[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]





 
          PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA) POST-

   IMPLEMENTATION OF THE LUMA TRANSMISSION AND DISTRIBUTION CONTRACT

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

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                       Wednesday, October 6, 2021

                               __________

                            Serial No. 117-9

                               __________

       Printed for the use of the Committee on Natural Resources
       
       
       
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
       
       


        Available via the World Wide Web: http://www.govinfo.gov
                                   or
          Committee address: http://naturalresources.house.gov
          
          
          
                             ______                       


                U.S. GOVERNMENT PUBLISHING OFFICE 
45-791 PDF               WASHINGTON : 2021         
          
          
          
                     COMMITTEE ON NATURAL RESOURCES

                      RAUL M. GRIJALVA, AZ, Chair
                JESUS G. ``CHUY'' GARCIA, IL, Vice Chair
   GREGORIO KILILI CAMACHO SABLAN, CNMI, Vice Chair, Insular Affairs
                  BRUCE WESTERMAN, AR, Ranking Member

Grace F. Napolitano, CA              Don Young, AK
Jim Costa, CA                        Louie Gohmert, TX
Gregorio Kilili Camacho Sablan,      Doug Lamborn, CO
    CNMI                             Robert J. Wittman, VA
Jared Huffman, CA                    Tom McClintock, CA
Alan S. Lowenthal, CA                Paul A. Gosar, AZ
Ruben Gallego, AZ                    Garret Graves, LA
Joe Neguse, CO                       Jody B. Hice, GA
Mike Levin, CA                       Aumua Amata Coleman Radewagen, AS
Katie Porter, CA                     Daniel Webster, FL
Teresa Leger Fernandez, NM           Jenniffer Gonzalez-Colon, PR
Melanie A. Stansbury, NM             Russ Fulcher, ID
Nydia M. Velazquez, NY               Pete Stauber, MN
Diana DeGette, CO                    Thomas P. Tiffany, WI
Julia Brownley, CA                   Jerry L. Carl, AL
Debbie Dingell, MI                   Matthew M. Rosendale, Sr., MT
A. Donald McEachin, VA               Blake D. Moore, UT
Darren Soto, FL                      Yvette Herrell, NM
Michael F. Q. San Nicolas, GU        Lauren Boebert, CO
Jesus G. ``Chuy'' Garcia, IL         Jay Obernolte, CA
Ed Case, HI                          Cliff Bentz, OR
Betty McCollum, MN
Steve Cohen, TN
Paul Tonko, NY
Rashida Tlaib, MI
Lori Trahan, MA

                     David Watkins, Staff Director
                        Sarah Lim, Chief Counsel
               Vivian Moeglein, Republican Staff Director
                   http://naturalresources.house.gov
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, October 6, 2021.......................     1

Statement of Members:

    Gonzalez-Colon, Hon. Jenniffer, a Resident Commissioner in 
      Congress from the Territory of Puerto Rico.................     2
        Prepared statement of....................................     3
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona...........................................     4
        Prepared statement of....................................     5

Statement of Witnesses:

    Aviles-Deliz, Edison, Chairman, Puerto Rico Energy Bureau 
      (PREB), San Juan, Puerto Rico..............................    22
        Prepared statement of....................................    23
        Questions submitted for the record.......................    34
    Fontanes, Fermin, Executive Director, Puerto Rico Public-
      Private Partnership Authority (P3A), Santurce, Puerto Rico.    44
        Prepared statement of....................................    46
        Questions submitted for the record.......................    52
    Gil, Fernando, President, Puerto Rico Electric Power 
      Authority (PREPA) Governing Board, San Juan, Puerto Rico...     6
        Prepared statement of....................................     9
        Questions submitted for the record.......................    13
    Irizarry, Agustin, Professor of Electrical Engineering, 
      University of Puerto Rico at Mayaguez (UPRM), Mayaguez, 
      Puerto Rico................................................    79
        Prepared statement of....................................    81
        Questions submitted for the record.......................    84
    Laboy, Manuel, Executive Director, Central Office of 
      Recovery, Reconstruction, and Resiliency (COR3), San Juan, 
      Puerto Rico................................................    59
        Prepared statement of....................................    61
        Questions submitted for the record.......................    67
    Santiago, Ruth, Community and Environmental Attorney, 
      Salinas, Puerto Rico.......................................    85
        Prepared statement of....................................    87
    Stensby, Wayne, President and Chief Executive Officer, LUMA 
      Energy Puerto Rico, San Juan, Puerto Rico..................    36
        Prepared statement of....................................    38
        Questions submitted for the record.......................    39

Additional Materials Submitted for the Record:

    AES Puerto Rico, Comments Submitted to the Natural Resources 
      Committee, dated October 6, 2021...........................   127

    CAMBIO PR, Sierra Club of Puerto Rico, El Puente and the 
      Union of Electrical and Irrigation Industry Workers 
      (UTIER), Joint letter to the Committee, dated October 14, 
      2021.......................................................   129

    International Brotherhood of Electrical Workers (IBEW), 
      Letter from Lonnie R. Stephenson, President to Chair 
      Grijalva and Ranking Member Westerman, dated October 5, 
      2021.......................................................   131

    Windmar Group, Letter to the Committee, dated October 12, 
      2021.......................................................   131

    Submissions for the Record by Hon. Javier A. Aponte Dalmau, 
      Majority Speaker, Puerto Rico Senate

        Letter to Chairman Grijalva on the Energy Crisis in 
          Puerto Rico, dated October 5, 2021.....................   133

        Senate Resolution 1, First Partial Report, dated June 28, 
          2021...................................................   134

    Submissions for the Record by Hon. Luis Raul Torres-Cruz, 
      Puerto Rico House of Representatives

        Letter to Chairman Grijalva on the Transformation of the 
          Electric System of Puerto Rico, dated September 30, 
          2021...................................................   134

        H.R. 136 Final Report, dated May 11, 2021................   138

    Submissions by Ruth Santiago, Esq.

        LUMA Energy Report, ``Net Metering Program Update,'' 
          dated July 22, 2021....................................   138

        Letter to the Committee, ``Supplemental Information for 
          Hearing,'' dated October 14, 2021......................   143

        Sotomayor-Ramirez, David, ``The Case for Preserving 
          Agricultural Land Area in Puerto Rico and Green-Energy 
          Projects,'' dated October 14, 2021.....................   144
                                     



OVERSIGHT HEARING ON PUERTO RICO ELECTRIC POWER AUTHORITY (PREPA) POST-
   IMPLEMENTATION OF THE LUMA TRANSMISSION AND DISTRIBUTION CONTRACT

                              ----------                              


                       Wednesday, October 6, 2021

                     U.S. House of Representatives

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to notice, at 1:04 p.m., via 
Webex, Hon. Raul M. Grijalva [Chairman of the Committee] 
presiding.
    Present: Representatives Grijalva, Napolitano, Costa, 
Sablan, Porter, Leger Fernandez, Stansbury, Velazquez, Soto, 
Garcia, Tonko, Tlaib; Gohmert, Wittman, McClintock, Graves, 
Radewagen, Gonzalez-Colon, Tiffany, Moore, and Obernolte.
    Also present: Representatives Espaillat, Ocasio-Cortez, 
Price, and Torres.

    The Chairman. The Committee on Natural Resources will come 
to order. This oversight hearing is on the Puerto Rico Electric 
Power Authority post-implementation of the LUMA transmission 
and distribution contract, and the Committee is meeting today 
to receive testimony on the status of Puerto Rico's electrical 
infrastructure, including the privatization of the transmission 
and distribution system from PREPA to LUMA Energy, and the 
transition toward renewable energy.
    Under Committee Rule 4(f), any oral opening statements at 
hearings are limited to the Chair and the Ranking Minority 
Member or their designees. This will allow us to hear from our 
witnesses sooner and help Members keep to their schedules.
    I therefore ask unanimous consent that all other Members' 
opening statements be made part of the hearing record if they 
are submitted to the Clerk by 5 p.m. today or at the close of 
the hearing, whichever comes first.
    Hearing no objection, so ordered.
    Without objection, the Chair will also declare a recess, 
subject to the call of the Chair.
    Also, without objection, Representative Torres, 
Representative Ocasio-Cortez, Representative Price, and 
Representative Espaillat are authorized to question the 
witnesses at today's hearing.
    As described in the notice, statements, documents, and 
motions must be submitted to the electronic repository at 
[email protected].
    Additionally, please note that as with in-person meetings, 
Members are responsible for their own microphones. As with our 
in-person meetings, Members can be muted by staff only to avoid 
inadvertent background noise.
    Finally, Members or witnesses experiencing technical 
problems should inform Committee staff immediately.
    The Chair now recognizes, for her opening statement, the 
Vice Ranking Minority Member for Insular Affairs.
    So recognized.

  STATEMENT OF THE HON. JENNIFFER GONZALEZ-COLON, A RESIDENT 
   COMMISSIONER IN CONGRESS FROM THE TERRITORY OF PUERTO RICO

    Miss Gonzalez-Colon. I want to thank you, Chairman and 
Ranking Member Westerman, for the opportunity to have this very 
timely hearing.
    I also want to recognize the witnesses who have responsibly 
come before us.
    The hearing is timely because over the summer Puerto Rico 
has faced extreme instability of the power supply, with 
widespread prolonged power interruptions, due to a near 
collapse of the generation fleet in the hands of PREPA, the 
state-owned utility. As of last Sunday morning, only 38 percent 
of its nominally operational base load, and 42 percent of its 
peaker and backup capacities were available for dispatch.
    That means that, all together, running even with the 
backups, it is still nearly 1,000 megawatts short of estimated 
daily load. That is also almost the full capacity of the two 
base load private generators. So, we see that the whole system 
will barely meet demand and any spike could bring it down. Plus 
that is being done by keeping our units on-line, and that are 
known to require repair, or are past due, way past due, for 
maintenance, creating a time bomb. Because of that, this is why 
much of the old installed capacity is now unavailable.
    This also creates a paradox that, since it increases costs 
on both PREPA and the distribution operator, LUMA, it means 
consumers see the bills go up when they are not even getting 
electricity. Four years after Hurricane Maria, 1 year since the 
obligation of over $10 billion in different funds, Federal 
funds, to build back a better grid, 3 months later, after a 
much-proclaimed contract of transmission and distribution, this 
has ended people's patience.
    How long is this going to happen? LUMA and PREPA must 
answer that question, explain what is happening, what is going 
to be done in the short term and long term, and how are they 
preparing to build back better.
    The people of Puerto Rico want their power to be on today--
I am not just thinking about the future--and the cost to stop 
rising, and accountability for when it happens, not just great 
plans about the future, or the greatest plans that they are 
going to be installing. We want to see service improve now. And 
if anyone is objectively failing, then take the needed steps 
provided under the law and contracts to rectify it.
    It worries me if this hearing, instead, revolves around an 
ideological position of blaming privatization itself, that it 
will be based on a demand that contracts must be reverted just 
because they should be, and that we should take the FEMA 
rebuilding funds and forbid them from being used for anything 
other than someone's favorite alternative. I think we should be 
more precise on this.
    We support having community renewables and distributed 
generation microgrids in Puerto Rico's recovery; these are 
tools for resiliency and self-reliance itself. But, again, the 
renewable energy plan in Puerto Rico is already very ambitious, 
with goals of 50 percent by 2030 and 100 percent by 2050. And 
now we just have 2 percent of renewables. If that is achievable 
under the current parameters, great; if not, we need to discuss 
now what are the necessary steps to get there.
    In order for that to happen, we must now, first and 
foremost, provide the people of Puerto Rico an energy supply 
that is affordable for the consumer; reliable for both base 
loads and peak loads for the private sector, as well--our 
manufacturing industry is important, and they cannot operate 
just with batteries; resilient in case of a natural disaster or 
infrastructure mishap; and compliant with all environmental and 
public health requirements. We cannot do that if we exclude 
upfront resources like LNG, which I support, or if we rush 
plant closings that are already programmed to happen before the 
new grid is really ready.
    I hope this hearing provides better guidance to all of us 
in addressing this issue, in answering what is going to happen 
when the people of Puerto Rico are going to have power, and 
when PREPA is going to submit to FEMA all the necessary 
documents and actually get the Federal funds that are available 
from last year.
    With that, Mr. Chairman, I thank you, and I yield back.

    [The prepared statement of Miss Gonzalez-Colon follows:]
  Prepared Statement of the Hon. Jenniffer Gonzalez-Colon, a Resident 
       Commissioner in Congress from the Territory of Puerto Rico
    I want to thank you, Chairman Grijalva (and Ranking Member 
Westerman), for the opportunity to have this very timely hearing. I 
also want to recognize the witnesses who have responsibly come before 
us.
    The hearing is timely because over the summer Puerto Rico has faced 
extreme instability of the power supply, with widespread prolonged 
power interruptions, due to a near collapse of the generation fleet in 
hands of PREPA, the state-owned utility. As of last Sunday morning, 
only 38% of its nominally operational base load and 42% of its peaker 
and backup capacities were available for dispatch.
    That means, all together running even the backups, it is still 
nearly 1,000 megawatts short of estimated daily load. That is also 
almost the full capacity of the two base load private generators. So, 
the whole system would barely meet demand, and any spike could bring it 
down. Plus, that is being done by keeping units on-line that are known 
to require repair or are way past overdue for maintenance, creating a 
time bomb. Because THAT is why much of the old installed capacity is 
now unavailable.
    This also creates the paradox that, since it increases costs on 
both PREPA and distribution operator LUMA, it means consumers see the 
bills go UP, when they're NOT getting electricity. Four years after 
Hurricane Maria, 1 year since the obligation of over $10 billion in 
different funds to build a better grid, 3 months after a much-
proclaimed contract for Transmission and Distribution, this has ended 
the people's patience.
    How long is this going to go on? LUMA and PREPA must answer that; 
explain what is happening; what is going to be done short term and long 
term; how are they preparing to build back better.
    The people of Puerto Rico want their power to be on, today, the 
cost to stop rising, and accountability for what happens. Not just 
great plans, we want to see service improve. If anyone is objectively 
failing, then take the needed steps provided under the law and 
contracts to rectify that.
    It worries me if this hearing, instead, revolves around an 
ideological position of blaming privatization itself. That it will be 
based on a demand that contracts must be reverted just because they 
should be, and that we should take the FEMA rebuilding funds and forbid 
them from being used for anything other than our favored alternative.
    We support having community renewables and distributed generation 
microgrids in Puerto Rico's recovery: these are tools for resiliency 
and self-reliance. Puerto Rico's renewable energy plan is already 
ambitious with goals of 50% by 2030 and 100% by 2050. If that is 
achievable under current parameters, great; if not, we must discuss 
what are the necessary steps to get there.
    However, we must first and foremost provide the people of Puerto 
Rico NOW an energy supply that is affordable to the consumer, reliable 
for both base loads and peak loads, resilient in case of natural 
disasters or infrastructure mishap, and compliant with all 
environmental and public health requirements. We cannot do that if we 
exclude up front resources like LNG or if we rush plant closings that 
are already programmed to happen before the new grid is really ready.
    I hope this hearing provides better guidance to all of us in 
addressing these issues. Thank you, I yield back.

                                 ______
                                 

    The Chairman. The gentlelady yields back, thank you.
    And the Full Committee Ranking Member, Mr. Westerman, do 
you wish to make a statement?
    [No response.]
    The Chairman. Hearing no response, let me say my opening 
statement.

