appreciate that you have traveled to be with us this 
morning and appreciate your time.
    Governor Rossello.

     STATEMENT OF HON. RICARDO ROSSELLO NEVARES, GOVERNOR, 
                  COMMONWEALTH OF PUERTO RICO

    Mr. Rossello Nevares. Thank you, Chairwoman Murkowski and 
Ranking Member Cantwell and all of the members of the Committee 
for inviting me to testify today before you.
    I would also like to give special thanks to Senator 
Murkowski and all of the members from both the House and Senate 
who have taken the time to come to Puerto Rico to bear witness 
to the horrific conditions on the island as well as the 
unbreakable spirit of the people of Puerto Rico.
    It is impossible to describe the fury and violence of the 
storm to the people who did not experience it. Irma impacted 
the island and Maria left no corner of Puerto Rico untouched 
causing the full failure of the power grid, major damage to our 
water systems, ports and airports were rendered unusable, roads 
and bridges were washed away and virtually all communication 
systems were shut down.
    I was there when we had to rescue 2,000 people from 
rooftops in Toa Baja after flooding reached massive proportions 
several hours after the hurricane hit. I saw mothers holding 
their infant babies on rooftops praying that somebody would 
pick them up. A few days later I had to drive several hours 
northwest to the part of the island and through the mountainous 
regions to personally warn folks that their dam could collapse 
because there was no other way to communicate. No phones. No 
radio. No water. No power. No businesses open. Little access to 
roads and little access to fuel. I flew over parts of Puerto 
Rico that looked like a Category 5 hurricane went through it. 
Others looked like a bomb was dropped. I personally took food, 
water and medicine to the people of Puerto Rico, in all corners 
of the island, that had lost their homes.
    Notwithstanding these challenges and the widespread 
devastation, we are resilient and we're making progress. We're 
moving from life sustainment phase to the recovery. Water 
restoration is now at 90 percent. Telecommunications is at 75 
percent. Almost all supermarkets and gas stations are open.
    I called for aggressive milestones for energy generation 
and called out everyone involved to make sure that we could do 
everything humanly possible to power Puerto Rico as quickly as 
possible. And tomorrow, we will have met our second milestone 
of restoring 50 percent of the energy grid by November 15th. 
Fifty-nine of the sixty--58 of the 68 hospitals are connected 
to the grid and we have started to steadily open schools--now 
we have 839 schools that are open.
    It is important to note that this event has no parallel in 
American modern history with risk models categorizing this a 
200- to a 1,000-year storm that caused between $90 and $120 
billion in damages. This was not a partial disaster; this was a 
total catastrophe. Had these twin storms blasted through 
another state, a catastrophe would have ensued as well.
    I became Governor earlier this year with the challenging 
task of correcting decades of misplaced priorities and 
insufficient leadership. As you are aware, long before this 
hurricane season had started, Puerto Rico and its people had 
been battered by long storms of economic, fiscal and 
demographic challenges.
    I've worked tirelessly since taking office just ten months 
ago embarking on an aggressive agenda of fiscal, economic and 
government reforms. Within six months of taking office my 
administration has obtained the approval of Puerto Rico's 
PROMESA--a required ten-year fiscal plan--and enacted the first 
budget compliant with that plan. Although we've had our 
differences with the board, we have worked together.
    In addition, we also implemented an aggressive array of 
policies for economic and social growth, including a gold 
standard P3 law, labor reform, permits reform, government as a 
single employer, pensions reform and are currently working on a 
new government downsizing model, procurement reform and the 
transformation of the electric utility.
    Even during the recovery and restoration process we are 
focused on developing a plan for future electric energy in 
Puerto Rico. We are working with members of PREPA, our 
governing board, to bring together top minds in the industry 
and provide best-in-class thinking on the future of our 
electric utility.
    Our team is evaluating all options including public and 
private ownership, or a combination, in order to achieve grid 
reliability and resilience for the long-term. We aim to revamp 
completely the delivery of electric energy in Puerto Rico. This 
includes aggressively incorporating technological advancements 
and alternative energy sources, creating frameworks for 
distributed energy resources, virtual power plants, achieving 
customer engagement and developing a robust regulatory 
framework that creates the right market and competitive signals 
to assure electric power is delivered reliably and efficiently 
and at a sustainable cost structure.
    Therefore, I call upon Congress to approve by December an 
emergency supplemental legislation that provides equal 
treatment for the people of Puerto Rico compared to what any 
state in the country would have expected had they experienced 
similar devastation.
    Attached to my written testimony I have provided an 
extensive analysis and documentation of the devastation of the 
hurricanes and the federal resources necessary to build a more 
resilient Puerto Rico, worked along with third party groups of 
reputable institutions and organizations. In doing this I am 
committed, I commit to you today, that I will lead the most 
transparent disaster reconstruction in American history.
    Toward that end I have issued an Executive Order creating 
the Central Office of Recovery and Reconstruction of Puerto 
Rico which has been tasked with ensuring full accountability 
and transparency for all state and federal funds directed 
toward the island reconstruction. To foster a culture of 
accountability we will create a recovery transparency portal 
that will not only track the status of recovery but will also 
provide information to the public about how and where the funds 
have been used. This great country of ours has always prided 
itself on leadership, moral values and principles. It has also 
responded to extraordinary times in extraordinary ways.
    Madam Chairwoman, the whole world is watching. It is time 
to show that we mean what we say when American citizenship is 
one and only one. It is time for our homeland to show that we 
can walk the talk.
    As Governor of Puerto Rico, but more so, as a proud U.S. 
citizen of this great country, I ask you to once again rise to 
the call as you have done so many times before.
    Thank you. God bless you, God bless Puerto Rico and God 
bless America.
    [The prepared statement of Mr. Rossello Nevares follows:]
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    The Chairman. Thank you, Governor.
    Governor Mapp, welcome to the Committee.

         STATEMENT OF HON. KENNETH E. MAPP, GOVERNOR, 
                  UNITED STATES VIRGIN ISLANDS

    Mr. Mapp. Thank you. Good morning, Madam Chairwoman and 
Ranking Member Cantwell and members of the Committee. Thank you 
for the opportunity to appear before you today to discuss the 
catastrophic damage the United States Virgin Islands suffered 
from two Category 5 hurricanes, Irma and Maria, that devastated 
our islands just 12 days apart.
    Let me take the opportunity to thank you, Madam Chair, and 
members of your Committee and the Congress for visiting the 
U.S. Virgin Islands. I want to thank the Vice President, Mike 
Pence, for coming and seeing firsthand the devastation in our 
territory and speaking with our citizens.
    I'd like to acknowledge in the audience today, members of 
my legislature that are here, led by the Senate President, 
Myron Jackson, and members of our Cabinet, my Cabinet, as well.
    But first and foremost, on behalf of the more than 100,000 
resilient Americans living in the United States Virgin Islands, 
let me convey our heartfelt gratitude and appreciation for the 
concern so many fellow Americans have shown to us during this 
difficult time. From the great leadership and support of our 
President, to you, Madam Chair and the many members of the 
House and Senate who came to see the devastation firsthand to 
better understand the conditions we are living in, we thank 
you.
    We also thank FEMA for the unwavering support of our 
ongoing critical needs in the Virgin Islands, and I want to 
thank my Federal Coordinating Officer, Mr. William ``Bill'' 
Vogel, for his support and his hard work in helping the people 
of the territory. I know of no government on Earth which 
responds to the needs of its citizens in a disaster than the 
United States of America. Is the response always perfect? No. 
But neither is the prediction of the outcome of a natural 
disaster. To our country, to our fellow citizens, to our 
national government--the people of the Virgin Islands say thank 
you.
    Of course, I didn't travel here today to only express 
gratitude. I came here before you to personally ask for your 
help and your support in recovering. These storms brought 185-
mile-an-hour winds that ripped leaves from the trees, pulling 
up century old trees by their roots and turning our green 
hillsides nearly black. Power lines were strewn across our 
roads. Utility poles snapped like matchsticks and over 400 
boats sunk in our harbor. Nine schools, our two main hospitals 
and related health facilities, fire stations, police stations, 
were so badly damaged they had to be condemned. Our airport and 
many of our government offices are also unusable, which has 
dramatically impacted the delivery of vital government 
services.
    Simple things we normally take for granted--running water, 
cell phone services, electricity, a hot meal--remain 
unavailable to many of our citizens. More than 15,000 homes 
were damaged or destroyed and virtually all of our power 
distribution infrastructure was wiped out. Power remains 
limited with power connections across the Virgin Islands at a 
mere 27 percent. On the island of St. John, our residents only 
started seeing power for the first time last week. Can you 
imagine a community here on the mainland going out, going 
without power for over six weeks?
    In addition to the physical destruction, our economy has 
ground to a near halt. Few businesses are opening and those 
that have reopened, have reopened with significantly reduced 
services. Many private sector workers have not returned to 
work. Damage to our economy of this magnitude has created 
unsustainable cash shortfalls that we will experience now and 
into the future. We have estimated that the economic losses to 
our key industries, including tourism, stand at more than $1.7 
billion over the next three years. Damage to commercial 
facilities stand at almost $1 billion.
    Our recovery from these islands will take time, and it will 
begin with a full understanding of the damages caused. We 
estimate uninsured hurricane-related damages to the public 
sector to exceed $7.5 billion. I have requested that amount in 
federal disaster assistance to enable us to address our most 
essential needs in order to return to normalcy.
    Virgin Islanders are resilient, but we must do more to make 
our islands resilient. Unless you want to see me back here 
after the next major hurricane devastation of America's 
paradise, we must build it back stronger and more sustainable 
than before. We must build it back stronger and more resilient 
to protect our citizens and to protect the investments of our 
national government.
    This is what I am asking of you. Consider our power 
distribution network which Irma and Maria destroyed. While we 
are optimistic that power will be nearly fully restored by 
Christmas, this is the fifth time that the U.S. Government is 
paying to rebuild this power distribution system in the Virgin 
Islands.
    We've already taken basic steps to improve the resiliency 
of the grid and to build it back using things like composite 
poles that can better withstand hurricane force winds, but we 
must go further. With your help, we plan to bury power lines on 
the primary and secondary road systems throughout the territory 
and invest in a microgrid system that will add renewable 
generation capacity, like solar and wind energy.
    It's not just power lines we need to approach differently. 
Irma and Maria completely devastated our critical healthcare 
infrastructure, destroying our two main hospitals and 
affiliated healthcare facilities. Today critical care is 
unavailable in the Virgin Islands. A critically ill patient in 
the U.S. Virgin Islands cannot receive care there. Critical 
patients and persons requiring dialysis must be flown to the 
U.S. mainland for care. We were doing that after Irma in Puerto 
Rico, but now that our neighbor has been impacted by Maria, our 
patients are now flown to Atlanta, Texas and Florida. The 
recovery funds we're seeking will help rebuild these two main 
hospitals on St. Thomas and St. Croix and a healthcare facility 
on St. John.
    Helping the U.S. Virgin Islands recover will also require a 
serious look at our healthcare system as it relates to federal 
law and policies. Healthcare funding in the Virgin Islands was 
under great stress even before the two hurricanes. Unequal 
federal Medicaid funding, primarily due to arbitrary low 
federal matching rate, has imposed a severe hardship on the 
government finances.
    The Virgin Islands is also fiscally disadvantaged because 
of the centers of Medicare and Medicaid services using decades-
old benchmarks and methodologies. Our hospitals' fee schedules 
are based on a 1989 fee schedule. So reimbursing of these 
publicly-owned hospitals cause great distress to the finances 
of the government of the Virgin Islands.
    The Chairman. Governor, I am going to ask you to start 
wrapping here.
    Mr. Mapp. Sure.
    The Chairman. Thank you.
    Mr. Mapp. Regarding public safety, we have lost our fire 
stations, police stations, emergency operation centers for 
disasters on St. Croix. The universities have been heavily 
damaged.
    While we appreciate the efforts of FEMA and the Blue Roof 
program, these mainly protect homes from further damage. 
However, this program is not covering folks that lived in homes 
without frames and without roofs. So with each rainfall, 
families are being harmed.
    Our citizens, American citizens, have suffered terrible 
losses, dislocation and distress in the wake of these storms. 
Our recovery will be long and difficult. Virgin Islanders 
understand and accept our responsibility for being in front of 
our rebuilding communities, but we cannot do it alone. We 
cannot squander this opportunity to rebuild a better and 
stronger and more resilient Virgin Islands to simply rebuild it 
quickly. If we do, we will only compound the suffering that so 
many of our citizens have endured. With your support, that 
won't happen.
    Thank you for listening and thank you for supporting your 
fellow American citizens in the U.S. Virgin Islands.
    [The prepared statement of Mr. Mapp follows:]
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    The Chairman. Thank you, Governor, and know that your full 
statement, along with everyone on the panel, will be included 
as part of the record.
    Let's go to Bruce Walker, welcome.

STATEMENT OF HON. BRUCE J. WALKER, ASSISTANT SECRETARY, OFFICE 
OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. DEPARTMENT 
                           OF ENERGY

    Mr. Walker. Good morning.
    I'd like to thank Chairman Murkowski, Ranking Member 
Cantwell and the members of this Committee for moving me 
favorably from this Committee during the confirmation process 
and expediting the confirmation so that I may go to Puerto Rico 
and the Virgin Islands to get a firsthand account of the damage 
and devastation that was done.
    With the permission of the Committee I would like to enter 
my written testimony into the record so that I can convey my 
thoughts regarding the time spent on the island.
    The Chairman. Your full written testimony will be included 
as part of the record.
    Mr. Walker. Thank you.
    I'd like to discuss three topics: number one, the successes 
that I realized in my attending the Virgin Islands, as well as 
Puerto Rico; the challenges that were faced; and the 
opportunities we have going forward. And speaking to, 
specifically, a number of the things that both Governors 
mentioned, there are opportunities and we have an opportunity 
to take advantage of those.
    Successes. The leadership provided by the two Governors 
sitting next to me was fantastic and the resilience and the 
heartfelt strength of the citizens of both Virgin Islands and 
Puerto Rico was amazing. The calm on the island was 
outstanding. The key humanitarian challenges are continuing to 
be met with the leadership provided by the Governors.
    I'd like to point out there were two critical components 
with the restoration that, I think, are worth noting. Number 
one, PREPA, with the limited crews that I had--I will point to 
this map over here--made an early decision to tie the southern 
portion where the generation is to the northern portion where 
the load is. And in doing so they made a key decision to 
construct the 230 kV line from the south bringing it up to the 
San Juan area, the Bayamon Substation.
    On the map you can see here, from down here wrapping up 
through where that dotted line is, from up here, all the way 
over to here.
    [The information referred to follows:]
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    What was important about that was that one decision and the 
efforts made by PREPA, with limited staffing, enabled the power 
to be distributed to where the load was and in conjunction with 
the other big decision, which is the next slide.
    Jennifer?
    [The information referred to follows:]
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    The Army Corps, working with PREPA, installed two 25-
megawatt generators at the Palo Seco Generation Plant. And 
that, in conjunction with the rebuild of the 230 line, enabled 
power to be distributed to the northern portion to start 
picking up commercial and residential customers.
    Those two efforts were monumental, given the facts and 
circumstances. The installation of this generator was with the 
letting of the contract and the install and I was at Palo Seco 
when this was being put in, and the work that had to be done 
was really incredible. We had fantastic support from PREPA in 
coordinating it, particularly with the relaying and the 
coordination with the Army Corps.
    Lastly, the work of the Federal Coordinating Officers, both 
in the Virgin Islands, and the Governor mentioned, Bill Vogel 
and his Deputy, David Haas, and then in Puerto Rico with Mike 
Byrne and his Deputy, Ahsha Tribble. The coordination that was 
set forth by FEMA was outstanding in an effort to drive and 
work with the leadership provided by the two Governors to my 
right.
    On the challenges--I think you can see through a number of 
these pictures, the mountainous terrain was a key component 
where there was stress in trying to rebuild the transmission 
system. Lack of generation in the north necessitated the work 
to be done on the transmission system.
    [The information referred to follows:]
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    The logistics, as were mentioned, were highly successful in 
trying to mobilize all the things necessary--equipment, people 
and material--to get down there, and it's still a challenge 
just to be working through. The amount of fiber optics on the 
island were a challenge, particularly as they increased their 
wind shear and, therefore, the damage to the poles. And the 
water infiltration to 18 substations, three of which were 
inundated to the point where they were not able to be 
energized.
    That leads me to my last component which is the 
opportunities. At a very high level we've already mobilized the 
Grid Modernization Lab Consortium to look at work that has been 
previously done by labs like PNNL and Oak Ridge. And we're 
looking, specifically, at things like modern relay protection 
at key substations, predictive modeling with improved sensing 
capabilities, hardening control devices.
    Secondly, microgrid opportunities. We've already looked at 
and started the process to install 200 locations representing 
11 megawatts of power on Puerto Rico. Those are key locations 
where we have provided generation for hospitals' water 
supplies, and we have 400 other locations behind that we're 
doing the investigation on right now to add additional 
microgrid opportunities. And then we'll also begin looking at 
them in the Virgin Islands as well.
    Use of the American Society of Civil Engineering Standards 
for the 18 substations that were inundated, there's a flood 
mitigation program, it's called 24-14. We're looking at that 
for the reconstruction of those 18 substations.
    In conjunction with that, we're utilizing NOAA to do a wind 
study to identify where we can put solar and utilize, take the 
mountains, and utilize them as shieldings for the design. Also, 
we're looking at the SLOSH modeling done by NOAA for the Virgin 
Islands as well as Puerto Rico, in order that when we have to 
replace substations we don't put them in an area that could 
ever or that would be inundated going forward.
    Also, we have the opportunity with the high penetration of 
the fiber optics to develop the BlackNet and utilize it. And 
there was a discussion here with this Committee on the 
cybersecurity, a real opportunity because of the density.
    Integration of distributed generation and/or other 
generation renewables, particularly in the northern area where 
the load is, that's a key component and would add a level of 
resiliency into the network because the transmission system 
wouldn't need to be built from the south to the north in the 
event that we have to raise this up and then inevitably we'll 
see more hurricanes.
    And lastly, there are some basic structural components that 
we have the opportunity to do. I have some of our folks at the 
Bonneville Power and WAPA doing investigation on the tower 
constructions because the dead-end towers that are used on the 
transmission system which you see pictures of there, 
fundamentally, most of those were standing through the island. 
The other style towers, actually, were more damaged, and it's 
mainly because these towers are guyed or anchored differently 
than the other towers.
    [The information referred to follows:]
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    So there's some structural improvements that are also 
available to us and also the modification of the fiber optic 
and other attachments on the poles is something that we'll have 
an opportunity to take a look at.
    Thank you for the opportunity to convey my thoughts 
regarding this and I look forward to your questions.
    [The prepared statement of Mr. Walker follows:]
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    The Chairman. Thank you, Mr. Walker.
    General Jackson.

