[Senate Hearing 115-515]
[From the U.S. Government Publishing Office]
S. Hrg. 115-515
THE CURRENT STATUS OF PUERTO RICO'S
ELECTRIC GRID AND PROPOSALS FOR
THE FUTURE OPERATION OF THE GRID
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MAY 8, 2018
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
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
30-282 WASHINGTON : 2020
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 JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
LAMAR ALEXANDER, Tennessee MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
BILL CASSIDY, Louisiana TAMMY DUCKWORTH, Illinois
ROB PORTMAN, Ohio CATHERINE CORTEZ MASTO, Nevada
SHELLEY MOORE CAPITO, West Virginia TINA SMITH, Minnesota
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
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OPENING STATEMENTS
Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska.... 1
Heinrich, Hon. Martin, a U.S. Senator from New Mexico............ 2
WITNESSES
Walker, Hon. Bruce J., Assistant Secretary, Office of Electricity
Delivery and Energy Reliability, U.S. Department of Energy..... 6
Alexander, Jr., Charles R., Director, Contingency Operations and
Homeland Security, U.S. Army Corps of Engineers................ 14
Sobrino Vega, Christian, President of the Government Development
Bank, and Chairman of the Board of the Puerto Rico Fiscal
Agency and Financial Advisory Authority, Government of Puerto
Rico........................................................... 20
Higgins, Walter M., Chief Executive Officer, Puerto Rico Electric
Power Authority................................................ 25
Roman Morales, Jose, Acting Chairman, Puerto Rico Energy
Commission..................................................... 32
Masses, Rodrigo, President, Puerto Rico Manufacturers Association 64
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Alexander, Jr., Charles R.:
Opening Statement............................................ 14
Written Testimony............................................ 16
Responses to Questions for the Record........................ 114
Cantwell, Hon. Maria:
Statement for the Record..................................... 4
Financial Oversight and Management Board for Puerto Rico:
Letter for the Record........................................ 166
Heinrich, Hon. Martin:
Opening Statement............................................ 2
Higgins, Walter M.:
Opening Statement............................................ 25
Written Testimony............................................ 27
Responses to Questions for the Record........................ 131
Masses, Rodrigo:
Opening Statement............................................ 64
Written Testimony............................................ 66
Responses to Questions for the Record........................ 159
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
Roman Morales, Jose:
Opening Statement............................................ 32
Written Testimony............................................ 34
Responses to Questions for the Record........................ 145
Sobrino Vega, Christian:
Opening Statement............................................ 20
Written Testimony............................................ 22
Responses to Questions for the Record........................ 116
Toledo, Ana L.:
Comments for the Record...................................... 169
Walker, Hon. Bruce J.:
Opening Statement............................................ 6
Written Testimony............................................ 9
Responses to Questions for the Record........................ 103
THE CURRENT STATUS OF PUERTO RICO'S ELECTRIC GRID AND PROPOSALS FOR THE
FUTURE OPERATION OF THE GRID
----------
TUESDAY, MAY 8, 2018
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:10 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 today to learn more about the work that has
been completed, the work that is still underway as we seek to
restore electricity to the people of Puerto Rico, and really to
discuss this morning, moving forward. So much remains to be
accomplished.
We will also take a close look at proposals to reform the
island's energy sector, such as the Governor's proposals with
regard to the Puerto Rico Electric Power Authority, PREPA, and
the Puerto Rico Energy Commission.
At a hearing we held last November on hurricane recovery
efforts, I suggested at that time that there are essentially
three different tenets, basic tenets, for the restoration and
the reconstruction of Puerto Rico's electric grid. I first
suggested that we needed to make the grid more resilient to
future weather events. I think everybody agrees it makes sense.
Number two, in the case of damage from a future storm, bring
the timeframe for repairing the grid on par with the rest of
the United States. Again, absolutely reasonable. And the final
tenet is to bring down the overall cost of electricity compared
to pre-storm prices. Moving forward, I think that that is
something, again, that we all agree must happen.
Unfortunately, I am not sure that any of those tenets have
been fully or adequately addressed. Although I would note that
some parts of the grid infrastructure are probably more
resilient today but perhaps more resilient by default as they
have been replaced with newer materials. Still, as last month's
island-wide power outage demonstrated, the grid remains fragile
and unstable.
Before we can get to those basic tenets, however, there
remains a very primary question that I think needs to be
answered, and that is, going forward, who is in charge of the
grid? Who is providing the vision for the future of the grid
and who should outside parties be in contact with to help
fulfill that vision? Is it the Governor's office, which is
promoting legislation to sell off some of PREPA's assets and
contract with a third party to operate the transmission and
distribution lines? Is it the Financial Oversight and
Management Board, which recently certified a new fiscal plan
for PREPA that includes a process for privatization? Is it
PREPA, which has a relatively new Board of Directors, a new
CEO, but could be completely upended by these other plans? Or
is it the PREC, which claims responsibility for setting the
overall policy direction for the grid yet could be dissolved
under the Governor's reorganization plan? Then how do the
Department of Energy and the Army Corps of Engineers fit into
this hierarchy? And, of course, what about the creditors? There
are many, many questions here.
Today's hearing is also an opportunity for officials to
provide some clarity to questions that many in Puerto Rico are
asking. They are asking, why are we still seeing island-wide
blackouts? They are asking where all the federal dollars have
gone, how have they been directed. Then, as we enter a new
hurricane season, they are asking whether or not the grid is
more stable and more resilient. They are asking what efforts
are being made to incorporate alternative energy sources so
that the island is not dependent on the global price of oil.
Then they are also asking what the status of the PREPA
privatization proposal is. So there are a lot of questions to
be answered.
I would further add a concern about the consolidation of
the regulatory agencies in Puerto Rico, particularly the PREC.
With Puerto Rico's fiscal issues, attracting capital investment
is a struggle, and without a stable regulatory environment,
bringing in investors to upgrade the electric grid will be even
tougher.
I am hopeful that our witnesses this morning can help us
sort through some of these issues and provide a little more
clarity, not only to the Committee, but to the people of Puerto
Rico and the many, many who are closely following the situation
on the ground.
I thank you all for being here as we focus on this very
important issue.
I will turn to Senator Heinrich for an opening statement.
He is helping Senator Cantwell out this morning, and we
appreciate you taking the chair here.
STATEMENT OF HON. MARTIN HEINRICH,
U.S. SENATOR FROM NEW MEXICO
Senator Heinrich. Happy to do it.
Thank you, Madam Chair, for scheduling this timely hearing
to examine the current status of Puerto Rico's grid restoration
and proposals for the future operation of its grid. Senator
Cantwell asked me to fill in for her at the start, and she will
be here later.
Before proceeding, I would like to take a moment to
recognize the service of nine Puerto Rican National Guardsmen.
They were tragically killed last Wednesday when their C-130
crashed shortly after taking off in Georgia. Our thoughts and
prayers are with their families. This is an important reminder
of the sacrifices that Puerto Rican American citizens make for
this nation each and every day.
Senator Cantwell asked me to acknowledge Senators Nelson
and Rubio for leading a letter of a group of our colleagues,
requesting this hearing. Senator Nelson has been such a
forceful advocate for Puerto Rico, and I understand he was on
the island just last Friday.
I thank our distinguished witnesses for sharing their
expertise and perspective with us today.
Hurricane Maria struck Puerto Rico on September 20, 2017,
causing the largest power outage in our nation's history and
the second largest outage the world has ever known. We are
still not done with the restoration process, over seven months
after the storm.
Today, 98 percent of power customers in Puerto Rico have
power, but much more work remains. To put it in perspective,
tens of thousands of Americans there are still in the dark, and
the threat to their health and well-being is real.
As we approach hurricane season in the coming weeks, we
need to ensure that we have learned the lessons of Maria so
that we do not repeat those same mistakes.
Congress would like to see federal aid go to help Puerto
Rico incorporate microgrids, renewables, distributed generation
and dramatically increased resilience into the future grid. I
think we can also agree that a starting point is a robust,
independent and transparent regulatory structure, something
that Puerto Rico has struggled with over the years.
If we do not get this right, we will be in exactly the same
place after the next hurricane.
Madam Chair, I understand Senator Cantwell will join us
shortly, but I would ask that her statement for the record be
included in the record.
The Chairman. It will absolutely be included.
Senator Heinrich. Thank you.
[The prepared statement of Senator Cantwell follows:]
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Senator Heinrich. I am looking forward to our testimony
this morning.
The Chairman. Thank you, Senator Heinrich.
With that, let us go to our panel. Again, I thank you all
for joining us here this morning and for your contributions.
The panel this morning will be led off by Bruce Walker, who
is the Assistant Secretary at the Office of Electricity
Delivery and Energy Reliability at U.S. DOE. It is good to have
you back before the Committee.
We are also joined by Charles Alexander, Jr., who is the
Director for the Contingency Operations and Homeland Security
at the U.S. Army Corps of Engineers (USACE). We thank you for
your work.
Mr. Christian Sobrino Vega is the President of the
Government Development Bank and Chairman of the Board of the
Fiscal Agency and Financial Advisory Authority for the
Government of Puerto Rico. We welcome you.
Mr. Walter Higgins is also known to this Committee. He has
come before us before as the CEO for the Puerto Rico Electric
Power Authority. We welcome you.
Mr. Jose Roman Morales is the Comisionado Asociado-
Presidente Interino. You can tell mi Espanol is way malo.
[Laughter.]
He is with the Commission on Energy of Puerto Rico. Mr.
Morales, welcome.
And Mr. Rodrigo Masses is the President of Puerto Rico
Manufacturers Association.
We welcome each of you to the Committee here this morning.
Mr. Walker, if you would like to begin? I would ask you to
try to limit your comments to about five minutes. Your full
statements will be incorporated as part of the record, and once
you have completed your opening remarks, we will have an
opportunity to pose our questions.
Mr. Walker, welcome, Assistant Secretary.
STATEMENT OF HON. BRUCE J. WALKER, ASSISTANT SECRETARY, OFFICE
OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY, U.S. DEPARTMENT
OF ENERGY
Mr. Walker. Chairman Murkowski, Senator Heinrich and
distinguished Members of the Committee, thank you for the
opportunity today to discuss the possibilities for the future
operation of the electric grid in Puerto Rico. Most
importantly, I want to assure this Committee that DOE is
committed to providing technical assistance to PREPA as they
begin their task of rebuilding and redesigning Puerto Rico's
electric grid.
During significant events essential services from energy,
critical infrastructure, including water, telecommunications
and transportation must be operational to support the safety
and health of our residents in Puerto Rico. Accordingly, the
energy infrastructure in Puerto Rico must be designed, built,
managed and maintained in such a way to ameliorate disruptions
when they inevitably occur to facilitate rapid recovery.
This is a continual process of improvement, one that will
require PREPA to reassess and adopt solutions and technologies
to address changing needs, and DOE and our national labs will
remain an active partner to provide technical expertise and
deploy cutting edge technology to assist PREPA.
DOE has nearly completed its report on energy resilience
options and potential solutions for the Puerto Rico grid. This
report provides recommendations through PREPA and FEMA that
reflect principles of resilience and are intended to inform
investments in energy infrastructure.
The recommendations address near-term and potential long-
term actions that will require further analysis to make optimal
investment decisions.
Several long-term recommendations that require additional
analysis include: Number one, power flow to assess power system
operations, including generator dynamics and protective relay
coordination; number two, production cost and capacity
expansion to inform economic dispatch strategies and long-term
planning; number three, microgrids, energy storage and system
segmentation to identify where clusters of generation and load
provide maximum community benefit; and number four, cross
sector, critical infrastructure interdependencies. These items
are being addressed through the development of a sophisticated
modeling effort incorporating the efforts of five national
labs. The model will be developed in phases, working with PREPA
and when complete will serve as a planning tool as well as an
operational tool.
As a planning tool, it will provide contingency analysis
and identify interdependencies of critical infrastructure
necessary to ensure the health and safety of our residents in
Puerto Rico. As an operational tool, it will provide next,
worst case analysis in near real time thereby providing system
operators situational awareness in order to make sound
operating decisions to improve day-to-day operation of the
electric grid. The operational capabilities of the model will
rely upon near real time data from micro phasor measurement
units that PREPA and DOE are planning to deploy shortly in key
locations throughout the island.
Furthermore, the modeling effort will provide technical
insight into the resiliency objectives allowing for
coordination and communication of potential solutions across
stakeholder groups. This will help enable PREPA to ensure that
the investments being made achieve the desired improvements
necessary for a resilient grid.
Of course, any version of Puerto Rico's future grid
requires the incorporation of cybersecurity. Uncontrolled
disruption of our energy infrastructure is not only inherently
problematic, but it hampers our ability to respond to other
types of emergency events, like hurricanes.
Late last year, DOE awarded over $20 million to our
national laboratories and partners to support critical, early
stage research and development through strength and protection
of the nation's electric grid from cyber threat.
One of these projects, Dark Net, is a collaboration between
four national labs, three universities and several utilities,
including the University of Puerto Rico and PREPA. Participants
are working to define the requirements for a secure energy
delivery system control network that is independent of the
public internet, utilizing what is called Dark Fiber. Working
with PREPA, DOE will seek to deploy this capability into
PREPA's grid as we work together to strengthen it, capitalizing
on the significant amount of fiber optics on the island.