  STATEMENT OF THE HON. RAUL M. GRIJALVA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    The Chairman. The Committee is meeting today to hear from a 
number of witnesses regarding the status of the privatization 
of management of Puerto Rico's electric grid from the Puerto 
Rico Electric Power Authority, PREPA, to LUMA Energy.
    We will also hear about the authority's plans to spend an 
estimated $9.5 billion of Federal cost-share for the 
reconstruction of the island's electrical infrastructure, which 
was destroyed by Hurricanes Irma and Maria almost exactly 4 
years ago.
    This hearing is indeed timely, as Representative Gonzalez-
Colon mentioned and said in her statement, in part because of 
the recent changes that have taken place at PREPA, with the 
resignation of the PREPA Chair, as well as the utility's 
Executive Director.
    It is more likely the case than not that these changes in 
PREPA's leadership were due to a recent spate of widespread 
power outages on the island that has understandably left the 
island residents very angry, especially since the LUMA contract 
was supposed to improve service.
    Why are so many power outages happening now, and what are 
their causes? Are they because of lack of maintenance at the 
power generation plants or because of poor vegetation control 
and lack of proper consultation with PREPA by LUMA on proper 
load management? Do these and other problems stem from the 
shortage of experienced workers at LUMA who know the system and 
can anticipate where the hiccups are likely to occur?
    We intend to receive answers to these and other questions. 
I am hopeful that many of them can be answered today from our 
diverse group of witnesses, including a representative of the 
Puerto Rico Energy Bureau, which is tasked by law with 
overseeing operations at PREPA, including the LUMA-managed 
transmission and distribution system.
    The last time this Committee held a hearing on PREPA, I 
said that my primary goal was to determine the best way to 
guarantee that PREPA can be rebuilt so that it withstands 
future extreme weather, provides the people of Puerto Rico with 
reliable and inexpensive power, and prevents the displacement 
of its workers. In many ways, this remains my chief concern as 
we convene this hearing today.
    When I visited Puerto Rico 2 years ago and met with PREPA 
officials, I raised with them a number of concerns I had at the 
time about their privatization plan. These concerns, which I 
also heard from various stakeholders on the island, were that 
their plan lacked transparency and stringent contract 
monitoring and oversight requirements, which are needed to 
instill confidence in the process. In many ways, I am still 
hearing those same concerns expressed today.
    Finally, I must repeat my many calls, as echoed by the 
PREPA Integrated Resource Plan and Act 17, for renewables to 
quickly become the energy source for the island, so that the 
cost of producing power, and its reliability, can be reduced 
for the ratepayers.
    Even though Puerto Rico Act 17 calls for PREPA to increase 
its renewable portfolio by 40 percent by 2025, 60 percent by 
2040, and 100 percent by 2050, ongoing foot-dragging in the 
implementation of the law, as well as the IRP, make it unlikely 
that these renewable energy goals will be met.
    PREPA and LUMA need to move more aggressively to comply 
with the IRP and Puerto Rico law. If they don't, the people of 
Puerto Rico are going to pay the price.
    I regret that LUMA backed out at the last minute from our 
oversight hearing on the coal power plant on the island a few 
months ago. Attending today was the right decision.
    I want to thank our witnesses for being here. I look 
forward to hearing the testimony and I yield back.

    [The prepared statement of Mr. Grijalva follows:]
 Prepared Statement of the Hon. Raul M. Grijalva, Chair, Committee on 
                           Natural Resources
    The Committee is meeting today to hear from a number of witnesses 
regarding the status of the privatization of management of Puerto 
Rico's electric grid from the Puerto Rico Electric Power Authority, or 
PREPA, to LUMA Energy. We will also hear about the authority's plans to 
spend the estimated $9.5 billion of the Federal cost-share for the 
reconstruction of the island's electrical infrastructure which was 
destroyed by Hurricanes Irma and Maria almost exactly 4 years ago.
    This hearing is indeed timely in part because of recent changes 
that have taken place at PREPA, with the resignation of the PREPA Board 
Chair as well as the utility's Executive Director.
    It is more likely the case than not, that these changes in PREPA's 
leadership were due to the recent spate of widespread power outages on 
the island that has understandably left the island residents very 
angry; especially since the LUMA contract was supposed to improve 
service.
    Why are there so many power outages happening now and what are 
their causes? Are they because of lack of maintenance at the power 
generation plants or because of poor vegetation control and lack of 
proper consultation with PREPA by LUMA on proper load management? Do 
these and other problems stem from a shortage of experienced workers at 
LUMA who know the system and can anticipate when and where hiccups are 
likely to occur?
    We intend to receive answers to these and other questions. I am 
hopeful that many of them can be answered today from our diverse group 
of witnesses including a representative of the Puerto Rico Energy 
Bureau which is tasked by law with overseeing operations at PREPA 
including the LUMA-managed transmission and distribution system.
    The last time this Committee held a hearing on PREPA, I said that 
my primary goal was to determine the best way to guarantee that PREPA 
can be rebuilt so that it can withstand future extreme weather, provide 
the people of Puerto Rico with reliable, inexpensive power and prevent 
the displacement of its workers.

    In many ways, this remains my chief concern as we convene this 
hearing today.

    When I visited Puerto Rico 2 years ago and met with PREPA 
officials, I raised with them a number of concerns I had at the time 
about their then privatization plan. These concerns, which I had also 
heard from various stakeholders on the island, were that their plan 
lacked transparency and stringent contract monitoring and oversight 
requirements which are needed to instill confidence in the process.

    In many ways, I am still hearing those same concerns expressed 
today.

    Finally, I must repeat my many calls, as echoed by the PREPA 
Integrated Resource Plan or (IRP) and Act 17, for renewables to quickly 
become the energy source for the island so that the cost of producing 
power--and its reliability--will be reduced for ratepayers.
    Even though Puerto Rico Act 17 calls for PREPA to increase its 
renewable portfolio to 40 percent by 2025, 60 percent by 2040, and 100 
percent by 2050, ongoing foot dragging in the implementation of the law 
as well as the IRP make it unlikely that these renewable energy goals 
will be met.
    PREPA and LUMA need to move more aggressively to comply with the 
IRP and Puerto Rico law. If they don't, the people of Puerto Rico will 
pay the price.
    I regret that LUMA backed out at the last minute from our oversight 
hearing on the coal power plant on the island a few months ago. 
Attending today was the right decision. I want to thank all our 
witnesses for being here and I look forward to hearing your testimony.

                                 ______
                                 

    The Chairman. Let me now turn to our witnesses. Before I 
introduce each witness, let me remind the witnesses that, under 
our Committee Rules, they must limit their oral statements to 5 
minutes, but their entire statement will appear in the hearing 
record.
    When you begin, the timer will begin, and it will turn 
orange when you have 1 minute remaining. I recommend that 
Members and witnesses joining remotely use the grid view, so 
that they may pin the timer to their screen.
    After your testimony is complete, please remember to mute 
yourself to avoid any inadvertent background noise. I will also 
allow the entire panel to testify before questioning begins.
    The Chair now recognizes our first witness, Mr. Fernando 
Gil, President of the Puerto Rico Electric Power Authority, 
PREPA, Governing Board.
    Mr. Gil, welcome, and the time is yours.
    You are recognized, Mr. Gil for 5 minutes, sir.

  STATEMENT OF FERNANDO GIL, PRESIDENT, PUERTO RICO ELECTRIC 
 POWER AUTHORITY (PREPA) GOVERNING BOARD, SAN JUAN, PUERTO RICO

    Mr. Gil. Thank you. Good afternoon, Chairman Grijalva, 
Ranking Member Westerman, and members of the Committee, and to 
our Resident Commissioner, Congresswoman Gonzalez. Thank you 
for the opportunity to appear before you today to discuss the 
status of the ongoing transformation of the Puerto Rico 
Electric Power Authority and Puerto Rico electric grid.
    My name is Fernando Gil, and I am recently appointed 
Chairman of PREPA Governing Board, alongside engineer Josue 
Colon Ortiz, who was appointed Executive Director on September 
29, 2020.
    PREPA continues to face difficult challenges. Nonetheless, 
it is undergoing a fundamental transformation, as required by 
Puerto Rico law, conducting the most ambitious program to 
procure renewable resources currently being pursued anywhere in 
the United States.
    At the same time, PREPA has transitioned to its management 
agent, LUMA, the responsibility for operation and maintenance 
of its transmission and distribution systems, in accordance 
with the mandates of Act 17. We are making changes intended to 
improve our performance. And among these are senior-level 
management changes, power plants needs assessments, and asset 
management strategies, among others.
    The recent transition of PREPA's transmission and 
distribution system to LUMA was complex. It required the 
transfer of a large number of employees from PREPA to LUMA, and 
the cutover of billing systems and call centers.
    LUMA took over the transmission and distribution system, 
along with the generation dispatch, on June 1, according to 
plan. Unfortunately, there have been system problems since the 
transfer. Among these were substation fires, caused by failure 
of outmoded equipment, and other customer outages that were not 
related to the transition.
    I should stress that no PREPA employee who was in good 
standing as of June 1 was terminated because of the transition. 
All PREPA employees whose functions were being transferred to 
LUMA under the agreement were either given the opportunity to 
move to LUMA or to stay in agencies in the Government of Puerto 
Rico.
    Prior to the transition, PREPA had 5,321 employees. As of 
June 8, LUMA recruited around 1,190 PREPA employees, and 
currently PREPA staff is 1,260.
    PREPA's generating fleet is old, outmoded, inefficient, and 
expensive to run. Under PREPA's Integrated Resource Plan, most 
of the fleet will be retired over the next 10 years as we 
transition to renewable generation and energy storage, per 
public policy mandate.
    PREPA suffered a large number of generating facilities 
outages in late August and through September. They had a 
variety of causes, but many had to do with the advanced age of 
our fleet. PREPA's base load units are 25 years old, and the 
rest average over 40 years old. PREPA's ability to expend funds 
on maintenance and upgrades has been constrained by the debt 
restructuring process, as Title III of PROMESA, liquidity 
challenges, and the need to address damages resulting from 
hurricanes and earthquakes. The execution of maintenance and 
repair work has also been affected by the measures required in 
response to the COVID-19 pandemic.
    The most significant outage involved a generating station 
on August 22. A transmission line fault led to voltage 
fluctuations that affected generating facilities in the south, 
including Costa Sur. Those fluctuations forced Costa Sur Unit 6 
off-line and damaged a steam turbine rotor. Repairs will take 
several months. Costa Sur Unit 5 suffered a rupture in its 
boiler and was taken out of service on September 13 for 
repairs. Welding work to repair a subsequent steam line failure 
was completed earlier this week.
    The Palo Seco Generating Station has experienced several 
events. Unit 3 suffered boiler ruptures on August 31 and 
September 6, and was limited over the September 25-26 weekend, 
due to the malfunction of the cooling tower system. This unit 
tripped again on September 27, due to a broken economizer. The 
Unit 3 repairs have been completed. Palo Seco Unit 4 was off-
line on September 11 and 12 because of water chemistry issues, 
and was again off-line on September 28 because of a turbine 
lubricating oil leak. These units should be repaired and back 
in service by the end of this week.
    PREPA's Aguirre Station has suffered a variety of failures. 
Recently, Unit 1 tripped off-line, due to a blockage in the 
cooling water intake system, and Unit 2 was limited, due to the 
same event as well as by issues with a regulator valve.
    In 2019, PREPA installed combustion turbines at Palo Seco 
that were briefly operated under a temporary emergency waiver 
granted by the Environmental Quality Board following the 
January 2020 earthquakes. Unfortunately, PREPA could not run 
those turbines last month to make up for the loss of other 
units, because it awaits a clearance from the Environmental 
Protection Agency, and we can't stress enough the need for the 
EPA to act soon on this.
    Fortunately, during late August and September, private 
operating facilities were generally available.
    As required by FEMA and Puerto Rico's Central Office for 
Recovery, Reconstruction, and Resiliency or COR3, PREPA and 
LUMA have developed an updated 10-year plan for the repairs and 
renewal of Puerto Rico's electric grid, as well as damaged 
generation, dams, and irrigation facilities. The first version 
of this plan was submitted on December 7, 2020. Updated 
versions will be submitted every 3 years.
    Over the past 5 months, PREPA has advanced a large number 
of projects through the early stages of FEMA and COR3 review 
and through the required Puerto Rico Energy Bureau approval 
process. With these approvals in hand, PREPA and LUMA can begin 
architectural and engineering design work that will feed into 
project approval submittals.
    Of the roughly $10.7 billion that has been obligated under 
FEMA programs, PREPA is responsible for generation, dams, 
hydroelectric, and irrigation projects involving investment of 
around $2.5 billion. Around $900 million has been identified 
for generation projects, and nearly $1.6 billion for dams, 
hydro, and irrigation projects.
    The Chairman. Mr. Gil, you are a minute over. If you could, 
wrap up, if you don't mind, sir.
    Mr. Gil. Sure, I will, sir.
    PREPA continues to work with LUMA to implement the 
agreement, and to support efforts to transform the Puerto Rico 
transmission and distribution grid. We have the goal of making 
our system more reliable, cleaner, affordable, and more 
customer-centric.
    PREPA is taking a proactive approach to address and resolve 
the problems that have led to an unacceptable number of outages 
due to its generation fleet. We are making progress in securing 
Federal funding to support----
    The Chairman. Thank you, Mr. Gil.
    Mr. Gil. Sorry.
    The Chairman. No, that is OK. As I said earlier, I hope the 
witnesses understand 5 minutes. We have a lot of witnesses, and 
we have Members that have questions. So, anything within your 
power to try to limit that would be great.