   STATEMENT OF MAJOR GENERAL ED JACKSON, DEPUTY COMMANDING 
  GENERAL, CIVIL AND EMERGENCY OPERATIONS, U.S. ARMY CORPS OF 
                           ENGINEERS

    General Jackson. Chairman Murkowski, Ranking Member 
Cantwell and distinguished members of the Committee, on behalf 
of the Army Corps of Engineers (Corps), thanks for the 
opportunity to testify today.
    The Corps conducts emergency response activities under two 
basic authorities: the Stafford Act and Public Law 84-99. Under 
the Stafford Act, we support FEMA under the National Response 
Framework as the lead federal agency for Emergency Support 
Function (ESF) #3, Public Works and Engineering. ESF #3 
provides temporary emergency power, temporary roofing, debris 
management, infrastructure assessment, critical public facility 
restoration and temporary housing. Under Public Law 84-99, we 
prepare for disasters through planning, coordination, and 
training with local, state and federal partners assisting them 
with advanced measures that prevent or reduce storm event 
damages and repairing damage to authorized federal projects, 
including eligible non-federal flood infrastructure to pre-
storm condition.
    When disasters occur, Corps teams and other resources are 
mobilized from across the command to assist local offices with 
their response to the event. As part of this mission, the Corps 
has more than 50 specially trained teams, supported by 
emergency contracts, that perform the wide range of public 
works and engineering-related support missions I just 
described. The Corps uses pre-awarded contracts that can be 
quickly activated for ESF #3 missions such as temporary power, 
debris removal and temporary roofing.
    This year the Corps has supported FEMA-led federal response 
and recovery operations in support of multiple events, 
including Hurricanes Irma and Maria in the Caribbean. We 
continue to be actively involved in ongoing federal response 
operations in support of Hurricane Harvey in Texas and 
Louisiana, Hurricane Irma in Florida and in the aftermath of 
devastating wildfires in California.
    The Corps has received 59 FEMA mission assignments in 
support of the federal response to Hurricanes Irma and Maria in 
Puerto Rico and the U.S. Virgin Islands. Currently, the Corps 
has over 1,900 personnel employed in the region.
    As of this morning, the Corps has completed over 1,300 
assessments and over 765 temporary generator installations in 
the Caribbean. This includes 270 assessments and 156 generator 
installations in the U.S. Virgin Islands and 1,100 assessments 
and 612 generator installations in Puerto Rico. Under FEMA 
authority we are also assisting Puerto Rico with operation and 
maintenance of over 150 critical, non-federal generators across 
the island. We have over 550 soldiers, civilians and 
contractors dedicated to temporary power alone in Puerto Rico.
    The Corps has completed 12,000 temporary roofing 
installations in the Caribbean, including 3,300 in the U.S. 
Virgin Islands and 8,700 in Puerto Rico. Roofing requirements 
in both the U.S. Virgin Islands and Puerto Rico have been 
extensive requiring additional material and construction 
support which initially slowed progress. We have adjusted, are 
adding capacity and will continue to see improvements in both 
locations.
    Corps debris subject matter experts are providing technical 
and direct federal assistance to both Puerto Rico and the U.S. 
Virgin Islands. We are working to remove an estimated one 
million cubic yards of debris in the U.S. Virgin Islands and 
over four million cubic yards of debris in Puerto Rico.
    The Corps worked closely with the U.S. Coast Guard, the 
National Oceanic and Atmospheric Administration and local 
authorities to open harbors and navigation channels across all 
affected areas critical to restoring commerce and allowing the 
flow of commodities and essential equipment to reach affected 
communities.
    In Puerto Rico, Corps dam and levy teams inspected 14 
levies and 17 priority dams, working closely with the Puerto 
Rico Electric Power Authority, or PREPA, to stabilize a 
spillway failure at Guajataca Dam. Additionally, the Corps 
teams helped to clear existing outflow conduits and place 
emergency pumps to further reduce water levels in the dam, yet 
restore flow to a critical treatment plant that supports the 
needs of over 100,000 people.
    On September 30th, the Corps was given a FEMA mission 
assignment under Stafford Act authority to assist PREPA in 
conducting emergency repairs to the grid itself. The Corps is 
partnering with PREPA in this effort and has established a 
general officer-led task force with three area offices on the 
island to oversee work and provide technical assistance. The 
Department of Energy has embedded experts in our team and 
continues to advise and assist in our efforts.
    Unlike with our ESF #3 mission, the Corps does not have 
pre-awarded contracts for this type work but has relied on our 
contingency contracting tools to competitively build capacity 
to meet operational requirements.
    Since receiving the mission assignment, the Corps has 
installed a 50-megawatt temporary power plant to stabilize the 
grid in San Juan, as Secretary Walker just talked about. We 
procured over $170 million in critical materials that are 
currently flowing into the island today that includes, 
currently, 39,000 poles and 3,000 miles of conductor wire and 
we contracted for 200 additional line repair crews that are 
also flowing into the island to assist the ongoing efforts by 
PREPA.
    And finally, we just recently awarded a contract for a 25-
megawatt temporary power plant that will be installed in the 
next several weeks to assist the critical facility at Yabucoa.
    The Corps remains fully committed and capable of executing 
its other civil work activities across the nation despite our 
heavy involvement in these ongoing response and recovery 
operations. We also remain ready and poised to assist in future 
events as they may occur.
    This concludes my testimony, and I look forward to 
answering any questions you might have. Thank you.
    [The prepared statement of General Jackson follows:]
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    The Chairman. Thank you, Major General.
    Thank you all for your testimony. We will now have an 
opportunity for five-minute rounds of questioning.
    Governors, I want to direct this to you first. One of the 
things that impressed me, Governor Mapp, when we were in U.S. 
Virgin Islands, you relayed to us or shared, certainly, with 
me, that this is now your fifth hurricane. You have a little 
bit of experience dealing with disasters and you indicated that 
in anticipation of Hurricane Irma coming your way, you 
effectively had teed things up so that in the event that you 
were hit, which of course you were, you could immediately move 
forward to, basically, push and send the request for mutual aid 
and indicated that that allowed you then to move quickly to 
remove debris and really get to work in an area that had been 
incredibly devastated.
    We are looking at this hearing to not only learn about what 
we have done right but where we have stumbled in this effort 
and also how to move forward from that. But that is one thing 
that as I look at the two islands that were impacted, both in 
considerable ways--in Puerto Rico, Governor Rossello, mutual 
aid was not implemented immediately. In fact, I heard many 
times as we were traveling there that, in fact, the real 
recovery did not begin until a month later, effectively October 
30th when the mutual aid switch was flipped and the effort 
really began. Governor Rossello, can you share with the 
Committee why mutual aid was not advanced immediately?
    Mr. Rossello Nevares. Of course. Thank you, again, for the 
opportunity.
    Let me just take you, initially, through the timeframe that 
was the two twin storms. We first got hit with Irma. At that 
juncture, there were some requests for information for several 
contractors to come to Puerto Rico to attend to some of the 
challenges that we had after Irma. That, of course, was looking 
forward to just restarting without the energy grid, without 
looking at the moment where we would have another storm in 
Puerto Rico.
    The Chairman. Just so I am clear, did you not believe after 
Irma that the damage was sufficient to have invoked mutual aid, 
that you could handle that on your own? Is that what I 
understand?
    Mr. Rossello Nevares. Well, the results are there. The 
power authority, actually, picked up from 25 percent energy 
that we have the day after the storm to about 96.5 percent 
energy restoration right before Maria hit. So there was work in 
progress being made. Of course, the power authority had been 
working on alternative mechanisms to bring more, you know, more 
support to the island.
    In comes Maria and I just have to define what were the 
first days immediately after Maria. First of all, we really had 
no knowledge of the vast damage that was done in Puerto Rico 
because we had no communications. I mean, I know it's hard to 
put yourself in that situation, but Puerto Rico is a relatively 
small island, but it is, to travel it, typically takes a couple 
of hours. At that point we had no communications, no radio 
communications which we expected to have. At that point, all of 
the roads were basically blocked. So our efforts immediately 
after the storm were to assess the situation, get contact, 
establish logistics moving forward and going through a licensed 
statement phase.
    Right after the storm, as I mentioned in my initial 
statement, emergencies ensued. We literally had to go. I had to 
make the decision that even under martial law, I had to 
mobilize police officers and the National Guard from wherever 
they were so that we can rescue people that were at risk of 
drowning. This happened several times because as the storm 
passed more water came through it as well.
    After that came also the devastation, or the potential 
announcement of the devastation, of the dam for which we had no 
communications with the mayors and with the people of that 
township. So I had to go in a car and in a route that takes 
typically an hour and a half--it took us about four hours to 
get there. I went there with our resident commissioner so that 
we can warn the local authorities, the mayors, of what was 
going on.
    The Chairman. Governor, I am going to interrupt only 
because I am out of time, but it begs the question then, 
obviously, a great deal of immediate urgency to save human 
life.
    Mr. Rossello Nevares. Right.
    The Chairman. But in retrospect, would it have not been 
wiser to do as we saw in the U.S. Virgin Islands, just push 
send and request that mutual aid?
    Mr. Rossello Nevares. Right. You know, we spoke about this. 
The PREPA head will be happy to answer all of those components 
into the decision-making that went to that, but I just want to 
add an element.
    When we were making that decision about bringing some of 
the additional assets to Puerto Rico, we had the offer from the 
Corps of Engineers that would allow us to restore the energy 
grid fairly quickly and immediately, as was stated to us 
initially, and that we didn't have to have a cost-sharing to do 
so. But right now, as you know, Puerto Rico is in a fiscal 
predicament that we had little liquidity to push forward.
    So having those two alternatives, Madam Chairwoman, we 
chose under the understanding that, you know, things were going 
to pick up quickly, that the energy grid was going to be 
restored and most of it within 45 days. We chose the 
alternative that both FEMA and the Corps of Engineers proposed 
to us, which was let's do it through the Corps of Engineers and 
then in collaboration with PREPA so that we can get going.
    The Chairman. We all have a lot of questions here.
    I am going to go to Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair, you are right 
about that, we definitely do.
    I appreciate everybody's testimony. I want to make sure 
that we work on solving the problems. Is everything working 
seamlessly now as it relates to the Army Corps and to PREPA and 
everything that needs to happen or do we still need some 
streamlining?
    Mr. Rossello Nevares. Well, let me say two things. First of 
all, I mean, it is public record that I wasn't satisfied with 
the original deployment of the Corps of Engineers. I 
established, again, we were under an impression that this was 
going to, you know, start immediately, that we were at a 45-day 
timeframe. Otherwise, of course, we would have looked for other 
alternatives.
    Having said that and thanks to several meetings that we've 
had, now we have three daily meetings on what's going on with 
the energy grid that includes PREPA, the DOE, includes the 
Corps of Engineers, some of the stakeholders, so that we can 
push forward and meet the aggressive standards that we had for 
Puerto Rico.
    So while, again, as I said in the onset, I was not 
satisfied and I voiced it, I am hopeful that this new mechanism 
can allow us to get to our objectives and, you know, what I ask 
the Senate is, of course, to keep us serving, to keep hearing 
us out and as it pertains to the past week, there has been an 
increase, a phenomenal increase in communication, more 
deployment of personnel to Puerto Rico. And as I stated on our 
initial statement, you know, our objective to get 50 percent by 
November 15th, looks like we're right on target.
    Senator Cantwell. Thank you, Governor.
    Mr. Walker, what do you do about this issue with the 
bondholders having a lien against PREPA? Here we are trying to 
make this work from a perspective of restoring the grid and we 
have a bondholder lien. What are you going to do to make sure 
that taxpayer dollars aren't just going to Wall Street instead 
of building the grid?
    Mr. Walker. Thank you for the question, Senator.
    During my time in Puerto Rico, that was a question that 
came up in working with FEMA and the FEMA lawyers. They've 
worked through mechanisms where they feel confident that the 
investments that are being made in the system under the 
emergency restoration will not be attachable as they're 
actually grants.
    And so, the Federal Government through FEMA--it's a better 
question to be answered by a FEMA expert, but I had learned as 
much about the FEMA rules as I could when I was in Puerto Rico. 
So I asked that question, specifically, when I was down there. 
There was, obviously, concern with the investment being made 
under the emergency restoration, but they believe that that 
money will be protected.
    Senator Cantwell. Do you believe that we need further 
structure by you, DOE or others in integration with PREPA 
because yesterday I am pretty sure those bondholders were in 
court trying to wrangle this organization away from the 
government and into their pocketbooks. Now, the judge denied 
that but I guarantee you this won't be the end of this 
situation. What does the Administration believe? If you are 
saying today PREPA has the full oversight that it needs, or are 
you saying, no?
    Mr. Walker. Well, I think if Congress appropriates money 
for permanent work that, you know, FEMA will have to make 
decisions with regard, and Congress will have to make decisions 
with regard, to how that money is allocated and who's 
responsible for it, if the Congress approves or appropriates 
money for permanent restoration.
    Senator Cantwell. But do you believe that PREPA needs any 
other oversight by you or any other aspect of the Federal 
Government right now?
    Mr. Walker. No, the emergency restoration component, I 
think, PREPA is uniquely qualified--it's their system--to 
restore the system and get it up and running.
    Senator Cantwell. And you are a person who has spent much 
time in this sector prior to coming to the Administration?
    Mr. Walker. I've spent my entire life there. And I worked 
very closely with Ricardo Ramos, who is on the next panel, and 
PREPA personnel and their control staff restoring the systems.
    And as I earlier noted, you know, there were some very 
significant challenges in making the decisions to restore the 
system. But PREPA rose to the challenge and made those 
decisions and started the work and, as the Governor noted, has 
gotten back to almost 50 percent of the system. So it's 
working.
    Senator Cantwell. So you are standing by PREPA in this and 
moving forward?
    Mr. Walker. I am.
    Senator Cantwell. Then you will work with us on this larger 
issue because, as you know, this is not the last disaster we 
are going to see.
    Mr. Walker. No.
    Senator Cantwell. I think we need to work very hard to make 
sure this situation where somebody came in to take advantage of 
the gap that existed between not having this full faith FEMA 
commitment and the fact that PREPA made a decision then.
    Look, we had our constituents gouged during the ENRON 
crisis. Literally, people were saying you are going to pay 
3,000 times the rate. So utilities, who had a must-serve 
requirement, signed up for those exorbitant rates. It took us 
years to get out of it. We were going to be the deep pocket in 
bankruptcy.
    I just want to make sure that we are stopping this kind of 
behavior and that we work across this. We are going to see many 
more disasters and we should just put the word out, we are not 
going to be involved in this kind of price gouging by somebody 
coming in and trying to take advantage of a disaster.
    Mr. Walker. Yes, ma'am.
    Senator Cantwell. Thank you.
    The Chairman. Thank you, Senator Cantwell.
    Senator Cassidy.
    Senator Cassidy. I will return for the second panel with 
PREPA, but my questions all relate to it.
    Mr. Walker, do you know how much it will cost to upgrade 
the Palo Seco?
    Let me start over. Senator Franken and I and Senator 
Murkowski have had this conversation. What could you do to make 
your grid, Governor, in Puerto Rico more--and by the way, 
Governors, thank you very much for your hospitality--more 
resilient? The idea is that you could have a distributed energy 
system of renewables, but then some sort of fast-acting LNG to 
come on the back side when the sun does not shine.
    I was struck that we went to a Tesla facility and they laid 
out a nice array, but it had rained every day since they put it 
out and their battery still had not fully charged so they were 
running the generator pretty constantly because the battery had 
not fully charged which showed the limitation of the 
distributed energy--important, useful, but a little limited and 
needing backup.
    First, can I ask, and this may be a question for PREPA, I 
know that there is already some LNG on but to what degree can 
your current fossil fuel facilities serve as fast-acting backup 
in case there is a need for electrons immediately on the grid? 
Governor or Mr. Walker, do you all have that answer?
    Mr. Rossello Nevares. You want to?
    Senator Cassidy. I can wait for the next panel to speak.
    Mr. Rossello Nevares. Yes.
    Senator Cassidy. Okay.
    Do we know how much it would cost to upgrade the Palo Seco 
facility to make that operational going forward, as opposed to 
short-term?
    Mr. Rossello Nevares. In the long-term or in the short-
term?
    Senator Cassidy. In the long-term, I'm sorry, in the long-
term.
    Mr. Rossello Nevares. Yeah, in the long-term, again, I 
would pass that question to the PREPA director.
    Senator Cassidy. Sounds great.
    Can I ask the progress right now of--Mr. Walker, you showed 
the nice pictures of those long-term transmission lines going 
across the mountains. What is the progress of getting those 
stood up and, where are we--90 percent, 80 percent?
    Mr. Walker. As far as I know, and Ricardo is here so he can 
correct me, both the 230 lines that cut through the middle of 
the island are on schedule to be complete by the end of 
November.
    Senator Cassidy. Got it.
    And what percent of the island now has power back?
    Mr. Rossello Nevares. Forty-nine percent, today.
    Senator Cassidy. Forty-nine percent. San Juan looked pretty 
good when we were there, relatively speaking, but other 
communities less so.
    Mr. Rossello Nevares. Right, right. It's been continuously 
flowing. Of course we've had ups and downs. We've had 
significant rain events as well that have deterred. But right 
now, as we stated, we had an objective of getting to 50 percent 
by mid-November and we're poised to achieve that tomorrow.
    Senator Cassidy. And General, I think it was a conversation 
with you, I think it was with you. My sense was that the 
utility level renewables really did not do that well. We saw 
the busted windmills and the broken arrays, but the distributed 
energy did okay, the solar panels on tops of the rooftops sort 
of thing. As I went around, anecdotally, it seemed as if those 
were intact, both by helicopter and by visioning. Is that a 
correct impression?
    General Jackson. Senator, that's exactly what I observed in 
the same flyover. I mean, I think, depending on where the solar 
panels were located, how they were situated with regard to the 
wind flow, really determined how well they fared post storm.