Just three weeks ago, my office issued a $25 million
funding opportunity announcement through our industry partners
to develop innovative approaches to advance cyber resilient
energy delivery systems. Focused on redesigning our existing
system protection infrastructure for the electric and oil and
natural gas sectors, the goal is to develop near, real-time
solutions that will reduce and potentially eliminate the risks
presented by cyberattacks. This funding opportunity was done
with an eye toward accelerating R&D efforts with the
anticipation that we can incorporate these new solutions into
PREPA's grid and then utilize them across North America.
In conclusion, the effects of this past hurricane season,
though a disaster in the short-term, now offers a unique
opportunity to accelerate cutting edge technology to improve
Puerto Rico's grid.
In this case, various forms of technology including
microgrids, cyber, modeling, distributed energy resources and
strategic utilization of storage are a few of the capabilities
we are undertaking to improve the resiliency of the Puerto Rico
and U.S. Virgin Islands electric sector.
Thank you and I look forward to your questions.
[The prepared statement of Mr. Walker follows:]
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The Chairman. Thank you, Assistant Secretary.
Mr. Alexander, welcome.
STATEMENT OF CHARLES R. ALEXANDER, JR., DIRECTOR, CONTINGENCY
OPERATIONS AND HOMELAND SECURITY, U.S. ARMY CORPS OF ENGINEERS
Mr. Alexander. Chairman Murkowski and distinguished members
of the Committee, thank you for the opportunity to provide an
update on the status of Puerto Rico's electric power grid.
The Corps conducts emergency response activities under two
basic authorities, the Stafford Act and Public Law 84-99. In
response to Hurricanes Irma and Maria, the Corps received 47
mission assignments at $181 million and 44 Maria-related
mission assignments at $3.4 billion to execute our traditional
public works missions. Over $15 million in flood control/
coastal emergency funds were expended under our PL 84-99
authority.
I will now limit my remarks solely to the restoration of
Puerto Rico's grid.
On 30 September '17 as assigned by FEMA, USACE assumed lead
for federal efforts to repair the power grid. To date, we have
received $2.15 billion for that mission alone. Our task was to
scope, coordinate and execute interim repairs to grid segments
until a comprehensive restoration of the overall system could
be implemented.
The grid consists of 2,400 miles of transmission lines,
30,000 miles of distribution lines, over 300 substations, 16
power generation plants. An estimated 80 percent of the grid
was damaged.
USACE is part of the Unified Command Group, or UCG,
comprised of USACE, FEMA, PREPA and the island's restoration
coordinator. The UCG makes decisions guided by PREPA's
restoration master plan priorities. These priorities and
decisions are carried out by PREPA, the Corps and our
respective contractors.
The road to repairing the grid consists of four main lines
of effort: provide temporary emergency power and spot
generation for critical facilities; ensure adequate generation
at the power plants; reinstall and repair transmission lines;
and restore and repair distribution lines, ultimately providing
power to the customer.
For temporary emergency power the Corps and its contractors
installed 2,180 generators. And as of 7 May, 812 remain in
operation. We anticipate the temporary power mission will be
extended until 31 July.
We also installed nine microgrids to provide temporary
power to communities while grid power was being restored.
Currently, four are operational at Arecibo, Culebra, Maunabo
and Vieques.
To ensure adequate generation at the power plants, the
Corps installed mega generators at the Palo Seco and Yabucoa
plants. The Corps will continue to operate and maintain both
out through mid-July.
As of 2 May, 79 percent of the transmission line segments,
69 percent of the sub-transmission line segments and 88 percent
of the distribution lines have been repaired and energized. As
of 7 May, PREPA reports that 98.44 percent, or approximately
1.45 million out of 1.473 million pre-storm customers who are
able to receive electric power, have their service restored,
leaving approximately 22,900 customers without power.
Due to the shortage of materials required to affect
repairs, FEMA authorized USACE to procure, transport and store
material, leveraging the purchasing power of the defense
logistics agency, USACE procured over $229 million in material
and to date have received over 33 million items. Included in
these quantities are over 52,000 telephone poles or power
poles, 5,500 miles of conductor wire.
Based on FEMA's guidance in the design of the grid, we
purchased a mix of wood, concrete and galvanized steel poles.
PREPA's pole standard for distribution of feeder lines prior to
Maria, was galvanized steel and these poles were used to repair
the grid to the greatest extent possible dependent upon the
supplies available at the time. Concrete poles with reinforced
steel were used to replace existing broken concrete poles.
All lattice structures used to support transmission lines
were aluminum with reinforced galvanized steel plates at
critical joints.
The USACE mission assignment from FEMA will end effective
midnight 18 May. Our power restoration contractor will continue
to work until that date and time. We currently have over 540
USACE personnel and over 1,000 USACE contractors supporting
this mission. As the mission assignment ends there will be an
orderly transfer of responsibilities and material.
In the days remaining we are committed to maximizing
contributions toward restoration. The U.S. Army Corps of
Engineers is proud to have had the opportunity to serve the
citizens of Puerto Rico.
This concludes my testimony. I look forward to your
questions.
Thank you.
[The prepared statement of Mr. Alexander follows:]
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The Chairman. Thank you, Mr. Alexander.
Mr. Sobrino Vega.
STATEMENT OF CHRISTIAN SOBRINO VEGA, PRESIDENT OF THE
GOVERNMENT DEVELOPMENT BANK, AND CHAIRMAN OF THE BOARD OF THE
PUERTO RICO FISCAL AGENCY
AND FINANCIAL ADVISORY AUTHORITY, GOVERNMENT OF PUERTO RICO
Mr. Sobrino Vega. Thank you, Committee Chair Murkowski,
Ranking Member Cantwell and the rest of the distinguished
members of this Committee. Our statement will focus on
addressing our strategy for transforming Puerto Rico's energy
sector and PREPA itself.
On January 23, Governor Rossello announced a vision for the
transformation of PREPA and the Island's electric system. The
envisioned transformation is based on attracting private
participation to the sector through a concession of the
transmission and distribution system and private ownership and/
or operation of the generating capacity. The transformation is
desperately needed.
While Hurricanes Irma and Maria left the electric system in
shambles and millions of Puerto Ricans without electricity for
months, the fragile nature of the Island's electricity
infrastructure was painfully evident before the September
devastation.
The envisioned transformation is intended to bring to
Puerto Rico a consumer-centered model that provides people with
options, is sustainable, opened to advanced technology and is
resilient to future atmospheric events.
Establishment of an independent regulator and a regulatory
structure that creates investor and customer confidence is
critical. The transformation is also intended to be an
innovative energy model with a commitment to the use of
renewable and environmentally friendly resources and with the
goal of achieving more than 30 percent renewable energy
generation and an aspirational energy cost of approximately
$0.20 per kilowatt-hour. Energy transformation will provide a
springboard for the modernization of Puerto Rico, attract new
business and create jobs.
The government intends the transformation process to be
achieved through a proven model--Puerto Rico's Public-Private
Partnership Act. The P3 Act is well understood by potential
investors and has been used successfully in recent concessions.
The legal framework is one that promotes a competitive
process and assures transparency and fairness while still
providing the flexibility necessary to achieve the best results
for Puerto Rico.
We also expect that the transaction will be approved by the
Title III Court having jurisdiction over PREPA's insolvency
proceedings.
In any structure, federal funding provided for permanent
system improvements will be necessary to achieve the
appropriate levels of resiliency and hardening of the system
consistent with federal law. The structure of the
transformation will be designed to assure that benefits of
federal funding flow to the citizens, just as in any natural
disaster.
To make the Island's recovery efforts the most transparent,
effective and efficient in history, the Governor created the
Central Recovery and Reconstruction Office for Puerto Rico. The
Recovery Office is responsible for the development and
implementation of a strategic plan for the reconstruction of
the island in the short-, medium- and long-term.
In addition, the Recovery Office is intended to provide
financial accountability during the transformation process.
But one thing needs to be very clear. The U.S. citizens of
Puerto Rico should and must be the principle agents in our
recovery. Mechanisms are being instituted to show and provide
confidence that we will be good stewards of the U.S. taxpayer
funds.
During the transformation process, we anticipate that a new
or modified, adequately funded and independent regulator will
be established by the Puerto Rico legislature. We expect this
regulator will be comprised of five, highly qualified members
with staggered six-year terms to mitigate against political
interference. They may only be removed for just cause
consistent with Puerto Rico case law developed in that process.
This regulator will be free from regulatory conflicts and
structured to support the steps leading to sector
transformation. We expect this commission to be supported by a
staff with utility regulation expertise and that the ratepayer
advocate will exist separately from the regulator to provide an
independent voice for consumers.
After the transformation has been completed with a
successful transaction, the new regulatory structure will
protect consumers and implement Puerto Rico's energy sector
policy. It must do that while creating investor confidence and
attracting private capital.
Transformation of the energy sector is a vital part of
Puerto Rico's economic recovery. The Government's economists
inform us that empirical analysis from Argentina and other
countries indicates that a one percent increase in investment
will increase gross domestic product per capita by 0.3 percent,
implying that consistent investment results in considerable
increase in GNP levels over time.
In the recently-certified fiscal plan for PREPA, the
Oversight Board projected that the energy reforms would
increase growth by 0.30 percent starting in Fiscal Year 2020.
As a result, electric sector reform is one of the lynchpins of
the future of Puerto Rico.
And with these words, I will submit our testimony and look
forward to answering your questions.
[The prepared statement of Mr. Sobrino Vega follows:]
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The Chairman. Thank you, sir.
Mr. Higgins, welcome.
STATEMENT OF WALTER M. HIGGINS, CHIEF EXECUTIVE OFFICER, PUERTO
RICO ELECTRIC POWER AUTHORITY
Mr. Higgins. Thank you, Chair Murkowski, Senator Heinrich.
Thank you very much for inviting me today.
I'm now in my sixth week in Puerto Rico. Delighted to be
there.
I want to start by thanking the Congress, the Federal
Government, especially the FEMA, the U.S. DOE, the U.S. Army
Corps of Engineers and, more recently, the HUD for all the
things that are going on that are helping Puerto Ricans and
Puerto Rico's electric utility to become better and to be
restored.
There are many, many initiatives that are underway or soon
to be underway and we look forward to how those will help to
shape the grid in the future.
I'd also like to recognize the many public and private
utilities that came to Puerto Rico after the storm and helped
us, hundreds and hundreds of people, to get as many people as
possible restored to power.
You heard Mr. Alexander say that as of last night 98.44
percent of the people of Puerto Rico have power available to
their premises. That's good, but it's not nearly good enough
because there are still 23,000 people that do not have power
available to their premise. And we now have about 1,900 field
workers in the field in Puerto Rico working on resolving that
problem.
In addition, we also know that there are some places that
may be just too hard to get to in any reasonable time. We have
activities underway currently to find alternate solutions for
those people. Perhaps they might be microgrids, at a minimum, a
solar generator, a solar battery and an emergency generator.
Those kinds of activities are underway, actively, trying to
figure out who it is we will not be able to get to.
One thing that we're very sensitive to at this moment is
the impending hurricane season that starts in less than three
weeks. We are updating our emergency plans, both island-wide as
well as inside PREPA. We will hold an emergency drill inside
PREPA a few weeks from now and then right after that, there
will be an island-wide emergency drill to make sure that the
island is ready. And then whatever lessons we learn from that,
we will hold another drill in June so that we will have
practiced and practiced and practiced to be ready as possible
for the next season.
We're now moving from the planning and execution of
restoration to what's called recovery, and we have lots and
lots of things to do thanks to the federal dollars that are
going to be made available and the idea that we can do better
than we have done in the past.
Yesterday we announced the adoption of a national standard,
the RUS, Rural Utilities Service, standard for all future
construction in Puerto Rico of the grid. That's an important
step for us.
The system was designed to American Society of Civil
Engineering standards in the past, but this national standard
will help to facilitate bringing people into the island,
getting parts on a faster basis, making things familiar to
everybody, everywhere, making it easier to model, easier to
restore, easier to adopt new technology because everything we
do, new from now on and eventually to be rebuilt, will be done
to an accepted national standard. And the RUS standard is a
good one.
Two things really stand out as needing to be fixed, and
they've been alluded to in one way or another. The grid did not
withstand the hurricane. It simply didn't withstand it. The
grid has to be able to do better, and it has to be restorable
faster.
Much, if not most, of the grid was designed many, many
years ago, more than 20 years ago and sadly, it has not been
maintained the way it needed to be maintained. You don't just
build a transmission tower and walk away and hope everything is
fine. You have to go back on a regular basis, make sure that
the guy wires that hold the towers up, that everything is still
there and still intact. That needs to be done.
Second, our generation does not perform as well as
possible. That's certainly been hurting us recently. Most of
the generation that's active and capable in Puerto Rico is on
the south side of the island. Most of the load is on the north
side of the island. Sadly, the interconnection is what got
damaged so badly during the hurricane.
So, anytime, like happened recently, there is an incident
that effects the grid, the transmission system, the generation
can quickly get out of balance and a blackout can and
unfortunately did ensue.