    [The prepared statement of Mr. Gil follows:]
 Prepared Statement of Fernando Gil Ensenat, Chairman, Governing Board
              and Josue A. Colon Ortiz, Executive Director
                  Puerto Rico Electric Power Authority
    Chairman Grijalva, Ranking Member Westerman, and members of the 
Committee, thank you for the opportunity to appear before you today to 
discuss the current status and ongoing transformation of the Puerto 
Rico Electric Power Authority and Puerto Rico's electric grid. My name 
Fernando Gil Ensenat. I am the Chairman of PREPA's Governing Board. 
With me is Josue A. Colon Ortiz; he was appointed PREPA's Executive 
Director on September 29, 2021.
    PREPA appreciates the interest the Committee has expressed in 
progress PREPA has made in implementing the June 22, 2020 Operation and 
Maintenance Agreement with LUMA Energy. I will address this subject 
first, and will also address questions I understand the Committee may 
have concerning the status of former PREPA employees following the LUMA 
transition. I will then describe recent generation outages and what 
PREPA has done and is doing in response. I will offer a brief update as 
to where we stand in taking advantage of federal funding for the 
restoration of facilities for which PREPA remains responsible. I will 
also offer an update on PREPA's progress in advancing its renewable 
energy generation and energy storage procurement program.
    I want to start by acknowledging that PREPA continues to face 
difficult challenges on a number of fronts. These include a PROMESA 
Title III restructuring process that has been underway since July 2017, 
and serious liquidity constraints. Added to this have been several 
severe weather events, including Hurricanes Irma and Maria in 2017, 
which destroyed or severely damaged much of PREPA's transmission and 
distribution system. Then came earthquakes in December 2019 and January 
2020, which did serious damage to the Costa Sur Generating Station, one 
of PREPA's largest, and led to limits on the amount of liquified 
natural gas that can be stored at the EcoElectrica facility for use in 
generating power. The COVID-19 pandemic has affected and continues to 
affect every aspect of life in Puerto Rico, including the pace at which 
repairs on the T&D system and PREPA generating facilities can be 
completed. Most recently, failures at a number of PREPA's generating 
facilities have required rotating load shedding to balance available 
electricity supply with demand.
    To complicate these challenges, the Authority is undergoing a 
fundamental transformation, as required by Puerto Rico law. It is 
conducting perhaps the most ambitious program to procure renewable 
generation and energy storage resources currently being pursued 
anywhere in the U.S. At the same time, PREPA has transitioned 
responsibility for operation and maintenance of its transmission and 
distribution system, in what was the largest transaction of its type 
ever completed in the United States. PREPA is evaluating a similar 
transition of responsibility for the operation, maintenance and 
decommissioning of its generating fleet to third parties. The PREPA 
organization has become much smaller than it was even a year ago, and 
significant changes in senior management have been made in the past 10 
days.
    PREPA's handling of these challenges has been uneven. We have made 
mistakes. We are making changes intended to benefit from lessons we 
have learned and to improve our performance. Among these are very 
recent senior level changes, including my appointment as Chairman of 
PREPA's Governing Board and Josue Colon's appointment as Executive 
Director. The purpose of these changes, and others we will be making, 
is to position PREPA to achieve the goals established in recent laws 
and the approved Integrated Resource Plan.
    We take our obligations to the people of Puerto Rico seriously, and 
are working to address the many challenges I have just described. We 
remain committed to the transformation of PREPA and Puerto Rico's 
electric system to one that is reliable, resilient, efficient, clean 
and customer-centric.
Status of the LUMA Transition
    The recent transition of the transmission and distribution system 
to LUMA was complex. The transition required the transfer on June 1, 
2021 of large numbers of employees from PREPA to LUMA, the cutover of 
billing systems, and the transfer of responsibility for call centers, 
all effective on June 1. At the same time, PREPA and LUMA had to manage 
the handover of responsibility for dispatching generation, responding 
to outages and performing day-to-day transmission and distribution 
system maintenance. The transfer of responsibility for running the 
system took place as scheduled on June 1, and the preparations PREPA 
and LUMA had made leading up to that date were equal to the challenge. 
LUMA succeeded in taking over the T&D system and the dispatch of 
generation on June 1, as scheduled, with minimal disruption. There were 
some significant problems following the transfer. Among these were a 
substation fire, which was caused by the failure of outmoded equipment, 
not anything specifically related to the transition. And there were 
customer outages that were unrelated to the transition.
    Since the June 1 transition, PREPA and LUMA have been adjusting to 
their new roles, with PREPA now solely responsible for the operation 
and maintenance of its generating assets and LUMA responsible for the 
operation and maintenance of the T&D system and generation dispatch. 
Our organizations are committed to the transformation of Puerto Rico's 
electric sector.
    I should stress that no PREPA employee who was in good standing as 
of June 1 was terminated as a result of the transition. All PREPA 
employees whose functions were being transferred to LUMA under the O&M 
Agreement were either given the opportunity to move to LUMA, at 
salaries comparable to their pre-existing salaries, or to take 
positions with Puerto Rico government agencies. Just prior to the June 
1 transition, PREPA had 5,321 employees. As of June 8, LUMA had 
recruited 1,190 PREPA employees. Currently, PREPA has 1,260 active 
employees.
Recent Generation Outages
    PREPA's fleet of generating facilities is old, outmoded, 
inefficient and expensive to run. PREPA's approved Integrated Resource 
Plan envisions that most of these units will be retired over the next 
10 years, in favor of new generation from renewable sources as well as 
energy storage. The IRP also envisions the retirement of the AES 
generating facility, as required by Puerto Rico law, by year-end 2027.
    PREPA suffered a large number of generating facility outages in 
late August and through September. They had a variety of causes, but 
many had to do with the advanced age of PREPA's generating fleet. 
PREPA's newest baseload units are 25 years old, and the rest average 
over 40 years old. PREPA's ability to expend funds on maintenance and 
upgrades has been constrained by the Title III process, liquidity 
challenges and the need to address damage resulting from hurricanes and 
earthquakes. The execution of maintenance and repair work has also been 
affected by measures required in response to the COVID-19 pandemic. 
Over the past 45 days, several of PREPA's largest steam generating 
units were forced out of service. This, along with some faults in the 
transmission system and the limited availability of backup generation, 
meant that there was less generation available than was required to 
meet demand during peak periods. To address the generation resource 
shortfall, LUMA was required to shed load to allocate the limited 
electricity supply.
    The most significant generating unit outage involves the Costa Sur 
generating station. On August 22, a transmission line fault led to loss 
of two of the San Juan generating units and transmission system 
fluctuations that affected generating facilities in the south, 
including Costa Sur. Those fluctuations led to vibrations which 
eventually forced Costa Sur Unit 6 offline and damaged the steam 
turbine rotor. Repairs of that equipment will take several months. In 
the meantime, a spare turbine rotor has been sent for repair in St. 
Louis. That repair should be completed and Unit 6 back in service 
within 4 months, subject to inspection results. Costa Sur Unit 5 
suffered a rupture in its boiler and was taken out of service on 
September 13 for repairs. A break in the main steam line prevented the 
unit's return to service as scheduled on September 14. Welding work to 
repair that break was completed at the beginning of this week. Costa 
Sur's difficulties are particularly frustrating for PREPA, since 
following the January 2020 earthquakes PREPA invested around $40 
million to repair and restore both Costa Sur units and to eliminate a 
maintenance backlog. These repairs were effective, but the Costa Sur 
plant, being an old plant, remains vulnerable to age-related failures.
    The Palo Seco Generating Station experienced several events 
beginning August 31 that have limited its available capacity. Unit 3 
suffered boiler ruptures on August 31, and again on September 6. Unit 3 
was limited on the September 25-26 weekend due to sargassum clogging of 
cooling water systems. This unit tripped again on September 27 due to a 
broken economizer. Repairs have been completed. Palo Seco Unit 4 was 
offline from September 11 to September 12 because of water chemistry 
issues, and was again offline on September 28 because of a turbine 
lubricating oil leak which burned a cable tray and affected a pump's 
hydrogen seal and a motor turning gear. This unit should be repaired 
and back in service by this weekend.
    PREPA's Aguirre station, another large and old generating facility, 
has suffered a variety of boiler and pump failures in recent weeks. 
Most recently Unit 1 tripped offline because its cooling water intake 
system became clogged by sargassum and Unit 2 was limited due to the 
same event, as well by issues with a regulator valve.
    In 2019, PREPA installed combustion turbines at its Palo Seco 
generating station to provide backup generation and system support. 
Those turbines were operated under temporary emergency waivers from the 
Environmental Quality Board after the January 2020 earthquakes. PREPA 
would have liked to have run those turbines last month to make up for 
the loss of generation at other facilities, but could not because it 
needs a clearance from the Environmental Protection Agency. So the new 
Palo Seco combustion turbines have not been available during the recent 
generation outage events. PREPA continues to seek the required air 
permits, and is ready to commission the combustion turbines once it has 
the necessary EPA authorization. We need EPA to act soon.
    Fortunately, during late August and September, when several of 
PREPA's generating units were forced offline, the AES generating 
facility was consistently available. During that time the EcoElectrica 
combined cycle generating facility was also generally available.
    PREPA and its contractors are working hard to repair PREPA's 
damaged generating facilities. And PREPA is actively in the market 
seeking commitments from developers to add a large amount of renewable 
generation and energy storage to replace its aging generating fleet, as 
I will discuss.
Status of Federal Funding of Generation, Dam and Hydroelectric Projects
    As required by the Federal Emergency Management Agency and Puerto 
Rico's Central Office for Recovery, Reconstruction and Resiliency, or 
COR3, PREPA has developed and has since updated a 10 Year Plan for the 
repair and renewal of Puerto Rico's electric grid as well as damaged 
generation, dam and irrigation facilities with federal support. The 
first version of this Plan was submitted on December 7, 2020, and an 
updated Plan will be submitted every 3 years. On September 21, 2021, 
PREPA submitted a 90 Day Plan that addresses areas covered by the 10 
Year Plan on which PREPA will be focusing and executing over the next 
90 days. With the 10 Year Plan in place, and processes for project 
review and approval by the Puerto Rico Energy Bureau, COR3 and FEMA now 
established and well understood, PREPA is now in a position to begin to 
advance repair and renewal projects eligible for FEMA funding that were 
first identified 3 years ago, in the wake of Hurricane Maria.
    Over the past 5 months PREPA has succeeded in advancing a large 
number of projects through the early stages of the FEMA/COR3 process. 
This has required the involvement of the Puerto Rico Energy Bureau, 
which must approve T&D and generation projects, as well as the 
Financial Oversight and Management Board for Puerto Rico, whose sign-
off is also necessary. The process is complex, demanding and time 
consuming. The first projects, which were jointly submitted for 
approval by PREPA and LUMA, did not receive the required Energy Bureau 
approvals until June 8, 2021. Now with these approvals in hand, PREPA 
and LUMA can begin architectural and engineering design work that will 
feed into project approval submittals to be made to COR3 and FEMA.
    With the transfer to LUMA of responsibility for Puerto Rico's 
transmission and distribution system, PREPA's efforts relating to FEMA 
federal disaster relief funding are now focused on projects involving 
generation, dams, hydroelectric facilities and irrigation. There are 
currently 41 generation, dams and hydro projects for which PREPA 
expects to receive FEMA funding. LUMA now has responsibility to secure 
from the Energy Bureau and FEMA authorizations for projects involving 
the transmission and distribution system. T&D system projects will 
absorb most of the funding that FEMA has obligated for Puerto Rico 
electrical infrastructure; generation projects for which PREPA remains 
responsible are a small portion--under 10 percent--of the total.
    Of the roughly $10.7 billion in funding that has been obligated for 
investments in Puerto Rico electric and related infrastructure, PREPA 
is now responsible for generation, dam, hydroelectric and irrigation 
projects that as of today would involve investments of approximately 
$2.5 billion under FEMA's 428 and 404 programs. This amount will change 
as engineering analyses are performed and project scopes are more 
clearly defined. Of this amount, approximately $900 million has been 
identified for generation projects, and nearly $1.6 billion has been 
identified for dams, hydro and irrigation projects. Some repairs have 
been completed for which PREPA has sought or will seek reimbursement 
through COR3 from FEMA. Early in September PREPA received Puerto Rico 
Energy Bureau approval to proceed with 14 of 20 projects, and the other 
6 projects were approved on September 28. PREPA submitted the first 
group of 14 approved projects to COR3 and FEMA for the establishment of 
required FEMA project numbers the same day the Energy Bureau approved 
them.
    Around 61% of all federally funded generation, dam, hydro and 
irrigation projects have been started in the sense that a scope of work 
is under development. To date PREPA has received around $500,000 in 
federal reimbursements. We are in early days, so the dollar spend is 
low, being focused on architectural and engineering design work. The 
spend will ramp up as projects move from the design phase into 
implementation.
    Before project construction can commence, PREPA must submit 
projects to the Energy Bureau for its approval and, having received 
this, then must submit a scope of work to FEMA. That scope of work has 
to be detailed enough to enable FEMA to evaluate the environmental and 
historical resource impacts of the individual project. Depending on the 
nature of the project, at least 30% of the project design work needs to 
be completed in order to provide FEMA the information it needs, and for 
projects that may have significant impacts, as much as 100% of the 
project design work may need to be completed. The process takes a great 
deal of time. It can be set back by delays, for example, in obtaining 
FOMB approvals for renewal of professional services contracts for firms 
assisting PREPA in complying with FEMA and COR3 requirements.
    PREPA has recently submitted a request to COR3 for reimbursement of 
$7.1 million for architectural and engineering work required in 
connection with generation and dams, hydro and irrigation projects 
identified for FEMA funding. Those funds should be disbursed to PREPA 
this week. So we are making progress, slowly, in obtaining access to 
the FEMA funds that have been identified for projects involving 
generation, dams, hydro and irrigation.
Status of PREPA's Renewable Generation/Energy Storage Procurement 
        Process
    As required by its approved Integrated Resource Plan and orders of 
the Energy Bureau, PREPA has embarked on one of the most ambitious 
efforts being undertaken anywhere in the United States to procure new 
renewable generation and energy storage resources. Over the next 3 
years, to comply with Energy Bureau directives, PREPA will seek 
commitments from third party developers to permit, construct, own and 
operate a total of 3,750 MW of renewable energy generation resources 
and 1,500 MW of energy storage resources. PREPA issued a Request for 
Proposals for renewable generation and energy storage systems on 
February 22, 2021. This was Tranche 1 of 6 Tranches; in this first 
Tranche, as the Energy Bureau directed, PREPA sought commitments to 
develop at least 1,000 MW of renewable generation and to develop energy 
storage systems having capacity of at least 500 MW.
    The response to PREPA's first RFP has been encouraging. Quantities 
of both renewable generation and energy storage offered were greater 
than the targets PREPA identified for the first Tranche. Last Thursday 
PREPA communicated to participants in the first Tranche PREPA's 
decisions as to which proposals have been selected to advance to 
``Phase III'' of the RFP process. More than three dozen project 
proposals will be considered and given the opportunity to be awarded 
contracts in this third and final Phase. This could result in over 40 
individual contracts with generation, storage and virtual power plant 
project developers. PREPA and its advisors will complete System Impact 
Studies and Facility Studies addressing the interconnection of each 
project to the transmission and distribution grid, and PREPA will make 
interconnection cost estimates based on these studies available to each 
project proponent. It will then invite each proponent to make its best 
and final price offer. PREPA expects to commence the final contract 
documentation process with individual project proponents in October, 
and expects to complete this process in November and December of this 
year. The Energy Bureau-mandated target is for the selected projects to 
commence commercial operation within 24 months of contract execution.
    PREPA will issue its Tranche 2 RFP by mid-October. In this second 
Tranche, as the Energy Bureau has directed, PREPA will seek to procure 
at least 500 MW of renewable generation capacity and at least 250 MW of 
energy storage capacity. The remaining 4 Tranches will be issued at 6 
month intervals over the next couple of years.
    We are pleased with the interest we have seen among developers in 
responding to Puerto Rico's urgent need to add clean and reliable 
generating resources to the island's electric grid. PREPA is committed 
to making its renewable procurement process a success, and to the goal 
of transforming Puerto Rico's electric system to one that is reliable, 
resilient, environmentally sustainable and customer-centric.
Conclusion
    In compliance with the applicable laws and regulations, PREPA 
continues to work with LUMA to implement the LUMA O&M Agreement and to 
support LUMA in its efforts to transform the Puerto Rico transmission 
and distribution grid. Our organizations share the goal of making the 
grid more reliable, resilient, cleaner, affordable, and more customer-
centric. Our relationship is good and improving.
    PREPA is doing all that it can to address and resolve the problems 
that have led to an unacceptable number of outages in its aged and 
inefficient generation fleet. Recent management changes at PREPA are 
intended to reinforce the Authority's commitment to turning this 
situation around.
    PREPA is making progress in securing federal funding to support the 
renewal of generation and hydro assets, though the process continues to 
be complex and time-consuming. PREPA, the government of Puerto Rico, 
and all the people of the island appreciate the federal funding that 
will help us do this. It will make a huge difference for our people. I 
want to thank Members of Congress for their support for the 
transformation of the Puerto Rico Electric system through the federal 
funding mechanisms they have established.
    And finally, PREPA is focused intently on advancing its procurement 
of new renewable and energy storage capacity as quickly as possible. 
Initial indications on this front are positive. More generally, PREPA 
remains fully committed to continuing on the path of transforming 
Puerto Rico's electric sector and to a future in which energy is 
cleanly and efficiently produced and reliably distributed to the people 
of Puerto Rico at reasonable cost.

    Thank you for the opportunity to appear before you today.

                                 ______
                                 

 Questions Submitted for the Record to Fernando Gil-Ensenat, Chairman, 
         Governing Board, Puerto Rico Electric Power Authority

            Questions Submitted by Representative Velazquez
    Question 1. How is PREPA going to comply with the Renewable 
Portfolio Standard to achieve a minimum of 40% of renewable energy on 
or before 2025, if as of today Puerto Rico only generates 3% of 
renewable energy?

    Answer. The Puerto Rico Electric Power Authority (PREPA) is 
proceeding as required by its approved Integrated Resource Plan and 
orders of the Puerto Rico Energy Bureau (PREB) to procure the 
quantities of renewable generation and energy storage resources 
required to satisfy Puerto Rico's Renewable Portfolio Standard (RPS), 
as established by Act 82-2010, as amended. The RPS contemplates that 
40% of the energy distributed to Puerto Rico consumers be generated by 
renewable resources, by 2025. As I testified to the Committee on 
Natural Resources on October 6, 2021, to this end PREPA has embarked on 
one of the most ambitious efforts to procure new renewable generation 
and energy storage resources being undertaken anywhere in the United 
States.
    PREPA will seek commitments from third party developers to permit, 
construct, own and operate a total of 3,750 MW of renewable energy 
generation resources and 1,500 MW of energy storage resources. This 
quantity is approximately equal to the amount of generation capacity 
currently available from PREPA. In the first of what will be six 
procurement Tranches, PREPA has sought commitments from third parties 
to develop at least 1,000 MW of renewable generation and energy storage 
systems having a capacity of at least 500 MW. These quantity thresholds 
are consistent with those set out in PREPA's approved IRP and those the 
Energy Bureau has determined are required to meet the 40% renewable 
generation requirement, by 2025.
    The response to the Tranche 1 RFP has been encouraging. The 
renewable generation and energy storage resource capacity offered was 
in the aggregate greater than the targets PREPA identified for that 
first Tranche. PREPA representatives are currently engaged in efforts 
to conclude the evaluation of more than 40 renewable generations, 
energy storage and virtual power plant projects, and PREPA expects to 
complete this process and the contracts approvals by all the external 
stakeholders (Puerto Rico Energy Bureau and the Financial Oversight and 
Management Board for Puerto Rico) by the end of this year.
    By the end of this month, PREPA will issue its second Tranche RFP. 
In this second Tranche, as the Energy Bureau has directed, PREPA will 
seek to procure at least 500 MW of renewable generation capacity and at 
least 250 MW of energy storage capacity. PREPA intends to request 
Proponents to submit their Tranche 2 proposals in early January. The 
remaining 4 RFP Tranches will be issued at 6 month intervals over the 
next two years.
    As of today, PREPA acquires only around 3% of the energy it 
distributes from renewable resources. This percentage is lower than it 
would have been if PREPA had been permitted to execute power purchase 
and operating agreements with 16 ``shovel ready'' renewable generation 
projects, representing 594 MW of capacity, which PREPA renegotiated 
last year. Unfortunately, although the Energy Bureau authorized PREPA 
to enter into those renegotiated agreements, on August 17, 2020 the 
Financial Oversight and Management Board for Puerto Rico notified PREPA 
that it had concluded that the cost of energy to be purchased under 
those contracts would be higher than those assumed under PREPA's Fiscal 
Plan, and therefore permitted PREPA to procure only 150 MW of the 
nearly 600 MW of renewable generating capacity it had set out to 
acquire from the ``shovel ready'' projects.