    Senator Cassidy. Got ya.
    Mr. Walker, you spoke about some of these switching 
stations being inundated. Was that by rain or by flood?
    Mr. Walker. Both, sir.
    Senator Cassidy. Now I am going to ask something really 
stupid but when the rain inundated, did it, I assume--I can 
imagine a flood because it comes in and it fills up from the 
bottom, but rain comes down from the top and it seems as if a 
shield would have kept that protected unless the shield blew 
over----
    Mr. Walker. It wasn't the rain, per se, on the station. It 
was the accumulation of the rain into these channels that then 
went into the substations.
    Senator Cassidy. Okay. Was that a design flaw or is that 
inherent just--in any storm like this you are going to have 
that inherent problem?
    Mr. Walker. I don't think it was a design flaw. I mean, you 
know, many of these stations have been there for many, many 
years.
    Senator Cassidy. So the upgrading and hardening you are 
speaking of would address this?
    Mr. Walker. Yes, sir.
    Senator Cassidy. Okay.
    Mr. Walker. Specifically.
    Senator Cassidy. Got ya.
    Mayor Mapp, I am not ignoring U.S. Virgin Islands. It is 
just that your problems seemed a little bit more manageable 
than those of Puerto Rico.
    Mr. Mapp. Yes, and I did want to answer your question about 
the upgrade of the power situation of the Virgin Islands. 
Totally, the rebuild and the resiliency would be about $850 
million. And I did want to point out that, in the renewables, 
we had two experiences. Renewables on the hillsides by one 
vendor, on one island worked perfectly. I mean, that entire 
field, maybe two percent damaged----
    Senator Cassidy. Which island was that?
    Mr. Mapp. ----two percent. On another island with a 
different vendor and the vendor for the district court, 
completely emaciated.
    Senator Cassidy. Now St. Croix was relatively unaffected, 
correct?
    Mr. Mapp. No, St. Croix suffered tremendously in Hurricane 
Maria, and St. Thomas, St. John, suffered tremendously in the 
eyewall of Hurricane Irma.
    Senator Cassidy. Got ya.
    Mr. Mapp. So I got it on both sides, but the point I'm 
trying to make is that part of the issue with these solar 
panels are clearly how they are installed and who installs them 
because we had great survivability in 175-mile-an-hour winds 
across one hillside. And on the same island, just a mile away 
with a different vendor, completely destroyed St. Thomas, 
completely destroyed.
    Senator Cassidy. That is intriguing, but I am over time. I 
yield back. Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Senator Heinrich.
    Senator Heinrich. Thank you, Madam Chair. I want to start 
and recognize Congresswoman Stacey Plaskett from the Virgin 
Islands, who is joining us as well.
    Governor Mapp, I am going to allow you to expand on the 
same line of questions. Have you been able to determine, at 
this point, what the characteristics of that survivability were 
so that we can make sure that in future installations that is 
incorporated?
    Mr. Mapp. Not as yet but this particular entity that is the 
third-party provider, their panels also, for their private 
clients, I mean, in huge arrays, also seemed to survive very 
well. And that just indicates to us that in just putting these 
people or hiring them, we've got to be careful in terms of how 
they're installing them and what systems they are using----
    Senator Heinrich. Yes.
    Mr. Mapp. ----because we had that different experience.
    Senator Heinrich. But it seems like there is probably 
something in the engineering that we need to----
    Mr. Mapp. To look at.
    Senator Heinrich. We need to ascertain what that is and 
then make sure that any future installations, regardless of 
vendor, learn those lessons.
    Governor Rossello, I wanted to ask you, as you said the 
hurricane was an unprecedented catastrophe for Puerto Rico, but 
given the antiquated nature of the pre-hurricane PREPA grid, it 
is also an opportunity to create a much better, more modern, 
more resilient electrical grid for your constituents. What do 
you want to see in a new grid in terms of generation, 
transmission, distribution? What would you like that to look 
like for your constituents?
    Mr. Rossello Nevares. Well, I would like it to be an 
opportunity for us to leapfrog from really 19th century 
technology to the vanguard of the 20th--21st century.
    And what does that look like in Puerto Rico? Well, we have 
major, you know, several flaws in terms of the design. Aside 
from having antiquated, you know, power plants, most of our 
generation is done in the south. Yet, most of the people and 
most of the consumption is done in the north. So you lose about 
12 to 15 percent in the transmission going northward.
    It is time. It is an opportunity to rethink that where do 
we have that generation and make it better, you know, 
piggybacking on Senator Cassidy's comments, you know, I think 
it is an opportunity also to leapfrog in renewables. I've 
envisioned, you know, also leapfrogging to 25 percent 
renewables in Puerto Rico and recognizing that there are, you 
know, some mitigation strategies that we need to put in place.
    That is why we have worked with the PREPA governing board 
to have a group of thought leaders that can actually help us in 
the design and looking forward and specifically looking where 
this could happen.
    Last-mile events in Puerto Rico are very important. It's 
important to consider the terrain. Puerto Rico is not flat; 
it's got a mountainous region. And so, you know, we will be 
very aggressively pursuing that we get to 90, 95 percent of 
energy consumption and energy generation, but that last mile 
always takes more time because there are, sort of, remote areas 
of the island. This is an opportunity to make microgrids in 
Puerto Rico so that they can be sustained in different areas.
    And lastly, adding to this whole component of renewables, I 
think it is an opportunity to look at this from a bottom-up and 
a top-down approach. With the collaboration of FEMA, we were 
able to, for the first time in the STEP program, allow that 
either a power plant generator be added to the house or a 
renewable battery pack solar combo be added to those homes in 
the STEP program.
    Now we expect that there will be about 80,000 homes that 
will be introduced in the STEP program. Think about what that 
means if half of them decide to go with a renewable battery 
pack route.
    It means that now you have the starting conditions to 
actually think about things like a virtual power plant in 
Puerto Rico where you can have smart distribution of the energy 
and where, you know, some days it might be cloudy in some areas 
in Puerto Rico; it will be sunny, certainly, in others as well. 
And that energy can be distributed alongside, you know, of 
course, a complement of utility-size and industrial-size 
generation which I envision, Senator, should start 
transitioning from petroleum-based generation which is costly 
and, of course, more harmful to a gas, liquid gas and the so 
forth, generation. So those are, in a nutshell, what we 
envision the, sort of, future grid of Puerto Rico looking like.
    Senator Heinrich. I am about out of time. I would just add 
to that, when you have retail electric rates in the mid-20s, 
that gives an awful lot of room to be able to build that new--
--
    Mr. Rossello Nevares. Right.
    Senator Heinrich. ----distributed, clean grid because when 
you have PPA agreements being signed in the U.S. for $0.045 a 
kilowatt-hour, solar plus storage, that really creates some 
real opportunities here to do that, to do it in a way that 
serves your constituents without gouging them as well.
    Mr. Rossello Nevares. Yeah, I think it is an opportunity 
based on that margin, based on that differential. I'm sure the 
Governor as well over here has the same problem that can become 
an opportunity.
    The Chairman. Thank you, Senator Heinrich.
    Senator Gardner.
    Senator Gardner. Thank you, Madam Chair. Thank you to the 
panelists for being here. Governors, thank you for your 
leadership, all of you. Mr. Walker, General, thank you very 
much for your leadership during very challenging times.
    Governor Rossello, good to see you again. Obviously, it was 
a very meaningful visit to Puerto Rico in the days following 
the hurricane and to have the opportunity to see what had 
happened to our fellow Americans is tragic and, of course, this 
Committee, this Congress is obligated and committed to 
continued solutions and partnerships.
    I apologize for stepping out. I had a Foreign Relations 
Committee markup and vote, so I may have missed when you 
discussed this in your opening statements or question and 
answer sessions.
    What should PREPA, Governor Rossello, look like in five 
years from a governing structure standpoint? What should it 
look like in ten years?
    Mr. Rossello Nevares. I think we need to transform PREPA. 
We are, I think everybody is in accordance. I think that pre-
storm we had a strategy moving forward. It was a longer-term 
strategy based on natural obstacles that we would see in terms 
of switching, you know, some of these power plants and so 
forth. But now, you know, based on the catastrophe, if we look 
at this as a window of opportunity to renew and make it better, 
I think that it's a phenomenal opportunity for the people of 
Puerto Rico.
    What will it look like? I certainly see collaboration with 
the private sector. What is that structure? It needs to be 
ironed out. It needs to be fleshed out and developed. I think 
we need to look at the best interests of the people of Puerto 
Rico to work for that solution. We have a gold standard P3 
structure in Puerto Rico which, I think, can be very powerful, 
but we are not closed to other alternatives as well.
    Senator Gardner. Just quickly, in your mind is there 
anything that is off the table when it comes to PREPA and its 
organization?
    Mr. Rossello Nevares. Well, as long--there is nothing, as 
long as the objective stays the same, which is producing 
reliable, efficient energy at competitive costs. I think that 
this should be a cleaner energy paradigm for the people of 
Puerto Rico. Those are the critical components, what the 
tactical strategies are, those might be shifting. I spoke a 
little bit about those at a higher level. But we're certainly 
committed to getting results for the people of Puerto Rico. We 
are very much an outcomes-driven administration.
    Senator Gardner. You mentioned a little bit of this in the 
conversation with Senator Heinrich--the Commonwealth's 
objective to have 50 percent renewable energy by 2040. Prior to 
the storm, a little over two percent was derived from 
renewables.
    Is this 50 percent goal still realistic? Is it right? And 
how can we help get information from National Renewable Energy 
Laboratories and others to achieve that goal?
    Mr. Rossello Nevares. Yup, I think that statement was laid 
out by another person on another panel.
    What we are looking at is the current opportunity to 
increase to about 20 to 25 percent renewables right now in 
Puerto Rico.
    What that longer-term path, you know, post five year looks 
like and what, you know, I think depends a lot on, you know, 
what is the resiliency of the system, how does it work with 
some of our other needs, industrially and so forth. But 
certainly, right now, in the short- to mid-term, we see an 
opportunity to leapfrog in what our renewable growth effort was 
and get to 20 to 25 percent.
    Senator Gardner. Yes, and thank you.
    Governor, obviously, my comments about Puerto Rico stand 
for the U.S. Virgin Islands as well and what we are going to be 
doing to make sure that we complete the process.
    Thank you for your leadership.
    I am going to probably submit questions for the record for 
you because I need to get to Mr. Walker real quick before I run 
out of time.
    Mr. Walker, when you had your confirmation hearing you 
talked about understanding disasters, your experiences were a 
key qualification for the appointment that you were receiving. 
It seems like we picked the right guy at the right time.
    How are these skills being put to use in Puerto Rico from a 
modernization standpoint? We talked about resources, rapid 
response and national laboratory participation. How are we 
moving forward with that and toward actions of resilience in 
Puerto Rico?
    Mr. Walker. Yes, sir.
    I spoke earlier about the opportunities that are being 
taken advantage of now, focusing on building the resiliency, 
lowering the cost of electricity and driving economic growth.
    One, as the Governor just noted, the STEP program. We 
converted that over to be able to change out. Instead of 
putting generators in, we're putting, with the opportunity to 
put in solar with battery pack recognizing that there's some 
cost avoidance in maintaining the generator, but also providing 
some long-term strategies.
    In addition to that, we've already identified 200 locations 
where we're providing generators for hospitals----
    Senator Gardner. Mr. Walker, if I could interrupt real 
quick, and I apologize.
    Mr. Walker. Yeah.
    Senator Gardner. Maybe we can follow up with this 
conversation.
    Mr. Walker. Absolutely.
    Senator Gardner. I am about out of time.
    The last question I really wanted to get in though was, 
what do you need from this Committee, specifically, to move 
forward with your job?
    Mr. Walker. I don't need anything immediately, because all 
the things that are necessary are actually being done.
    So we've mobilized the modernization lab consortium 
already. I've got people at the Bonneville Power and WAPA 
working on some very specific projects. We've invoked NOAA and 
the National Hurricane Service to do wind studies and the SLOSH 
model studying for some of the resiliency for the substations 
and the integration of solar farms back on the main lands of 
Puerto Rico and Virgin Islands. Talking about, Governor Mapp 
mentioned earlier--some survived, some didn't. So we're doing 
all that analysis already. I think, you know, as we move 
forward and if Congress decides to appropriate dollars for 
permanent work, a number of other things may come out of that 
based on the planning that the Governors are doing.
    Senator Gardner. Great. I apologize for cutting you off. We 
will have that conversation.
    Mr. Walker. Yup. Yes, sir.
    Senator Gardner. Thanks.
    The Chairman. Thank you, Senator Gardner.
    Senator Franken.
    Senator Franken. Thank you, Madam Chair, for holding this 
Committee hearing, and thank you for leading the delegation 
down to Puerto Rico and Virgin Islands, and Senator Cassidy 
came along with us. It is good to see both Governors.
    Governor Rossello, just before I start a series of 
questions, I had a different take away than Senator Cassidy on 
the Tesla array at the children's hospital. It seemed to me 
that actually they were, during the day, operating the 
hospital, using the solar array which they admitted wasn't big 
enough because of the space that was there, but that powered 
the hospital during the day and did fill up the battery and the 
battery lasted until about midnight until it was down to 20 
percent. Was that your understanding?
    Mr. Rossello Nevares. Yes, they were. The average load time 
that they were working, mind you, it was a couple of days of a 
lot of rain that they were still, obviously, getting some 
energy, but it was about 20 to 21 hours a day that it was 
working under the solar panel battery system and then they 
would have----
    Senator Franken. Yes, and then they had generators after 
that.
    So two weekends ago we went down to Puerto Rico. Last 
weekend I visited some Minnesotans from Puerto Rico and who, 
you know, want this done, the rebuilding done, in a resilient 
way, as I think everybody on the panel does, in a resilient way 
that makes humanitarian, environmental and fiscal sense, and 
the Federal Government must do everything it can to assist.
    The importance of resilience here is that we know we are 
going to see these storms. We have heard this is a once in a 
200- to a 1,000-year storm. With climate change that is not 
going to be the case anymore. We know that with rising sea 
level you are going to see stronger surges, storm surges. We 
need to build a resilient grid because these are going to be 
happening again. And as the climate continues to warm, they are 
just going to get more powerful. So we really have to build a 
stronger and more resilient grid.
    I want to talk about that a little bit. We have been 
talking about it, a vision of this, how we do that.
    One of the things I want to ask about is the Stafford Act 
because if we are rebuilding this under the Stafford Act, I was 
wondering, and anybody's thoughts on this, about the changes in 
the Stafford Act that are necessary to build back better and is 
the Administration aware of that? Mr. Walker, any thoughts on 
that?
    Mr. Rossello Nevares. I can comment a little bit on that as 
well.
    I think there's two critical components. Number one, you 
need to be flexible, right? If you have a state that has a 
modern system already and it comes down, then the Stafford Act 
makes sense because you just put something back up that was 
already modern. But if you are investing a lot of money in 
something that's going to come down again, it's just not the 
best use for that money.
    And I would also add the component of causation, you know, 
there is this element of trying to evaluate how much damage was 
done prior to the storm, because of the storm, or because of 
maintenance issues.
    Well, here's the reality with the storm----
    Senator Franken. Okay, I do not have much time and I want 
to hear from others. Sorry.
    Mr. Rossello Nevares. Okay.
    Senator Franken. Sorry, Governor.
    Mr. Mapp. I would like to comment on that.
    Senator Franken. Yes.
    Mr. Mapp. One, we should really think about building 
stronger and better because it prevents future costs for 
reconstruction. And in communities like the Virgin Islands and 
Puerto Rico, the matching fund component could be very 
difficult in terms of its restriction and administrative 
waivers. We will have a difficult time meeting our match at 
$800 or $900 million to have the reconstruction done really as 
is, as opposed to even doing mitigation or resiliency. So I'll 
say those two issues. It should be built back to withstand, 
meaning resilient and mitigation, and it should really give 
some additional flexibility on the cost share.
    Senator Franken. Okay, before I run out of time, I just 
want to say, the one thing we did not talk--hasn't been raised. 
I mean, it has been raised a little bit in terms of we want the 
power to be less costly, but my understanding is it was $0.27 
per kilowatt-hour in----
    Mr. Mapp. $0.27 to $0.29 kilowatt-hour cost in the U.S. 
Virgin Islands.
    Senator Franken. That is outrageous.
    Mr. Mapp. Yes.
    Senator Franken. And if we want to keep manufacturing 
there--we have, 10 percent of our pharmaceuticals come from 
Puerto Rico. We want those to stay there.
    One of the things about building this more resilient and 
sustainable and renewable is that we can drive that cost down 
and the second largest cost for those pharmaceutical 
manufacturers is energy.
    Mr. Mapp. Yes.
    Senator Franken. And so, if we want to keep those 
businesses there and we want to keep those professionals there 
who are working on that, we need to build a much, much better 
grid that is not run on diesel.
    Yes, there is definitely a place for LNG for natural gas, 
but also for the solar----
    Mr. Mapp. And wind.
    Senator Franken. ----that we place and that we make 
resilient, and for wind.
    Thank you.
    The Chairman. Thank you, Senator Franken.
    Senator Lee.
    Senator Lee. Thank you, Madam Chair.
    Thanks to each of you for being here today for this 
important discussion.
    We begin today's hearing with a certain amount of 
knowledge. We know a lot about what is going on with PREPA. For 
example, expert opinion testimony has identified a laundry list 
of concerns with PREPA's management and operation. Let me just 
list a few: staff have been hired without regard to experience 
and expertise resulting in the failure of multiyear projects; 
we have seen widespread theft of power and billing failures; we 
have seen a lot of outdated infrastructure that has resulted in 
an abnormally, unacceptably high rate of forced and sometimes 
prolonged outages; we have generation units that are 
technologically outdated requiring the reliance on really 
expensive fuel; and we have procurement practices that have 
focused on a large number of small vendors with payments going 
out to over 14,000 individual entities. Corruption and 
mismanagement have been a problem, and they have plagued both 
PREPA and WAPA for decades. If we do not start exercising 
meaningful oversight over every dollar spent on every contract 
signed in the territories, particularly with regard to these 
entities, we could be looking at decades of ongoing problems 
and even more dire financial situation going forward and 