So we believe that with the right technology, such as
Secretary Walker talked about, with the right amount of
maintenance, with a new view of how to build the grid back
using resilient, renewable, distributed and more efficient
resources, Puerto Rico's grid can be the grid that the
customers need.
Thank you for your attention today. I appreciate being
invited.
[The prepared statement of Mr. Higgins follows:]
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The Chairman. Thank you, Mr. Higgins.
Mr. Roman Morales.
STATEMENT OF JOSE ROMAN MORALES, ACTING CHAIRMAN, PUERTO RICO
ENERGY COMMISSION
Mr. Roman Morales. Thank you, Chairman Murkowski and
members of the Committee. Thank you for inviting me to appear
and for your interest in Puerto Rico's plans to transform its
grid.
The Commission has continued to carry out its statutory
duties. However, the need to restore electric service fast and
effectively while simultaneously seeking a sustainable
development, the Commission promulgated draft rules for the
development of microgrids and is about to publish the final
version of the same.
The Commission has also issued new integrated resource
planning rules and is preparing to guide PREPA's 2018 IRP
process. The Commonwealth is currently at a decisive moment for
the development of Puerto Rico's electrical system. The clear
mandate of I57 to transform it into an efficient, cost-
effective and resilient electric system today becomes more
important than ever. So it is of utmost importance that these
decisions are made based on a rigorous analysis of the needs of
the country within an orderly and objective planning process.
The Commission ordered PREPA to file the IRP by October
2018. We have initiated a proceeding to set new rates for
Fiscal Year 2019 to reflect PREPA's new cost structure. The
hurricanes have drastically affected PREPA's costs, revenues
and expectations of future sales, making it unlikely that the
rates in effect today satisfy the statutory just and reasonable
standard.
There are many decision-makers involved in Puerto Rico's
electric industry. There's PREPA, the FOMB, the Commonwealth
Legislature, the Governor, the Commission, the Federal
Government. Among all of these players, there should be just
one common goal and that is performance for the consumer.
In order for the term privatization to be useful, it needs
more clarity, otherwise people will confuse ideologies with
solutions. There are four distinct concepts that sometimes get
confused and combined. They are market structure, asset
ownership, operational responsibility and business ownership.
So when someone speaks of privatization it is not clear what at
least they propose to privatize: assets, operational
responsibility or the business. And it is not clear whether
they want Puerto Rico's historically monopolistic market to
remain monopolistic or to convert it into competitive market.
Instead of privatization, I will better describe it as a
restructuring. There is more to transformation than just a
change of ownership. Too often people talk about privatization
and market structures when what they really want to do is
escape the costs of the past, address only their own needs and
leave the resulting problems to others. That approach will not
solve Puerto Rico's problems.
To produce the performance Puerto Rico needs, we must
follow a logical sequence of steps.
First, describe the mix of products and services that
customers need. Describe the qualities of those products and
services in terms of reliability, timeliness, innovation, ease
of use and resilience.
Identify the market structures that will provide those
products and services most cost effectively. Identify the
companies that can most, that can provide those services cost
effectively. For those services that will remain under a
monopoly market structure, develop the necessary regulatory
procedures for them to proceed on principles.
And for those products and services to be provided on the
competitive market structure, create the regulatory principles
and procedures.
There are many decision-makers and stakeholders involved in
Puerto Rico's electric industry, all with ideas, plans and
proposals to address Puerto Rico's situation. All ideas, all
paths to performance should be on the table, but all ideas
should compete in a merit-based, fact-based, transparent
process.
We must find the best paths to performance. The integrated
resource plan approval process will determine the correct mix
of resources that is most cost effective from centralized to
decentralized generation from the impact of demand response
programs and energy efficiency to address the consumption, the
highest consumption that occurs during the evening, in order to
allow highest penetration of renewables.
The Commission is ready and able to assist the
Commonwealth, the FOMB and Congress to define the new
regulatory frameworks and market structures for the benefit of
the people of Puerto Rico.
Chairman Murkowski and members of the Committee, thank you
very much 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 very much, sir.
Mr. Masses.
STATEMENT OF RODRIGO MASSES, PRESIDENT, PUERTO RICO
MANUFACTURERS ASSOCIATION
Mr. Masses. Good morning.
Masses.
The Chairman. Masses.
Mr. Masses. Masses.
Good morning, Madam Chairman, good morning, Senators. Thank
you for having us here.
We already submitted our testimony. So if you don't mind, I
will go, I will summarize our points.
First of all, you ask about who is in charge? Who is in
control? The Governor, the Oversight Board, PREPA, Energy
Commission? Maybe I could answer who should be in control? The
private sector should be in control.
The Manufacturers Association, Asociacion de Industriales,
represent 50 percent of the gross domestic product in Puerto
Rico. No other sector gets close to seven or eight percent.
In the past two or three decades, we have been very much
affected by bad and expensive energy. As a matter of fact, when
they mention about 98.8 percent of the people of Puerto Rico
getting back on energy, it should be corrected: getting back on
bad and expensive energy. Okay?
It's been subject to blackouts and brownouts costing
thousands of billions of dollars in terms of product lost and
time lost and, of course, equipment damages.
So, we are going to hear and listen to many statements. We
will receive a lot of data.
And yes, you're right, we need a stable, robust, regulatory
framework, legal framework. And yes, it's very important to
have an independent, regulatory entity. And we need to complete
the integrated resource plan that was approved by the Energy
Commission in 2016 in order to have a good map of what to do,
how to transition this power-activity. Okay?
We also need, badly, to allow the productive sector to
generate our own demand, to own the energy we need by allowing
us to co-generate or generate by using distributive energy.
And yes, transparency. It doesn't matter if we have a
beautiful higher peak and we have a beautiful framework, okay?
If we go through the typical process of RFPs to contract and
procure, we may get back into a bad and expensive energy at the
end of all this mechanics.
So, the process of public auction, subasta publica in
espanol, which is basically the way that everything is
presented, the way that the agency announces the opportunities,
the bid, allows you and me, if we are competing against each
other, to review and audit our proposals, allow the press to
follow up in all this. That's the only way that we're going to
finish with a good product at the end of all this.
We have been accumulating a lot of intelligence. We have
the data. We just have to go and execute what we should do.
And the only way that we are going to be resilient is when
we own the generation that we're going to use.
Thank you, Madam Chairman.
[The prepared statement of Mr. Masses follows:]
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The Chairman. Thank you, and thank you each for your
statements. There is a lot to discuss here this morning. Let's
just get right into it.
Let me ask first, Mr. Alexander, on the timeline that you
have here. May 18 is the end date for the Army Corps power
restoration mission. So, it concludes at that point in time--
98.44 percent of the folks having power there is good, but for
the 22,900 who are without, I would imagine that they look at
that date and say, wait, you can't leave us. Is there any
consideration of an extension of this mission? Any need for it
to be extended?
Mr. Alexander. Ma'am, I believe that options, all options,
were looked at. The Unified Command Group, they deliberated.
The gentleman to my left actually sits on that body. Our
authority to be there rests with FEMA and our resources.
So we will do whatever the mission is, but we, right now,
have been told at midnight on the 18th we will transition
orderly with FEMA, our lines that we're working on and the
material that we have and replenish their inventory as well----
The Chairman. Let me ask about the orderly transition and
this may be directed to either you, Mr. Alexander, or to Mr.
Higgins.
Big story, not too many weeks ago about the raid, I guess
it was in January, a couple months ago now, of a PREPA
warehouse at the Palo Seco power station where the rebuilding
materials were seized.
So we have had a lot of discussion. You have mentioned the
inventory of the material purchases but recognizing that that
was one of the initial limiting factors in restoring the
electric grid because you had supplies that were being
requested in other parts of the country for other hurricanes.
You had a supply issue at the time. We have obviously worked to
address that. Then you had a very serious incident there in
January where the materials are secured.
So now you are saying you are going to be doing an orderly
transition? Can you give us that assurance that we really do
have the materials that are needed and what that will entail
when you move on and the work remains?
Mr. Alexander. Ma'am, I'll start off.
You know, we will conduct an audit, an inventory, of the
material that will be turned over to PREPA, again to replenish
stocks that were consumed during the response and then the
material that they still need to complete the mission.
The Chairman. How much is outstanding and do you have a
sense in terms of what is needed to complete?
Mr. Alexander. On what we need to complete?
Well, we're down to one point something percent until we
hit 100 percent. I don't have the actual, you know, count for
number of poles, transformers, conduit, et cetera.
The Chairman. I guess where I am going with the question
is, is whether or not we are still in a situation where we have
a shortage of the material for the completion. You are
suggesting no because we have got to about 98 percent.
Mr. Alexander. Ma'am, material is no longer a limiting
factor.
The Chairman. Okay.
Mr. Alexander. It was initially because there literally, in
many cases, the material wasn't there. It had been consumed in
the previous storms. It was coming straight off the
manufacturing line and then there are some unique
specifications that apply solely to Puerto Rico.
The Chairman. Okay.
Mr. Higgins, did you want to add anything to that?
Mr. Higgins. Yeah, I think Mr. Alexander has correctly
stated that material acquisition is no longer a big picture
problem. All the materials are either on the way or on the
island or have already been deployed.
There could occasionally be a localized problem where a
material isn't available to a crew at a particular time, but
that's more of a matter of getting it to them, getting it from
central to regional warehouses and out to a crew.
The important thing going on now with the Army's mission
ending is the assumption by PREPA of the logistics operation,
that the Army has capably and admirably performed over the last
many months.
So now we're in the process of PREPA's material acquisition
people taking over the inventories, all the material that the
Army has acquired for this, taking over the replenishment of
future materials, receiving the materials that the Army
``borrowed'' from PREPA. And in addition, being prepared, fully
prepared to operate the logistics of material activities in a
way that supports continuing restoration and the ongoing and
soon to be undertaken recovery.
The Chairman. And you are prepared to take that up on the
18th of May?
Mr. Higgins. Well, we're still--it's going to be a
challenge and we're probably going to get some help via the
FEMA for that, but our people feel they are ready and the FEMA
is going to give us some additional augmentation as we go
through that transition.
The Chairman. I guess recognizing that May 18th is coming
up next week, we sure want to know that you really are ready
and that you are not still, kind of, ``working through
things.'' That is next week.
So if there are things, if there are steps, if there is
anything that needs to be done on the outside looking in to
help facilitate that, we would certainly hope that you would
make sure that that is known.
Mr. Higgins. We feel that we are ready to take this task on
and the help will make sure that we are ready. I don't doubt
that we'll have some growing pains. This is a massive effort,
but we are ready to take the task.
The Chairman. I understand that, sir, and I appreciate it,
but I also think that for those that have been living with
great uncertainty about their power generation since these
hurricanes, these 22,900 that are still without, when they hear
you say that there is going to be continuing growing pains,
that must be really tough on them.
Mr. Higgins. Yeah, I completely agree with your comment,
Madam Chairman.
The Chairman. Senator Heinrich.
Senator Heinrich. I am still trying to--I am having a hard
time wrapping my head around this.
Mr. Alexander, if there are over 20,000 Puerto Rican
American citizens still without power, is your mission really
accomplished?
Mr. Alexander. Our mission, as assigned by FEMA, is.
Senator Heinrich. I don't think that is acceptable. I
cannot imagine a scenario where 20,000+ Texans or 20,000+
Floridians were without power and FEMA would make that
decision. I think that is reprehensible.
Mr. Masses, I am going to get to the bottom of something
you raised that I think is a bit of a game changer here. Puerto
Ricans pay painfully high retail electric rates, both
individual citizens and manufacturers. I can't imagine a world
where you try to make manufacturing work at $0.20 plus per
kilowatt-hour. A lot of that is because of an antiquated over-
reliance on diesel generation which is incredibly expensive.
So at a time when we see new generation from wind, from
solar, from natural gas, all priced in the bulk market at $0.02
to $0.04, even $0.02 to $0.05 a kilowatt-hour, it seems to me
that even on the retail price, we ought to be able to build new
generation cheaper than operating the existing diesel
generation. Am I missing something here?
Mr. Masses. By all means, by all means, but let's get back
into the material cost here.
Senator Heinrich. Why can't you?
Mr. Masses. They talked about the inventory is not a
problem anymore because it's being handled.
What about in the next three or four months, if we are hit
again is the inventory there because they fix what was broken
the last two or three months?
Senator Heinrich. Right.
Mr. Masses. But what about if we get hit again? Are we
going to go through this again? Of course, if we are, if we own
our generation, we will have the inventory available to fix our
problems.
Senator Heinrich. What are the barriers to your members
being able to own their own generation, their own storage,
their own behind-the-meter distributed resources that then
cannot only support your members, but in an emergency
potentially provide services back to the grid?
Mr. Masses. Well, not just in an emergency because we could
design it in order to share our excess with the community and
other components of these regions.
So, I mean, we could design all this in a proper way to
help everybody in Puerto Rico.
Senator Heinrich. Why can't you do that today?
Mr. Masses. Well, we have not been able to do that in the
past because typically PREPA protect their invoice. Remember
that we are the biggest invoice of the company. So, they may be
concerned about this kind of trend.
And yes, in terms of technologies, solar, wind and there's
many others that are available and that could make things very
nice.
Senator Heinrich. Mr. Higgins, what is the PREPA legal
stance with regard to behind-the-meter resources with regard to
solar and storage for individual retail customers as well as
with regard to large commercial customers being able to have
behind-the-meter generation?