    Question 2. According to your testimony and the answer to my 
question, Costa Sur's recent failure was due to issues with the 
transmission. Could you please provide the pertaining documentation 
regarding this incident and how a fault in transmission was 
responsible?

    Answer. On August 22, 2021, a transmission line, 38,900, suffered a 
malfunction which led to the loss of two of the San Juan generating 
units (Units 5 and 6), and Units 3 and 4 of Palo Seco Steam Plant. The 
loss of these four units caused an automatic load shedding in the 
electric system. As a result of those Units being forced off-line, the 
transmission system experienced significant voltage fluctuations. Those 
fluctuations may have affected generating facilities in the south, 
including Costa Sur, as they attempted to compensate for voltage 
excursions. Although further testing and evaluations would be needed to 
establish this as a fact, the fluctuations could have technically led 
to turbine vibrations which eventually forced Costa Sur Unit 6 off-line 
and damaged that Unit's steam turbine rotor.

          Questions Submitted by Representative Gonzalez-Colon

    Question 1. Please provide us the latest generation report and the 
tables/report on the condition of the generating fleet.

    Answer----
    Latest reports follow:
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
     

    .epsQuestion 2. Those reports are expected to show [t]here are 
units both in PREPA and in the private generators that should have long 
already been undergoing maintenance or upgrade but remain active so as 
not to lose capacity.

    (a) Can you identify critical units that absolutely must go offline 
soon for maintenance?

    Answer. The two units of EcoElectrica generating facility in 
Penuelas need to be taken off-line for maintenance from November 6 
until November 30, 2021, and Unit 2 of the AES generating facility in 
Guayama needs to be taken off-line in January 2022 for approximately 
four to six weeks.

    (b) How will that leave us in reserve capacity?

    Answer. The information that PREPA has available indicates that the 
projected average of reserve capacity that PREPA will have available 
with the EcoElectrica and AES units off-line is approximately 300 MW. 
Provision of official information regarding the reserve capacity that 
will be available for that period is the responsibility of LUMA 
Energy's Dispatch Control Center.

    Question 3. What do you answer to those who say we need not rebuild 
or convert to new fuels any of the existing fleet, but just fix it to 
keep running until the renewables come on-line?

    Answer. PREPA anticipates that, even under optimal conditions, the 
build-out of renewable generation and energy storage is likely to take 
the better part of 10 years. As this build-out is being pursued, Puerto 
Rico will need reliable conventional generation to meet system demand. 
Accordingly, PREPA believes that it must take a balanced approach that 
includes the repair of many of the generating facilities that are 
currently unavailable, since their capacity will continue to be 
required as renewable generation and energy storage is developed, 
constructed and placed into service over the next several years.
    In addition to repairing and improving the maintenance of existing 
units, PREPA believes it will be necessary to add some new natural gas-
fired generating facilities, including a baseload unit in the San Juan 
area, to provide more reliable capacity and to support system 
operations, as renewable generation and storage are being added. 
Experience in other jurisdictions, including California, Texas, Spain 
and Germany, shows that some amount of fast-response rotating 
generating equipment, generally in the form of natural gas-fired 
combustion turbines, must continue to be available even in systems with 
large amounts of renewable generation and storage to maintain system 
voltage within acceptable levels, to compensate for the unavailability 
of solar generation during certain times and to enable the system to 
respond to weather events.

    Question 4. How fast could the ``Virtual Power Plants'' be 
established, from PREPA's perspective? Are they in the plans?

    Answer. PREPA has sought to procure virtual power plant resources 
in its Tranche 1 RFP, and VPPs are anticipated to be among the 
resources that will be added quickly once PREPA is authorized to enter 
into contracts with VPP Proponents. Three Proponents have come forward 
in Tranche 1 with VPP project proposals. These Proponents have 
indicated that some of the Participant resources they would aggregate 
into a VPP are already interconnected with the Transmission and 
Distribution System, and they have suggested that they could make some 
capacity available from VPP resources within one year of their 
execution of a Grid Services Agreement.
    A major challenge for PREPA and LUMA Energy, the operator of the 
T&D System, is that the Energy Management System that is currently 
employed in the operation of the T&D System was not designed to 
interface with VPPs, and until that system is replaced the ability to 
dispatch and benefit from VPP resources is very limited. The 
replacement of the Energy Management System is planned and will be 
carried out by LUMA Energy. This project will be supported by funding 
to be supplied by the Federal Emergency Management Agency. PREPA 
understands that this replacement is unlikely to be completed before 
2023.

    Question 5. Palo Seco Station's three so-called ``portable'' 23 MW 
generators--They were installed with a waiver for certain parameters 
for emission control during the Maria emergency. They cannot be fully 
used due to still to this date remaining non-compliant. What is the 
status of progress?

    Answer. PREPA is awaiting a required clearance from the 
Environmental Protection Agency (EPA) to perform the unit's operational 
water injection system commissioning. This is required in the operation 
of the emissions control systems in the Palo Seco portable combustion 
turbine generators. PREPA will commission the combustion turbines once 
it has the requested EPA authorization in hand. PREPA expects that such 
authorization could be in place by the end of October 2021.

    Question 6. Workforce matters: How many enterprise critical 
positions are vacant?

    Answer. There are approximately 122 vacant critical positions. In 
addition to the aforementioned vacant positions, the Generation 
Directorate has some employees in critical positions that are going to 
retire in the near future.

    Question 7. Future Generation:

    (a) What is the status of the Renewables/Storage RFPs?

    Answer. As I have testified, the Renewable Generation and Energy 
Storage RFP process is well underway. See my response to Rep. 
Velazquez's first question set forth above.
    On September 30, 2021, PREPA communicated to Tranche 1 participants 
its selection of proposals that will advance to ``Phase III'' of the 
RFP process, in which contract documentation will be completed and 
final costs of interconnection determined. More than three dozen 
project proposals are being considered in this third Phase. PREPA and 
LUMA will complete System Impact Studies and Facility Studies 
addressing the interconnection of each generation and storage project 
to the Transmission and Distribution System, and PREPA will make 
interconnection cost estimates, based on these studies, available to 
each project proponent.

    (b) What is the status of proposals for privatizing the legacy 
generation fleet?

    Answer. This process is being managed by the Public-Private 
Partnerships Authority (the ``P3A''), with the technical advice of 
PREPA. We understand that several prospective respondents have 
performed due diligence reviews and site visits focused on individual 
generating facilities. We respectfully recommend that the Committee 
request any additional information concerning this process from P3A, 
which is in charge of the procurement process.

    (i) Are proponents likely to take on plants nearing end-of-life?

    Answer. PREPA understands that the operation and maintenance 
agreement that would govern the relationship among PREPA, P3A and the 
party or parties who contract to take on responsibility for the 
operation, maintenance and retirement of legacy generating facilities 
will require the successful bidders to assume the obligation to 
decommission and dismantle the existing plants. The sites at which the 
legacy generating facilities are located are likely to be valuable as 
potential locations of new generating and energy storage facilities or 
as industrial facilities, and therefore there will be substantial 
incentives to make these sites ready for redevelopment. We respectfully 
recommend that the Committee request any additional information from 
P3A, which is in charge of the procurement process.

    (ii) When are the older units scheduled for replacement?

    Answer. PREPA's approved IRP assumes that the legacy baseload units 
fired by heavy fuel oil will be retired over the next ten years.

    Question 8. Permitting of LNG units:

    (a) What's the status of the PREB/PREPA discussion on the 
installation of LNG units that were not in the prior PREB-approved 
resources plan?

    Answer. See response immediately below.

    (b) Does the renewables plan in any way forbid any further 
installation of combustion units transitionally? 

    Answer. The Integrated Resource Plan, under which PREPA is 
currently pursuing procurement of new renewable generation and energy 
storage facilities, significantly limits PREPA's ability to pursue the 
installation of new fossil-fired combustion turbine generating 
facilities. But it does not entirely preclude the installation of such 
facilities. PREPA continues to evaluate the possibility of installing 
some new fossil-fueled generating facilities to support the ongoing 
transition to a future state in which renewable generation and energy 
storage dominate the resource mix supporting electric power supply in 
Puerto Rico.
    In its August 24, 2020 order in Case No. CEPR-AP-2018-0001, 
approving in part and rejecting in part PREPA's IRP, the PREB declined 
to authorize the inclusion of new gas-fired combustion turbine 
generating units in the Modified Action Plan, pending further study. 
The PREB also declined to approve the development of additional 
liquefied natural gas infrastructure that would support the delivery of 
natural gas to certain generating units. The PREB authorized PREPA to 
commence preliminary design, economic analysis, engineering and site 
selection work on a new fossil fuel-fired combined cycle generating 
facility at Palo Seco or at another location in the San Juan area. The 
purpose of such a facility would be to serve as a dependable source of 
generating capacity, energy and ancillary services, permitting the 
retirement of several existing, obsolete oil-fired generating units by 
2025.
    In January 2021, PREPA reported to the PREB that it is performing 
planning and preliminary engineering studies which evaluate the 
construction of a new dual-fuel combined cycle generating facility in 
the San Juan area having a capacity of 300-400 MW. It also reported 
that in October 2020, the Federal Emergency Management Agency had 
obligated $13,507,500 of mitigation funds under Section 404 of the 
Stafford Act, for the planning and design of a new combined cycle 
facility in the San Juan area. If this new combined cycle facility were 
to be built, it would be 100% federally funded. The Energy Bureau is 
monitoring PREPA's development of preliminary studies for this new 
combined-cycle generating facility in Case No. NEPR-MI-2021-0003 and 
has required PREPA to file quarterly reports on the status of those 
studies.
    The PREB has directed PREPA to evaluate the replacement of only a 
small amount of the gas combustion turbine generating capacity that is 
installed, though generally unavailable, around the Island. At the same 
time, FEMA has approved Section 404 hazard mitigation funding in the 
amount of $280.7 million to cover the costs of replacing 11 Frame 5 
combustion turbine units to minimize the risk that Puerto Rico's 
recovery could be hampered by the unavailability of generating units 
capable of responding in an emergency. Moreover, the availability of 
fossil fuel-fired generating facilities would mitigate risks of 
increasing grid instability that could result as rotating generating 
equipment is replaced by inverter-based generation and energy storage. 
PREPA is continuing to engage with the PREB on the question of how much 
gas-fired combustion turbine generating capacity should be included in 
PREPA's going-forward resource procurement plans.

                                 ______
                                 

    The Chairman. Let me now turn to the Chairman of the Puerto 
Rico Energy Bureau, Mr. Edison Aviles-Deliz.
    Sir, you are recognized. Thank you.

STATEMENT OF EDISON AVILES-DELIZ, CHAIRMAN, PUERTO RICO ENERGY 
              BUREAU (PREB), SAN JUAN, PUERTO RICO

    Mr. Aviles-Deliz. Good afternoon, Chairman Grijalva, 
Ranking Member Westerman, Congresswoman Gonzalez-Colon, and 
distinguished members of the Committee. My name is Edison 
Aviles-Deliz, I am the Chair of the Puerto Rico Energy Bureau. 
On behalf of the PREB, I appreciate the opportunity afforded to 
present our views regarding the implementation of the LUMA 
transmission and distribution contract.
    The PREB was created in 2014 by Act 57, serving as a key 
component for the full and transparent implementation of the 
Act's energy reform goals. The PREB has a mandate to ensure 
that electric service is safe, reliable, and affordable.
    The T&D system in Puerto Rico is now operated and 
maintained by LUMA under the operation and maintenance 
agreement entered by PREPA, the P3, and LUMA, in accordance 
with Act 120. The T&D agreement is implemented with the 
oversight from the P3 authority, PREPA, and the PREB. Act 120 
safeguards the powers of the Energy Bureau regarding energy 
matters, as well as its authority to regulate, supervise, and 
ensure compliance with the public energy policy of Puerto Rico, 
including, but not limited to, matters related to the T&D 
agreement.
    Since the last time the PREB testified before this 
Committee, the PREB has undertaken an extensive review of the 
plan proposed by LUMA, the PREB's responsibilities to ensure 
these plans improve the delivery of electric service and 
increase the resilience of the electric infrastructure against 
future weather events.
    PREB is working to ensure the use of the Federal 
reconstruction dollars assigned to Puerto Rico is aligned with 
the requirements and targets imposed by our energy public 
policies. During the front end transition period of the T&D 
agreement, the PREB extensively evaluates LUMA's plan that 
included opportunity for public participation and wide 
dissemination through the PREB's YouTube channel. This 
evaluation resulted in approval that carries specific 
conditions that LUMA needs to satisfy at determined intervals 
within LUMA's contract period.
    LUMA is a certified electric service company within the 
PREB's regulatory jurisdiction. During the interim service 
period, the electric utility maintenance and operation are 
shared by LUMA and PREPA, where LUMA is responsible for 
planning, operating, and maintaining the T&D system, and PREPA 
is in charge of the operation and maintenance of the generation 
system.
    PREB has strong oversight of LUMA and the electric industry 
in Puerto Rico, as demonstrated by the extensive range of 
proceedings currently underway. The PREB is working over 25 
proceedings that address the significant components of LUMA's 
responsibilities. The responsibilities in operating includes 
improving system reliability, achieving sustainability, and 
preserving the cost effectiveness of the electric services.
    The Federal funding made available to Puerto Rico in 
response to the disasters arising from Hurricane Maria is a 
major enabler of the rebuild of the electric grid, in which a 
system that meets industry standard is modern and flexible, and 
able to integrate renewable generation with future resilience 
required to better withstand a future weather event.
    The PREB has already evaluated and approved around 250 
electric system reconstruction projects that amount to $8.29 
billion. Any permanent work proposed for the electric 
infrastructure needs approval from the PREB before it can move 
forward to the receiving of the Federal funding.
    The PREB is the entity vested in Puerto Rico with ensuring 
that the investment made on the electric infrastructure is 
consistent with the energy public policy. In addition, to 
ensure that adequate controls are in place for the efficient 
use of public funds, the PREB is currently evaluating LUMA's 
procurement processes.
    I am pleased to represent before you here today the public 
interest of the people through the legal mandate that has been 
bestowed upon the PREB, to provide strong leadership and 
oversight of the recovery and revitalization of the Puerto Rico 
electric grid. I look forward to your questions and remain 
committed to continue building up the working relationship with 
the Committee for the benefit of Puerto Rico. Thank you.