perhaps decades of DOJ corruption prosecutions.
    A lot of people might be tempted to look at this and think 
that this story somehow starts and ends with Whitefish. 
Whitefish is, of course, important; it is significant. We have 
to look at it because it exemplifies what has become all too 
commonplace in Puerto Rico and in the Virgin Islands, a system 
in which public graft and economic corruption have become all 
too common. But it doesn't take a biologist to see that a 
Whitefish does not swim alone. If we put out a trolling net, I 
bet we will find a school of similar contracts with boatloads 
of handouts with graft and with greed, all at the expense of 
hard-working families. And so, I want to look for some ways 
that we can address this.
    Now, Governor Rossello, I would like to start with you----
    Mr. Rossello Nevares. Of course.
    Senator Lee. ----and make reference to the False Claims 
Act. The False Claims Act, as you know, was put in place during 
the Civil War era and it put in place, among other things, some 
provisions that we refer to as the qui tam provisions, allowing 
private citizens to bring suit on behalf of the United States 
in the name of the United States for billing fraud.
    So let me ask you, Governor, would you object to an 
amendment of the federal False Claims Act, the qui tam 
provisions, and allow things like that to be brought by 
citizens in such a way that we define the United States to 
include Puerto Rico. In other words, to define the United 
States to include territories, including Puerto Rico, such that 
billing fraud cases could be addressed through the qui tam 
provisions of the federal False Claims Act?
    Mr. Rossello Nevares. Well, it is my view that anything 
that gets us closer to behavior and treatment of the U.S. 
citizens of Puerto Rico to the U.S. citizens that live anywhere 
else in the United States, I propose, you know, I support.
    So having not looked in detail at your proposal, what I 
will say in terms of, sort of, a broad statement is I am, you 
know, and the vast majority of citizens in Puerto Rico are 
willing to be full participants as U.S. citizens in all 
respects.
    I do want to say, Senator----
    Senator Lee. Including this one? You don't see anything 
about amending the federal False Claims Act----
    Mr. Rossello Nevares. What I would ask is for equal 
treatment in general. Let's not pick in certain ways. Let's 
just get equal treatment for the people of Puerto Rico, respond 
to their claim.
    I want to also answer some of the premise, Senator. You 
know, I've been in office ten months and I ran on a platform of 
transparency, working, recognizing that there have been decades 
of reckless behavior, but recognizing as well that there are 
good, serving people in Puerto Rico and that we had to 
establish reforms. Our administration has been breaking records 
in terms of how many reforms we've established, and one of 
those reforms that we're continuing on working on is a 
procurement reform.
    So that's why when, you know, when the Whitefish situation 
came about, you know, I took action immediately. Even, first of 
all, I called for an investigation. I called for an 
investigation on that, that light should be shed on that 
matter. Secondly, I installed a procurement compliance officer 
as well that will actually be working on the concepts of that 
procurement reform for Puerto Rico as well.
    So we are very much committed to transparency. That's why 
when we're proposing, you know, that Puerto Rico starts 
rebuilding and in the rebuilding process, we're going to do 
this transparently. We're going to do this with controls. We're 
going to be working--we're working actually with the White 
House and with OMB for controls and transparency. So we're very 
much a willing participant in that effort.
    Senator Lee. Thank you.
    I see my time is expired. I do want to be clear. Fraud 
against Puerto Rico as a territory of the United States is 
fraud against the United States and it should be covered by the 
False Claims Act.
    Thank you.
    Mr. Rossello Nevares. As well as equal treatment to the 
U.S. citizens.
    The Chairman. Senator----
    Mr. Mapp. Madam Chair? With all due respect, I'd like to 
ask for just two minutes to respectfully respond----
    The Chairman. Very briefly, Governor.
    Mr. Mapp. ----to Senator Lee.
    I want to be very clear that the Virgin Islands and the 
Water and Power Authority have gone to great lengths to deal 
with issues of fraud. We've connected meters technology. We 
prosecute customers who steal electricity and water. We fire 
and prosecute employees involved in theft.
    We're in our third year where we bid out, each year, 
services for off-island linemen if there's a disaster so that 
we don't have to go through that in a hurricane. This year we 
simply pulled the trigger. We do that for debris removal. We do 
that for road clearing.
    We are making sure that the cost of power in the territory 
is what it costs to produce power and distribute it. We have no 
tolerance for graft, none for theft, none for our employees 
being involved to enrich themselves whether in the Water and 
Power Authority or in the central government. And you can be 
assured any of this money that you provide, we will ensure that 
contracts with vendors have penalty clauses. We require Grade A 
bonds to protect the interest of the people of the territory 
and the people of this country.
    We need your help for the reconstruction, but we don't want 
any obstruction on the premise that we're planning to enrich 
ourselves or to use graft or underhand tables or activity in 
the procurement process, and you have my personal assurance 
that that won't happen while I'm sitting in the office of the 
Governor.
    The Chairman. Thank you, Governor.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you. Thank you, Madam Chair. 
And thank you, thank you, to the panelists here. Governors, 
thank you, and thank you for your comments today.
    I, too, have constituents in Nevada who have loved ones in 
Puerto Rico and are just as concerned, not only about Puerto 
Rico, but the Virgin Islands----
    Mr. Mapp. Thank you.
    Senator Cortez Masto. ----and doing everything we can to 
stand up the infrastructure and help the people there.
    Let me start with something that my colleague, Senator 
Franken, brought up because this was a concern of mine as well. 
Because my understanding under the Stafford Act, it is Section 
406-E that limits the use of federal disaster relief funds for 
repairing, restoring, reconstructing or replacing a public 
facility or private, non-profit facility on the basis of the 
design of the facility as the facility existed immediately 
before the major disaster.
    Now my understanding of that then is that all of the talk 
that I have heard today, which is important talk about new 
infrastructure, burying lines, looking at how we add renewable 
capacity, that is something that is not going to be addressed 
through the funding through the relief that comes from the 
Federal Government. Is that correct? And I guess I am asking 
Mr. Walker and General Jackson. Is that your understanding?
    Mr. Walker. That is my understanding. As I mentioned 
earlier, we're doing emergency restoration work now. A number 
of the things that have been mentioned here, if the Congress 
approves additional appropriations, those would be 
opportunities that we could further, you know, build into----
    Senator Cortez Masto. Are you asking today then? That is 
what you are asking Congress today, additional appropriations, 
outside of the Stafford Act, to be able to set up new 
infrastructure and do just what we have heard today because we 
know another hurricane is going to come through or some other 
disaster, I think it is just the way the climate is today. Is 
that the ask today from the Governors?
    Mr. Rossello Nevares. To amend that--could you repeat the 
question, Senator?
    Senator Cortez Masto. Sure.
    So, the Stafford Act limits the amount of money----
    Mr. Rossello Nevares. Yup.
    Senator Cortez Masto. ----that you are getting from the 
Federal Government for disaster relief to repair and 
reconstruct.
    Mr. Rossello Nevares. Yup.
    Senator Cortez Masto. It is not for new construction or new 
types of renewable energy or burying lines. Are you coming 
today for additional funds, outside of the Stafford Act, 
outside of disaster relief? Is that what I am hearing today?
    Mr. Mapp. Yes. Yes, because under Stafford if a system 
connected to the power generation isn't damaged it can't be 
touched. If it's cost-effective, it can be mitigated, but the 
whole power system is all connected. And so, if we want to 
change to more efficient renewables--wind, solar--if the 
generation system hasn't been damaged, then we can have an 
exclusion. So we will need changes in the language to permit 
that.
    Mr. Rossello Nevares. Yes, we are. We recognize what the 
limitations of FEMA funding are within this, so we're asking, 
you know, for additional funding so that we can get that 
flexibility as well and actually rebuild better.
    I mean, again, it is--you can discuss whether it's a good 
idea or not on the context of the merit of the energy and the 
structure, but it is really just a bad idea to rebuild a system 
that is frail, over again, spend good taxpayer money on that 
because you're going to have to do it once over again.
    Senator Cortez Masto. Governor, thank you.
    And so, my time is limited. Let me just say, everything I 
have heard about the concerns with the energy grid and setting 
it up and the infrastructure and the needs there, I echo with 
my colleagues.
    But let me jump to healthcare because this is an issue that 
I have heard the Governors talk about as well and can you 
address this? Are we doing everything we can to address the 
medical needs and healthcare needs, if we have hospitals that 
have been destroyed, if we have healthcare facilities that have 
been destroyed? What additionally do you need from us and are 
you happy with the federal response when it comes to providing 
that healthcare? And I guess, Governor Mapp, let's start with 
you.
    Mr. Mapp. Yes, we need changes in the policies and the law. 
For example, the matching, the match made for Medicaid is an 
arbitrary 45 percent to the territory. The fee-basing schedules 
and the services covered under Medicare and Medicaid are just 
stuck in the statute because it's a territory.
    Just as a simple example, I have Medicaid patients with 
cancer. If I have a treatment for that patient and that one 
treatment costs $13,000, under the statute the CMS only allows 
a $1,000 reimbursement for that patient. That means the central 
government is in at 12 grand.
    And so, the basing of the fee schedules for the hospitals 
and application for renewal, complete, accepted by CMS over 
five years old, we're back on a 1989 fee schedule for the 
hospitals.
    So folks just leave the territory and go to the mainland 
for services, but those who cannot afford it are severely 
impacted and then the Central Treasury of the Government of the 
Virgin Islands has to subsidize that care and airlift or 
transport patients to the U.S. mainland and pay for their 
services. So we want to work with the Committee to make 
adjustments. We want to get the Medicaid match rate adjusted. 
You gave us $300 million eight years ago to spend over ten 
years, but $226 million of it is unspent because we can't 
afford to put the dollars on the table to make the 45 percent 
Medicaid match. So we're saying waive it for three years. We 
could spend it out of that pool. Remove the fiscal cliff. I 
have more people requiring Medicaid because of the disaster, 
and we could cover it out of that allotted pool.
    Mr. Rossello Nevares. I'll be brief because I share many of 
the concerns.
    Affordable Care Act gave Puerto Rico a block grant for a 
particular amount of time because we're capped. We're capped at 
$350 million. That, sort of, gave the illusion for a couple of 
years that we were spending about $1.6, $1.65 billion.
    What we're asking right now, that money ends. So, aside 
from having the limitations and the catastrophe of the storm, 
we're now heading on a Medicaid cliff as well that's dropping 
us off from an effective $1.6 billion to $350 million.
    What are we asking for? We're asking to consider for a 
five-year path, at least for a five-year path, to increase that 
cap number to $1.6 billion for two years to have it 100 percent 
cost-sharing for Puerto Rico.
    Senator Cortez Masto. Thank you.
    Mr. Mapp. And Senator, if I can add, in Hurricane Katrina 
the Congress provided these waivers on the match and the 
additional support on the Medicaid and Medicare side.
    Senator Cortez Masto. Great. Thank you. And thank you for 
letting me go over my time, Madam Chair.
    The Chairman. Thank you, Senator Cortez Masto.
    Senator Cortez Masto. I appreciate it.
    The Chairman. Senator Hirono.
    Senator Hirono. Thank you, Madam Chair.
    Governor Rossello, you recently canceled the $300 million 
contract with Whitefish.
    Mr. Rossello Nevares. Yes.
    Senator Hirono. And you called for an investigation. Is the 
investigation still going on?
    Mr. Rossello Nevares. It is still ongoing. At least I 
called for two investigations. I called for one for the local 
comptroller in Puerto Rico, and I called for the IG at DHS to 
do the same. And I called essentially upon all of the entities 
that can investigate to do so. Listen, we are committed to 
transparency, and we're committed to finding out the truth in 
this effort.
    Senator Hirono. I take it if the investigation discovers 
any wrongdoing there will be prosecutions or appropriate 
actions to follow.
    Mr. Rossello Nevares. Of course.
    Senator Hirono. Thank you.
    Secretary Walker, you did indicate that you stand by 
PREPA's ability to restore the grid, but in light of the 
ongoing investigation of Whitefish, as the Governor just 
mentioned, perhaps the DOE should provide more oversight than 
what you had indicated.
    I also want to note that I think it is a good thing that 
you are working with our national labs to come up with a more 
resilient grid and doing all the kind of modernization efforts 
that should occur for Puerto Rico, but a state like Hawaii 
which is also an island state. So the kind of collaboration 
that you are doing and the developments that are occurring as a 
result of what has happened to Puerto Rico would have, I hope, 
an applicability to the Virgin Islands, to Hawaii, and perhaps 
even Alaska, another non-contiguous state. Do you have those 
kinds of recognitions in mind as you proceed?
    Mr. Walker. Absolutely, Senator.
    That's the baseline where we started it. So Hawaii has done 
quite a bit of work in resiliency and the integration of 
renewables. I actually have the written document with that and 
we've pulled on some of the work that DOE actually did in 
conjunction with Hawaii, HECO, when HECO was actually putting 
that system together.
    I, myself, have been to Hawaii several times working as an 
SME on the underground secondary networks and also taking a 
look at some of the integration of renewables as it relates to 
their overall system. So between the work that has been done 
previously in the labs, the work that has been done by HECO, 
specifically. In fact, I had a meeting at the White House 
yesterday where the Hawaii projects were actually, you know, we 
were going through the reports and the documents with specific 
regard to how to integrate things that were done that were 
successful and those things that weren't----
    Senator Hirono. Yes.
    Mr. Walker. ----with the Virgin Islands and Puerto Rico.
    Senator Hirono. I thank you for that because I know that 
Hawaii has some pretty significant vulnerability should a 
disaster of the magnitude of Maria hit Oahu, for example.
    Mr. Walker. Right.
    Senator Hirono. Whatever the applicability is with Puerto 
Rico, I think that that----
    Mr. Walker. Yup.
    Senator Hirono. I'm very interested in how we can be, how 
that can help Hawaii.
    Governor Rossello, we know that the Stafford Act has some 
limitations on the funding that you can get. Now I do have a 
concern though that were we to lift that limitation there might 
be the unintended consequence of our various power authorities 
not doing their jobs to maintain, modernize and do those 
maintenance of effort kinds of things. So I think that it is 
really important that we provide you with the opportunity to 
come before us and ask for additional funds, in addition to 
what is provided in the Stafford Act.
    And I am wondering, based on your estimates, how much are 
you asking Congress to fund in terms of the kind of 
modernization, resilience, et cetera, that you would like to 
see in Puerto Rico?
    Mr. Rossello Nevares. It's about $17 billion in damage 
estimation.
    Senator Hirono. One year?
    Mr. Rossello Nevares. No, for the bulk of the process.
    Senator Hirono. $17 billion?
    Mr. Rossello Nevares. Yes, that's right.
    Senator Hirono. Well I know that you hope that Congress 
will authorize that, and do you expect that authorization or 
that funding to occur in one year or is it over a period of 
time?
    Mr. Rossello Nevares. It would be over a period of time, of 
course. Again, the effort is, this is our initial damage 
assessment. I want to state that we worked on this with third 
parties so that you could get third party validation of how 
robust and deep the damage was. We're also including and 
separating, as I know Governor Mapp did as well, what it takes 
to put it back together and what it takes for it to be 
resilient toward the future and ahead.
    Senator Hirono. Do you know if the Trump Administration is 
prepared to support your funding request of $17 billion?
    Mr. Rossello Nevares. Well, what we're asking over here is 
very simple. You know, Congress has to make a decision on how 
they want to act upon the different disasters that have 
occurred across our nation. What we're asking is equal 
treatment. Equal treatment.
    Texas submitted their, you know, their damage assessment as 
well. I'm sure that the other jurisdictions that have had 
damages will do so as well.
    I think that you are empowered to put the guidelines of how 
that is going to work. It is my job as Governor to make sure 
that you have the best information available so that you can 
make those decisions.
    What I cannot accept, what I cannot accept, is unequal 
treatment to the U.S. citizens in Puerto Rico. I'm sure the 
Governor would expect the same as well.
    So we are doing the damage assessment, recognizing that 
this has been a huge catastrophe. I mean, had this storm gone 
through any other state, no matter how, you know, how modern 
the system was, it would have been catastrophic. And this is 
what we want to say. We don't want this conversation to be 
diluted by just saying well, some of the parts were old and so 
forth. This is a, you know, this is a top ten storm in the 
history of measured storms in the Atlantic. It passed right 
through the whole of Puerto Rico leaving no place unturned. It 
was a slow storm, slower than the average storms. It was about 
eight to nine miles per hour so the devastation was 
significant.
    It is my job to make sure you have all of the information 
and then my expectation is that we get treated equally to all 
the U.S. citizens in all of the other states.
    Senator Hirono. Thank you.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Hirono.
    Senator Sanders.
    Senator Sanders. Thank you, Madam Chair, for holding the 
hearing, and let me thank all of our panelists for their hard 
work on these very difficult circumstances.
    Madam Chair, today's hearing on disaster relief is 
enormously important, but this Committee has overall 
responsibility for the territories and the work we have to do 
goes, in fact, above and beyond the immediate disasters.
    Let me start off and please, everybody forgive me, the 
short amounts of time, so I will be curt and asking you to be 
brief.
    But let me ask, Mr. Walker and General Jackson, given the 
fact that almost two months after the hurricanes some 50 
percent of the people in Puerto Rico are continuing not to have 
electricity and many people lack drinking water. In the Virgin 
Islands, as I understand it, it is 31 percent that now have 
electricity. In St. Croix, I think the number is something like 
16 percent that have electricity.
    We are the wealthiest, most powerful country in the history 
of the world. Do we really think that we are doing a great job 
when half the people in Puerto Rico and 80 percent of the 
people in the Virgin Islands still don't have electricity two 
months after the storm? Mr. Walker? And I understand the 
difficulty. This is tough terrain and all that. That is 
islands, but do we really think we are doing a great job?
    Mr. Walker. I think there is a, you know, a team of people 
between the Federal Government and PREPA and the Puerto Rican 
Government, as well as Virgin Islands, that are working and 
working through the challenges associated with this. I believe, 