Mr. Higgins. Senator Heinrich, I think the question needs
to be answered in, kind of, two ways.
Number one, Puerto Rico needs to change the way the grid is
supplied by power today. It is not being adequately and
properly supplied with the current generation mix. That
generation is troubled by a maintenance issue. It's troubled by
being reliant on oil which is both environmentally and cost-
wise a difficult commodity. And in addition, there's not enough
generation where it needs to be and, in some cases, there's too
much where we don't need it.
So, the grid needs to be rebuilt. It needs to be rebuilt,
not just the wires, but the generation needs to be rebuilt and
as we change it out, then I agree with Mr. Masses in that
regard, we should be relying on customers to generate
themselves. We should be allowing customers who want to self-
generate to do so.
We need to interconnect with them safely such that the grid
is still safe, the workers can still work without danger and
the customer is able to supply what they want to and PREPA, in
the new world, will supply what PREPA is capable of supplying
for people that don't want to do it themselves or when it's
more economic.
Senator Heinrich. Do you have a current net metering policy
either for retail or for large commercial users?
Mr. Higgins. As I understand the retail policy--I've not
spent a lot of time looking into that in my short time there--a
customer, in order to be a retail solar customer and still be
connected to the grid, must have a system that supplies their
own needs and have storage. Therefore, they aren't going to
suddenly rely on the grid when their system doesn't work. That,
I believe, is our current way of dealing with behind-the-meter
solar.
Senator Heinrich. Thank you.
The Chairman. Thank you, Senator Heinrich.
Senator Cassidy.
Senator Cassidy. I agree with what the Chair said. There
are a lot of things to talk about here. But let me, kind of, go
to you, Mr. Walker, and I think also you, Mr. Sobrino Vega.
You mentioned the desire for resilience and for 30 percent
renewables. Now when we took our tour of Puerto Rico, there
were lots of smashed windmills, and on our tour of the U.S.
Virgin Islands, a lot of smashed solar panels. I am guessing
that if you are going to be resilient there has to be at least
some redundancy in terms of yes, we have renewables, but there
has to be an amount of backup generation as either baseload
and/or reserve generation. Is that correct?
Mr. Walker. Senator, when I spoke earlier, I spoke about
the integration of renewables as part of the strategy. I did
not indicate any percentage like an RPS.
Senator Cassidy. That may be you, sir.
Mr. Walker. But that being said, the question you're asking
is a good one because I, too, saw the havoc that was wrought
during Hurricane Maria and the impact it had on renewables.
To that end, part of the modeling effort we are undertaking
is the utilization of our expertise with weather data,
particularly wind, to identify where there are opportunities,
strategically, to place things like solar and wind that we saw
damaged in Puerto Rico, utilizing the topography of the island
to facilitate its ability to withstand hurricanes.
So----
Senator Cassidy. Presumably though, it will always be more
vulnerable than other assets.
And sir, you were going to comment?
Mr. Sobrino Vega. Yes.
Resiliency requires resiliency in generation capacity on
the island. That's a given. But the introduction of renewable
energy sources is not, the way it's structured in our renewable
portfolio standard that was legislated back in 2010 and amended
subsequently, is to provide a cheaper source of energy that can
allow the energy sector and the cost of producing energy on the
island is lower if we only depend and if we only depended on
diesel and petroleum products.
Senator Cassidy. I accept that.
So there would be redundancy, if you will, for resiliency,
but nonetheless, net, you would have a lower price. I think----
Mr. Sobrino Vega. I think that is our goal, sir. Yes.
Senator Cassidy. So let me ask. The other thing we learned,
Mr. Higgins put it very nicely, the generation is not co-
located with your consumption. I recall that coal-powered power
plant on one side of the island, but it is the opposite side in
San Juan.
That seems as if you are going to address that. You are
actually going to put some of this redundant, necessary for
resiliency capacity on the northern side of the, or I should
say, on the opposite side of the island from the coal-fired
plant. I presume that plan is in the works?
Mr. Higgins. Yes, sir.
One of the important initiatives that we are undertaking is
to look at, possibly and hopefully, repowering some of the
northern generation, both bringing the maintenance up to
standards and repowering it with a, hopefully, liquified
natural gas imported and then burned in the generators.
Senator Cassidy. Now we saw that.
Going back to the former regime, I remember being struck at
that plant outside San Juan. It was rusted. I mean, it was just
amazing how lousy the maintenance had been of that plant.
But there were two, kind of, I think GE, looked like jet
engines sitting there generating electricity. Do you anticipate
this, sort of, LNG associated with these sorts of engines on
multiple places around the island so it can back up these
microgrids and the 30 percent renewable?
Mr. Higgins. Senator, for the first round we're thinking
of, perhaps a small, not a massive LNG solution for the two jet
engine installations that you talked about so that instead of
being fired by oil they'd be fired by natural gas.
Senator Cassidy. I thought those were being fired by
natural gas. Do I remember that incorrectly?
Mr. Higgins. They are not fired by natural gas today, the
ones at the San Juan generating station that you allude to.
I also think it's very fair to say that we are not proud of
the maintenance condition of our fleet, whether it's the
generating fleet or our transmission grid. That needs to be
maintained better and our future budgets call for that.
Senator Cassidy. Lastly, but to my point, it seems when we
flew there, it seemed as if, again, you have this island way
over here that was one of the last places to have its island
restored. As we flew over, that was dark and other things were
lit. Then you have the mountains separating three or four
different places. You know exactly what I am stumbling and
fumbling to try and describe.
Again, would you put that sort of two jet engines, sort of,
back in each of those places or are we, again, going to have
all these lines stretching over the mountains, being vulnerable
to a big storm?
Mr. Higgins. Senator, what we're going to try to do through
the integrated resource planning process that Chair Roman has
addressed, that Mr. Sobrino has also addressed, that Mr. Walker
has addressed. Integrated resource planning is a modern, highly
developed methodology for determining what the right mix of
resources and grid improvements and technology should be to
best meet the island's energy needs.
It's clear that we're not meeting them very well today;
therefore, the integrated resource plan should identify the
very kinds of things you're identifying. Where does the
generation need to be? What kind of generation would make the
most sense? Meeting all the goals, whether environmental or
cost----
Senator Cassidy. Let me stop you----
Mr. Higgins. Sorry.
Senator Cassidy. ----because I am out of time.
I will say that I guess one more question I would have
asked, and I will ask for the record is, we have just spent all
this money rebuilding, but it looks as if going forward we may
redistribute. Knowing that maybe that is how it had to be done,
it does seem as if there is an inefficiency on resource
allocation. Again, maybe it had to be done that way, but it
does seem as if you are going to relocate from your testimony.
I yield back. I am sorry for going over, Madam Chair.
The Chairman. Thank you, Senator Cassidy.
Senator Smith.
Senator Smith. Thank you, Madam Chair, I am really happy to
be here today. Thank you all very much for being here.
I am new to this Committee, but I am just so struck by the
reality that with Hurricane Maria, we lived, American citizens,
lived through the second largest blackout in the history of the
world. It is incredible to think about, and yet we are still
working to recover from this. And I am thinking about what
would happen if this had happened in my state of Minnesota and
we were still waiting to recover.
I appreciate the complexities of trying to respond to this
amazing disaster, but I would like to just first go to Mr.
Walker and Mr. Alexander and try to get at what you think our
responsibility is in Puerto Rico. We have, this Committee, has
to be the voice for Puerto Rico here because there are no
representatives from Puerto Rico on this Committee. But what is
our responsibility to make sure that we recover quickly from
this? It feels like it is up to us.
Mr. Walker. Do you want to take that?
Mr. Alexander. Ma'am, our responsibilities are, you know,
tied to the Stafford Act and it's to provide temporary interim
repairs, not permanent repairs.
There, we have a, the Corps has a long history in working
with Puerto Rico. We have an area office there. We work on
projects. We will continue to be on projects. Our Jacksonville
district is focused on Puerto Rico.
But we are, our responsibility is to turn the lights on as
quickly as possible and other missions assigned, and we're
doing that to the best of our ability.
Senator Smith. I appreciate that this is complicated, as I
said, but I am glad to have this opportunity to figure out what
we all can do to do better because this is--I think about what
would happen if we were in Minnesota and we were coping with
this.
Mr. Sobrino Vega, I would like to ask you about something
related to your testimony which I thought was very helpful. We
know that with climate change we are going to be seeing more
storms, more frequent storms, more intense storms. Your
testimony, I think, gets at really laying out the problem that
we have, all of us have, in Puerto Rico with long-term failure
to invest and modernize the electricity system and also the
need for transformation, right, so that it is more sustainable
and as you say, more customer centered in the way that we do
this.
I always like to think about how we can have more
affordable, reliable, resilient and clean energy as a solution
to that problem. Could you talk to us a little bit about what
you see as the federal policy changes that we should be
considering or the things we ought to be considering from this
Committee's level to help you to achieve that goal?
Mr. Sobrino Vega. The main driver right now in the recovery
effort in Puerto Rico is really the funding.
The issue with maintaining the infrastructure for PREPA,
the truth of the matter is that it, PREPA was succumbed to a
fiscal crisis. When you have any municipality or any entity,
any public entity, that is involved in a fiscal crisis,
typically what you'll see is that the first budget item that
goes down is capital expenditures and maintenance costs. That
explains why the San Juan plant that the Senator alluded to had
rusted infrastructure, why you had transmission lines that
hadn't been replaced. The mere effort of reestablishing
electricity was, in and of itself, an improvement on what we
had before.
So something that we would appreciate is--and the federal
agencies like DOE, FEMA, U.S. Army Corps of Engineers, that
have been helping us out on this--is ensure that the
infrastructure, that the infrastructure funds and recovery
funds that are provided to the island reflect what is the best
assessments not only from a conceptual phase up here in
Washington but what we know in Puerto Rico to be best for the
island.
Senator Smith. Thank you.
I just want to ask a quick follow-up question.
As we think about the goal of getting more resilience in
the system as well as more affordability, is there, do we think
that having more renewable generation takes away from the
resilience of the system?
Mr. Sobrino Vega. No, there are inherent difficulties with
producing and providing energy and fuel to an island. That's
inherent. That's part of the reality that Puerto Rico faces.
What we do need to make sure is that while we strive to
have cleaner and renewable energy sources, we do provide for
redundancy, so in case that there is an atmospheric event like
the one ago, we can turn on generators.
Senator Smith. Yes, that is not the conflict.
It strikes me that my colleague, Senator Hirono, might want
to, may well have comments about this, given the similar
situations that Hawaii has and a huge emphasis on renewables.
Madam Chair, I realize that I am out of time. I appreciate
this.
I am also really interested as a follow-up as we go forward
on this question that you raised at the beginning about who is
in charge here and how do we make sure that the coordination
happens? It needs to happen so we can be successful.
The Chairman. Thank you, Senator.
Senator Gardner.
Senator Gardner. Thank you, Madam Chair, for your time and
testimony. Thank you for allowing this testimony to be held
today, this hearing to be held today, and thank you for the
time and testimony of the witnesses today.
A few questions.
Mr. Walker, you talked briefly about one of these questions
already. In your testimony you describe how DOE provided both
modeling support for the island electric grid and technical
assistance for the microgrids. I think you answered yes to a
question basically of, were these grid models used to identify
microgrid opportunities and the long-term role that they can
play. I think you have already talked a little bit about that.
But the models that you used on microgrid modeling, will they
be made available to future owner-operators of the grid?
Mr. Walker. Senator, absolutely.
My team is working with Mr. Higgins' team. We have people
in Puerto Rico today both from the PMAs from a technical
expertise standpoint as well as personnel from within my R&D
organizations coordinating with the national labs providing
those models.
Senator Gardner. And so, the modeling techniques, can they
be used for regional, other national models, within the
continental U.S.?
Mr. Walker. Absolutely.
Senator Gardner. And will there be regulatory innovations
to address the increased use of distributed energy systems that
we can transfer then to the 50 states?
Mr. Walker. Yes.
We're building the model bigger and larger, a more
sophisticated model in Puerto Rico, that will be both a
planning tool and an operational tool with the idea that we
will be able to transport the lessons learned while we're
building that model into the broader model for North America.
Senator Gardner. I think you mentioned that DOE is working
with the Southern States Energy Board (SSEB) to develop a
policy and legal framework that would help provide a regulatory
process for possible restructuring and privatization efforts in
Puerto Rico. What role is DOE playing there? What is the
timeline to deliver options and recommendations?
Mr. Walker. Yeah.
So mainly DOE's role there was the Secretary and I met with
Governor Bryant from Mississippi who chairs their Executive
Board. Recognizing that our expertise within DOE is on the
technical side of the energy systems, we hired the Southern
States Energy Board to work with Puerto Rico and USVI mainly
because both USVI and Puerto Rico are already members of SSEB
and they have the expertise with regard to regulatory policy,
working with municipal utilities.
Senator Gardner. Thank you.
Mr. Higgins, as you oversee the rebuilding of the grid you
have talked about resiliency, but how broad of a definition
does that resiliency cover? Do you have the ability to not only
withstand storms, but manmade, physical and cyber threats as
well with this new resiliency?