    [The prepared statement of Mr. Aviles-Deliz follows:]
     Prepared Statement of Edison Aviles-Deliz, P.E., Esq., Chair,
                       Puerto Rico Energy Bureau

                            I. INTRODUCTION

    Chairman Grijalva, Ranking Member Westerman, Congresswoman 
Gonzalez-Colon, and distinguished Members of the Committee, thank you 
for the opportunity to appear before you today to discuss the Puerto 
Rico Energy and Power Authority (PREPA) Post Implementation of the LUMA 
Transmission and Distribution Contract.
    My name is Edison Aviles-Deliz, and I am the Chair of the Energy 
Bureau of the Puerto Rico Public Service Regulatory Board 
(``PREB'').\1\ The PREB is an independent, regulatory body consisting 
of five (5) commissioners that regulate the electric utility serving 
the Island and functions similarly to the Public Utilities Commissions 
(``PUC'') found across the mainland. The Commissioners have equal 
voting powers. The PREB has a mandate to implement and enforce the 
energy public policy enacted in Puerto Rico, as well as to adopt the 
regulations necessary for such implementation.
---------------------------------------------------------------------------
    \1\ Formerly known as the Puerto Rico Energy Commission.
---------------------------------------------------------------------------
    Having a strong and effective regulator is crucial to the 
development of a stable and robust electric delivery system and the 
transformation of the Puerto Rico electric system. The PREB is an 
independent regulator that is subject to judicial review. This 
stability fosters an environment where long-term plans and strategies 
can succeed. Since the last time the PREB testified before this 
Committee,\2\ the PREB has undertaken an extensive review of the plans 
proposed by the private Transmission and Distribution System (``T&D'') 
Operator, LUMA,\3\ to ensure that these plans are conducive to 
improving the delivery of electric service and increasing the 
resilience of the electric infrastructure against future weather events 
by making smart use of the federal reconstruction dollars available to 
the Island, and ensuring that the shift toward 100% renewable 
generation is aligned with the targets imposed by our energy public 
policy.
---------------------------------------------------------------------------
    \2\ The Transformation of the Puerto Rico Electric Power Authority 
(PREPA), July 23, 2020.
    \3\ LUMA Energy, LLC and LUMA Energy ServCo, LLC (jointly 
``LUMA'').
---------------------------------------------------------------------------
    The T&D system in Puerto Rico is now operated and maintained by 
LUMA with extensive oversight from the Puerto Rico Public Private 
Partnership Authority (``P3 Authority''), PREPA and the PREB.\4\
---------------------------------------------------------------------------
    \4\ LUMA Energy, LLC is a certified electric service company that 
operates under the jurisdiction of the PREB, Certification Number: 
NEPR-CT-2020-0008. LUMA Energy ServCo, LLC is a certified electric 
service company that operates under the jurisdiction of the PREB, 
Certification Number: NEPR-CT-2020-0007.
---------------------------------------------------------------------------

                         II. THE PREB--OVERVIEW

    The PREB was created in 2014 by the Puerto Rico Energy 
Transformation and RELIEF Act \5\ serving as a key component for the 
full and transparent implementation of the Act's energy reform goals. 
Specifically, the PREB has the responsibility to regulate, monitor and 
enforce the energy public policy of the Government of Puerto Rico. PREB 
has a mandate to ensure electric service is safe, reliable, and 
affordable.
---------------------------------------------------------------------------
    \5\ Act 57-2014, as amended.
---------------------------------------------------------------------------
A. Expertise
1. Commissioners

    By statute,\6\ PREB Commissioners have diverse professional 
backgrounds. The current Bureau features exceptionally qualified 
commissioners in its ranks. Currently, three commissioners hold dual 
degrees in engineering and law, one commissioner is a seasoned energy, 
land use, and environmental attorney who serves in the National 
Association of Regulatory Utility Commissioners (``NARUC'') Board of 
Directors, and one commissioner is a licensed engineer specialized in 
the design of electrical power systems.
---------------------------------------------------------------------------
    \6\ Section 6.6 of Act 57-2014, as amended.
---------------------------------------------------------------------------
2. PREB is supported by Nationally Recognized Technical Resources

    PREB relies on recognized experts in the utility regulatory field 
to assist its informed and grounded regulatory development. These 
resources include former commissioners and staff from multiple U.S. 
Public Utility Commissions (``PUCs''), some with first-hand experience 
dealing with the current arrangement found in Puerto Rico: a private 
operator running the T&D system for the public electric utility. The 
PREB is also advised by experts in the areas of energy regulatory 
affairs, economics, engineering, energy efficiency and resource/system/
operations planning, among others. These experts also provide 
consulting services throughout the US and other international 
jurisdictions.

 III. PREB'S OVERSIGHT OF THE ELECTRIC INFRASTRUCTURE RECONSTRUCTION, 
                       OPERATION AND MAINTENANCE

    Puerto Rico suffers from an inherently deficient electric system, a 
condition that has been exacerbated after the impact of hurricanes Irma 
and Maria. In particular, the planning, design, and operation of an 
isolated island-based electricity system imposes on PREPA, and Puerto 
Rico as a whole, significant challenges regarding power system 
stability and reliability. Act 120-2018 \7\ establishes the legal 
framework for the transformation of the electric power system in Puerto 
Rico.\8\ It empowers PREPA to sell its assets related to electric power 
generation and transfer or delegate any of its operations, functions, 
or services.\9\ However, any agreement arising from Act 120-2018 shall 
be entered into under the legal and administrative framework 
established in Act 29-2009 \10\ which regulates Public-Private 
Partnerships.
---------------------------------------------------------------------------
    \7\ Known as the ``Puerto Rico Electric Power System Transformation 
Act'', as amended (``Act 120-2018'').
    \8\ See generally, Statements of Motives, Act-120-2018, pp 3-5.
    \9\ Id.
    \10\ Known as ``Public-Private Partnership Act'', as amended (``Act 
29-2009'').
---------------------------------------------------------------------------
    Act 120-2018 safeguards the powers of the Energy Bureau regarding 
energy matters, as well as its authority to regulate, supervise, and 
ensure compliance with the public energy policy of Puerto Rico. In 
other words, regarding any agreement entered pursuant to Act 120-2018, 
the Energy Bureau retains its powers, responsibilities, and duties to 
establish and implement the regulatory actions necessary to guarantee 
the capacity, reliability, security, efficiency, and reasonableness of 
the system rates.
    After a comprehensive competitive process, the P3 Authority 
selected a third-party operator for the PREPA Transmission and 
Distribution System (``T&D System''). On June 22, 2020, PREPA, P3 
Authority, LUMA Energy, LLC \11\ as ManagementCo, and LUMA Energy 
ServCo, LLC \12\ as ServCo entered into an Operation and Maintenance 
Agreement (``T&D OMA'') under which LUMA will manage the T&D System. It 
is worth mentioning that under the T&D OMA, LUMA, in coordination with 
PREPA, the P3 Authority and the COR3, manages federal recovery funds 
intended to reconstruct the electric system and improving its 
resiliency. It is expected that the comprehensive O&M Services provided 
by LUMA will benefit PREPA by (i) transforming the T&D System into a 
modern, sustainable, reliable, efficient, cost-effective, and resilient 
electric system consistent with prudent utility practices to increase 
electric service quality; (ii) enabling delivery of low-cost 
electricity to ratepayers of Puerto Rico; (iii) increasing T&D System 
resiliency and reliability; (iv) deploying new technologies; and (iv) 
implementing industry best practices and operational excellence through 
managerial continuity and long-term planning.\13\ Therefore, the 
contractual accountability of LUMA under the T&D OMA and its 
independent regulatory oversight by the PREB are critical to ensure 
that performance incentives align with the public interest.
---------------------------------------------------------------------------
    \11\ See In re: Request for Certification LUMA Energy, LLC, Case 
No. NEPR-CT-2020-0008.
    \12\ See In re: Request for Certification LUMA Energy ServCo, LLC, 
Case No. NEPR-CT-2020-0007.
    \13\ See Partnership Committee Report, Puerto Rico Public-Private 
Partnership for the Electric Power Transmission and Distribution 
System, dated May 15, 2020 (``Report''), p. 27, included as Exhibit 1 
to Puerto Rico Public-Private Partnership s Authority's Request for 
Issuance of Certificate of Energy Compliance and Request for 
Confidential Treatment of Documents Submitted to PREB, dated May 18, 
2020, In re Certificate of Energy Compliance, Case No.: NEPR-AP-2020-
0002.
---------------------------------------------------------------------------
A. Transmission and Distribution System Operation and Maintenance 
        Agreement (``T&D OMA'')--Front-End-Transition

    During the Front-End-Transition period of the T&D OMA, the PREB 
conducted extensive evaluations, that included opportunities for public 
participation \14\ of key LUMA's utility plans. These evaluations 
resulted on approvals that carry specific conditions that LUMA needs to 
satisfy at determined intervals during LUMA's contracted period. PREB 
evaluations have included:
---------------------------------------------------------------------------
    \14\ The PREB sought public input through written commentary and 
public hearings. The public hearings are archived in the PREB's You 
Tube channel. https://www.youtube.com/c/NegociadodeEnerg%C3%ADaenvivo/
videos.
---------------------------------------------------------------------------
1. LUMA's Initial Budgets \15\

    \15\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0004.
---------------------------------------------------------------------------
    PREB approved with conditions LUMA's budgets for fiscal year 2022. 
Approval conditions include:

     LUMA shall maintain detailed accounting of annual expenses 
            for FY 2022 and FY 2023 and account for the use of funds 
            within the budget for that timeframe. LUMA is to explain 
            annually any differences between account expenses and 
            approved budgets, and request approval for cost recovery of 
            any uncollected funds.

     LUMA shall provide quarterly reports to the Energy Bureau 
            detailing Initial Budget spending amounts, broken out by 
            spending initiative, and detailing any differences from the 
            approved Initial Budget. These reports should also include 
            detail allowing the Energy Bureau to assess funding, 
            withdrawals and outstanding balances in the Operating 
            Budget, the Capital Budget, and the Generation Budget 
            Accounts outlined in the T&D OMA.

     LUMA shall submit to the Energy Bureau, on a quarterly 
            basis, summary reports outlining federal funding activity. 
            These summary reports shall include aggregated information 
            showing the cumulative amount of federal funding applied 
            for by LUMA and/or PREPA, broken out by the source of such 
            funding, the incremental amount of federal funding applied 
            for in the reporting quarter, and both the cumulative and 
            quarterly amount of federal funding received.

     LUMA shall provide annual reports on the implementation of 
            improved efficiencies and quantification of resulting 
            savings.

     Not later than April 1, 2022, LUMA shall submit to the 
            Energy Bureau the Fiscal Year 2023 proposed budgets 
            following the annual budget examination process delineated 
            in the 2017 Rate Order.

     Not later than August 1, 2023, LUMA shall file a formal 
            rate review for rates effective July 1, 2024, utilizing the 
            most recent historic test year in accordance with the 
            requirements set in the 2017 Rate Order. During these 
            proceedings LUMA must demonstrate and quantify the 
            projected operational efficiencies claimed in its petition 
            for Initial Budgets approval; these efficiencies are 
            expected to favorably impact customer rates.

2. LUMA's System Operation Principles (``SOP'') \16\
---------------------------------------------------------------------------
    \16\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0001.

    PREB approved with conditions LUMA's SOP. Approval conditions 
---------------------------------------------------------------------------
include:

     On or before thirty (30) days from the notification of the 
            SOP's Approval Resolution, LUMA shall file with the Energy 
            Bureau a detailed updated timeline for the completion of 
            any other procedure, protocol, manual or document necessary 
            for the operation of the system in accordance with prudent 
            industry practices, standards, and local laws and 
            regulations, including but not limited to the draft 
            procedures filed on May 19, 2021. The timeline shall be 
            provided in a Gant Chart format with detailed information, 
            including but not limited to, the party responsible for 
            each task (i.e., name and position of LUMA personnel and/or 
            consultants), any precursor tasks or events, and the 
            estimated date for the completion of preparation and 
            finalization of drafts. The total timeline shall not exceed 
            five (5) months.\17\
---------------------------------------------------------------------------
    \17\ LUMA submitted a request for the Energy Bureau to reconsider 
four (4) of the five (5) conditions the Energy Bureau established for 
the approval of LUMA's SOP. With regard to this condition, the Energy 
Bureau deferred its determination of whether the Gantt Chart complies 
with Condition No. 1 of the May 31 Resolution until after the September 
17, 2021 Compliance Hearing.

     On or before thirty (30) days from the notification of the 
            SOP's Approval Resolution, LUMA shall file with the Energy 
            Bureau enhancements to the Energy Dispatch principles 
            included in SOP 5.1 and 5.2 that shall fully incorporate 
            capabilities found in Distributed Energy Resources (DERs) 
---------------------------------------------------------------------------
            into system planning and operations.

     In response to LUMA's request for Clarifications and/or 
            Reconsideration, PREB ordered LUMA to file with the Energy 
            Bureau final versions of its Load Forecasting Procedures 
            that include the methodologies used to incorporate power 
            meter load data, load management, load forecast, DER 
            adoption models, weather normalization and peak allocation.

     Starting on July 5, 2021, LUMA shall file with the Energy 
            Bureau a series of monthly progress reports on the status 
            of the implementation of the timeline required on the 
            conditions imposed in the SOP's Approval Resolution.

     The Energy Bureau will hold periodic compliance hearings 
            to monitor the progress toward compliance with the 
            conditions hereby established. LUMA and the relevant 
            personnel and consultants shall appear before the Energy 
            Bureau fully prepared to answer the questions that the 
            Energy Bureau Commissioner and staff may have.

3. LUMA's System Remediation Plan (``SRP'') \18\
---------------------------------------------------------------------------
    \18\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0019.

    PREB approved with conditions LUMA's SRP. Approval conditions 
include the requirement that reports be submitted quarterly, not later 
than thirty (30) days after the close of the reporting quarter, 
---------------------------------------------------------------------------
comprising the following:

     Actual spending amounts, broken down by spending 
            initiative/portfolio, and reflecting in detail any 
            differences from the System Remediation Plan.

     A detailed timeline per portfolio with sufficient detail 
            to allow the Energy Bureau to assess project status for 
            System Remediation Plan capital expenditures and 
            operational initiatives.

     Any capital expenditure or operational initiatives that 
            are behind schedule, compared to the initial System 
            Remediation Plan timeframe and a detailed explanation as to 
            the cause of the delay and the corrective actions 
            implemented to prevent further delays, as applicable.

     Periodic compliance hearings are to take place to monitor 
            the status of these conditions.

4. Utility Performance Incentive Mechanisms \19\
---------------------------------------------------------------------------
    \19\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0007.

    PREB is currently developing the framework for the performance 
incentive mechanisms to be applied to the electric utility. The PREB is 
also establishing the performance targets that will apply to LUMA to 
determine incentives \20\ during the contract period where payments 
\21\ are permitted to enhance the T&D Operator's yearly fees during the 
service period. This incentivizes the Operator to improve compliance 
with performance requirements, and fines \22\ can incentivize the 
Operator to improve compliance with performance requirements. Fines 
will be paid directly by the T&D Operator and not passed to customers.
---------------------------------------------------------------------------
    \20\ https://energia.pr.gov/en/dockets/?docket=nepr-ap-2020-0025.
    \21\ See Section 7.1 (c) and Annexes VII, IX and X of the Puerto 
Rico Transmission and Distribution System Operation and Maintenance 
Agreement, https://www.p3.pr.gov/wp-content/uploads/2020/06/executed-
consolidated-om-agreement-td.pdf.
    \22\ Id. Section 7.6 (a)(ii).
---------------------------------------------------------------------------
B. Transmission and Distribution System Operation and Maintenance 
        Agreement (``T&D OMA'')--Interim Service Period \23\
---------------------------------------------------------------------------
    \23\ As a result of PREPA not having exited Title III, LUMA is 
operating under the Supplemental Agreement of the T&D OMA since June 1, 
2021. Supplemental Agreement and O&M Agreement shall automatically 
terminate if Service Commencement Date does not occur within 18 months 
after the Supplemental Agreement Effective Date, unless extended prior 
to termination upon mutual agreement of the Parties and upon request by 
the P3 Authority. (SA 7.1).

    The electric utility maintenance and operations are currently 
shared by LUMA and PREPA.\24\ LUMA is in charge of operating and 
maintaining the electric transmission and distribution system. The LUMA 
implementation team also includes Innovative Emergency Management, Inc. 
(North Carolina) (``IEM'') as a prime subcontractor. IEM offers 
comprehensive emergency management and disaster recovery services, 
including obtaining, managing, and retaining federal funds, and 
implementing disaster recovery programs funded through government 
sources. PREPA is still in charge of maintaining and operating the 
generation fleet.
---------------------------------------------------------------------------
    \24\ The Puerto Rico Electric Power Authority is a certified 
electric service company that operates under the jurisdiction of the 
PREB, Certification Number: CEPR-CT-2016-0018.
---------------------------------------------------------------------------
    LUMA has responsibility for long-term plans and strategies to 
expand and upgrade the Island's grid, proposals for resilience buildup 
of the electric infrastructure, and management of federal recovery 
funding. Emphasis is being placed on rebuilding the electric system to 
meet current national codes and standards and to integrate electric 
industry best practices to facilitate Mutual Aid efforts with other 
U.S. utilities during emergency response events. It is important to 
highlight that even though system plans may have existed or may still 
exist for the electric grid in Puerto Rico, all T&D system planning and 
operations are now the responsibility of the T&D Operator, who is 
subject to the full oversight of the PREB. The PREB is to ensure that 
LUMA, as the T&D Operator, will implement well-studied long-term 
strategies to improve grid reliability that assures federal recovery 
funding is effectively and efficiently invested to build up the 
resilience of the Island's electric network system.
1. LUMA is subject to PREB's oversight

    LUMA is a certified electric service company within the PREB's 
regulatory jurisdiction. For regulatory purposes, LUMA, as agent of 
PREPA, stands in PREPA's shoes for all aspects of electric transmission 
and distribution. The arrangement of the T&D OMA places a private 
operator to manage PREPA's electric grid. This operator is the single 
entity charged with orchestrating the long-term plans and strategies 
for the electric T&D system.
2. PREB's oversight efforts \25\ of LUMA's T&D O&M functions
---------------------------------------------------------------------------
    \25\ See Attachment on page 13 for a list PREB open proceedings 
providing oversight to the LUMA/PREPA arrangement.