under the leadership of the Governor and the leadership of the 
FEMA FCO there, they are mobilizing.
    Senator Sanders. No, I got all that. I don't mean to be 
harsh here, but we are, we are the most powerful nation on 
Earth. Should two months after these disasters half the people 
in Puerto Rico and some 70, 80 percent of the people in the 
Virgin Islands, still not have electricity? General Jackson?
    General Jackson. Senator, I think--we got the mission 
assignment on the 30th of September. This is not a mission that 
the Corps normally does.
    So as I mentioned in my opening remarks, we don't have pre-
awarded contracts, and we have to go through a federal 
acquisition process to allow us to get the right capability to 
the island and that's what we've done.
    We've gotten, I think, we've moved----
    Senator Sanders. It's not a criticism. I understand you've 
got a bureaucracy you've got to deal with, you've got protocol 
you've got to deal with. It's tough stuff.
    But all that I am saying, if somebody from Mars was looking 
down. This is the United States of America, two months later, 
people on these islands that are still living in misery. I 
think, as a nation, we could have done better, and we must do 
better.
    Number two. Let me say to the Chair, I agree with much of 
her initial remarks, except she did not mention two words and 
that is climate change.
    My guess is that who knows what tomorrow will bring, but 
there is every reason to believe that your islands may suffer 
even worse disasters in the future. I think we are in agreement 
that it is insane to rebuild the way it was. We all agree with 
that.
    Let me ask Governor Mapp, you mentioned that some of the 
solar installations, in fact, worked quite well. If you had 
your druthers and you had the freedom to move the way you 
wanted to, what percentage of the Virgin Islands would be 
sustainable, you tell me, within 10 weeks?
    Mr. Mapp. We sought a target of 30 percent by 2025 and 
before the hurricanes hit, we had one-third of that installed. 
So we want to put 21 more megs in wind and additional solar and 
then smaller power-generating units with microgrids on the 
three islands.
    Senator Sanders. Do you think that the future, would it be 
unrealistic to say that in 20 years you could be 100 percent 
sustainable?
    Mr. Mapp. I will not say that's unrealistic. I'm hopeful 
I'll just live another 30, and I'm hopeful by then we're at 40 
percent or 50 percent renewable.
    Senator Sanders. Okay.
    Right now--and Governor, thank you so much for your 
hospitality. I know we had a very brief roadside meeting there 
for five minutes. And I wanted to thank Mayor Yulin Cruz for 
her hospitality when I was in San Juan as well.
    Right now, and I don't understand this. You are the Isla 
del Sol, right?
    Mr. Rossello Nevares. Yes.
    Senator Sanders. Translated that is the Island of the Sun, 
but right now in Puerto Rico, as I understand it, about two 
percent of your electricity----
    Mr. Rossello Nevares. Yes.
    Senator Sanders. ----is generated by solar.
    Mr. Rossello Nevares. By renewables.
    Senator Sanders. By renewables in general.
    How does that happen? And you talk about, I think, 20 
percent being solar. That seems to be a pretty conservative 
goal.
    Mr. Rossello Nevares. Yup. In the short-term, we talk about 
20 to 25 percent in the immediate aftermath of rebuilding after 
the storm.
    But certainly, Senator, I am very much committed to 
renewables in Puerto Rico. I just think that a lot of the 
effort, you know, we've been making with some of the 
stakeholders is challenging them to prove that their 
technologies can be scalable to a size of Puerto Rico. If it 
were up to me, I am, you know, 100 percent backing renewables 
in Puerto Rico as much as I can get.
    Senator Sanders. Okay.
    Madam Chair, let me just conclude by saying this. Today, 
appropriately, we are dealing with the immediate crisis that we 
have, but please let us not forget--I am more familiar with 
Puerto Rico's problems than the Virgin Islands, although they 
may be similar. You have in Puerto Rico a poverty rate of 46 
percent. Unemployment rate is twice the national average. 
Healthcare statistics, we had a brief discussion on that, is a 
disaster in Puerto Rico. High school graduation rates in Puerto 
Rico and the Virgin Islands are near the bottom of the United 
States.
    But perhaps, and this is an issue we will have to discuss, 
and that is that Puerto Rico is struggling with an 
unsustainable $75 billion debt and $49 billion in pension 
obligations. More than one-third of that debt is held by Wall 
Street vulture funds that are getting interest rates of up to 
34 percent on tax-exempt bonds they purchased for as little as 
$0.29 on the $1.00.
    Is that correct, Governor?
    Mr. Rossello Nevares. Yup.
    Senator Sanders. Okay.
    This is an issue that this Committee must deal with.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Sanders.
    Senator Manchin.
    Senator Manchin. Thank you, Madam Chairman, and thank both, 
well, thank all of you all for being here. My heart goes out to 
all of you. I understand how tough this is and everything.
    Mr. Rossello, I would like to briefly touch on the now-
canceled contract, and I want to go into it because, coming 
from the State of West Virginia, we do an awful lot of this 
type of work.
    Whitefish Energy, the small company consisting of a handful 
of employees from Montana, we understand, was awarded a $300-
million post-storm contract.
    I will go through a few things. This is the New York Times, 
and I think I would like to have that, with unanimous consent, 
be entered into the record, that article, Madam Chair?
    The Chairman. It will be included.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Manchin. Okay.
    Under the terms of the contract they charged $319 an hour 
for linemen. That is a rate 17 times higher than the national 
average. I understand the emergency situation. Things are 
stressful. I understand all that and also the cost on the 
island. But, for example, Whitefish is billing $4,000 an hour 
to rent a helicopter. That is twice the rate, you know, of an 
ongoing. They are charging $80 per diem for daily meals which 
is more than double $30 that even the major league baseball 
players get. And they charged $332 for hotel rooms and workers.
    The thing that I look at and see in this whole thing, I 
understand how this could have happened. It happened so 
quickly. But then I found out that the request for the mutual 
assistance which goes out immediately, usually when you are 
going to get hit and you know you have a high probability of 
getting hit you ask for this assistance, either from the 
American Public Power Association (APPA), or Edison Electric 
Institute (EEI). But Governor Rossello, I think your Mr. 
Rodriguez waited six weeks before he made that request?
    Mr. Rossello Nevares. So, there's--thank you for the 
opportunity.
    Senator Manchin. Sure.
    Mr. Rossello Nevares. First of all, let me stress that I 
immediately canceled the----
    Senator Manchin. Sure, I understand.
    Mr. Rossello Nevares. ----or called for the cancellation of 
the Whitefish contract, even without the results of the 
investigation, recognizing that it was in the best interest of 
the people of Puerto Rico.
    In terms of the mutual aid, you have to put this into 
context of where we were at that juncture. A lot of the mutual 
aid was going to other areas.
    Senator Manchin. Sure.
    Mr. Rossello Nevares. Virgin Islands, Florida, Harvey. And 
within the span that the RFI was established, it was to attend 
to the considerations of the storm after, in the aftermath 
after Irma, not after Maria.
    Once that process went through, we had alternatives with 
the Corps. We understood that they were going to be aggressive 
so that we can engage with them. And once we saw that that 
wasn't going to be enough, there was a solicitation in terms of 
that.
    Let me state again, that I am a willing participant in this 
effort that investigations need to go on. That whatever comes 
out of them, we will take forceful action.
    Senator Manchin. I am not accusing. I am really not here 
accusing. I am just saying--a disaster plan.
    In my little State of West Virginia, when I was Governor, 
we had disaster plans, what was going to be subjected to, 
obviously, subjected to flooding.
    Mr. Rossello Nevares. Yup.
    Senator Manchin. I had a very challenging state that 
topographically, you know, when you look at our geographical 
location on the hills and mountains, but we were ready and 
prepared. We had to be prepared.
    It seems like you would have reached out, or your people 
would have reached out, to the American Public Power 
Association and Edison, being prepared because you know that is 
the first thing that is going to go down. That is all I am 
saying on that.
    And I would wish, it just doesn't--this contract went out 
quicker than the request for help from the professionals that 
could have brought you a whole different rate structure. That 
is all I am saying, sir.
    Mr. Rossello Nevares. Senator, the CEO of the power 
authority will be in this panel----
    Senator Manchin. Sure.
    Mr. Rossello Nevares. ----and he will be available to----
    Senator Manchin. Good, we will get to that.
    Governor Mapp, you and I have spoken before and everything, 
and I have a fondness for all the islands in my heart.
    With that being said, I think one of the members before, 
one of my colleagues said that you cannot continue to do the 
same thing over and over. And I saw in your testimony and your 
statement at first that you are going to be burying some lines, 
you are going to be doing things differently.
    Right now, your price is about $0.32 per kilowatt-hour. We 
know it is about three times higher than the national average. 
We know still petroleum is a great--you are relying a great 
deal on petroleum and I know you are trying to reduce that.
    I have been there and we have tried to work through some 
things before, and it was always a challenge because the local 
people would reject different types of things that you felt 
needed to be done. With this disaster that we have had 
throughout all three of the islands of your Virgin Island 
chain, are people more willing to understand we have to make 
changes to prepare for the next time we get hit?
    Mr. Mapp. Thank you for that question, Senator Manchin, and 
the answer is yes. And this is why we are pushing for, we were 
before the storm----
    Senator Manchin. Yes.
    Mr. Mapp. ----but with more aggression, we're pushing for 
more renewables. We want to work with U.S. DOE in terms of how 
do we access liquid natural gas. We have made a decision and 
advised the community, we're going to not put all of the 
generation systems in the same location. We want to have 
microgrids. We--some of that property that we received in our 
settlement with Hess Oil, we want to use that for wind 
generation.
    So the short answer is there's a lot of opportunity both 
from myself, my delegate, my legislature, to make the tough 
decisions to strengthen building codes, to change the way we 
produce and deliver power, to bring the price down and to 
tighten our procurement system.
    Senator Manchin. Yes. My time is running out.
    The expertise that we should be able, you know from the 
mainland, to give you with some of the things that we have 
changed in technologies and things of this sort, but I know 
that sometimes you run into opposition because of the structure 
of how you all run your grid systems or how you run your 
utilities. If we are able to break through that this time here, 
to really, to get to where we can give you a more----
    Mr. Mapp. Well Senator, when 80 percent of the people, on 
average, can't turn on their lights----
    Senator Manchin. Right.
    Mr. Mapp. ----they're willing to do anything to get their 
lights back on. And so, that's why we want to use the 
opportunity to make those changes.
    Senator Manchin. We definitely want to help.
    Mr. Mapp. Thank you.
    Senator Manchin. Thank you.
    The Chairman. Thank you, Senator Manchin.
    Senator King.
    Senator King. Thank you, Madam Chair.
    I want to join Senator Heinrich in welcoming Delegate 
Plaskett, who I know is a strong advocate for her constituents 
in the islands.
    I also want to welcome the two Governors. As a former 
governor myself, I always feel the discussion around here is 
elevated substantially when we have Governors on the panel.
    Governor Mapp, I apologize, I was at another hearing. I 
didn't hear your initial statement. Are the Virgin Islands on 
track to get the aid that they need? Is it being a package with 
Puerto Rico? What is the status of the federal aid?
    Mr. Mapp. The support from the federal system has really 
been good for the Virgin Islands in terms of how we respond to 
life issues. We are working through FEMA on the shelter-in-
place program. We're having some difficulty there. The feds are 
putting more money in tarpaulins in terms of $25,000 per unit 
but want to restrict the amount for permanent repair at 
$20,000. So we're trying to work that out.
    Our presence here and your help, Senator, is essential in 
terms of setting aside dollars and changes in the statute that 
permit more than simply ``rebuild as is.''
    Senator King. I will get to that in a minute.
    But basically, it is on track, but there is going to be a 
damage assessment and a request for aid, just as we have done 
for Texas and Florida.
    Mr. Mapp. Yes.
    Senator King. Thank you.
    I have a couple of technical questions. I was fascinated by 
your testimony that some of the solar farms survived and others 
did not, which indicates that solar is survivable----
    Mr. Mapp. Yes.
    Senator King. ----if it is properly built.
    I notice in the photo of the wind turbines, it appears that 
the damage is broken blades. Has there been an assessment of 
whether all the towers withstood the storm? The turbines are 
all there; are broken blades the extent of the damage?
    Mr. Mapp. That would be a question I defer to Governor 
Rossello. He has the wind towers.
    Senator King. And tell me about wind and were there wind 
farms that survived?
    Mr. Rossello Nevares. Yup. I mean, there was devastation 
across some of the wind farms that we had. You would see the 
blades come out. Some of the towers went out as well. And 
similar to what the Governor saw in the Virgin Islands, you 
know, we saw severe devastation such as here in Humacao, but we 
saw other areas that were practically----
    Senator King. But the question I am getting at is--properly 
designed renewables are still a feasible option for the 
islands?
    Mr. Rossello Nevares. Yeah, of course.
    Senator King. Even given the hurricane risk?
    Mr. Rossello Nevares. Of course.
    Senator King. How about rooftop solar? How did that do?
    Mr. Rossello Nevares. Yeah, it did much better in Puerto 
Rico. Again, there's some mitigation strategies about putting, 
sort of, a----
    Mr. Mapp. Similarly in the Virgin Islands as well.
    Mr. Rossello Nevares. ----yeah, walls in the side of it and 
those turned out to be, to survive very well, and considering 
this was a Cat 5, a slow Cat 5.
    Senator King. And rooftop did well in the----
    Mr. Mapp. Yes, and in fact, Senator, because of that, in 
terms of the reconstruction on the schools, we are going to 
work with the Water and Power Authority and we're going to use 
the roofs on the schools to create microgrids for the schools 
and put solar panels right on them.
    Senator King. Well, that gets to my next question--I think 
we are all agreed here that it does not make sense to rebuild a 
1980s grid----
    Mr. Mapp. As is.
    Senator King. ----when we have an opportunity, when we have 
renewables, the economics of renewables are so much better. Who 
makes that decision? Who is going to design the new grid?
    Mr. Mapp. You do, Senator. You do, by changing language in 
Stafford.
    Senator King. I never knew I had that power.
    [Laughter.]
    Mr. Mapp. Yes, sir, you do.
    Senator King. I need to----
    Mr. Mapp. You do, by making the changes in the Stafford Act 
that permits it or in the appropriation and to set aside for 
the monies for the Virgin Islands and Puerto Rico, if you 
authorize it.
    Senator King. That is the second time you have anticipated 
my question.
    Clearly, we need to amend Stafford so that it is not simply 
rebuild what was there before.
    Mr. Rossello Nevares. Right.
    Mr. Mapp. Yes, sir.
    Senator King. And I think there are several bills being 
considered on that line and that is something we need to do, 
but I will get back to it.
    Even if Stafford is amended, assume for a moment, who is 
going to make the decision? Is it the power authority of the 
islands and Puerto Rico?
    Mr. Mapp. Once the authority is in place and the dollars 
are in place, then we will work with FEMA, we'll work with the 
Army Corps of Engineers, and in the case of HUD, we will work 
with them through the process that every other state goes 
through in setting up what the new profile should be.
    The U.S. DOE and the Virgin Islands have been great 
partners in the last five years. That's how we know how 
renewables can work, the test and all of that. So we'll work 
with the federal agencies to make the right decisions.
    Senator King. Final technical question for both islands, 
both sets of islands--the transmission lines went down, I take 
it?
    Mr. Rossello Nevares. Yup.
    Mr. Mapp. Yes.
    Senator King. So that is a vulnerability as well.
    Mr. Rossello Nevares. Yes.
    Senator King. And that gets back to the idea of distributed 
microgrids.
    Mr. Rossello Nevares. Right.
    Senator King. So you are not so dependent upon major----
    Mr. Mapp. And underground.
    Senator King. ----major transmission and underground.
    Mr. Rossello Nevares. Yeah, it certainly does, and in 
Puerto Rico, as we said, most of the generation is done in the 
south. Most of the consumption is in the north, so you get loss 
in efficiency as well. It is an opportunity to, sort of, flip 
that script.
    Senator King. And I hope--go ahead.
    Mr. Mapp. And just to add that in the U.S. Virgin Islands 
this is the fifth time that the United States Government is 
paying to rebuild the power distribution system on an aerial 
basis. And this one is $300+ million just on the 
reconstruction.
    So that putting it underground in the main corridors, the 
second corridors, and having the microgrids and some aerial in 
the neighborhoods make the system a lot more resilient that 
could withstand these 185-mile-an-hour storms.
    Senator King. Well, I appreciate your testimony and look 
forward to working with you.
    Mr. Mapp. Thank you.
    Senator King. I think this is an extraordinary opportunity 
for our country----
    Mr. Rossello Nevares. Yup.
    Senator King. ----to see what a modern grid can and should 
look like.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator King.
    Colleagues, we have a second panel that we need to get to. 
I do think that we have gained great information. I have a host 
of additional questions that I would like to ask each of you. I 
am prepared to stay for another hour, hour and a half and do a 
second round with this panel if colleagues want that. But 
otherwise, I would suggest that we move to panel number two so 
that we can get their comments. I am getting consensus there.
    Gentlemen, thank you. Governors, we appreciate your 
leadership.
    Mr. Mapp. Thank you.
    The Chairman. Secretary Walker, General Jackson, thank you 
both.
    We will ask our second panel to please be seated so we may 
begin. Please be seated. Thank you.
    We begin the second panel, again with a distinguished group 
of individuals who are prepared to continue the conversation 
relating to the aftermath of Hurricanes Irma and Maria on 
Puerto Rico and the U.S. Virgin Islands.
    The second panel will be led by Mr. Ricardo Ramos, who is 
the Executive Director for the Puerto Rico Electric Power 
Authority, PREPA. Welcome, thank you for being here this 
morning. Mr. Julio Rhymer is the Executive Director and CEO for 
the Virgin Islands Water and Power Authority, WAPA. Thank you 
for joining us, Mr. Rhymer. He will be followed by Mr. Jose 
Roman Morales, who is the Acting Chairman for the Puerto Rico 
Energy Commission. We welcome you. Finally, we will have Ms. 
Natalie Jaresko, who is the Executive Director for the 
Financial Oversight and Management Board for Puerto Rico. 
Welcome to each of you.
    I would ask that you limit your comments this morning to 
five minutes. Your full testimony will be included as part of 
the record, but I do know that colleagues have questions. As 
you have obviously seen from that first panel, there were some 
directed to the Governors that they deferred until we had the 
expertise from this panel. So hopefully you will be able to 
address those questions either in your opening statements or in 
your follow-on questions.
    With that, Mr. Ramos, if you would like to lead off the 
panel. Welcome.