Mr. Higgins. I think as the grid, Senator, as the grid is
redeveloped and much along the lines of what Assistant
Secretary Walker talked about, we will build into some of these
new systems more resistance, more resiliency to, let's say, a
cyberattack.
As we rebuild and redesign the grid to the newly adopted
standards and with the help of the Federal Government, which we
appreciate, we'll be able to build some of these things, these
structures, so that they're more resistant to the next storm
that might come.
Senator Gardner. Okay.
Do you have the ability or authority to hire a manager team
at PREPA? What authorities do the Governor and legislature
retain in assigning or approving the management team there?
Mr. Higgins. I was asked to come to Puerto Rico with the
full knowledge that I could replace anybody in management that
I felt I should replace. I've received no interference on that.
The Governor has made clear to me that I am an independent CEO,
have the authority to replace management as I see fit.
Senator Gardner. So, the Governor and legislature, what if
any do they retain in terms of authorities?
Mr. Higgins. The Governor is the Chief Executive of the
island and he sets policies for the island. And my job, as the
head of a major state agency, albeit under an independent
board, is to carry out the policies of the Governor.
Senator Gardner. But in terms of assigning or approving
your manager team, you have that full authority?
Mr. Higgins. Completely.
Senator Gardner. Very good.
Mr. Roman, I am sorry, go ahead Mr. Vega, I am sorry.
Mr. Sobrino Vega. I would like to clarify that.
Walt is the first CEO of PREPA that was appointed through a
non-politically influenced process. He was selected through a
headhunting mechanism. He was evaluated by a committee of
directors that was comprised of the independent directors of
PREPA, and he was selected and his compensation was also
established through that governing structure. And that is
something that we are very proud of that we have this first,
non-politically appointed CEO for PREPA.
Senator Gardner. Thank you.
Mr. Roman Morales, in your testimony you expressed
frustration with both the Governor's office and FOMB contending
they are impeding in the Commission's ability to implement
measures that would push PREPA toward financial and operational
responsibility.
Could you talk a little bit more about those frustrations
directly?
Mr. Roman Morales. Yeah, sure. Thank you, Senator.
Yeah, I have expressed my frustrations, one with Fiscal
Oversight and Management Board because of what we see as being
an overreach of the delegated powers by Congress. So, I would
ask Congress to really specify the FOMB, they should operate
within trying to harmonize commonwealth law and not against
commonwealth law.
As we see it, Congress delegated the Fiscal Oversight and
Management Board fiscal duties, but not policy responsibility
within the island. That remains completely within the
Commonwealth of Puerto Rico and where the Commonwealth send
delegates to the Commission, then the Commission would carry
out its duties.
For fiscal problems, the Commission isn't self-sustainable.
Our funding comes through rates. We have not been able to fully
utilize our funding through the hiring of either external
counsel or external consultants or hiring personnel because of
this law that requires the approval of the Office of the
Governor. And that has taken a long time to acquire. That has
actually impeded the performance of the Commission.
Senator Gardner. Thanks again. Thanks to all the witnesses.
Thanks, Madam Chair.
The Chairman. Thank you, Senator Gardner.
Senator Cortez Masto.
Senator Cortez Masto. Thank you.
Mr. Higgins, let me start with you. During our last hearing
on this subject, it was made clear to the Committee that the
Stafford Act, as written, requires funds to be used only to
restore damaged equipment to its previous state which made no
sense for Puerto Rico given the disrepair its electrical system
was in prior to the hurricane.
In the budget bill that we passed in February a provision
was included allowing funds to be used to replace or restore
systems to the industry standard without regard to the pre-
disaster condition of a facility. It also allowed flexibility
to allow components not damaged by the hurricane to be replaced
in order to bring a larger system up to industry standards.
My question to you is, does this provision go far enough in
enabling PREPA to rebuild for resilience and reliability?
Mr. Higgins. Senator, I think that the way it's written and
subject, of course, to funding, it does go far enough. These
are serial activities. You can't redesign and rebuild a system
from scratch and completely upgrade it to the new standards.
You had to get the power back on first, so that's been the
priority.
But as I understand the funding, as it's been explained to
me, as I read it, provided it is funded, there is enough
authorization activity and hopefully funding to rebuild the
system so it meets modern standards.
Senator Cortez Masto. Mr. Walker, let me ask you the same
question. Do you think that we need to take any further action
in regards to the Stafford Act in order to achieve power and
resiliency in Puerto Rico?
Mr. Walker. Thank you for the question, Senator.
Yes, I do.
When testifying in front of the House I spoke to this a
couple weeks ago, and my point was that there's an opportunity
for us to allow engineering to be done to modify and make
corrections with regard to design, particularly to add the
resiliency.
And so, rather than be held to what a standard may very
well be, there are opportunities. And I think Puerto Rico has
presented many of those, where we could have replaced and made
decisions early in the restoration process to increase the
capability for, let's say, a line. And so, I could build it
with, you know, double up lock poles as opposed to what the
industry standard might be a single lock.
So I think the capability to allow those who are on the
ground, making decisions with regard to the emergency
restoration, to incorporate the ability to modify the system
and to add capability whether it's through redesign or just
stronger equipment, even if it exceeds industry capacity or the
industry standard.
Senator Cortez Masto. And that is true for not just Puerto
Rico, but some of the other islands that sustained damage as
well?
Mr. Walker. That's right.
Senator Cortez Masto. Thank you.
Would you be willing to work with my staff as we address
these issues?
Mr. Walker. Yes, ma'am.
Senator Cortez Masto. Thank you.
Mr. Higgins, let me go back to a question that came up, and
I believe it was the Chair who talked about this and the
concern with the Corps leaving May 18th and my understanding
with PREPA taking over.
You mentioned in your response to the Chair that as you
take over these logistics that there are going to be challenges
to take over the logistics to engage in the continuing
recovery. What challenges were you talking about?
Mr. Higgins. There's a--Senator, thank you for the
question.
There's a massive amount of material both still coming in
and that needs to be reintegrated into PREPA's warehouse system
from the Army's warehouse system that they very capably
developed in order to fight the battle, so to speak.
And so, our people are now in the process of receiving all
that material and all the paperwork that goes along with it so
that everything is properly accounted for, along with getting
all the material out of the laydown yards and the Army
warehouses, getting out of the Army warehouses. That's a lot
more things than the company was normally doing.
In order to do that efficiently we've asked for some
temporary help, but our people feel they're capable, and I
agree with them, of managing the ongoing material requirements,
but this transition period where we're getting a lot more
stuff, we have a lot more things to do and we have to comply
with FEMA requirements all the way along the way to be sure
it's reimbursable.
Senator Cortez Masto. So you say you are going to be
getting help. Who is providing the help for you?
Mr. Higgins. FEMA will fund some temporary help for us. I
don't know exactly the source, Senator.
Senator Cortez Masto. Would you prefer that the Corps
extend its mission and stay and continue?
Mr. Higgins. We've been delighted with the work the Corps
has done. And at the end of the day, it's not really PREPA's
decision. We're very interested in how the work got done and
the Corps engaged contractors to do that work. And they've done
a good job. The Corps also took over the logistics operation
which was very helpful.
We just want it done. We're not indifferent. We want the
job done well. We have more contractors coming to the island to
replace the Corps' soon to depart contractors. We don't choose.
This is FEMA's choice, but I think the FEMA is making a choice
that's dictated by what their guidelines are as well.
Senator Cortez Masto. Alright, thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator.
Senator Lee.
Senator Lee. Thank you, Madam Chair, for holding this
hearing. Thanks to all of you for being here.
I would like to start with Mr. Alexander. Are you concerned
about mismanagement within PREPA?
Mr. Alexander. No, sir. I am not.
We've been a partner. We've been in collaboration with
PREPA since day one, and we've been working out of their
headquarters. I believe it's been a partnership that has led to
our ability to get as far as we have.
Senator Lee. Are you aware of any ongoing investigations
regarding the missing inventory information for Warehouse Five,
located near Puerto Rico's Palo Seco generating station?
Mr. Alexander. Sir, I'm not aware of any.
Senator Lee. Can you tell us why the raid of Warehouse Five
was conducted on January 6th?
Mr. Alexander. I don't know if I would characterize it as a
raid. I believe it was just some of our personnel were there
and they happened to notice that there were supplies in our
warehouse that had not been previously identified when we were
working with PREPA to inventory the stocks on hand which would
ultimately help inform what we needed to procure.
Senator Lee. Since that operation, whether you call it a
raid or otherwise, do you have reason to believe that there are
other gaps in PREPA's inventory?
Mr. Alexander. No, I think an extensive joint inventory was
done. And again, that's what resulted in the material we
procured, about 90+ percent of the 36 million items that we
ordered has been delivered. I think that we'll find the
inventory will be suffice and allow PREPA to not only have
replenished stocks but to finish the restoration mission.
Senator Lee. Okay.
Mr. Higgins, I would like to talk to you for a moment.
In November, before this Committee, I asked Governor
Rossello about some of the serious issues with PREPA's
management and operation.
I would like to follow up on that by asking you directly,
do you think there is mismanagement and corruption within PREPA
in Puerto Rico, generally, and in particular within PREPA?
Mr. Higgins. I have no idea about Puerto Rico, Senator. I
don't know enough about it yet to know that.
I can tell you this, that with respect to PREPA there are
always going to be in an organization of 6,000 people,
something that's going on that shouldn't be, and we're going to
vigorously investigate and go after anything that's not done
the right way.
Similarly, I've told all the Senior Managers that were
there when I came, it's time for you to decide if you want to
be a part of the solution or you don't. And if you don't want
to be a part of the solution, tell me now because if you don't
tell me and I have to make a change, it's not going to be nice.
So, some may make it, some may not.
I'm optimistic that some get it, that PREPA is going to be
different in the future, but I've made quite clear to them,
you've got to be different, you've got to be a different kind
of leader and run the company differently than it used to be
run.
Senator Lee. To the extent you are suggesting that PREPA is
no more susceptible to or vulnerable to or the victim of
mismanagement and corruption than any other business
organization or any other utility company, state owned or
otherwise. I don't think you are suggesting that, are you?
Mr. Higgins. No, sir, I am not.
I'm simply saying that within a group of 6,000 people
there's likely to be somebody that's not doing the job the way
they ought to. Hopefully, it's just not doing the job as
opposed to something corrupt, but anything that we find that
even suggests corruption will be seriously and thoroughly
investigated and dealt with strongly.
Senator Lee. Some of the things that have concerned me
involve reports of staff being hired without experience or
expertise required for the job that sometimes resulted in the
failure of big, multi-year projects, widespread theft of power
and billing failures, outdated infrastructure systems that
cause an unusually high rate of forced outages and generation
units that are often technologically outdated requiring
reliance on very expensive fuel. Are you aware of some of those
problems and are you taking steps to address them?
Mr. Higgins. Senator, several of the last few you mentioned
were covered in my remarks that we do have maintenance issues
with our generators. We do have environmental compliance issues
with our generators. And if they're not able to be run for
environmental reasons, they have to be shut down. If our
generators are not up to snuff, maintenance wise, then we do
have to run a less efficient, more expensive generator.
There's no question that is going on. That needs to be
fixed. That's part of my mandate.
Senator Lee. Thank you. I see my time has expired. Thank
you.
The Chairman. Thank you, Senator Lee.
Senator Hirono.
Senator Hirono. Thank you, Madam Chair.
Question for Mr. Alexander. In a May 6th article in the New
York Times, the Commanding General of the U.S. Army Corps of
Engineers, General Semonite, was quoted as saying that, ``prior
to Puerto Rico, the Corps had never repaired an electric power
grid of this magnitude as part of a domestic disaster response
and could not predict the assignment from FEMA to restore the
grid.''
Do you believe that the Corps should be tasked with grid
repairs in future natural disasters because there will be more,
beyond its more routine task of bringing in generators? As you
said, your immediate mission was to turn on the lights. So
should the Corps be able to do more than just turn on the
lights in a situation like what happened in Puerto Rico?
Mr. Alexander. Thank you, Senator.
You know, the Corps has traditionally just done the
temporary emergency power generators. This was a new mission
set.
We have done some grid work in Iraq and Afghanistan, but
certainly nothing to this extent. It's not a core, c-o-r-e,
competency of ours.
The decision on whether this should be, you know,
incorporated in our portfolio of services is not ours to make,
but if it is made, then we would have to train our personnel
and be resourced adequately to be able to execute that mission.
A lot of this was done on the fly, if you will. We were
able to get contracts in place quickly under federal
acquisition regulations due to the large contract vehicles that
we had in place.
Senator Hirono. So you say the decision to expand the
mission of the Corps is not yours. Whose decision is it? The
Congress?
Mr. Alexander. Well, the determination for the grid
restoration mission for the Corps to end at midnight on the
18th, that decision is by FEMA. You know, we're there under the
Stafford Act authority and under the associated resources. We
run out of money on the 18th and we run out of authority.
I would tell you, based on a statement made earlier, and I
would be remiss if I didn't say, you know, the thousands of
Corps of Engineer employees and military that have deployed to
serve the citizens of Puerto Rico, it's not in our culture to
walk away from a mission----
Senator Hirono. Yes.
Mr. Alexander. ----when it hasn't been fully accomplished.