    The PREB's strong oversight of LUMA in fulfilling its 
responsibility to guide and oversee the statutory transformation of the 
electric industry in Puerto Rico, is demonstrated by the extensive 
range of proceedings summarized below. The PREB is working more than 25 
dockets that address the significant components of LUMA's 
responsibilities as system operator, in particular, with respect to the 
transformational goals of system reliability, sustainability and cost 
effectiveness. The transparency of these proceedings is of paramount 
importance to the PREB. PREB's YouTube channel streams live and then 
archives these proceedings for public access. Most of these hearings/
workshops are live streamed in Spanish/English.
    The PREB provides extensive opportunity for public input in its 
proceedings through public hearings and the opportunity for written 
comment. Utility filings are carefully reviewed by the PREB and its 
consultants before the PREB decides.
    By way of example, the original Initial Budgets filing was found to 
be incomplete by the PREB and additional material was requested. The 
filing was subjected to a three-day technical conference, in which PREB 
Commissioners and the PREB's consultant questioned LUMA extensively 
with respect to its filing and LUMA provided additional supporting 
material. Numerous reporting requirements for LUMA going forward were 
incorporated in the PREB's approval. The entire record of a proceeding 
is taken into account by the PREB in making its decision.
C. FEMA PA DR-4339-PR \26\ Project Evaluation and Progression Status--
        PREB
---------------------------------------------------------------------------
    \26\ https://www.fema.gov/disaster/4339.

    FEMA Public Assistance (``PA'') Permanent Work Stafford Act Section 
428 (disaster-related repair/restoration/replacement) has made 
available to PREPA up to $9.4599bn \27\ that when combined with 
Stafford Act Section 406 (mitigation activities) and Stafford Section 
404 (state hazard mitigation program) funding are destined to increase 
the resiliency of the electric grid against future weather events. PREB 
highlights that the fatalities experienced during Hurricane Maria 
(2017) were mainly associated with the loss of medical services 
resulting from the lack of electricity.\28\
---------------------------------------------------------------------------
    \27\ Actual FEMA funding available to PREPA under DR-4339-PR 
amounts to $9.459B after deducting private insurance payments and 10% 
state matching requirement. Federal Emergency Management Agency (FEMA), 
Puerto Rico Hurricane Maria (DR-4339-PR).
    \28\ https://www.npr.org/2019/02/21/696769824/problems-with-health-
care-contributed-to-hurricane-maria-death-toll-in-puerto-ri.
---------------------------------------------------------------------------
1. Infrastructure sought for upgrades consistent with increasing 
        resiliency and improving emergency readiness follows:

          a.  T&D Lines

                  i.  Transmission Centers

                  ii.  Distribution Poles

                  iii.  Transformers

                  iv.  Undergrounding

          b.  Generation Facilities

          c.  Substations

          d.  Cleanup Hydroelectric Generation Dams

          e.  IT Infrastructure--System Operations

          f.  DER Integration for Resilience

2. PREB's evaluation of permanent work of the electric infrastructure

    Any permanent work proposed for the electric infrastructure needs 
approval from the PREB before it can move to the recipient of the FEMA 
DR-4339-PR grant, COR3, for further commitment. The PREB is the entity 
vested in Puerto Rico with ensuring that investments made on the 
electric infrastructure are consistent with the enacted energy public 
policy.\29\
---------------------------------------------------------------------------
    \29\ Act 17-2019.

                                Table 1

  PREB's Approvals of Electric Infrastructure Permanent Work through 
                           September 30, 2021
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


.epsD. Pending LUMA/PREPA Transition Matters
1. PREPA's Reorganization [T&D OMA, 4.5(q)]

    PREPA is a corporation created by virtue of Act 83 on 1941, as 
amended. In its current form, Act 83 defines PREPA's faculties and 
powers in section 5 of said Act. The aforementioned Section was amended 
by Act 17-2019 to include, among other powers, the capacity to, with 
prior approval from PREB, divide and separate into one or more 
subsidiaries: the generation, transmission, and distribution functions 
of PREPA.\30\
---------------------------------------------------------------------------
    \30\ Sec 5(u)(i) of Act 83 of May 2, 1941 as of May 25, 2021.
---------------------------------------------------------------------------
    PREPA's Reorganization proposal is due to the Financial Oversight 
and Management Board for Puerto Rico (``FOMB'') on September 30, 
2021.\31\
---------------------------------------------------------------------------
    \31\ https://drive.google.com/file/d/
1pHlwrqYrjypE80yv9x05bQ_n5RLKz-C7/view?usp=sharing.
---------------------------------------------------------------------------
    PREPA's reorganization into GridCo, GenCo, and HoldCo requires 
approval from the PREB.\32\
---------------------------------------------------------------------------
    \32\ Sec 5(u) of Act 83 of May 2, 1941 as of May 25, 2021.
---------------------------------------------------------------------------
2. GridCo-GenCo Purchase Power Operating Agreement (PPOA) [T&D OMA, 
        Exhibit H]

     A power purchase and operating agreement between GridCo 
            and GenCo requires PREPA to corporately reorganize itself.

     PPOA's require PREB's approval.\33\
---------------------------------------------------------------------------
    \33\ PREB's Regulation 8815, https://energia.pr.gov/regulations-
dockets/?docket=8815.

                IV. PREB'S STRONG ENFORCEMENT CAPABILITY

    The previous notable proceedings demonstrate the strong 
comprehensive regulatory landscape created by Act 57-2014 and Act 17-
2019. More significantly, this landscape includes an enforcement 
infrastructure for compelling compliance with the statutory 
transformational measures to develop a reliable and sustainable 
electric system.
A. PREB's Enforcement Mechanisms--Real Incentives/Real Penalties

    The recently adjudicated T&D OMA provides the PREB with real teeth 
for enforcement. The private T&D Operator has a financial incentive 
\34\ to improve system performance according to metrics approved by the 
PREB.\35\ The PREB can also fine the T&D Operator for noncompliance 
with its regulations.\36\ In the past, imposing fines on PREPA 
effectively meant fining the Puerto Rico government, thus negatively 
impacting the people of Puerto Rico twice. Third-party accountability 
means that any potential penalties imposed on the private T&D Operator 
will erode its fixed fee payments under the contract. Having this 
regulatory tool available to the PREB is nothing short of 
transformational.
---------------------------------------------------------------------------
    \34\ See Annex IX and X of the Puerto Rico Transmission and 
Distribution System Operation and Maintenance Agreement.
    \35\ Id. Section 4.2(f).
    \36\ OMA Section 7.6 (a)(ii).
---------------------------------------------------------------------------
B. Independent Office of Consumer Protection (IOCP)

    The electric regulatory landscape in Puerto Rico is well supported 
by a strong legal framework that directs the IOCP to represent and 
defend, among others, the energy services customer in all matters in 
front of the PREB, including the IRP, rate revisions, electric utility 
bill disputes and disputes originating from customer dealings with 
electric service companies.

                             V. CONCLUSION

    The PREB is an independent electric utility regulator authorized by 
statute to impose penalties on the contracted T&D Operator for 
regulation non-compliance that will not be borne by consumers.\37\
---------------------------------------------------------------------------
    \37\ OMA Section 7.6 (a)(ii).
---------------------------------------------------------------------------
    In accordance with PREB's authority pursuant to the Puerto Rico 
Energy Public Policy Act--Act 17-2019 and Puerto Rico Electric Power 
Transformation Act--Act 120-2018, I am pleased to represent before you 
here today, the public interest of the people through the legal mandate 
that has been bestowed upon the PREB, to provide strong leadership and 
oversight of the recovery and revitalization of the Puerto Rico's 
electric grid, to yield a dependable, resilient, clean and efficient 
electrical infrastructure for our people, and to oversee Puerto Rico's 
transmission and distribution system operator, LUMA.
    I look forward to your questions and remain committed to continue 
strengthening the working relationship with the Committee for the 
benefit of the people.

                                 *****

                               ATTACHMENT

     Current PREB proceedings overseeing the LUMA/PREPA arrangement

A. PREB's Oversight of LUMA's Front-End-Transition (FET)

    PREB's oversight of LUMA's front-end transition period provides 
transparency to the transition process by making available to the 
public key FET LUMA reporting.

1. NEPR-MI-2020-0008 \38\ [LUMA Monthly Status Reports for Front-End 
        Transition Services]
---------------------------------------------------------------------------
    \38\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0008.

    The PREB made LUMA's monthly reports and FET invoices available to 
the public, it also requested LUMA to submit additional information 
---------------------------------------------------------------------------
concerning certain FET activities.

B. PREB's evaluation of LUMA's proposed plans for the operation and 
        maintenance of the T&D system and use of federal funding for 
        the reconstruction of the grid

    During the course of the front-end transition period, the PREB 
initiated additional proceedings to evaluate LUMA's proposed plans for 
the T&D system.

2. NEPR-MI-2021-0007 \39\ [LUMA's Liability Waiver], denied in part and 
        approved in part with modifications by PREB
---------------------------------------------------------------------------
    \39\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0007.

    LUMA requested to be released from liability in the event of 
defective electric service due to released parties' control, ordinary 
negligence, gross negligence, or willful misconduct; PREB denied this 
request and granted a waiver where customer protections were expanded 
from LUMA's original petition.
3. NEPR-MI-2021-0004 \40\ [LUMA's Initial Budgets], approved with 
        conditions by PREB
---------------------------------------------------------------------------
    \40\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0004.

    The PREB approved LUMA's budget for fiscal year 2022. LUMA 
presented to the PREB the budget for the entire utility operations that 
included the budget for the maintenance and operation of PREPA's 
---------------------------------------------------------------------------
generation fleet.

     Review LUMA's Budgets on a yearly basis

     Ensure LUMA's transactions are kept at arm's length from 
            its subsidiaries--Evaluation of LUMA's Procurement Manual

4. NEPR-MI-2021-0001 \41\ [LUMA's System Operation Principles], 
        approved with conditions by PREB
---------------------------------------------------------------------------
    \41\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0001.

    The PREB is currently having LUMA submit for evaluation key 
procedures and methodologies that will support the improvements of how 
---------------------------------------------------------------------------
energy is dispatched across the Island and how capacity is planned.

     Follow up of established SOP's approval conditions

     Compliance hearing streamed and archived in PREB's YouTube 
            channel on Friday, September 17, 2021.

     Oversee the establishment of Long and Short Range 
            Transmission and Distribution Planning Analysis and 
            Forecasts

     Proceeding addresses rolling blackout challenges

5. NEPR-MI-2020-0019 \42\ [LUMA's System Remediation Plan], approved 
        with conditions by PREB
---------------------------------------------------------------------------
    \42\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0019.

    The PREB is currently having LUMA submit rebuild projects moving 
down the pipeline to ensure alignment with reconstruction and 
mitigation activities that will result on efficient use of federal 
---------------------------------------------------------------------------
funding available to increase system resilience.

C. Significant Open Dockets Relating to the Oversight of LUMA

6. NEPR-MI-2021-0002 \43\ [10-Yr Infrastructure Plan]
---------------------------------------------------------------------------
    \43\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0002.

    PREB has provided guidance to LUMA and PREPA to avoid duplication 
of efforts that could have led to unnecessary expenses resulting from 
Front-End Transition contracting.
    LUMA \44\ and PREPA \45\ are currently filing for PREB's evaluation 
proposed reconstruction projects that are to employ funding from the 
obligation under the FEMA DR-4339-PR \46\ grant.
---------------------------------------------------------------------------
    \44\ LUMA formulates projects addressing the needs of the 
Transmission and Distribution system.
    \45\ PREPA currently formulates the projects addressing the needs 
of the Generation system.
    \46\ Actual FEMA funding available to PREPA under DR-4339-PR 
amounts to $9.459B after deducting private insurance payments and 10% 
state matching requirement. Federal Emergency Management Agency (FEMA), 
Puerto Rico Hurricane Maria (DR-4339-PR), https://www.fema. gov/
disaster/4339. In addition to the Public Assistance permanent work 
proposals, LUMA and PREPA are also putting forward projects that fall 
under the Hazard Mitigation program of the Stafford Act sections 404 
and 406.

---------------------------------------------------------------------------
     Maximizes federal funding

     Ensures adherence with public energy policy

     Ensures adherence to IRP

     Projects are then forwarded by the utility to COR3, FEMA 
            for consideration.

7. NEPR-AP-2020-00025 \47\ [Establishment of Performance Targets for 
        LUMA Energy ServCo, LLC]
---------------------------------------------------------------------------
    \47\ https://energia.pr.gov/en/dockets/?docket=nepr-ap-2020-0025.

     Establishment of Performance Targets for LUMA's incentive 
---------------------------------------------------------------------------
            payments and potential penalties

     Establishment of Framework to update LUMA's Performance 
            Targets

     Development of Yearly Incentive Fee Report

8. NEPR-MI-2019-0007 \48\ [Establishment of Performance Incentive 
        Framework for the Electric Utility]
---------------------------------------------------------------------------
    \48\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0007.

     Establishment of indicator/metrics to gauge the 
---------------------------------------------------------------------------
            performance of the electric utility

9. NEPR-MI-2021-0004 \49\ [LUMA's Initial Budgets]
---------------------------------------------------------------------------
    \49\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0004.

---------------------------------------------------------------------------
     Review LUMA's Budgets on a yearly basis

     Ensure LUMA's transactions are kept at arm's length from 
            its subsidiaries--Evaluation of LUMA's Procurement Manual

     Monitor GenCo Shared Services Agreement

10. NEPR-MI-2019-0005 \50\ [Vegetation Management]
---------------------------------------------------------------------------
    \50\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0005.

---------------------------------------------------------------------------
     Review LUMA's Vegetation Management Plan

     LUMA has submitted a comprehensive plan consistent with 
            the approved Initial Budgets

11. NEPR-MI-2019-0006 \51\ [Emergency Response Plan (``ERP'')]
---------------------------------------------------------------------------
    \51\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0006.

     PREB is conducting a review of PREPA and LUMA's ERP for 
---------------------------------------------------------------------------
            potential modifications

     Last Technical Conference was held on September 2, 2021 
            and LUMA was directed to provide additional information by 
            September 17, 2021

     Virtual Public Hearing was held on September 27, 2021 with 
            written comments accepted until September 30, 2021

12. NEPR-MI-2020-0017 \52\ [LUMA's Data (Cyber) Security Plan]
---------------------------------------------------------------------------
    \52\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0017.

     Evaluation of LUMA's data (cyber) security plan, includes 
---------------------------------------------------------------------------
            IT/OT (LUMA's website, payment processor, billing)

13. NEPR-MI-2020-0018 \53\ [LUMA's Physical Security Plan]
---------------------------------------------------------------------------
    \53\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0018.

---------------------------------------------------------------------------
     Evaluation of LUMA's Physical Security Plan

     Conduct field visits to gauge current capabilities

14. NEPR-MI-2020-0019 \54\ [LUMA's System Remediation Plan]
---------------------------------------------------------------------------
    \54\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0019.

     Seek to maximize opportunities to increase system 
---------------------------------------------------------------------------
            resilience

     Ensure adherence to Integrated Resource Plan (``IRP'')
15. NEPR-MI-2020-0001 \55\ [Quarterly Adjustments: Fuel Purchase FCA, 
        Energy Purchase PPCA, Fuel Oil Subsidy FOS]
---------------------------------------------------------------------------
    \55\ https://energia.pr.gov/en/dockets/?docket=nerp-mi-2020-0001.

     LUMA functions as PREPA's representative before the PREB 
---------------------------------------------------------------------------
            and reports on:

            -- Fuel

            -- Purchased Power

            -- Fuel subsidies

16. NEPR-MI-2019-0009 \56\ [T&D Interconnection Regulation]
---------------------------------------------------------------------------
    \56\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0009.

     Regulations that seek to leverage Distributed Energy 
            Resource (DER) interconnection and interoperability 
---------------------------------------------------------------------------
            standards, e.g., IEEE-1547-2018

     Emphasis on DER interoperability and integration to system 
            planning and operations

17. NEPR-MI-2019-0011 \57\ [Integrated Electric Distribution Planning]
---------------------------------------------------------------------------
    \57\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0011.

     Development of Hosting Capacity capabilities that will 
---------------------------------------------------------------------------
            facilitate Renewable Generation Interconnection

     Integrated Planning approach where System Operator fully 
            maximizes technical functionalities found in Distributed 
            Energy Resources (DER)

18. NEPR-MI-2019-0015 \58\ [Energy Efficiency and Demand Response 
        Regulation]
---------------------------------------------------------------------------
    \58\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2019-0015.

     Cost effective and environmentally friendly alternative to 
---------------------------------------------------------------------------
            buildup of generation

     System resilience considerations

19. NEPR-MI-2021-0009 \59\ [Puerto Rico Test for Demand Response and 
        Energy Efficiency]
---------------------------------------------------------------------------
    \59\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0009.