  STATEMENT OF RICARDO RAMOS, EXECUTIVE DIRECTOR, PUERTO RICO 
                    ELECTRIC POWER AUTHORITY

    Mr. Ramos. Chairman Murkowski, Ranking Member Cantwell and 
Senators, thank you very much for the opportunity to appear 
today.
    Although I'm present here physically, my thoughts, my focus 
are on the people of Puerto Rico and on the workers on the 
ground re-establishing power to all of our customers.
    When I became Executive Director of PREPA in March 2017, I 
knew that we faced significant challenges. What I never 
imagined is that I will be facing the unprecedented natural 
disasters and humanitarian crisis caused by two massive 
hurricanes in just two weeks.
    The second storm, Hurricane Maria, damaged nearly every 
single PREPA substation, shut down all of our transmission 
lines across the entire island, devastated PREPA's operational 
control centers and left all of Puerto Rico without any 
electrical power.
    Senators, I cannot overstate the extraordinary challenges 
that we have faced. Hundreds of transmission structures, 
substations, distribution poles, lines, transformers were 
destroyed or damaged. PREPA's communications and control 
centers were inoperable. We were forced to resort to shortwave 
radios and satellite phones to get, at least, some sort of 
communications with our other operational centers and power 
plants. Actually, they were then used by the Salvation Army to 
go through the shortwave radio once we were able to establish 
the communications centers.
    The devastation to roads and airports made it difficult or 
impossible to assess the damage in some areas. It took us 
nearly a full week even to make contact with all of PREPA's 
facilities.
    In total today, load has been restored to 49 percent and we 
successfully have focused on restoring power to critical 
customers, including hospitals, water and sewage treatment 
plants, agencies providing essential services and other that 
are central to Puerto Rico's recovery.
    The first mission was water systems and hospitals. I'm 
happy to report that 85 percent of all hospitals in Puerto Rico 
are under PREPA grid power today.
    We continue to have extraordinary and unprecedented 
challenges however. The areas currently without power are more 
isolated and more mountainous, not as easy to reach. Restoring 
power to these communities requires unique skills and it will 
take significantly more resources. In this extraordinary 
recovery effort, the island needs your support.
    I would like to take a moment to address PREPA's contract 
with Whitefish Energy. Around the two hurricanes, before Maria, 
PREPA received many offers of assistance from different 
companies, including one from Whitefish.
    Whitefish indicated that it had access to more than 100 
accredited workers, over 100 pieces of equipment and a large 
stock of supplies. After the devastation of Hurricane Maria, I 
believed that PREPA was unable to meet the requirements for 
mutual assistance through the APPA, such as providing 
accommodations and other logistics.
    Senators, for three weeks PREPA was suffering of lack of 
fuel for its trucks, lack of food for its employees, lack of 
drinking water, lack of ice which is important on a tropical 
island. How could I have counted on bringing even more people 
into that situation? So I needed people that were self-
contained, military unit types that would bring their diesel, 
would bring their food, bring everything, on the table as first 
responders. After reviewing about half a dozen proposals from 
potential first responders, only two offered immediate 
services, meaning they were the first that would be able to 
arrive.
    One proposal required a guaranteed payment of $25 million 
because of PREPA's situation. PREPA is basically under Title 
III of PROMESA which is very similar to a Chapter 9. The other 
offered the ability to pay only for work that was completed 
along with mobilization and demobilization.
    Taxpayer money was never at risk. There was never an 
expenditure of $300 million. They get paid when the line that 
they're working on is finished and delivered to PREPA, tested 
and energized, then they send us an invoice for that portion 
and we pay.
    So I authorized the Whitefish contract while we continued 
to seek additional assistance from others for the complete, 
multibillion-dollar restoration effort to come. I chose to 
contract with Whitefish because my priority was securing the 
immediate assistance, as first responders, that we desperately 
needed.
    Finally, even during the recovery PREPA continues to focus 
on our plan for the future based on distributed energy at the--
market pricing that recognizes the cost of delivery.
    I am grateful for the thousands of employees and others who 
have worked tirelessly to restore power. We have made 
significant progress, but much more remains to be done.
    Madam Chairman, thank you very much for the opportunity to 
be here today. I will be happy to answer any questions that you 
may have.
    [The prepared statement of Mr. Ramos follows:]
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    The Chairman. Thank you, Mr. Ramos.
    Mr. Rhymer, welcome.

STATEMENT OF JULIO A. RHYMER, SR., EXECUTIVE DIRECTOR AND CHIEF 
  EXECUTIVE OFFICER, VIRGIN ISLANDS WATER AND POWER AUTHORITY

    Mr. Rhymer. Good day, Chairman Murkowski and members of the 
United States Senate Committee on Energy and Natural Resources.
    By way of introduction, my name is Julio A. Rhymer, Sr., 
Executive Director and CEO of the Virgin Islands Water and 
Power Authority (WAPA or Authority). On behalf of my governing 
board, I`d like to thank you for this invitation to appear 
before this august body and provide an overview of the 
Authority and the challenges we confront in the aftermath of 
two hurricanes that left devastation in its wake.
    The Virgin Islands Water and Power Authority is in the 
midst of recovery, restoration and rebuilding from two major 
hurricanes which hammered the territory in September. In their 
wake is considerable damage; levels of damage that has not been 
worse in almost two decades.
    Before I discuss the direct effect the hurricanes had on 
the Virgin Islands Water and Power Authority, give me the 
opportunity to discuss in broad terms how the Authority 
operates. Like so many other Caribbean counterparts, the Virgin 
Islands has no conventional energy resources to meet its power 
needs. While the U.S. mainland utilities can connect to grids 
across America to purchase power from other utilities, power 
companies such as WAPA do not enjoy that luxury of grid 
interconnection. The three major islands, St. Thomas, St. John 
and St. Croix are separated by water and face a greater 
challenge given the depth of the ocean floor. These factors 
make interconnection via submarine cables both financially and 
technically challenging.
    For the bulk of its 53-year history, WAPA has maximized the 
benefit of market conditions and utilized oil-fueled generation 
to produce electricity. Given the separation by water, 
duplicate generation, transmission and distribution systems are 
required on St. Thomas and St. Croix. St. Thomas provides power 
via submarine cables to the nearby island of St. John, Water 
Island, and Hassel Island. St. Croix is located more than 40 
miles to the south of St. Thomas and is not interconnected due 
primarily to the depth of the ocean floor which is 
approximately five miles deep.
    Citing the instability of the world oil markets, WAPA 
embarked on a plan to diversify its 100 percent dependency on 
fuel oil while at the same time committed itself to reduce its 
reliance on fuel oil by 60 percent by 2025. The fuel oil 
diversification strategy began to take hold with the 
implementation of net metering, additional solar power to the 
electric grid and, most notably, was the introduction of 
liquified petroleum gasoline, LPG, as a primary source of fuel 
for generation of electricity. This was achieved through a 
partnership with a multinational company to build, operate LPG 
terminals, provide propane supply, oversee the conversion of 
WAPA's generating units from solely fuel oil generating units 
to tri-fuel capable units which are LPG, LNG and diesel.
    At the same time the fuel diversification strategy was 
emerging, WAPA tapped a $500,000 Department of Interior grant 
to pursue an integrated resource plan which mapped out the 
generation mix for the utility over the next two decades.
    Taking a page from that plan, the Authority, in March, 
entered into a contract with Wartsila North America to provide 
new generation units for the Authority. We expect these units 
to be on island and basically operational in mid-2018.
    To focus specifically on hurricane impact of WAPA, the most 
extensive damage was experienced by the transmission and 
distribution system and overall electrical grid. The two power 
plants at Estate Richmond and Krum Bay on St. Thomas fared 
fairly well, minimal damage. The transmission system suffered 
major damage after Hurricane Irma of 80 percent on St. Thomas, 
90 percent on St. John, with the two outlying islands, Hassel 
Island and Water Island, each suffering 90 percent. Hurricane 
Maria rendered about 60 percent on St. Croix's system.
    Today, WAPA is engaged in a major restoration effort on all 
islands. We are in the process of rebuilding transmission 
feeders and primary circuits, all before we can completely 
restore commercial and residential customers. Our commitment is 
to rebuild and to reenergize about 90 percent of our customers 
by December.
    The arduous task of rebuilding the transmission/
distribution system on all islands is further complicated by 
challenges of mobilizing materials and equipment necessary for 
the restoration effort. Because of our unique geographical 
locations, we have struggled to actually be able to move 
materials and equipment from the United States to the Virgin 
Islands over the past several weeks.
    The hurricane also had a devastating effect on the 
financing of the actual utility. Every month the utility prior 
to the storms generated about $26 million in revenues. 
Currently, we're actually about, are less than $2 million a 
month in terms of revenues. Because of the storms' price tag 
that can actually top $300 million, the financial hurdle for 
WAPA is hard to overcome.
    Just equally concerning are the day-to-day operational 
costs, the cost of restorations, our cost associated with pre-
storm obligations such as debt service, operation and 
maintenance of the power plant, insurance, contractual 
agreements and previously-enacted financing agreements.
    In the aftermath of the catastrophic hurricanes our task is 
not only to rebuild our transmission systems and distribution 
systems, but the fact of more resiliency is taking precedence 
over everything else. We do not want to rebuild the system that 
is the same as before. We want to be more resilient, more 
hardened and, basically, do it by microgrid, undergrounding and 
basically composite poles.
    Senator, I'm here, available to answer any questions and I 
thank you for the opportunity.
    [The prepared statement of Mr. Rhymer, Sr. follows:]
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    The Chairman. Thank you, Mr. Rhymer.
    Mr. Morales.

 STATEMENT OF JOSE ROMAN MORALES, ACTING CHAIRMAN, PUERTO RICO 
                       ENERGY COMMISSION

    Mr. Roman Morales. Chairman Murkowski, Ranking Member 
Cantwell and members of the Committee, my name is Jose Roman 
Morales. I am the Acting Chairman of the Puerto Rico Energy 
Commission. Thank you for inviting me to appear and for your 
interest in the recovery and the restoring of the electric 
service in Puerto Rico.
    My testimony makes four points: the Commission is the 
Commonwealth's institutional expert on the electric industry 
performance; the Commission establishes performance standards 
and competitive pressures while restoring investor confidence; 
the Commission's current emphasis is to restore and transform 
the island's electric industry cost-effectively; and the 
Commission's current needs.
    For 70 years, PREPA operated as a vertically integrated, 
unregulated monopoly. Dissatisfied with PREPA's performance, 
the legislature in 2014, passed Act 57. At the center of Act 57 
is the Commission, created and empowered to use performance 
standards and competitive pressures to transform Puerto Rico's 
electric industry. The breadth of the Commission's duties is 
illustrated by the opening provisions of the Act: ``The 
Commission shall be able to guarantee the orderly and 
integrated development of our electrical system and the 
provision of electric power services at reasonable prices.''
    When establishing standards for utility monopolies, the 
goal is to induce performance compatible to what effective 
competition would produce reliable, innovative service at 
reasonable cost. When injecting competition, the goal is to 
extract and reward the most cost-effective entities.
    The key criterion is economic efficiency. A utility cost is 
only, and only if, the Commission determines it's to be the 
least cost is when it becomes reasonable, when it is the least 
cost among all reasonable alternatives.
    The Commission is an expert agency that makes decisions 
based on facts and logic. The foregoing principles are evident 
in the Commission's many orders: the transition charge 
proceeding, integrated resource plan, PREPA's performance 
proceeding and the rate case decision where the Commission 
issued the first order in which PREPA's $3.5 billion in annual 
costs were reviewed and rates established by an independent 
body of experts, the order detailed the extent of system 
deterioration and the absence of discipline in PREPA's 
budgeting and spending. The Commission's current emphasis is to 
restore and transform cost-effectively.
    The Commission opened a proceeding to identify short-, 
medium- and long-term actions that would produce an electric 
system that is modern, flexible, resilient and capable of 
supplying electric service reliably and at just and reasonable 
prices. PREPA's difficulties restoring service show the need to 
adopt and implement alternatives that allow greater resilience 
and faster restoration.
    The Commission will assess alternative ways to promote 
these technologies, increase private participation in 
restoration efforts and reduce dependence on centralized 
generation, all with the goal of enabling us to respond to 
future emergencies more quickly and cost-effectively. Prior 
Commission inquiries have produced examples of defective 
contracting policies and poor project management within PREPA.
    Correcting these defects is crucial to PREPA's ability to 
attract future financing while lowering its rates so that the 
Commonwealth's economic development effort can succeed.
    In these and other proceedings, the Commission will be 
focusing on the main--on the following areas: PREPA's spending, 
cost recovery and rate-setting, internal operations, finances, 
customer relations and the mix, the correct mix, of the 
island's supply and demand resources. Also, to identify 
strengths and weaknesses of alternative market structures for 
various products and services, implement competition for 
competitive services and determine the appropriate roles for 
distributed generation and net metering resources.
    The need for an independent entity, free of politics and 
focused on merits, with the single-minded goal of bringing 
cost-effectiveness and competitive rigor to the Commonwealth's 
most important infrastructural industry could never be greater.
    Chairman Murkowski, Ranking Member Cantwell and members of 
the Committee, thank you for this opportunity to testify and I 
look forward to your questions.
    [The prepared statement of Mr. Roman Morales follows:]
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    The Chairman. Thank you, Mr. Morales.
    Ms. Jaresko, welcome.

       STATEMENT OF NATALIE JARESKO, EXECUTIVE DIRECTOR,
          FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR
                          PUERTO RICO