But we follow orders. We follow orders and----
Senator Hirono. Yes, I understand that, especially because
I know that FEMA was on Kuai and they're on the Big Island
right now. So this is not denigrating anything that FEMA is
doing.
It's to ask whether or not we should in instances such as
Puerto Rico which is a very unique island nation, on an area
just like Hawaii is, whether there should be some greater
flexibility under the Stafford Act to allow you to do more and
to have more training and, of course, depending on resources
provided.
Mr. Walker. Senator, if I may answer this question.
I do not believe that the Corps should be focused on
emergency restoration for power grids as an expansion of their
duties.
The Corps was assigned, a mission assigned by FEMA, because
PREPA did not call for mutual aid. The standard within the
industry is that any utility, whether it's an EEI or NRECA or
APPA, they call for mutual aid and command the resources across
the entire United States and Canada to restore events. And so,
but for that failure to call for mutual aid, that is what
resulted in FEMA mission assigning the Corps to undertake the
emergency restoration component.
So, had the process worked as designed and the reason why
General Semonite indicated in his article that it was the first
time, it is, in my nearly 30 years working the industry, it's
the first time I've never seen mutual aid called.
Senator Hirono. So this is a responsibility of PREPA to
have a call for that mutual aid?
Mr. Higgins. Excuse me.
Senator Hirono. And so, Mr. Higgins, have you rectified or
has somebody rectified this omission?
Mr. Sobrino Vega. Senator, we did eventually call for
mutual aid. At the time when Hurricane Maria hit Puerto Rico a
lot of the utilities and the companies that would be providing
it usually were essentially busy in Florida and Texas.
Before that, after Irma, PREPA had hired certain
contractors to help in the restoration process and the mission
for the Corps, as I remember, because I was there, was signed
because they put it in front of the Governor and asked him to
sign it so that we could have energy in 40 days. So it's a
little more complicated than as narrated before.
Mr. Walker. I'm not sure that's accurate because I was
there.
Mr. Sobrino Vega. I was there, sir.
Mr. Walker. As was I.
Senator Hirono. So obviously there needs to be more
coordination because we can expect various kind of weather
conditions to be hitting simultaneously in all parts of the
country and our territories. I think that this is something
that needs to be resolved.
Mr. Walker, did you?
Mr. Walker. Yeah, just for the record, the request for
mutual aid came on October 31st.
Senator Hirono. And the hurricane hit when?
Mr. Walker. Late September.
Mr. Sobrino Vega. September 20th and the contractors were
there in five days.
Senator Hirono. That sounds like an area for rectification.
I am running out of, in fact, I have run out of time.
I will submit some further questions relating to the
flexibility that we provided under the Stafford Act.
The Chairman. Thank you, Senator Hirono.
I will just share that one of the impressions that I had
when we visited less than a month after the hurricane hit was
the difference between the U.S. Virgin Islands and Puerto Rico.
One had teed things up so that mutual aid assistance was
going to be there in anticipation of the disaster. And
literally on the day after, there were crews coming from the
continental United States into the USVI to help with just the
debris cleanup.
But the decision not to act, not to act for a full month
afterwards, I think, was one of those decisions you look back
on and say, we could have seen a different effort in terms of
what could have come to Puerto Rico more readily.
A lot of Monday morning quarterbacking goes on, but I do
think that is a very clear example of one place being prepared
in anticipation of the disaster and another hoping to get lucky
and they did not get lucky.
Senator King.
Senator King. Thank you, Madam Chair.
First, I want to thank you and Senator Cantwell for
arranging this hearing on this important topic and acknowledge
the role that, I believe, Senator Nelson played in trying to
encourage us to work on and look into this problem. I know that
he exerted a great deal of leadership on this issue.
I am a little unclear. We now have 98 percent restored.
Does that mean the system is all rebuilt and have we rebuilt
the old, vulnerable system?
Mr. Alexander? Are we, have we gone beyond building a new
system? In other words, are we patched up to work for now or
have we precluded the opportunity to build an entirely new and
modern system?
Mr. Alexander. Well, sir, our mission wasn't to build a
modern, resilient system. Our mission was to do the interim
measures to get power restored and in that Department of Energy
has been supporting us.
I think the longer-term resilient grid you mentioned, the
Department of Energy could play a heavy hand in that, as well
as PREPA.
The notion that our Chief of Engineers would say that
Puerto Rico would have power in 40 days, here sign this, is the
first time I've ever heard this.
Our Chief is very clear on expectations and when power
would be established, the different dates, the different
percentages. And it was not consistent with what, I believe,
the Governor unilaterally declared which we never agreed was
feasible.
Senator King. Okay.
So we have the system back up and running. Again, my
question is whether we have, sort of, gone by the moment when
we might have built a different kind of system.
Who is in charge? Who makes the next decisions about what
the system is going to look like? I asked that question the
last time, and I am still not sure I know. Who will make the
decision, for example, to go to a more distributed system as
opposed to the current baseload diesel plan and wire cross the
isle?
Mr. Sobrino Vega. Senator, regarding how the structure for
generation is connected in Puerto Rico, that is a policy choice
that's handled through the legislative process, through the
regulatory process at PREC. Regarding infrastructure funding
and investment, especially when it comes to----
Senator King. Before we even get to funding, I want to know
who is going to decide do we maintain the current baseload,
long wire system or do we go to a different kind of system. Is
that PREPA? Is it----
Mr. Sobrino Vega. As in any state, it is the government
through its legislative process in discussions with the
regulatory authority.
Senator King. No, that is not true in my state.
Mr. Sobrino Vega. Who does----
Senator King. The utilities make proposals. The Public
Utilities Commission approves them. The legislature doesn't
design the grid.
Mr. Sobrino Vega. But in Puerto Rico there is--PREPA is a
public corporation so it is subject to certain legislation.
That's why we want to transform PREPA to have private operators
so that it is completely de-politicized, disconnected from the
legislative process and it can look like a utility in the
mainland.
Senator King. Well, Mr. Higgins, do you have the authority
to start to redesign the system?
I have a very limited amount of time, so, give me a quick--
--
Mr. Higgins. I believe that through the auspices of the
integrated resource planning process and through the auspices
of the various initiatives that have been undertaken providing
longer-term funds and opportunities to make the grid more
resilient, we can do exactly what you say. We can figure out a
better way to do it.
Senator King. What is the price of electricity today all
in----
Mr. Higgins. Around $0.20 a kilowatt-hour.
Senator King. In my state we are building a 50-megawatt
solar project. This is in the State of Maine. Our costs are way
below $0.20, and it is competitive. I just read that last year
we are down to $0.06 a kilowatt-hour for solar.
Why isn't this the natural response in Puerto Rico? Why are
we doing 47 percent diesel, 17 percent coal, 34 percent gas, 2
percent renewables in a state with one of the great solar
resources in the history of the world?
Mr. Higgins. Senator, I believe that it's fair to say that
that's probably where things are going to go, but that has to
be taken through a process that everybody buys into, properly
funded, a plan made for how we get rid of the old generation,
where to locate the solar, how to put individual and
distributed solar projects around, how to bring, perhaps,
liquefied natural gas to the island so we can be cleaner.
Senator King. And I get back to my initial question. Is
that going to be your decision or is that going to be a
political decision? Who is going to decide how this new, what
this new grid is going to look like?
Mr. Higgins. I believe it will be my decision subject to
the oversight of the PREC that Mr. Roman runs and through the
auspices of the Oversight Board which has to approve my
integrated resources.
Senator King. I understand there is discussion of divesting
generation from transmission which has happened lots of places
in the U.S., including in my state. Who will regulate the
remaining wires? I understand that will still be a public
company or publicly owned company. Will there be a regulator of
the wires company, the wires and distribution company?
Mr. Sobrino Vega. Yes, the Energy Commission, represented
by Mr. Roman, will continue to be a regulator.
Senator King. And the wholesale production of energy will
be unregulated up to competition?
Mr. Sobrino Vega. No, sir, that would be subject also to
regulation by Mr. Roman's entity and would be subject to the
concession or the asset sale contracts that are signed by the
parties.
Senator King. Well, I appreciate the constraints and I
really appreciate your being here, but I hope we don't lose
sight of the big picture that Puerto Rico could go from a
challenged electrical system to a world leader given the
natural assets that the island has and solar prices have
plunged 80 percent since 2010.
Enormous opportunity, I hope. I look forward to working
with you to help seize those opportunities.
Thank you, Madam Chair.
The Chairman. Thank you, Senator King.
Senator Daines.
Senator Daines. Thank you, Chair Murkowski and Ranking
Member Cantwell for holding this hearing to reevaluate the
progress made and certainly the lessons learned in addressing
Puerto Rico's energy needs and others nearly six months
following a natural disaster.
Like others, I was troubled to learn that PREPA had
contracted with an energy company, although based in my home
state, with minimal experience. While I understand the need to
move quickly, given PREPA's and the island's financial state,
it is equally as important that these quick decisions are made
with the best interest of ratepayers and taxpayers.
Mr. Sobrino Vega, what kind of oversight is in place with
respect to PREPA's finances, and the other part of that
question, in your view does PREPA have sufficient internal
controls in contracting expertise?
Mr. Sobrino Vega. So following the contracting issue that
you alluded to, Senator, we, the Governor, instituted a limited
receivership over the contracting process in PREPA. It's called
the OCPC, the Office of Contract and Procurement. It has
effectively conducted its oversight of the procurement process.
We have to submit those contracts also to the Fiscal
Oversight Board under Section 204 of PROMESA. To this date,
they have not denied any of those contracts for consistency
with the fiscal plan in the budget.
Those contracts, when they are to be reimbursed by FEMA,
also are now subject to a pre-audit and that has also been
conducted successfully.
Regarding PREPA itself, it is subject to fiscal oversight
by state authorities and it is subject to the oversight, to
fiscal oversight by the Fiscal Oversight Board under PROMESA.
Senator Daines. When were those additional controls put in
place?
Mr. Sobrino Vega. Sorry?
Senator Daines. When were those additional controls put in
place?
Mr. Sobrino Vega. I don't remember the exact date, but they
were following, I believe, they were in October and November,
yes.
Senator Daines. Okay.
Had they been in place before, do you think it would have
prevented this contract issue?
Mr. Sobrino Vega. I think that learning from what we've
seen in the USVI, maybe in Hawaii and other islands, we would
implement probably, best practice, like conducting RFPs and
activating mutual aid agreements before hurricane season. The
USVI, for example, is subject to more hurricanes than Puerto
Rico had been historically. This was a matter also, we had
limited resources from the mainland. The USVI is much smaller
than Puerto Rico, so bringing in resources to the island was
difficult. So we do have to do work on our emergency planning
for atmospheric events like Hurricane Maria or Irma.
Senator Daines. Mr. Higgins, PREPA has had serious problems
with debt and mismanagement. Given the disaster situations,
will customers be able to pay for the service?
Mr. Higgins. Senator, I'm not sure I exactly understand
your question. Is it a question about the rates the customers
pay?
Senator Daines. Yes.
Mr. Higgins. We're some distance yet from a final decision
on how PREPA will be restructured and taken to the bankruptcy
judge, if you will, and how all the different contracts and all
the different activities of PREPA.
We now have a certified budget and that will guide us and
that certified budget will imply some rates that will have to
be submitted to Mr. Roman's organization for approval. So we're
in the process. The goal of many of the activities that are
being undertaken inside the entity now are to reduce the cost
pressures and reduce the cost so that there's less upward
pressure on the rates.
So, I think the bottom line is, with the federal help that
we're getting and with cost control measures underway, and with
an adequate set of solutions to the many, call it, contractual
problems we have, the rates are going to end up being fair and
acceptable to the customers, given that they're already too
high and they will need to come down over time.
Senator Daines. In your written testimony you mentioned
your concerns about PREPA having only two months of operating
expense and liquidity. How can this be addressed?
Mr. Higgins. In the short-term, we need to start doing a
better job, which we're trying to do, of collecting from our
customers in real time. We're only able to get about 80 percent
of the customers billed now because the automated meter reading
system depends on some substation devices that are, have not
yet been replaced. And the substations, in many cases, a large
portion of them, are still out of service. That will help in
getting the bills out and getting that cash flowing in which is
now about $50 million a week. That will help a lot. And the
continuing support of the bankruptcy court for loans that would
come from the Commonwealth of Puerto Rico, they are actually
who we borrow from, will help us to bridge through.
We'll be back asking for more if we need it when the--in
the next few months of the new fiscal year.
Senator Daines. Thank you, Chair Murkowski.
The Chairman. Thank you, Senator Daines.
Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair.
I apologize for not being here earlier. This is an
important hearing, and I certainly appreciate all the witnesses
being here and the attention to detail.
And Mr. Higgins, it is good to see you. I know that we
fought another battle together to make sure that ratepayers and
taxpayers got a fair deal after a lot of market manipulation,
so it gives me some degree of comfort to know that you are
helping in this.
Although, I'd have to say this recent run-up in debt
securities where the hedge funds are profiting off of this is
some of the frustration that, at least, we were concerned about
before. And to me, it is, really, it is shameful. We are trying
to get something done here at taxpayer expense. We will save
this to a different oversight hearing about that operation.