     Pilot plans for cost-effective and environmentally 
---------------------------------------------------------------------------
            friendly alternative to buildup of generation

     Increase system resilience and stability

20. NEPR-MI-2021-0008 \60\ [Review of LUMA's Bill]
---------------------------------------------------------------------------
    \60\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0008.

     IOCP \61\ providing significant input on behalf of the 
            consumer
---------------------------------------------------------------------------
    \61\ The Independent Office of Consumer Protection (IOCP) of the 
Public Regulatory Service Board represents and defends the energy 
services customer in all matters in front of the PREB, including the 
IRP, rate revisions, electric utility bill disputes and disputes 
originating from customer dealings with electric service companies. It 
also educates, offers guidance, assists, and represents customers of 
energy, telecommunications, and transportation services.

21. NEPR-MI-2021-0013 \62\ [Electric Vehicle (EV) Infrastructure]
---------------------------------------------------------------------------
    \62\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0013.

     Seeks to identify required generation and T&D investments 
            to support wide adoption of Electric Vehicles (EV) in 
---------------------------------------------------------------------------
            Puerto Rico.

22. NEPR-MI-2020-0016 \63\ [Optimization Proceeding--Minigrid 
        Transmission and Distribution Investments]
---------------------------------------------------------------------------
    \63\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2020-0016.

     Seeks to investigate further proposed minigrid 
---------------------------------------------------------------------------
            capabilities that were included in the latest IRP.

23. NEPR-MI-2021-0011 \64\ [Regulation Renewable Portfolio Standard 
        Compliance, Renewable Energy Credits]
---------------------------------------------------------------------------
    \64\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0011.

     Regulation establishing compliance mechanisms with the 
---------------------------------------------------------------------------
            Renewable Portfolio Standard

D. Ongoing LUMA/PREPA investigations

24. NEPR-MI-2021-001465 \65\ [PREPA Generation Maintenance and Repair 
        Management Program--Managed Load Shed Events of August 30-31, 
        2021]
---------------------------------------------------------------------------
    \65\ https://energia.pr.gov/en/dockets/?docket=nepr-mi-2021-0014.

     Consideration of PREPA assertion that maintenance budget 
---------------------------------------------------------------------------
            for generation is adequate

     Investigation of the load shedding events experienced 
            during August 30-31, 2021.

     Adequacy of Supply implications

     Revision of ACTUAL PREPA Generation Maintenance Expenses

     Hearing streamed on September 3, 2021 (English/Spanish) 
            and archived \66\ in the PREB's YouTube channel
---------------------------------------------------------------------------
    \66\ https://www.youtube.com/watch?v=ECegoQtTy9E.

25. NEPR-IN-2021-0002 \67\ [June 10, 2021 Monacillos Incident]
---------------------------------------------------------------------------
    \67\ https://energia.pr.gov/en/dockets/?docket=nepr-in-2021-0002.

     Investigation of the outage failure experienced in 
            Monacillos where LUMA was already in charge of the ECC 
---------------------------------------------------------------------------
            (Energy Control Center).

                                 ______
                                 

Questions Submitted for the Record to Edison Aviles-Deliz, P.E., Esq., 
                    Chair, Puerto Rico Energy Bureau

          Questions Submitted by Representative Gonzalez-Colon

    Question 1. Does PREB feel the laws ruling it provide you enough 
flexibility to adapt their plan approvals to changing realities on the 
ground, and to be able to get the end goal through different routes if 
necessary?

    Answer. An Integrated Resources Plan (IRP) is an electric power 
utility's guidebook for providing least-cost electric service over the 
planning horizon. Its purpose is to develop a plan for the least costly 
options to serve customer demand, considering other important policy 
objectives such as resiliency, reliability, and the goals of the 
utility, the government, society, and the environment.\1\ Least-cost 
refers to the least-cost-net-present value of revenue requirements 
taken at present value from the present day to the end of the analysis 
period.\2\ As part of the IRP process, the utility assembles data on 
its existing resources,\3\ historical customer demand \4\ and 
electricity loads. It uses the minimization of revenue requirements as 
its priority criterion, but also considers such factors as: system 
reliability; short and long-term risks; environmental impacts; 
transmission and distribution (T&D) needs and implications; financial 
implications on the electric service company; and the public 
interest.\5\
---------------------------------------------------------------------------
    \1\ See, in general, Resolution and Order, In Re: Review of the 
Puerto Rico Electric Power Authority Integrated Resource Plan, Case No. 
CEPR-AP-2018-0001, August 24, 2020 (``IRP Final Resolution and 
Order'').
    \2\ Id.
    \3\ Id. ``Resources'' includes generation, distribution, 
transmission, energy efficiency programs, demand-response programs and 
customer resources like distributed generation and microgrids.
    \4\ Id. ``Customer Demand'' in this context means the amount of 
electricity consumed at a given time in a utility's electric service 
territory, measured in GWh.
    \5\ See Sec. 2.03(H)(2)(d) of Regulation on the Integrated Resource 
Plan for the Puerto Rico Electric Power Authority, April 24, 2018 
(``Regulation 9021'').
---------------------------------------------------------------------------
    In the context of the Puerto Rico Power and Electric Authority 
(``PREPA''), an IRP considers all its reasonable resources to satisfy 
the demand for electric power services during a twenty (20) year 
period, including those relating to the offering of electric power, 
whether existing, traditional, and/or new resources, and those relating 
to energy demand such as energy conservation and efficiency or 
distributed resources, as well as localized energy generation by the 
customer.\6\ It is worth noting that an IRP shall incorporate the 
obligation of PREPA to comply with the laws and regulations that 
constrain resource selection.\7\ An IRP must be evaluated and approved 
by the Energy Bureau of the Puerto Rico Public Service Regulatory Board 
(``Energy Bureau'') and may not be eliminated or altered under any 
circumstances, without first carrying out a review process before the 
Energy Bureau.\8\
---------------------------------------------------------------------------
    \6\ See Sec. 1.3 (II) of the Puerto Rico Energy Transformation and 
RELIEF Act, as amended (``Act 57-2014'') and Sec. 1.08(B)(20) of 
Regulation 9021.
    \7\ Id.
    \8\ See Sec. 1.9(4) of the Puerto Rico Energy Public Policy Act 
(``Act 17-2019'').
---------------------------------------------------------------------------
    After the approval of an IRP, the Energy Bureau shall supervise and 
oversee compliance with it. The IRP will be reviewed and updated every 
three (3) years, in which case PREPA or the company responsible for the 
operation of the Electric System (currently LUMA \9\) will present to 
the Energy Bureau a proposal to modify and update the IRP. 
Nevertheless, provided, that there is a substantial change in the 
energy demand or in the set of resources necessary to meet the demand 
for energy, the review process may be conducted before the three (3) 
years period, to respond and mitigate changes in the energy demand or 
in the set of resources necessary to meet the demand for energy.\10\
---------------------------------------------------------------------------
    \9\ LUMA Energy, LLC and LUMA Energy ServCo, LLC are referred to 
collectively as ``Luma''.
    \10\ In general, a revision of an IRP should reflect changes in 
energy market conditions, changes in technology, environmental 
regulations, fuel prices, capital costs, incorporation of generation 
based on renewable energy sources and components in the grid to comply 
with the Renewable Energy Portfolio, distributed generation, energy 
efficiency and other factors.
---------------------------------------------------------------------------
    PREPA's Proposed IRP was evaluated by the Energy Bureau in an 
adjudicative proceeding under Case No.: CEPR-AP-2018-0001. On August 
24, 2020, the Energy Bureau issued a Final Resolution and Order, 
approving in part and rejecting in part PREPA's Proposed IRP.\11\ 
Consequently, the Energy Bureau ordered the adoption of the Modified 
Action Plan as set forth in the IRP Final Resolution and Order 
(``PREPA's Approved IRP'').\12\
---------------------------------------------------------------------------
    \11\ See Resolution and Order, In Re: Review of the Puerto Rico 
Electric Power Authority Integrated Resource Plan, Case No. CEPR-AP-
2018-0001, August 24, 2020 (``IRP Final Resolution and Order'').
    \12\ Id. Subsequently, on December 2, 2020, the Energy Bureau 
issued the Final Resolution on Reconsiderations through which it 
addressed several requests for reconsideration filed by certain 
intervenors. See Final Resolution on Reconsiderations, In Re: Review of 
the Puerto Rico Electric Power Authority Integrated Resource Plan, Case 
No. CEPR-AP-2018-0001, December 2, 2020.
---------------------------------------------------------------------------
    Based on the foregoing, the applicable laws and regulations provide 
a mechanism to modify or amend PREPA's Approved IRP at any time prior 
to the three (3) years revision period set forth in the Act 57-2014, 
provided, however, that there is a substantial change in the energy 
demand or in the set of resources necessary to meet the demand for 
energy. This modification shall be aimed to respond or mitigate the 
effects of the changes in the energy demand or in the set of resources 
necessary to meet the demand for energy. If the circumstances 
anticipated by the law arises, PREPA (Luma) may present to the Energy 
Bureau a proposal to modify the IRP. The Energy Bureau shall evaluate 
and approve the proposed modification based on the energy public policy 
and the applicable laws and regulations.

    Question 2. Permitting of LNG units:

    (a) What's the status of the PREB/PREPA discussion on the 
installation of the LNG units that were not in the prior PRES-approved 
resources plan?

    Answer. We clarify that the process to evaluate and approve an IRP 
and/or a modification thereof is adjudicative in nature. Therefore, the 
Energy Bureau refrains from having ex parte communications and/or 
discussions regarding matters related to the approval or modification 
of an IRP with PREPA nor any intervenor.
    We further clarify that currently there are no pending procedures 
before the Energy Bureau for the modification of PREPA's Approved IRP.

    (b) Does the renewables plan in any way forbid any further 
installation of combustion units transitionally?

    Answer. PREPA's Approved IRP provides a mix of generation resources 
that reflects changes in Puerto Rico's public policy, notably the 
obligations to substantially reduce energy supply costs and meet the 
revised Renewable Portfolio Standard. The Renewable Portfolio Standard 
is established to achieve a minimum of twenty percent (20%) by 2022, 
forty percent (40%) on or before 2025; sixty percent (60%) on or before 
2040; and one hundred percent (100%) on or before 2050.\13\
---------------------------------------------------------------------------
    \13\ See Act 82-2010, known as the Puerto Rico Energy 
Diversification Policy through Sustainable and Alternative Renewable 
Energy Act, as amended, (``Act 82-2010'').
---------------------------------------------------------------------------
    The scheduled deployment of the Renewable Portfolio Standard (in 
itself) does not forbid the use of thermal generation resources. 
However, for the twenty (20) years planning horizon studied in the IRP 
process, PREPA did not justify the use of additional thermal generation 
resources.
    It is important to note that changes in the assumptions used by 
PREPA for the development of the IRP; the results that can be observed 
from the implementation of the different phases of the Modified Action 
Plan (5-years Plan); as well as other relevant circumstances, could 
justify the need to modify the current mix of resources included in 
PREPA's Approved IRP. If this occurs, then PREPA (Luma) could use the 
mechanisms discussed in the response to Question 1 to seek 
modifications to the PREPA's Approved IRP.

                                 ______
                                 

    The Chairman. Thank you very much, sir. Let me now turn to 
the President and Chief Executive Officer of LUMA Energy Puerto 
Rico, Mr. Wayne Stensby.
    Sir, you are recognized.

   STATEMENT OF WAYNE STENSBY, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, LUMA ENERGY PUERTO RICO, SAN JUAN, PUERTO RICO

    Mr. Stensby. Thank you very much, Chairman Grijalva, 
Ranking Member Westerman, Resident Commissioner Gonzalez-Colon, 
and Committee members. Thank you for the opportunity to share 
LUMA Energy's perspective, as we stand here barely 4 months 
into this historic public-private partnership for the operation 
of the transmission and distribution system of Puerto Rico.
    This partnership is, indeed, a critical step in the overall 
transformation of the electric system, but by no means is it 
the only step. When we first began this operation in June, we 
knew how difficult and what an important task we faced. Change 
is hard, and change will inevitably take time, but change is 
the reason that we are here today. The people of Puerto Rico 
have been demanding it for years.
    The responsibility that comes with providing electricity to 
customers is a serious one, and we do not take it lightly.
    As this Committee knows well, the Puerto Rico electric 
system is arguably the worst in the United States, and has been 
for a very long time, even prior to the devastating hurricanes 
of 2017. In order to move forward, we are focusing on creating 
change, change of the physical infrastructure, but also 
business processes, and the creation of our very own company 
culture.
    I would like to start by stating how proud I am of the team 
here at LUMA. Today, we are more than 3,000 employees strong, 
and many of those were hired from PREPA. They embrace the 
change that they knew was needed. Those that did join LUMA did 
so under extraordinary circumstances, in many cases defying 
their friends, facing threats from those claiming to share 
their interests, and even being the targets of terrible and 
unspeakable acts of vandalism and intimidation. They did, 
however, get to work on June 1, and immediately they faced 
significant adversity again.
    First, access to equipment, tools, fleet, and roads, as 
well as warehouses to restore electricity were so limited that 
it was only able to be remediated through a court-ordered 
restraining order. Within our first 2 weeks of operation, LUMA 
and its customers faced targeted denial of service attacks, 
disrupting information, and then, unfortunately, a fire at the 
Monacillo substation, disrupting service to approximately 
800,000 customers.
    Thanks to the heroic efforts of the LUMA team, nearly all 
of those customers were restored within 24 hours, which is an 
unprecedented response here in Puerto Rico.
    Our team continues to grow, and today we have received more 
than 100,000 job applications from all across Puerto Rico: a 
strong endorsement of our mission. As part of our continued 
efforts to build a modern, world-class workforce, we have 
recently come to terms on a collective bargaining agreement 
with the International Brotherhood of Electrical Workers, or 
IBEW, who has recently amalgamated with one of the larger PREPA 
legacy unions. This represents the first newly negotiated 
agreement for labor at the electric utility in over a decade.
    As part of our commitment to Puerto Rico, LUMA's parent 
companies are actively investing in economic and workforce 
development. The new LUMA College for Technical Training in 
Canovanas represents an investment of more than $10 million by 
our parent companies, and will bring in world-class training 
and workforce development for technical trades, all through an 
accredited education program. Our first class of lineworkers 
will be graduating from this program later this month, and we 
look forward to seeing the impact that this will have in our 
utility in the coming years.
    While the transformation is in its early days, we have many 
reasons to be optimistic. We are seeing the impact of the 
changes as we implement them. For example, customers are seeing 
the impact of solar on the rooftops. We have increased the 
processing speed of this application process by nearly seven 
times, and we have cleared half the backlog that we inherited 
in June. Some of those customers have been waiting for as long 
as 2 years. We will be through this entire backlog in queue by 
the end of this year. We recently published queuing information 
on our website to improve the transparency of this 
interconnection process.
    We are not just focusing our efforts on outages, but we are 
focusing on fixing the infrastructure, so that we can prevent 
the outages in the first place. Our rate of pole replacement 
over our first 4 months is more than twice what PREPA had 
historically managed, and we have reconnected and replaced a 
large number of substations and lines, many of which had not 
been operational since Hurricane Maria.
    Still, there is a lot to be done. We are heavily focused on 
accelerating the major capital projects that we will be 
managing on behalf of PREPA. There are currently about 65 
projects, representing nearly $2.8 billion, that have recently 
been approved through initial statements of work, and are going 
through various stages of engineering and environmental 
assessments today. Many of these projects require close 
collaboration with PREPA as a sub-grantee, as well as COR3, 
FEMA, and also experts from the Department of Energy and 
national labs to ensure that they are compliant and are a 
prudent use of Federal funds.
    With that, I would like to thank the Committee for its time 
and its dedication to this very important topic. As we continue 
to emphasize, LUMA is here to be a transparent, accountable 
partner that will deliver improved customer service, increased 
emergency preparedness, and a safer, more effective workforce 
supporting the overall economic recovery and growth of Puerto 
Rico. We have just begun, and we remain committed to playing 
our role in transforming the electric system.