    Ms. Jaresko. Thank you, Chair Murkowski, Ranking Member 
Cantwell and members of the Committee. I am Natalie Jaresko, 
the Executive Director of the Financial Oversight and 
Management Board for Puerto Rico. It is an honor to appear 
before the Committee.
    Unlike the other members of the panel, I am not an energy 
expert, but I will try to frame for the Committee the Board's 
approach to the Island's power system.
    Let me first, though, if I may, step back. The Oversight 
Board is a creature of Congress, created in last year's PROMESA 
legislation to deal with the fiscal and debt crises faced by 
the Commonwealth and many of its instrumentalities, including 
its power system, PREPA. The problems we were designed to 
address were decades in the making.
    Under PROMESA, our primary tools to restore fiscal 
discipline and access to the private capital markets are 
Certified Fiscal Plans. And before the hurricanes, we had put 
in place fiscal plans and associated budgets for the 
Commonwealth and several of its instrumentalities, including 
PREPA, that were balanced without additional federal aid. 
Because the Commonwealth and some instrumentalities, including 
PREPA, had an enormous and unpayable debt burden, they entered 
the bankruptcy-like process established by Title III of 
PROMESA.
    That is more or less where matters stood before the 
hurricanes and in the Board's view, after the hurricanes, the 
Board's role of providing confidence, oversight and 
transparency is even more important to the welfare of the 
people of Puerto Rico and the protection of taxpayers.
    We are an oversight board. Our mission is to be able to 
assure all stakeholders--from residents of the Island to 
Congressional members, from creditors to American taxpayers--
that the Commonwealth and its instrumentalities are fiscally 
responsible and self-sufficient. To do so, we are utilizing all 
the tools Congress gave us to the fullest extent possible. We 
have the power to certify fiscal plans that meet PROMESA's 
goals, and deny those that don't, we have the power to require 
that spending be in accordance with the Certified Fiscal Plans 
and annual budgets, and we have the power to review contracts 
to require that they be consistent with Certified Fiscal Plans.
    But the truth is, the recovery of the island now depends 
not only on fiscal discipline but much more importantly on 
federal hurricane relief.
    We must revise our fiscal plans to reflect the new 
realities of declining revenues, postponed savings and the need 
for emergency- and recovery-related expenditures. There is no 
way around it--the immediate human needs and the longer-term 
success that the Board was established to facilitate depends on 
the continued generosity of American taxpayers in the form of 
emergency and supplemental appropriations.
    Similarly, the success of our mission depends on the people 
of Puerto Rico and its businesses, especially its manufacturing 
base, having the confidence that timely and sizable federal aid 
is coming and will be sufficient for the rebuilding and the 
recovery. In particular, the number of people and businesses 
that leave the island over the coming months will be deeply 
affected by the perception of whether the necessary help is 
forthcoming.
    Hence, the Board joins with the Governor and the people of 
Puerto Rico in requesting that the upcoming supplemental 
appropriations give the people and businesses of the 
Commonwealth confidence in the Federal Government's commitment 
to the island's recovery. However, we know that it is not 
realistic to believe that Congress will appropriate the level 
of funds needed if it is not confident of adequate oversight of 
those funds, and we will do everything we can to provide that 
oversight.
    Turning back to the power sector--this is the single, most 
important block of recovery, short- and long-term. Electricity 
is the key. Without it, we will not have functioning classrooms 
or businesses. Without it, we will not have truly safe and 
livable neighborhoods and homes. Without it, we will not even 
have a working water system, because it too depends on the 
restoration of power.
    Similarly, we will not succeed in achieving a long-term, 
sustainable economy, which is the mission of PROMESA, unless we 
can create a reliable, affordable, sustainable power system. 
PREPA's history and the system's decrepit condition, poor 
service and high rates before the hurricane evidenced that 
fundamental change is needed.
    The Board, working with the Governor and PREPA, intends to 
require transformation of PREPA in its revised fiscal plan. 
That plan is scheduled for certification by the Board in the 
final days--first days, excuse me--of February, and that 
revised fiscal plan needs to chart a path to provide stable, 
reliable and cost-effective power via a grid that incorporates 
best practices, private capital and acts as a catalyst for 
sustainable economic growth. And then all of this must be 
reflected and confirmed in a plan of adjustment proposed by the 
Board that also brings an end to the debt restructuring and 
ensures the future path for PREPA and that it serves Puerto 
Rico well.
    I commit that the process of revising the fiscal plan will 
be open and transparent, and it will welcome the insight from a 
broad array of experts. We have already scheduled several 
stakeholder listening sessions and we, of course, welcome input 
from the members of the Committee, those testifying here today, 
and all others with good ideas.
    Again Madam Chairman, Ranking Member and members of the 
Committee, thank you for the opportunity to testify today and I 
look forward to the Committee's questions.
    [The prepared statement of Ms. Jaresko follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Ms. Jaresko.
    Thank you all for your testimony here this morning.
    Mr. Ramos, let me begin with you. I think you have heard, 
as you have listened to the questions directed to Governor 
Rossello, some frustration, maybe a fair bit of frustration, 
questions about why mutual aid was not triggered earlier.
    Obviously, questions about the Whitefish contract and what 
has happened with that, clearly an issue of concern for all of 
us, as Senator Cantwell mentioned. It is one thing to be 
responsive in the immediate aftermath of a hurricane, it is 
another thing to be engaged in something that we would all call 
gouging of the taxpayer when you look at the terms that were 
agreed to.
    You have indicated, and the Governor said this as well, 
that right now it is about 49 percent power throughout Puerto 
Rico. We recognize that, particularly in the more interior 
parts of the island, it is going to be a long time before we 
see power to the island.
    There was an article just a couple days ago that on 
Thursday there was a major outage in the area apparently that 
Whitefish had been working on and that you literally went from, 
and this is quoting this article, ``went from 40 percent of 
power down to 18 percent.'' My question to you is, have we gone 
backward in certain areas? Have we seen parts of the efforts 
that were rebuilt failing?
    The 49 percent that you are saying today is something that, 
I understand, is fluid. The Governor has said that he wants to 
be 95 percent by the end of the year. Is that realistic and, 
really, what does that mean? Because what I was told was that 
that may be 95 percent to certain areas but long-term for the 
island of Puerto Rico. When do you realistically envision power 
to the full island? So several questions there for you.
    Mr. Ramos. Yes. So let's go to the first one.
    We suffered an outage last week not related to anything 
failing on any already repaired infrastructure. After the 
failure, we flew over in helicopters to find out the reason.
    We believe, because they denied it, there was an overhead 
crane working, not for PREPA, something else and it touched one 
of the conductors. Certainly, the system auto-protects, but 
that line is the only line that is tying the south where most 
of the generation resides to the north. Therefore--and most of 
the load is in the north. So therefore, we went down to about 
18 percent.
    To give you an example, about 65 percent of the load is in 
the metropolitan area which is about five to six towns joined 
together.
    The Chairman. So is this back online now?
    Mr. Ramos. It is, oh, it was back online, the line was 
reenergized within one hour because it didn't have any 
failures, nothing to fix.
    And then the system restoration takes time--the restarting 
the already repaired circuits--because we still don't have all 
of the communication with our substations. Therefore, every 
time the power goes out men have to go to each substation and 
open each circuit. When the power and the transmission system 
is restored, men have to go, physically, to each substation and 
throw the switches to return power back to the people. But 
right now, we're at 49 percent.
    The Chairman. How about meeting the deadlines?
    Mr. Ramos. I'm sorry?
    The Chairman. How about meeting the end-of-year deadline 
that the Governor has set for 95 percent?
    Mr. Ramos. The deadline is for tomorrow, 50 percent----
    The Chairman. Right.
    Mr. Ramos. ----and we are at 49 percent today so we feel 
very confident that we'll be meeting that deadline.
    The Chairman. And then for the year-end at 95 percent?
    Mr. Ramos. Year-end is 95 percent. It is a hard deadline to 
meet. We're working, very conscious about it. We are focused on 
our work. We believe we can reach it.
    The Chairman. Is it fair though to acknowledge that there 
will be parts of the island that will be without power for a 
significant period of time?
    Mr. Ramos. Certainly. And let me put this in context.
    Hurricane Hugo in 1989, when PREPA had 4,000 additional 
employees than it does today and where the system was certainly 
in better condition than previous to Maria, took six months, 
six months.
    The Chairman. We do not want that to be a standard.
    Mr. Ramos. We don't want that to be a standard.
    The Chairman. I think we all agree----
    Mr. Ramos. I agree, but every time an expert from the U.S. 
has come to Puerto Rico to help us, and we're very grateful, we 
take him in our helicopter trip and their jaw drops because of 
the rugged terrain, the amount of damage. So we need to keep 
that in perspective.
    We are bringing in now, through APPA and the EEI, a lot 
more resources. We've been in discussions since basically last 
week, trying to get hold of rooms which are not available.
    I think we've reached an agreement where people that are 
already there will, of course, they already have hotels. We 
provide them to them. And the rest may be in camps, like 
military-type camps.
    So----
    The Chairman. I think, though, Mr. Ramos----
    Mr. Ramos. Yup.
    The Chairman. ----that some of the frustration was, as I 
mentioned with the previous panel, that there truly was a full 
month of recovery effort that was lost.
    When you have individuals within DOE and the Army Corps 
suggesting that really the recovery began when that mutual aid, 
when APPA was brought in, when EEI was brought in, you can 
certainly understand the frustration, not only of the people of 
Puerto Rico, but those of us that, well, all Americans who want 
to be there to be helpful and supportive.
    Let me go to Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair.
    So, Mr. Ramos, you were in charge of the contract with 
Whitefish?
    Mr. Ramos. I certainly authorized its signature. The in 
charge was the procurement people of PREPA with our legal 
advisors, many of them, of course--you have to remember the 
dire conditions that Puerto Rico was in and some of the people 
arrived to the office weeks after. So we need to do a head 
count. But certainly, our emergency procurement personnel 
assigned to the Emergency Management Office were in charge of 
that contract.
    Senator Cantwell. Okay, so emergency procurement people.
    Mr. Ramos. Yeah.
    Senator Cantwell. So on September 26th the President 
authorized 100 percent federal cost-sharing for emergency work 
in Puerto Rico. PREPA had been granted $200 million for 
expedited funding to cover purchase of fuel. It was covered 100 
percent by the Federal Government.
    So when we hear about these huge markups and these huge 
prices, you know, juxtaposed to mutual aid, mutual aid is about 
recovery at cost. It is about people coming in to help you. 
That is why it is called mutual aid. They come in to help you 
at cost. That is why you sign an agreement. I am sure there are 
places all over my state, probably in Alaska as well, where 
people have already signed them because we have storms all the 
time.
    So mutual aid is, ``Hey, neighbor, neighboring county, 
neighboring state, if we have a disaster will you come in and 
help us at cost? Oh, I'll come in and help you at cost.'' Okay? 
Mutual aid is not, ``I'm going to come in and charge you 
exorbitant rates and gouge.'' Okay? Just to be clear.
    So once the Federal Government committed to 100 percent of 
the cost up front, why did you double down on the Whitefish 
contract instead of activating mutual aid instead? Why did you 
just keep going with Whitefish?
    Mr. Ramos. Well, Madam, the mutual aid agreement--first of 
all, PREPA is a proud member for many, many years of the APPA. 
I think, certainly, we need to revise mutual aid agreements in 
terms of PREPA. PREPA doesn't have a neighbor, as you just 
explained. The only neighbor is St. Thomas, which we have 
worked together in the past under certain storms, and they were 
devastated as well.
    The mutual aid agreement requires that the utility, the 
host utility, takes care of all of the logistics. There were no 
logistics in Puerto Rico. There were, at the first couple of 
weeks, no fuel, no phone, no internet, no nothing. The people 
that actually got there from Whitefish, they brought all their 
satellite and equipment, et cetera. We had a process. I mean, 
we had six offers from six companies.
    So I realize--and one other thing, you need to recognize 
and this is hard to change--hurricanes pass first through the 
Caribbean and then come here. And that situation, of course, 
creates some immobilization of the mutual aid resources. Right?
    If they're available, they probably are from the West Coast 
because as you correctly said, they're expecting to find out 
where the landfall is, what the damage is, in order to help 
their neighbors, physical neighbors, not virtual neighbors like 
we are.
    So we needed first responders. We did a process with six 
different companies. Six companies provided us with rates. The 
rates were extremely similar, very similar.
    Senator Cantwell. Okay, so are you saying that Puerto Rico, 
as an island, didn't understand mutual aid or are you saying 
that the concept of mutual aid as doing work at cost because it 
is an emergency, didn't exist? Is that what you are saying?
    Mr. Ramos. No, I'm not saying none of the above.
    What I'm saying is that Puerto Rico is not part of the 
continental USA so that the concept of neighbor, you know, 
companies coming to the aid gets changed, you know?
    The market basically sets the rates. PREPA is under 
bankruptcy. There's logistics for mobilization, costs of 
mobilizations. And when we saw that six companies, some of them 
very reputable, actually some of them now under contract with 
the Corps of Engineers, had similar rates for PREPA, we decided 
to move with the first responder effect. Eventually, after that 
first responder, we specifically required experience on 
transmission lines crossing mountainous regions. Eventually we 
were going to call everyone to help. As a first responder----
    Senator Cantwell. Well, I guarantee----
    Mr. Ramos. ----we needed to have somebody----
    Senator Cantwell. ----everybody was calling you, I 
guarantee you. You may not have been able to receive them, but 
I guarantee you everybody was offering to send people. 
Practically every member of Congress I talked to said, ``my 
utility wants to go.''
    Mr. Ramos. Yeah.
    Senator Cantwell. And I guarantee you they were not 
charging Whitefish rates to go.
    So somewhere, when the Administration said they would pay 
100 percent of the cost, that is when we should have stepped in 
and said, why are we paying exorbitant rates?
    And just because you are an island--I guarantee you we have 
disasters in Alaska. I doubt that people just gouge the heck 
out of people just because it is hard to get to Alaska. It is 
very hard to get there, all the resources, to every part of 
Alaska. Right?
    Mr. Ramos. So----
    Senator Cantwell. So I doubt that my utilities sit around 
and go, ``Ugh, it's Alaska, let's gouge.'' Just because it's 
Puerto Rico--so my point is, the reason why we are going 
through this painful exercise today is we don't want this to 
happen again. I personally, looking at these reports, think we 
are going to have a lot more disastrous storms. So we don't 
want to see price gouging just because somebody had the really 
unfortunate experience of being in a path of this kind of 
devastation.
    I just want to ask you, do you know of anything, of any 
information, any individuals that might have received a 
kickback from Whitefish, as part of this contract?
    Mr. Ramos. I don't know of any individuals that may have 
received a kickback from Whitefish.
    The price gouging issue will then be, we'll be talking 
about six different companies in both, in that sort of a 
situation.
    You know, our focus, again was restoring power, having 
first responders. We have six proposals, very similar pricing. 
So if there was price gouging, it involves six companies and I 
believe that's another legal term for that situation. No, we 
don't know of anybody having been offered a kickback----
    Senator Cantwell. Whitefish.
    Mr. Ramos. In PREPA, we, the negotiations and the contracts 
were direct from PREPA, from the evidence I've gathered from 
the Procurement Office.
    We have no--there's a legal figure in Puerto Rico which a 
representative, actually protected by law, that can represent a 
company. That was non-existent for none of those six companies.
    So, no, it was a direct contract with our procurement 
people----
    Senator Cantwell. Okay.
    Mr. Ramos. ----contact with the procurement people and 
Whitefish.
    Senator Cantwell. I want to ask you--Whitefish Energy said 
they had contacted Interior Secretary Zinke after signing the 
contract with you. Do you know of any contact there?
    Mr. Ramos. With PREPA, none.
    Senator Cantwell. Okay.
    Ms. Jaresko, do you know anything about this? Do you have 
any emails or communications or anything related to this?
    Ms. Jaresko. None. We learned about the contract in the 
press, as you did.
    Senator Cantwell. Okay, alright.
    Well, we may have some more questions for you, Mr. Ramos. 
But, I think, it isn't a question of whether other people 
wanted to charge exorbitant rates. It is that we want to set a 
principle here that is, I think this is how this all came 
about, is a bunch of utilities who know that this is the 
standard way we respond to disasters, is not to go in and 
charge exorbitant, gouging rates, but to have mutual aid 
agreements.
    Mutual aid is akin to the following: if you have a 
disaster, I will come there to help and do it at cost. And 
cost, sometimes, can be a little more than it would be if it 
was just in Oregon versus all the way to Puerto Rico but it 
doesn't mean that it is going to be these rates.
    And I am going to come back to you with questions about 
why, because previously what Puerto Rico has told us is, 
``Well, we weren't clear. We weren't clear. So we had to get 
somebody on the job and we didn't know who was going to pay so 
we were forced into this.'' But you are telling me it wasn't 
that you were forced into it, that you thought this was a 
standard way of doing business.
    Mr. Ramos. Senator, the standard way of doing business in 
an emergency, right, may get somewhat really--I'm very familiar 
with mutual aid. As I said, when I was young and worked in 
PREPA, we went to the Virgin Islands to provide help.
    What I'm saying is that on the conversations with the 
different CEOs of mutual aid that we had prior to Irma, it 
became evident that I would not get a fix date for resources 
arriving to Puerto Rico. That was evident. Therefore, after we 
saw that the hurricane was imminently hitting Puerto Rico and 
crossing it from one side to the other, I needed first 
responders.
    Senator Cantwell. Yes, well, I----
    Mr. Ramos. I requested six companies.
    Senator Cantwell. Yes.
    Mr. Ramos. The prices were very similar. We engaged one of 
them knowing that we will need more resources. I got calls from 
other utilities. They were not bringing diesel. They were not 
bringing lodging. You can ask the FEMA people. There are no 
hotel rooms in Puerto Rico. You have to come military style, 
you know, with a tent, with your diesel, with your generator--
--
    Senator Cantwell. Yes.
    Mr. Ramos. ----if you want to have all of those.
    Senator Cantwell. Yes, well, I guarantee you, I am sure if 
you raised that flag up the--my time is expired. If you would 
raise that up the flagpole and said to the U.S. Federal 
Government, should we be paying these rates, I doubt you are 
going to find somebody that says, yes, let's pay those rates.
    Thank you.
    Mr. Ramos. Thank you.
    The Chairman. Let's go to Senator Franken.
    Senator Franken. Maybe this is a misunderstanding, and I 
think surrounding all of this there sometimes are 
misunderstandings. But I learned from someone at DOE that the 
reason that mutual aid or mutual assistance did not kick in 
right away or that there were not offers right away, and now I 
am hearing there were six that were just high-priced, but that 
mutual aid is usually based on the state being able to repay, 
to pay you, and that since Puerto Rico was in bankruptcy that 
there were not offers to do this. Is that just wrong?
    Mr. Ramos. Senator, the six offers were from private 
companies. They were proposals. None of them are related to 
APPA or mutual aid.
    Senator Franken. Yes.
    Mr. Ramos. They're private companies.
    Senator Franken. Okay.
    So I think that's, that might be part of this, that it 
wasn't the normal, you know--if Minnesota gets hit, Wisconsin 
and Iowa and South Dakota, North Dakota are ready to go in 
there under normal mutual aid and to do it under the normal 
circumstance. But that the fact that you are in bankruptcy made 
these other, all the normal utilities that come in, worry that 
they were not going to get paid. And so, that's perhaps why the 
offers you got were not the normal ones coming in.
    This past weekend I met with Minnesotans from Puerto Rico. 
One issue they raised was ensuring that stakeholders across the 
spectrum in Puerto Rico are engaged in the rebuilding planning 
process. So I just want to make that heard.
    Another major concern they raised is about what critical 
infrastructure is being prioritized to receive power, 
especially when it comes to medical treatment. And I know when 
we say load restored to 49 percent that doesn't mean 49 percent 
of the population. That means 49 percent of the 100 percent of 
the grid power is being generated and it goes to strategic 
places.
    So citizens need medical help right now, the hospitals, 
most of the hospitals are up, but what I was hearing from my 
folks in Minnesota was that in some cases community clinics or 