But I did want to go to, I did put out a larger statement
that I won't go into now. Mr. Walker, I wanted to go back to, I
know some of my colleagues while I was sitting here, they were
asking about the blackout condition. What was the main cause of
that?
Mr. Walker. Based on the information we know and when that
happened, working with Mr. Higgins, the thing that I think
people neglect when looking at it, is the system is not in its
normal state by virtue of that there's two main transmission
lines that go from the south to the north on the 230 kV system.
One of those lines is out and being worked on which places
all of the northern, or the majority of the north/south
corridor, basically, relying on that one line. And the relays
are set and designed to operate with the system in, basically,
it's normal state. The system is not in its normal state for a
variety of different reasons, including that transmission line
that they're working on, and it's surmised and I think Mr.
Higgins, his team has done more and I know he's been working
with folks from NYPA, relay experts, to look at the details.
But it looks like that there's an overtrip mechanism or
overtrip of the relays based on the abnormal state of the grid
and maybe, Walt, if you want to add any more?
Mr. Higgins. I think Assistant Secretary Walker's comment,
Senator, is very appropriate that the grid is very weak right
now because a number of lines are still out, but notably, one
of the main transport lines to take power from the south to the
north.
When an incident occurred that caused a protective action
to start on an adjacent line, the way the relays were set which
was probably right for the normal system, caused the entire, an
entire set of lines to trip off. And then you suddenly had a
mismatch. And an electric system can't handle a mismatch for
very long and then things start tripping.
So, as a result of that, we just didn't have enough
generation in the northern part of the island to hold the load.
Therefore, everything started to trip. That's just the way it
protects the system by turning things off before they're
damaged.
Senator Cantwell. Was this something that was originally
fixed or reset, if you will?
Mr. Higgins. No.
Senator Cantwell. No.
Mr. Higgins. Not to my knowledge.
Senator Cantwell. So this did not have anything to do with
Whitefish?
Mr. Higgins. No, no.
This is--the issue starts with not enough generation in the
north and too much in the south. And then the second thing that
when the grid is in a bad condition, which it is right now
until that second line is built, then you're vulnerable to
almost any kind of incident. And then third, we really have to
look at--and this is what the Department of Energy's currently
helping us with as were the NYPA workers, the NYPA relay and
protection experts--are there things that we could do to better
operate in these abnormal conditions that exist right now? So
we're getting help on all three fronts.
Senator Cantwell. Okay.
And now to this proposal on the Energy Commission and
changes to it. I don't know that any utility operates this way
in the United States--basically considering what NARUC
recommends as far as an energy commission.
Mr. Alexander, do you think this will make us less or more
independent, this effective independent regulator?
Mr. Alexander. Ma'am, that's not an area that the Corps
usually delves into, so I don't have an informed opinion.
Senator Cantwell. Okay.
Mr. Higgins, do you have any comments?
Mr. Higgins. As the recipient of regulatory activity in
many, many places I've lived in my life, I believe that nothing
is better for a customer in the long run than a fair, firm,
strong, well-managed, regulatory entity and nothing is better
for a utility. At the end of the day, the customers get better
rates, better reliability and their utility knows what the
rules are and they operate by it.
Senator Cantwell. Well, I guess that is why I would be
concerned about having all of the appointees and then being
able to ignore it as well as being somewhat concerning. But
again, that is something that we will have to keep our eye on
and watch carefully for the future.
My colleagues were discussing distributed generation. Do
you think that we have enough in place now to focus on that
given this load issue?
Mr. Higgins. Senator, do you mean enough distributed
generation?
Senator Cantwell. Enough in the framework of discussion,
not so much in distributed generation, but my colleagues were
asking which I think is a viable question. It's a viable
question. You know, we have this all the time as it relates to
FERC and its oversight.
Given some of the changes that are being recommended, do
you think that there is a framework that exists within Puerto
Rico to properly vet and incent distributed generation?
Mr. Higgins. I think more work will have to be done to make
that work well in Puerto Rico, regulatory work, perhaps
legislative work and certainly work within PREPA.
But we do need distributed generation and it will be
adopted, I believe, as a result of the integrated resource
planning process.
Senator Cantwell. Okay, would you get back to us on what
legislative ideas you think we might need to make that a
reality because to me this is, look, I know all our colleagues,
well actually, I don't know what all our colleagues think, but
I hear them and a lot of them think this tragedy happened and
now we're going to build this most resilient grid.
As Mr. Walker just said, we basically got the grid up and
running to the best of our ability, okay? Now we know that
hurricane season is about to hit again, so people are going to
come back to us and say, I thought we built the most resilient
grid. No, we put some money toward that, but obviously we all
know that distributed generation could help in the reliability
of this.
Listen, the Chair and I want to get about rebuilding our
own grid and making it smarter. We hope our House colleagues
will help us get a bill at some point in time.
But I think that the key thing now for us in Puerto Rico is
to make sure that the regulatory process does allow for some
distributed generation that would help us with resiliency. And
so, if there are barriers to that, I certainly want to know and
I would think some of my colleagues would as well.
Mr. Higgins. Senator, I do not mean to imply any federal
actions needed. Mr. Sobrino talked about several legislative
initiatives in Puerto Rico about policies and that's the kind
of thing that might be needed to really make this work.
Senator Cantwell. Okay, great.
Alright, thank you, Madam Chair.
The Chairman. Thank you, Senator Cantwell.
A few more follow-on questions here.
Mr. Walker, in your testimony you mention the report on the
energy resilience options and potential solutions for the grid.
You said it is nearly complete. When might we see that report?
Mr. Walker. So, the final draft was done on the 30th. It's
going through final edits and we'll be presenting the report at
the next meeting of the Undersecretaries from all the
responding agencies which, I believe, is next Wednesday. And at
that point we'll be distributing that report.
The Chairman. Okay, great. We will look forward to that.
You also mentioned, talking about microgrids, the national
labs' work through the microgrid design tool and you indicated
in your testimony here this morning that you had identified
some key locations.
Can you share with us what you are looking at and probably
as important as where they are is whether or not these
microgrids have the support of the local folks there to use the
land and basically are signed on to the fact of having this
opportunity, as opposed to obtaining power from central
generation?
Mr. Walker. Sure.
The focus on microgrids is diverse. Our initial work on the
microgrids was with PRIDCO, which is the Puerto Rican
Industrial Development Company, who owns 200 pieces of property
throughout, industrial pieces of property throughout the
island.
We were working with them to help facilitate providing
better power quality for a number of the industrial customers,
particularly those that were out of power, to ensure that the
economic vitality of the island remained intact while we were
going through the emergency restoration component.
In addition to that work being done, we're now working with
PREPA to identify, kind of, the last mile, you know, isolated
communities where we can do that and also with FEMA and the
Corps for those locations where we had placed generation for
critical infrastructure and continue to have generation at
those critical infrastructure locations.
The idea being that by providing those microgrid
capabilities there, the next time an event like Hurricane
Maria, which is inevitable, is presented to us, there will be
some level of normalcy that can be established to help
facilitate the health and safety of those on the island while
we work to go through our restoration effort again.
The Chairman. In that vein there has been a lot of
discussion about the smaller islands off of Puerto Rico,
Vieques and Culebra, which you look at them and you say, well,
it makes total sense that these would be perfect opportunities
for the microgrid pilot projects.
Can you give me any update and maybe, Mr. Higgins, you
might be able to jump in here or Mr.----
Mr. Walker. I can answer the question.
The Chairman. Okay.
Mr. Walker. So, Vieques and Culebra are being designed to
be a microgrid where Vieques will be separated from the
mainland initially. There's two underground or undersea cables
that presently feed it. Those are inactive. There was an RFP
that went out for localized generation, diesel generation
that's presently there with work being done to develop the best
microgrid strategy for Vieques and Culebra going forward.
The Chairman. So we don't have that strategy identified
whether it is wind, solar or a combination.
Mr. Walker. There's an RFP that----
The Chairman. Okay.
Mr. Walker. I'm not sure if it's gone out or is going out
with regard to seeking the best information, you know, from
providers for those strategies.
We will be, DOE, will be working with PREPA to evaluate the
RFP submittals once they're coming in, utilizing the expertise
that we have within our national labs on microgrids.
The Chairman. Okay, great.
Let me ask you, Mr. Higgins, for an update on restoring
power to some of the more remote and the more mountainous
areas.
When several of us on the Committee went to Puerto Rico in
October we went out to Barranquitas--pretty isolated in the
sense of where it was.
I will tell you, you are left with impressions of
conversations that you have with people at certain places. And
a conversation that we had with a young woman who was five
months pregnant who was looking across this cut through the
earth, this ravine that separated us. The road was taken out
but she was separated from the home that she had just bought
and had not been able to move into because of the damage that
was done, not to her home, but in order to access her home. I
was thinking about her just a few days ago and the fact that
okay, she has had that baby by now. Hopefully all is well
there, but I have wondered whether she was ever able to get
back to her house and whether her home has been restored to
power.
Can you tell me how things are looking there in those
central mountain areas and what the plan is?
Mr. Higgins. Senator, thank you for the question.
You've identified the hardest part of this restoration, and
we're down now to where we're getting less than or sometimes
only one-tenth of a percent additional customers restored on
any given day. That's not very many. There were days before
when we'd get a half percent or even one.
Now I use that as an example because we still have about
1,500 people out in the field working every single day to
restore these distribution customers. That's in addition to the
300 or 400 that are working on the transmission lines which you
just can't put as many people on.
There are many, I think, situations like the one you
described. There's no question that that's going on. Many of
our employees still don't have power because they live in
similar places.
So in addition to continuing to work down the lines, and
that's exactly what the crews do, we also have an initiative to
try to identify the ones that are just really too hard to get
to in any reasonable amount of time, for any reason. And
sometimes, quite literally, you're crossing a canyon, kind of
like you describe, or you're going through, almost a jungle, in
almost rainforest, trying to refinish a line or put back up a
line that is 1,000 feet long and down.
We're making progress, not nearly as fast as our customers
would like, not nearly as fast as we would like, but we're
doing about as good as you can do in these very narrow, very
tight areas where you almost can't even drive two trucks past
each other.
So we're continuing with, you know, a lot of people working
on it. I think we try very hard to get there as fast as we can.
It will never be satisfactory to the person whose power has
been out for seven or seven and a half months. There's nothing
we can do to make that better except continue to work really
hard to try to do it.
The Chairman. Can you tell me whether, even in these areas
where they have been without that power for now seven months,
the schools have been taken care of? They have generators. Kids
are in their schools, aren't they? Please give me that
assurance.
Mr. Sobrino Vega. Yes, ma'am. School started. The schedule,
of course, changed.
A lot of work was done by UPR, the Department of Education,
to make sure they don't lose that semester, but kids are back
in school.
The Chairman. Okay.
Just kind of jumping around here.
Mr. Sobrino, you have talked about the sale of the assets
from PREPA, but given the age, the condition of many of the
electric power plants, who is really going to buy them? Who do
we anticipate is going to look at this and say, okay, here is a
deal?
Mr. Sobrino Vega. That's a great question.
What we're going to conduct is a market sounding process.
What we see is a lot of the PREPA generation fleet, part of
their value is their location, part of their value is the
requirement to continue operating them as new generation assets
are constructed. So we are open to not only having just an
outright sale but having intermediate agreements also included
in this transformation process.
The Chairman. So if I am somebody who is looking at this as
an opportunity, again, having seen some of it. I think Senator
Cassidy mentioned the condition of some of what we had seen. It
was not exactly enticing.
I understand that there is an opportunity because of the
location, but is this something that decisions on this would be
delayed as potential purchasers look to see what really is
going to be stood up?
There is just so much that is at play right now. You have
FEMA and the Corps who have been in place for these eight
months now. You have a transition. You have just so much that
is moving around and a great deal of uncertainty. Mr. Higgins,
you mentioned that part of your responsibility here is to make
sure that you have a grid that is resilient here. You are
preparing for the next hurricane season. Assistant Secretary
Walker has said that we are not in ``a normal state,'' and that
is why we saw this most recent blackout. So we are not in a
normal state yet.
Hurricane season is, you said, a month away. The Corps is
leaving. You have a transition that is going on that Mr.
Higgins has said, you know, it may be, I think you said
uncomfortable or a little painful in the process. I just have a
hard time believing that anyone is going to view this as a real
opportunity to come in and purchase these assets.
Mr. Sobrino Vega. The process to concession or to sale of
an asset, what we're working on right now is getting
legislative authority in Puerto Rico through our legislature so
that we can commence a market sounding and interface with
possible investors.
What is clear is that whatever happens there is going to
continue to be a transmission distribution service in Puerto
Rico. And the way that we have found in the past that services
like those are de-politicized are managed adequately is if we
contract the private operator or we provide some kind of long-
term concession. What we're trying is to find ways to actually
avoid falling into traps of the past and have a stronger
customer centric system.
There are a lot of challenges, Senator. We are not shying
away from them. We have asked for help when we need that help
and we invite that help to continue coming to the island, but
it is part of the reality of living on an island in the
Caribbean that you have to juggle governing, you have to juggle
what Mr. Higgins has to do in PREPA, what Jose has to do in the
Energy Commission, what Mr. Masses has to do in the private
sector. We all have to do, we have to continue our operations,
but also face possible atmospheric events in the future. So
that's what we're working on to make sure that what happened
before never happens again.
The Chairman. Well, I think we would all encourage that.
Mr. Masses. Senator, if I may?
The Chairman. I think it is important, your comment about
trying to de-politicize to the extent possible. I think we
recognize you have some pretty difficult history with the
politicization of your power grid, and I think that that has
been a real drag on your ability to move beyond it and the
genesis or the root of many of the questions that have been
presented.
I want to ask you, and I will let you, Mr. Masses, jump in
here, but as far as the coordination, the working together that
you have just referenced, how well are the Governor, the board
and PREPA coordinating with each other on the structure and on
the operation? It is one thing to sit here in front of a
Committee and share a table, but do you believe that all of the
necessary entities that must be coordinating to allow for a
better energy future for Puerto Rico, do you believe that that
is happening? I will ask each of you and also from the private
sector side as well.
Mr. Sobrino Vega. Should I start?
The Chairman. Yes, go ahead.
Mr. Sobrino Vega. Part of what we did when we, two months
after the hurricane to try to enable that coordination, we
created that recovery office within the P3 authority. We were
following best practices in Louisiana, in New York, in New
Jersey, trying to centralize that coordination effort.
The communication with FEMA, with U.S. Army Corps of
Engineers, with other federal stakeholders has been improving
substantially over the months.
Right now, I think that the unitary command group, I mean,
we can discuss, maybe, differences of what happened in the
past, but the truth of the matter is that federal officials and
Puerto Rican officials have been walking on the ground holding
hands to get working together for months and they've done great
work.
With the Oversight Board and PREPA. PREPA management runs
the day-to-day operation. We do have to conduct fiscal and
budgetary planning with the Oversight Board. They're included
in that process.
And from the regulatory point of view, we have been working
hard on improving relationships with the regulator to make sure
that they are more involved in the process. There was confusion
because of what are the authorities between PROMESA, between
the energy regulator, between PREPA itself, now that it's in
Title III. Those issues, some of those issues, have been
litigated and resolved. Some of them, we're working together to
figure them out.
But we are--that working together is happening day-to-day
and it is going to lead to more successful, a stronger and
better Puerto Rico in the future.
The Chairman. Mr. Higgins.
Mr. Higgins. My job is not to figure out what the policy
should be but to implement it and when the legislature and the
Governor, working with the Oversight, decide that the right
future for Puerto Rico's electric utility is go a certain way,
my job is to get it as ready as possible to execute that plan.
The Chairman. Do you feel you have that clear direction
now?
Mr. Higgins. Yes. I don't have the exact direction, but I
certainly have a good general direction at this point. And
that's what is being debated in the legislature, is how to look
at that.
The Chairman. And from the private side, what is the
observation there?
Mr. Masses. Well, first, one million, five hundred thousand
meters is a huge market. The importance of the value, it's not
the equipment in PREPA. The southeast, the market, it's a huge
market.
So as we speak, we are having the international energy
event in San Juan with dozens of companies interested in
competing for this market. So there is going to be many
competitors and there's going to be a huge appetite to get to
be part of this.
Now, our energy committee has offered itself to present a
bi-weekly progress report to this honorable commission in order
to keep you informed and assist you in helping. We will
present, every two weeks, a report of how Puerto Rico is
progressing in this crisis.
In terms of the relationship between the government and the
agencies, no pain, no gain, right? I believe that they're going
through some strong, some difficulty, but as Mr. Sobrino
mentioned, they will be fine and things are going well.
I hope that the conclusion will be a great, great for all
of us in Puerto Rico.
The Chairman. Mr. Roman Morales, would you like to jump in
there?
Mr. Roman Morales. Yes, thank you very much, Madam Chair.
I'm actually encouraged with what I'm hearing today at the
hearing. There is still work to be done to delineate
responsibilities between all the different agencies. There are
many agencies that have either, that there's an interaction
between the decision-making and there's overlap between them as
well.
So we have issues. I included that as part of, as an
attachment to my testimony, protocols that we established so
that we could work with the Fiscal Oversight and Management
Board so that we can mesh our responsibilities so that we don't
step on each other's jurisdictions.
And we have started conversations with Mr. Sobrino and the
government. There is the policy starts, starting within the
government, starting with the Governor and the commonwealth
legislature. It delegates to different entities in this regard
on the energy policies, the implementation of the policies, but
it's a possibility that they are implemented relies on the
energy commission and PREPA to carry out those policies or
whatever future transformation takes place.
But I'm encouraged with what I'm hearing. I hope that this
conversation keeps happening, that we're able to delineate
where we are all supposed to operate for the benefit of the
people of Puerto Rico.
The Chairman. Very good.
I had one more question and this was prompted from your
comments, Mr. Higgins, about this RUS national standard that
you mentioned for construction going forward. Is that standard
what is being utilized now as we are operating under these new
provisions within the Stafford Act that we just authorized
recently, or how does this RUS national standard fit in?
Mr. Higgins. Senator, what we did in restoring the system
so that people had power was to put it back the way it was
which was designed to a lot of standards that had evolved over
many years. They were standards, but they were not standards
that were generally adopted throughout the United States, but
they were professionally competent standards.
What we've now said, based in part on the findings of
difficulties that were encountered during the aftermath of
Hurricane Maria in having material issues, different voltages,
issues with linemen who came from the other states to know
exactly what they were encountering.
We have said, we're now going to reconstruct the system and
all new construction would be to this new national standard
which exists already, a national standard, new to us, called
the Rural Utility Standard. And that will identify all the
things, the practices, that need to be met as we reconstruct
things in the system, not simply put the power back on, but as
we rebuild the system to be more resilient, to be more able to
withstand.
The Chairman. I understand all that, but what you have just
said is we are rebuilding twice. We rebuilt the first time to
get things up and running, and now we are going to improve the
system. It was my hope that with changes to the Stafford Act
that we would do it once.
I understand, logistically, that the immediate need after
an emergency is to get power back to the people. I am going to
ask you, Mr. Walker, with this in place going forward with
these RUS standards, does this meet what you thought we needed
to do with addressing the Stafford Act limitations?
Mr. Walker. The Stafford, no, Senator.
The components of the Stafford Act get into being able to,
you know, redesign----
The Chairman. Right.
Mr. Walker. ----in very short time and make those decisions
to install.
In having spoken with Mr. Higgins about the RUS standards
over the last several weeks, this is an establishment of a
standard that will be incorporated for new projects as they go
forward.
The resiliency that needs to be built into the system comes
from a number of different things. Standards is just simply one
component on a going forward basis. But the design and how
certain components are integrated, so where the generation is,
what type of construction is used on certain poles that are
going to be subjected to certain type of winds during a
hurricane, the ability for the system to disconnect itself and
reaggregate itself through things like reclosers. Things like
that are not components that are going to be impacted by the
RUS standards. The RUS standards simply will define things like
standard pole size, how certain poles are guyed, certain
transformers. I know that Mr. Higgins had, you know, one of the
things that we struggled with when we were putting--going
through the emergency restoration component was the disparity
of the different types of voltages and how they didn't match up
with responding utilities.
So, what would be a typical voltage in the United States,
in the mainland, so that when those crews move from the
mainland down to Puerto Rico or USVI they can bring their own
stock with them and replace it. In this instance, they could
not because of some of the voltage standards in Puerto Rico.
So, those are the things that when you look at resiliency
on a much more holistic basis, there's a lot of components that
go into it, and a lot of it is the design capabilities.
Utilities, you know, typically always have a standard that
is utilized by their company. So, it's not--this would be in
step with moving toward resiliency. It's just, it's a big
island. It's 3,500 square miles, and there's lots and lots of
infrastructure. So it will take a period of time to transition
through all of those components, but there are, and we're
working very closely with PREPA. There are opportunities for
resiliency through design and through microgrids in utilization
of different technologies and resources to expand the
capabilities of the system.
The Chairman. Good.
This may be for both Mr. Higgins and Mr. Alexander, in
terms of the materials that we have sitting in the warehouses,
whether they are in the Corps or whether they are going to be
transferring over to you. Do these materials meet what you will
need to match up with these RUS national standards?
Mr. Higgins. Yes.
As we change voltages and do some other things over time,
we'll have to get new equipment to replace that, but the things
that have been brought back in are adequate to allow us to
operate until we make changes in the future.
If a voltage is set at a certain level for a structure, you
can't use just any other piece of equipment, you must use one
that is adequate for that voltage.
And so, many of the things that we'll have to do in the
future will require different equipment to be installed, but I
will endorse what Mr. Walker said. Resilience is about not just
design, but also design philosophy, operating philosophy. Many
things have to be done. That work is really just starting.
The Chairman. Okay.
So the stuff that you are going to be receiving is material
that you will be able to use.
Mr. Higgins. We will be able to use it. It will take years
and years for the system to be completely rebuilt.
The Chairman. Got it.
I always hate it when I am asked the question, give
yourself a grade on your performance. It is always much easier
to be the teacher and give you the grade, but this is national
teacher week, so I am going to ask you each to give yourself a
grade on how you feel the rebuild, the response is going, seven
months after with regards to the disaster in Puerto Rico. I am
going to make it easier on you and suggest that it not be a
letter grade, but let's go back to elementary school when you
are, where you are given an O for Outstanding, an S for
Satisfactory, or an N for Needs Improvement or an Incomplete.
That is always a good one.
Mr. Walker, we are going to start with you.
Mr. Walker. O plus, Senator.
The Chairman. There you go.
[Laughter.]
O plus.
Mr. Alexander.
Mr. Alexander. It's incomplete. Our goal was always 100
percent.
The Chairman. That is fair.
Mr. Sobrino.
Mr. Sobrino Vega. Ma'am, there's been a lot of tests. I
think we've aced a couple. We've passed others and there's need
for improvement in some of those as well. There's probably, at
the end of the day, the overall test of rebuilding the island,
that's still incomplete, but it is a process and there are a
lot of tests in it.
The Chairman. Good.
Mr. Higgins.
Mr. Higgins. You didn't say work in progress was another
choice, did you?
[Laughter.]
The Chairman. Needs improvement, incomplete.
Mr. Higgins. I think PREPA's response has gotten better and
better as time has gone on. I'm fairly new, so I can't take
credit for any of that. For myself, I'm at the needs
improvement stage because we still have a lot to do.
I think PREPA has learned a great deal about itself and
about what its responsibilities are. I would say overall,
especially fairly early, needs improvement and beginning to get
almost to satisfactory, but it won't be satisfactory until
every customer is back in service.
The Chairman. Good.
Mr. Roman Morales.
Mr. Roman Morales. It needs improvement, definitely needs
improvement.
I feel we have wasted two years. The Commission was created
in 2014. We did a lot to get PREPA up to a much better standard
to what it is. Definitely the hurricanes have affected the
performance of PREPA. We were in the process of establishing
performance metrics for PREPA before the hurricane hit the
island. And now I hear we're--see KPI is being thrown around
which I'm happy to see, but I feel we have wasted too much
time. And we're still are incomplete and therefore to restore
power and there still needs a lot of improvement.
The Chairman. Mr. Masses.
Mr. Masses. Before Maria, a very poor job in having a good
electrical grid. Yes, indeed, Mr. Roman is right. The early
commissions contribute heavily in terms of higher standards in
PREPA. After Maria there's a lot of improvement to be done in
order to complete this job. Thank you.
The Chairman. Well, thank you all.
I think I would agree with what many of you have said that
this is still a work in progress.
I think for the people on the ground, it is clearly a work
in progress and we worry that the progress has not been fast
enough. It is unnerving, I think, to think that we have the
hurricane season that will once again be upon us and there is a
vulnerability to the people in Puerto Rico, in the area. But
today's hearing, our focus today, is on Puerto Rico and how we
are doing in our response.
I appreciate the fact that we all recognize that we have
more to do in our various capacities and appreciate the work
that has gone into the response. It has been very complicated.
It was extraordinarily devastating to be hit by two hurricanes
and to be laid flat in many areas by the winds that came
through. Fortunately, we don't see the level of devastation in
these very populated areas too very often. And so, getting the
level of coordination that needed to come together in response
was an imperative.
Mr. Walker, I think having been on the ground, as you all
were working with, not only a great number of agencies but a
great number of volunteers that really did try to gear up, team
up, just as quickly as possible to provide for that response
and that relief. It is recognized that it was a considerable
challenge. And you were doing so in an area where you had a
system that was troubled to begin with. And so, there are a
whole host of issues that have just led to us having this
second hearing now within a six-month period following the
disaster.
Know that we will continue as a Committee to be vigilant in
following this to ensure that the resources that are necessary,
that the coordination that is required, will continue.
I do hope that we don't take the eye off of the ball until
this is done. My fear has always, is always, after every
disaster that the news is there for a cycle. The relief efforts
are there for a limited period of time and then we move off to
the next disaster, to the next issue and the people who remain
vulnerable feel forgotten. Well, we are not going to forget the
people of Puerto Rico. We are going to stay on this, and we
need your leadership to do just that.
Thank you for the time that you have given. I know that
other colleagues will be submitting additional questions for
the record. Hopefully you can be responsive to us as we
continue to help in this important area.
Thanks for what you do. With that, we stand adjourned.
Thank you for your time today.
[Whereupon, at 12:30 p.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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