a doctor's office might make more sense since the hospitals are 
so stressed. And if you could get a generator to a doctor's 
office, he could see people in his area and the same with 
community health centers or clinics. Mr. Ramos, are these 
smaller facilities being prioritized for emergency power now or 
during the rebuilding, grid rebuilding process?
    Mr. Ramos. Certainly, the U.S. Corps of Engineers, part of 
their mission has been to put emergency power generations on 
those facilities, critical facilities, that PREPA cannot reach 
on an expedited basis. So we've been collaborating with the 
U.S. Corps of Engineers on that strategy, and we believe it's 
worked fine. PREPA has 85 percent of all of the hospitals in 
Puerto Rico, hospitals, energized under its grid at this 
moment. There are smaller, as you said, medical facilities that 
are still running on generators. We have another, I don't have 
the percentage here, but we have also energized some of those 
medical, smaller medical facilities.
    The priorities were set from the beginning to get hospitals 
first because of the extreme forces that this hurricane 
impacted Puerto Rico with. So it was medical facilities and, of 
course, first the large, then the medium, then the small in 
each region. We have accomplished that with the exception of 
the southeastern region which we, I mean, we accomplished that 
fairly quick, but the southeast region took us longer. Last 
week we were able to energize the Guayama Hospital in the 
southeast.
    Senator Franken. Okay.
    Mr. Ramos. But it's more south than east. And we have a 
strategy in which, of course, again, the Corps of Engineers is 
helping.
    Senator Franken. I'm sorry, but I only have so much time.
    Mr. Ramos. Yup.
    Senator Franken. I just want you to hear from my----
    Mr. Ramos. Constituents.
    Senator Franken. ----Puerto Rican constituents in Minnesota 
that doctors, private doctor's offices, might be a good way to 
deliver healthcare to people so they don't all, they don't have 
to go to hospitals. That is all I was saying. And I am out of 
time.
    I just wanted to ask you about--I can ask these questions 
for the record, of course, but about how you see PREPA going 
forward in the rebuilding of the infrastructure, and Ms. 
Jaresko, what you see as your oversight responsibility 
regarding PREPA so that we can make sure that this is all done 
as efficiently as possible. That is what we all want. So----
    The Chairman. That is such an easy question, yes.
    Senator Franken. Huh?
    The Chairman. That is an easy question there for all of 
them.
    Senator Franken. Yes, it is very simple.
    The Chairman. Yes, yes.
    Senator Franken. It is like that. Boom.
    [Laughter.]
    It is up and done beautifully.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Franken.
    I think those, and so many others that people will have, we 
will submit for the record, but it is important that we try to 
discern what these appropriate roles are going forward.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you.
    Ms. Jaresko, previously, and by the way, thank you all. 
Thank you all for being and sitting this morning and 
testifying.
    In the previous panel there was a question that was asked, 
I think it was of Mr. Walker, and the question was whether or 
not the disaster relief money could go to bondholders to 
satisfy that lien and he responded, he was confident through, I 
think, some of the attorneys in FEMA, that the disaster relief 
money coming from the United States could not be utilized by 
the bondholders to satisfy the lien. Do you feel the same way? 
Are you confident in that statement as well?
    Ms. Jaresko. Yes, I am, ma'am, as well.
    We acted on behalf of the debtor and on behalf of the 
Commonwealth and filed and achieved a comfort order in the 
court, in the Title III Court, to assure everyone, in 
particular the Federal Government agencies, that their grant 
funding could not be used in that way.
    Senator Cortez Masto. Thank you.
    And then to respond to Senator Franken's last question, 
because I noticed you were ready to respond. I am curious as 
well what your answer is.
    Ms. Jaresko. Well, the tools that we've been given by 
PROMESA, in particular, have to do with fiscal plans and 
budgeting. So we are in the process of asking for a revised 
fiscal plan from PREPA which will be due December 22nd. We will 
then review and discuss with a goal to certify that by February 
2nd.
    That fiscal plan is basically a five-year business plan and 
then it will be followed by a single, annual operating budget 
to ensure that we actually are fulfilling that business plan.
    Beyond the fiscal plans, beyond the budgeting, we also have 
a contract policy where we have now begun to review all 
contracts over $10 million, as well as using that contract 
review policy to look back at other contracts, on an ad hoc 
basis, under $10 million.
    And then, finally, we have an authority through Title III 
as the representative of the debtor to bring all of this 
together.
    Many of you have asked questions about how the creditors 
work, how maybe being in bankruptcy affected the decisions that 
were made. All of this needs to come together in a plan of 
adjustment to take us out of bankruptcy in the end, and the 
plan of adjustment has to be filed in the court. It's a 
business plan, even beyond whatever business plan, fiscal plan 
or annual operating budget we have that gives everyone 
confidence that the situation is stabilized, the debt has been 
restructured, PREPA is no longer in bankruptcy and that we have 
achieved those goals that we talked about which is cost-
efficient, reliable energy for the island, for the residents 
and the businesses.
    Senator Cortez Masto. Thank you. Thank you, all. We 
appreciate you being here.
    No further questions, Madam Chair.
    The Chairman. Thank you, Senator.
    I think it is important to note that you have a head of 
PREPA, Mr. Ramos, who has been on the job since March of this 
year, you indicated. I understand that there has been a 
significant turnover with the PREPA Board. The most tenured 
member has been in place now for just 11 months. We have the 
Energy Commission as a new regulatory body that has been stood 
up. You have the Oversight Board that just came on with 
PROMESA. And oh, by the way, let's just throw two hurricanes 
into the mix as they are trying to deal with all of this, 
making a very hard situation, I think, even much more 
complicated and just really hard.
    Mr. Rhymer, I want to ask just one question of you, sir. We 
do not want to leave the Virgin Islands out of these 
discussions. I will tell you, and I know that Senator Franken 
saw the same thing when we were there on our trip, there has 
been so much attention focused on Puerto Rico that I kind of 
assumed that the Virgin Islands were doing just fine and 
perhaps the damage had not been as substantial. Then we get 
there and see the facts on the ground and it was just a true 
reminder that just because we have moved to another disaster on 
another island does not mean that the Virgin Islands are all 
well.
    The Governor has indicated that during his tenure, five 
hurricanes have gone through, an opportunity, if you will, to 
have to deal with a rebuild of the grid five different times. 
Surely you learn from each successive disaster and that effort 
to ``harden the grid'' is there with each rebuild. To what 
extent has the U.S. Virgin Islands been able to harden the grid 
from successive disasters to allow for greater resilience?
    Mr. Rhymer. Over several years we've been able to basically 
tap hazard mitigation funds and that's why we have underground 
systems that actually generate, basically, power to about 75 to 
80 percent of our businesses with our commercial districts on 
St. Thomas and St. Croix.
    And that's what we've been doing since each storm that we 
try to learn from each lesson learned how do we go underground, 
how to become more resilient. And that's what we're doing now 
in terms of microgrids, going toward, basically, composite 
poles, et cetera, to make sure that in the next storm there's 
less damage, not as much damage or little to no damage such as 
we have enclosed all of our, basically, our substations in 
concrete buildings.
    So there was no damage on our, basically, substations, 
territory-wide. So that made it where there's no damage. In the 
past, we would have had damage on the, actually, substations. 
Now we have zero percent damage on those. So with each storm 
and each successive storm, we learn and we get more resilient.
    The Chairman. I am told that Senator Lee is on his way 
back, so I am going to ask another question until he arrives.
    Secretary Walker mentioned and we saw a picture of some of 
the transmission lines that were just loaded with, almost a 
jungle, of fiber optics. He and I had an opportunity for 
conversation as we were coming back from our visit to both 
Puerto Rico and USVI. He indicated that this was something that 
Department of Energy was going to be looking at in terms of, 
does that increase vulnerability to additional damage?
    Mr. Ramos, have you looked at this aspect, those lines that 
were carrying, kind of a jumble, if you will, of fiber optics? 
Are you seeing some evidence that, perhaps, this may be 
something that we need to address and change going forward?
    Mr. Ramos. Certainly. Many of the fallen poles fell because 
of the additional weight of infrastructure that really was not 
supposed to be there. So the grid itself is old. Our new design 
standards account for an amount of additional infrastructure 
for communications and other, but many of the poles were, you 
know, they had communications because some local law of Puerto 
Rico permitted the common right-of-way usage. So we had to 
allow, you know, telecom companies to put the 
telecommunications cables up, but the pole itself was not 
necessarily designed to those standards.
    The new standards in PREPA, prior to Maria or the hearing, 
they've been in place for some years now, do include so that 
people can put, companies can put, additional infrastructure.
    Puerto Rico, as you know, even though we've lost so many 
people, you know, going out of the island, it's still, the 
metro areas are highly populated, you know. It's very 
difficult, and I understand the situation, for other 
infrastructure to get a space other than the PREPA pole. But 
you know, it's something that needs to be revisited. Everything 
relies on PREPA. All of the other infrastructure relies on 
PREPA, but you know, they need also to invest in their systems. 
Let's say telecommunications, for example, in order to provide 
excellent service.
    The Chairman. Yes, well, it was a new issue that had been 
raised with me and one that, I think, is important to look at 
and one that I understand was not at issue in the U.S. Virgin 
Islands which makes it, again, an interesting comparison there.
    Mr. Morales, a question to you about the Energy Commission. 
I noted that it is a relatively new regulatory body. In terms 
of your ability to gain operational capacity, what is it that 
is needed within the Energy Commission to support what it is 
that you need to do?
    Mr. Roman Morales. Thank you, Madam Chair.
    Definitely the Commission operates with a statutory budget 
that is very limited to what the requirements are that they 
mandate, the local law mandates the Commission to do, 
especially now with the restoration that is required.
    It's not only--one thing that we need to keep in mind is 
that PREPA is a government-owned, non-profit utility. So 
typical--tools that regulators have to stop imprudent costs to 
be borne by the ratepayers are not present in the situation 
that PREPA has because PREPA has no shareholders. So any costs 
in being prudent or imprudent are borne by the ratepayers.
    So the Energy Commission is very--we have to be involved in 
what's in all the restoration, not only if the federal forms 
are used correctly, but any recovery that is not covered by the 
federal forms will be covered by the people of Puerto Rico, by 
their ratepayers. So our role is to make sure that all actions 
are prudent.
    With that situation is why the Energy Commission ruled on 
the rate case order that, since we could not disallow costs 
after the fact, we needed to stop them from being incurred at 
all. And that's the reason why we requested PREPA to submit the 
budget so that we could approve the budgets before they 
actually started spending the money.
    There is a challenge of coordinating with the PREPA Board. 
So we ask PREPA, this is something that can be coordinating 
between one of the PREPA's board's requirement of approving 
budget as well as the fiscal oversight board requirement of 
approving the budget. But we are responsible that the costs are 
prudent and that the rates are just and reasonable for the 
people of Puerto Rico.
    So it's a matter of now working all together, being able to 
put a plan in place. The Commission has been the regulatory 
expert in the performance--we'll take a first look at it, PREPA 
will approve it and then the fiscal oversight can approve it 
and then we can move forward.
    The Chairman. Let me ask you, Ms. Jaresko, and I mentioned 
this just a few minutes ago, about the fact that you have a lot 
of new folks, a new regulatory body. From the oversight board 
perspective have you seen enough to determine that an emergency 
manager is necessary now or should the new leadership be given 
a chance to implement whatever reforms you feel are 
appropriate?
    Ms. Jaresko. So as you know, Madam Chairman, the Board took 
an action and filed in Title III Court to name a Chief 
Transformation Officer. The court ruled yesterday against us in 
that action, although we have not yet seen the written judgment 
so I can't comment on it in detail.
    The reason we thought that was necessary, the reason we 
think that is necessary to deal with PREPA is to bring together 
these various components, not in any way to interfere with the 
emergency work that's being done, the recovery work that is 
absolutely primary, number one and most important today, but to 
bring together the medium- and long-term aspects of federal 
funding, federal funding that has to be brought together with, 
potentially, private sector funding to ensure that the sector 
is finally competitive and providing the kind of low-cost, 
reliable electricity we all want to see and bring it together 
with, as I said earlier, the end of a debt restructuring and 
the end of the Title III process. Bringing all of those short-, 
medium- and long-term perspectives together was what we thought 
and we believe that the Chief Transformation Officer could do.
    However, the judge's decision is a setback for us but we 
are not throwing up our hands. We still, as I said earlier, 
have the authority to deal with the fiscal plans and we are in 
that process and we will continue to work toward providing the 
oversight necessary to assure everyone and give everyone 
confidence that all the funds that are being used will assist 
us in achieving the goals that we all share.
    The Chairman. You describe this as a setback. Do you think 
that this will limit the ability to attract that private 
investment that you believe is necessary?
    Ms. Jaresko. I think it is a setback from the perspective 
of providing the oversight that the Congress has been asking of 
us and for meeting the lofty expectations of the members.
    I believe that we will still work with the tools that we 
have. We will see what happens when we see that written 
judgment, as to what is in the written judgment from the court 
yesterday, but we will continue to work toward, together with 
PREPA, the government and the regulator, who I think is really 
quite critical.
    And I can't underline enough, in my previous experience in 
the energy sector in Ukraine, having an independent regulator 
that provides private sector with confidence about rate policy 
and consistency of rate policy, I think, is even--is an 
extremely critical part of attracting private sector capital.
    The Chairman. Thank you.
    Senator Lee.
    Senator Lee. Thank you very much, Madam Chair.
    I would like to start with you, Mr. Ramos.
    Do you think politics have played a part in PREPA's 
failures?
    Mr. Ramos. Historically?
    Senator Lee. Yes, historically or currently?
    Mr. Ramos. I can attest that historically, certainly, 
there's been--it's very hard to manage PREPA being a big 
corporation which is part of government. It gets--it is, even 
in its current bankruptcy, PREPA is like the jewel of the crown 
of Puerto Rico regardless of the bad service and the, you know, 
bad condition which it is in.
    And certainly there's, you know, too much intervention, you 
know, by government officials in the sense of--may I be--don't, 
please, don't feel bad, but it gets a lot of attention if you 
do bills for PREPA, if you do, you know, the people get 
attention so, you know, politicians, in order to get attention, 
they, you know, do subsidy, subsidies for and actually, 
subsidies have killed PREPA in its finances as well. Too many 
subsidies in order to get, I guess, you know, votes, et cetera. 
So certainly there's been----
    Senator Lee. The thinking is, ``I'll look good if I do 
that,'' and it encourages people to do that. What about in 
employment? How many political appointees are currently 
employed by PREPA?
    Mr. Ramos. PREPA, traditionally, has been a company where 
politicians or, you know, parts of government can get their 
family members to get work----
    Senator Lee. Do you ever think----
    Mr. Ramos. ----percentage wise, certainly over 50 percent, 
but----
    Senator Lee. Okay. Many hundreds. Many hundreds.
    Mr. Ramos. Sorry?
    Senator Lee. Many hundreds of political appointees 
currently work there.
    Mr. Ramos. They're not political appointees by the 
Governor. What I'm saying is that historically the PREPA, that 
PREPA has served as the place for employment of families of, 
you know, political figures since the '70s, or early '70s.
    Senator Lee. Okay, so this is separate and apart from any 
political appointees----
    Mr. Ramos. Exactly. Currently the political appointees are 
myself in the sense that the Governor recommends me and, but 
the Board of Directors confirms my assignment and then in turn, 
I choose, you know, qualified individuals, which many years ago 
used to be also a political issue, this time with the 
independent members of the Board that we have. We, you know, I 
choose the people according to their capacities and then the 
Board ratifies them.
    Senator Lee. Okay.
    My understanding is that, historically, currently there 
might be around 200 political appointees there. Historically, 
that number has been much larger at about 650. That is a lot of 
people. There are a lot of ways we could turn that.
    But I want to move on. I would like to speak to Mr. Rhymer 
for a moment. In our first panel this morning, Mr. Rhymer, 
Governor Mapp stated that WAPA has gone to great lengths to 
ferret out corruption. We are happy to hear that and look 
forward to hearing what changes have been made, and we will 
certainly follow up with Governor Mapp to learn more about 
them.
    But for now, I would like to focus on power theft and on 
some of WAPA's accounting practices. Back in May of last year, 
May 2016, if I am not mistaken you blamed some emergency rate 
increases on the territory's hospitals saying that they ``just 
don't pay.'' At that time, the estimate was that the government 
of the U.S. Virgin Islands owed WAPA nearly $32 million.
    Can you tell me, sir, how much money WAPA is currently owed 
by U.S. Virgin Islands' government agencies, independent 
authorities and non-profits?
    Mr. Rhymer. Currently about $36 million.
    Senator Lee. Thirty-six million. And what are you doing to 
collect that money?
    Mr. Rhymer. We work with the Governor of the Virgin Islands 
to actually try to collect those funds. The difficulties that 
you have is the two hospitals that, as you quoted earlier, 
simply just can't afford to pay because of the Medicare/
Medicaid structure that here it is, they don't--you're going to 
have a lot of uncompensated care that forbids them to be able 
to have the cash flow to be able to pay the utility.
    So what happens is they know that I'm not going to turn 
them off because it's a critical function of the actual Virgin 
Islands. So they just do not pay the utility.
    Senator Lee. Okay.
    So this is something that they are doing in order to deal 
with the funding shortfall that they have. They just don't pay 
and then they continue to have power.
    Have you changed your auditing and your billing procedures?
    Mr. Rhymer. Yes.
    Senator Lee. What can you tell me about changes you have 
made to your billing procedures and speak to what issues of 
fraud or corruption you have uncovered like, you know, 
duplicate billing or defaulted accounts?
    Mr. Rhymer. Well, we've never had duplicate billing. What 
normally happens in the Virgin Islands before we used to bill 
customers in terms of estimates. We now have an AMI structure 
in place where it's automated so we actually get more accurate 
billing.
    I've never encountered any fraud in terms of billing as a 
whole. We've had theft on the customer side, but not from the 
utility side.
    Senator Lee. Okay.
    I have other questions that I will submit in writing.
    Thank you very much, Madam Chair, and thanks for letting me 
come back to do this.
    The Chairman. Absolutely.
    Thank you, Senator Lee.
    Thank you for your testimony here this morning. Obviously, 
we have much to do working with you and the leadership and the 
people in Puerto Rico and the U.S. Virgin Islands.
    Well, this is the Energy Committee and we have focused a 
great deal of today's hearing on the energy piece and how we 
can build out a more resilient, efficient and better grid.
    We are also the Committee that has the oversight of our 
territories and our insular properties, so we heard discussion 
about Medicare, Medicaid, healthcare. I raised the issue of 
schools. And while it might not be specific jurisdiction for 
this Committee to take up, for instance, those issues relating 
to reimbursement for Medicaid or Medicare, I think it is 
important to recognize that we do have that oversight role 
within this Committee.
    And when you recognize the impact, the economic impact, the 
personal impact that these two significant territories, 
commonwealths, have sustained with these recent disasters, it 
makes the role of this Committee just that much more 
heightened.
    I think you have seen from the interest and the 
participation from Committee members, not only in today's 
hearing, but the many of us that have made the trip down to 
take a look for ourselves. I might note that Senator Carper, 
while not on this Committee, had joined us and had hoped that 
he would be able to participate or at least listen to some 
parts of today's hearing as well. So there is a great deal of 
interest.
    We need to be working with the Administration. We need to 
be working with so many of you that have given insight here 
today and know that as we move forward with proposals, we will 
be looking to you for your input and guidance on these specific 
areas.
    With that, I thank you all and this Committee stands 
adjourned.
    [Whereupon, at 12:49 p.m. the hearing was adjourned.]

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