    [The prepared statement of Mr. Stensby follows:]
   Prepared Statement of Wayne Stensby, President & Chief Executive 
                    Officer, LUMA Energy Puerto Rico
    Thank you for the opportunity to share LUMA Energy's perspective as 
we stand here 4 months into the historic public-private partnership to 
operate the transmission and distribution system of Puerto Rico. This 
partnership is a critical step in the overall transformation of the 
electric system, but by no means is it the only one.
    When we first began operations this June, we knew how difficult and 
important a task we face. Change is hard and it takes time. But, change 
is the reason we are here today--the people of Puerto Rico have been 
demanding it for years. The responsibility that comes with providing 
electricity to customers is a serious one, and we do not take it 
lightly. As this committee knows well, the Puerto Rico electric system 
is arguably the worst in the U.S., and has been for some time, even 
prior to the tragic hurricanes of 2017. For context, the frequency and 
duration of outages is more than twice the next worst performer in the 
U.S., customer service scores are 50% worse than the average electric 
utility, and OSHA safety recordable incidents were approximately 5 
times the industry average. To move forward, we are focused on creating 
change--change of the physical infrastructure, but also of the business 
processes and of the company culture.
    I should first state how proud we are of the team we are building. 
We are more than 3,000 employees strong with many of those hired from 
PREPA (Puerto Rico Electric Power Authority), embracing the change they 
knew would be needed. Those that joined LUMA did so under extraordinary 
circumstances--in some cases defying their friends, facing threats from 
those claiming to sharing their interests, and even being the targets 
of terrible acts vandalism and intimidation. They got to work on June 
1st and immediately faced significant adversity. First, access to 
certain equipment, tools, and roads needed to restore power were so 
limited that it could only be remedied through a restraining order. 
Within our first 2 weeks of operation, LUMA and its customers suffered, 
a targeted distributed denial of service attack, disrupting access to 
information. Then, a fire at the Monacillo substation, a central node 
in the electric system, disrupted power to approximately 800,000 
customers. Thanks to the heroic efforts of our team, nearly all of 
those customers were restored in 24 hours--an unprecedented response 
time.
    Our team continues to grow, and we have received more than 100,000 
job applications from across Puerto Rico--a strong endorsement of our 
mission. As part of our continued efforts to build a modern, world 
class workforce, we recently came to terms on a collective bargaining 
agreement with the IBEW (International Brotherhood of Electrical 
Workers), who recently amalgamated with one of the larger local unions 
at the utility. This represents the first newly negotiated agreement 
for labor at the electric utility in over a decade.
    LUMA is not here for the short term. We are here to modernize the 
electric transmission and distribution system, to perform based on 
thoughtful data-based, long-term planning, and to execute these plans 
which have been developed by engineers, subject to the approval and 
oversight of the corresponding government entities in accordance with 
law and policy.
    As part of our commitment to Puerto Rico, LUMA's parent companies 
are actively investing in economic and workforce development. The new 
LUMA College for Technical Training in Canovanas represents an 
investment of more than $10 million dollars by LUMA's parent companies 
and will bring world class training and development for the technical 
trades, all provided through an accredited education program. Our first 
class of lineworkers will be graduating from this program later this 
month, and we are looking forward to seeing the impact this can have in 
the coming years.
    While this transformation is in its early days, we do have reason 
to be optimistic about the future. We are starting to see the impact of 
the changes we implement. For example, for customers seeking to put 
solar on their rooftops, we have increased the processing speed of this 
application process by nearly 7 times, and cleared nearly half of the 
backlog we inherited. Some of those customers had been waiting as long 
as 2 years. We aim to clear this queue entirely by the end of this year 
and have begun publishing the connection queue information on our 
website to improve the transparency of the process. Our operational 
efforts are focused not just on restoring outages, but fixing 
infrastructure so we can prevent the outages in the first place. Our 
rate of pole replacement has nearly doubled, and we've re-connected or 
replaced a number of substations and lines--some of which had not been 
operational since Hurricane Maria.
    Still, there is a lot of work to be done. We have been heavily 
focused on accelerating the major capital projects to be executed under 
the various federal grant programs, which we will manage on PREPA's 
behalf. There are currently about 65 projects representing nearly $2.8 
billion dollars of work that have received approved initial Statements 
of Work and are going through various stages of engineering and 
environmental assessments today. An additional $3.7 billion of projects 
has been vetted by PREB, and the initial Statements of Work have been 
submitted to FEMA. These investments are all tied to disaster recovery 
linked to Hurricanes Irma and Maria from 2017, and are critical to 
making the electric infrastructure sustainable and resilient. For these 
efforts, we are working collaboratively with PREPA as the subgrantee, 
as well as COR3 (Central Office for Recovery, Reconstruction, and 
Resiliency), FEMA, and experts from the Department of Energy and the 
national labs, to ensure that these programs are both compliant and are 
a prudent and effective use of federal funds. This is a unique 
opportunity to build back better, and doing so efficiently will be 
critical. Recognizing that the annual construction efforts work will be 
multiples above today's activity, we have also signed a Project Labor 
Agreement with the IBEW. This PLA ensures that the workers on the 
electric system will be safe, fairly compensated, and well trained. 
This PLA also enables access to high quality, craft skilled labor, 
mitigating the risk of delays to the electric infrastructure rebuild 
that Puerto Rico so desperately needs.
    We thank this committee for its time and dedication to this 
important topic. As we continue to emphasize, LUMA is here to be a 
transparent, accountable partner that will deliver improved customer 
service, increased emergency preparedness, and a safer, more effective 
workforce, supporting the overall economic recovery and growth of the 
island. We have just begun and we remain committed to playing our 
critical role in transforming the electrical system in Puerto Rico.

                                 ______
                                 

Questions Submitted for the Record to Wayne Stensby, President & Chief 
               Executive Officer, LUMA Energy Puerto Rico

              Questions Submitted by Representative Porter

    Question 1. PREPA's testimony validates a rumor we heard about the 
real reason for one of the bigger blackouts--a transmission line 
failure that was managed by LUMA. Specifically: ``The most significant 
generating unit outage involves the Costa Sur generating station. On 
August 22, a transmission line fault led to loss of two of the San Juan 
generating units and transmission system fluctuations that affected 
generating facilities in the south, including Costa Sur. Those 
fluctuations led to vibrations which eventually forced Costa Sur Unit 6 
offline and damaged the steam turbine rotor.''
    According to PREPA's testimony, one of the biggest blackouts since 
LUMA took over was because of a failure of a transmission line that 
broke a turbine at the Costa Sur power plant.

    Answer. To be very clear, transmission line failures do not damage 
or break steam turbine rotors.

    The facts related to this event are as follows:

     Transmission line 38900, on the north side of the island 
            suffered a phase to phase fault and tripped at 
            approximately 12:25 on August 22. This transmission line 
            connects two transmission substations and does not have a 
            direct connection to a generating station. This trip caused 
            a transmission system disturbance which was exacerbated by 
            San Juan generating Units 5 & 6 tripping and also Palo Seco 
            generating Unit 3 tripping. Throughout this event, Costa 
            Sur Unit's 5 & 6 showed expected operation and were 
            witnessed as operating normally.

     A separate and wholly unrelated event occurred at 
            approximately 19:25 (7 hours later) on August 22 when the 
            generation output of Costa Sur 6 was manually decreased by 
            Costa Sur operating staff. There were no transmission 
            outages at or through this period. At 22:30 of August 22, 
            Costa Sur 6 was tripped via plant operating staff.

    (a) Is that line under the management of LUMA?

    Answer. Yes, transmission line 38900 is operated by LUMA. Costa Sur 
generating plant is operated by PREPA.

    (b) Did that outage contribute to the increased use of more 
expensive generating plants, possibly including peaker plants, to 
maintain sufficient supply of electricity?

    Answer. The transmission outage early in the day is not related to 
the Costa Sur 6 outage.

    LUMA dispatches energy based on availability and according to 
security-constrained economic principles to meet demand. Less expensive 
resources are generally dispatched first--these include available 
renewables and base load units. When base load capacity is insufficient 
to meet demand, LUMA shifts to other available sources--including 
peakers. The Costa Sur outage was one of many other unplanned outages 
that required the use of all available sources of generation in order 
to meet demand. Given the large shortfall of generation, caused by 
multiple unplanned outages across many PREPA generating units, there 
were many periods of insufficient supply of electricity which is what 
caused load shedding across Puerto Rico.

    (c) Was the increased use of more expensive power plants a primary 
justification for LUMA's proposed rate increase?

    Answer. The reduced availability (unplanned outages) of multiple 
lower cost plants in addition to rising global fuel prices led to the 
variation which prompted the Puerto Rico Energy Bureau (PREB) to issue 
a determination to revise and adjust the FCA factor to recover fuel 
costs. LUMA is required, on behalf of PREPA, to submit calculations for 
the component of tariffs used to recover fuel cost on a quarterly 
basis. When actuals vary materially from forecasts, that deficit or 
credit is applied to the forward-looking rates designed to recover fuel 
costs incurred by PREPA. LUMA does not set rates, nor does LUMA benefit 
when rates increase. All changes to electricity rates are adjudicated 
by the PREB.

    (d) What was the cause of the failure of the transmission line?

    Answer. Line 38900 suffered a phase to phase fault due to a faulty 
insulator.

    (e) If the transmission line failure is determined to be the fault 
of LUMA's mismanagement, will LUMA be responsible for the costs or does 
LUMA intend on asking the ratepayers to pay for its mistakes?

    Answer. The entire electricity system, both generation and 
transmission & distribution in Puerto Rico is in a very poor state. 
It's been well documented that this state of disrepair did not occur 
overnight, it occurred across more than a decade. The repair and 
restoration of the electricity system is exactly why Puerto Rico 
created Act 120 and then ultimate selected LUMA as the T&D operator. 
This is why LUMA exists.
    LUMA did not cause the transmission fault, however we did respond 
and restore the line to service. This transmission failure is unrelated 
to the Costa Sur 6 failure.
    Similar to other utilities in other jurisdictions, LUMA has 
operational liabilities established in the contract.

            Questions Submitted by Representative Velazquez

    Question 1. When LUMA and the government of Puerto Rico executed 
the agreement for the operation and management of the grid, LUMA made 
certain representations about hiring a firm that specialized in the 
management of Federal funds.

    (a) Has such firm been hired? If so, at what cost?

    Answer. As per the LUMA proposal to the Partnership Committee, IEM, 
an experienced and well-regarded federal funds manager, is indeed part 
of the LUMA team and is compensated on a time and materials basis for 
work actually performed. IEM's rates for LUMA are comparable to IEM's 
negotiated rates on other contracts with the U.S. Government. IEM costs 
are paid by federal funds through FEMA's public assistance 
administration fees, which are capped by Congress at 5% of the project 
value.

    Question 2. Please provide in writing how many of LUMA's VPs make 
more than $200k a year and how many make more than $500k a year.

    Answer. LUMA's Executive Leadership Team consists of highly 
qualified, skilled professionals with years of experience in leading 
high performing teams within the industry. LUMA has a compensation 
philosophy that aligns with paying its employees market based rates, 
which includes a total compensation package over $200,000 annually for 
five Vice President roles.
    As per our contract, six senior executives, including the CEO are 
paid for by the owners of LUMA at no cost to customers. Only the CEO is 
paid more than $500,000 per year.
    Historically, PREPA's executive leaders also received total 
compensation in excess of $200,000.

          Questions Submitted by Representative Gonzalez-Colon

    Question 1. Can you please provide us a specific timeline for LUMA 
submitting project Scope of Work documentation for FEMA/COR3 projects?

    Answer. The FEMA process consist of several steps with respect to 
the submission of project Scope of Work (SOW) documents. In Puerto 
Rico, the regulator has added an additional step wherein the regulator 
has directed proponents to submit any SOW for review and approval by 
the regulator prior to submitting to FEMA. The SOWs at this stage are 
high-level Initial SOWs. Once approved by the regulator, the Initial 
SOWs are submitted to FEMA for its review. At this point, FEMA provides 
a FEMA project number which initiates preliminary work by proponents 
toward the development of Detailed SOWs for issuance to FEMA for 
approval. In effect, it's a two-step SOW process. Upon receipt of the 
approval of the Detailed SOW, the proponent can then undertake final 
design work and ultimately construction activities.
    To date, LUMA has received approval from the regulator for 132 
Initial SOWs, of which 65 have received FEMA project numbers with the 
remaining 67 projects are expected to be processed shortly by FEMA. 
This step of the process enables LUMA to undertake the necessary work 
to develop the Detailed SOWs.
    The timeline for the Detailed SOW submissions ranges from the end 
of October 2021 through 2022 and 2023, depending on the complexity of 
the project and sequencing consideration. Initial projects whose 
detailed SOWs are being completed at this time will be utilized to work 
through and establish processes/procedures for future submission.

    Question 2. At last month's meeting in Puerto Rico, it was said 
that 37 PREPA projects totaling $1 billion have already been placed in 
the hands of LUMA.

    (a) You can tell us what they are and what the status is?

    Answer. As noted in response (1) above, the 65 projects noted have 
received FEMA project numbers based on LUMA's Initial SOWs submission. 
These projects are now at various steps in the development phase toward 
completing Detailed SOWs for submission to FEMA. This work involves 
preliminary engineering work, environmental and historic preservation 
assessment work, and hazard mitigation work toward the potential for 
additional FEMA funding.

    (b) If any of these projects have been awarded, who are the 
contractors, builders?

    Answer. There are no projects that have been awarded for 
construction activities. As noted above the projects are at preliminary 
engineering, environmental and historic preservation assessment, and 
hazard mitigation assessment stage of development.

    (c) Were any of those T&D projects that were already designed under 
PREPA, and can LUMA change the project design and specifications?

    Answer. As of June 1, there was only one project that had material 
early engineering work underway. All other projects required LUMA to 
initiate preliminary engineering activities.
    The one project in question has been progressed further including 
modifications based on direction received from FEMA. This is the 
project that is targeted for an October 2021 submission of its Detailed 
SOW to FEMA (refer to Q1 above).

    Question 3. Is a grid that supports these community distributed 
renewables be incompatible with one that supports central power plants, 
or just more complicated?

    Answer. These two ideas are not opposed, but rather complementary. 
Community distributed renewables requires a strong and well constructed 
basic electricity grid. The integration of distributed energy resources 
does require more complexity in terms of control systems and 
operational intelligence but this is overlaid or on top of the basic 
electricity system backbone.

    (a) What support will LUMA provide to these initiatives?

    Answer. LUMA is supporting these initiatives with the following 
current and future activities:

     LUMA is actively connecting distributed renewables as we 
            speak. There was a significant backlog when we commenced 
            operation and we are presently connecting new customers at 
            a pace that will clear the backlog by year end.

     Operate, maintain and restore the basic infrastructure 
            (poles, wires, transformers, protective devices, etc.)

     Install and operate the more complex operating control 
            system and field devices to implement a smart grid capable 
            of incorporating community distributed renewables and 
            optimizing the load and generation on the system.

     Replacement of current meters with smart meters (Advanced 
            Metering Infrastructure--AMI) to allow consumers to become 
            prosumers.

    Question 4. Labor Issue:

    (a) It was mentioned, that LUMA has required of its contractors and 
subcontractors a Project Labor Agreement modeled after its agreement 
with International Brotherhood Electrical Workers (IBEW) Local 222 of 
Tampa, FL. This has raised the following constituent concerns, for 
which we need clear Yes or No answers:

    (i) Whether this means ALL electrical contractors/builders in PR 
who may want to do business with LUMA, will have to place ALL 
employees, not just who do line or substation construction work for 
LUMA, under the agreement.

    Answer. No. LUMA will not require all employees of contractors 
doing work for LUMA to fall under the PLA. LUMA's priority is the 
safety and well-being of its employees and anyone working on the 
property. The PLA specifically outlines the scope of the agreement 
between LUMA, the IBEW and its contractors and it covers personnel 
directly working on electrical apparatus.
    Safety is dependent on highly skilled trained workers. LUMA 
recognizes the necessity of improving safety through offering 
additional evaluation, education, and training of workers.
    Of note, the parent companies of LUMA created the LUMA College for 
Technical Training at their own expense in order to train and develop 
skilled workers.
    LUMA is actively working to train its own workforce, but it would 
be atypical and impractical for LUMA to do the same for the outside 
workforce. Therefore, to gain the highest standards of safety and 
skilled workers, LUMA requires contractors working on the electrical 
system to follow the Project Labor Agreement or PLA.

    (ii) Whether in effect you are requiring anyone wishing to do this 
work with LUMA to become an IBEW Union Shop.

    Answer. No. LUMA is not requiring any contractor to become an IBEW 
Union Shop.

    (iii) Whether this means they would then become bound to follow the 
IBEW rates even when doing work for private entities that are NOT LUMA.

    Answer. No. Contractors are able to do as they wish when working 
for other entities or customers. The PLA only applies to the Puerto 
Rico Transmission and Distribution system.

    (iv) Does this conflict with observing prevailing market wages--
where the market is Puerto Rico?

    Answer. No. There are only three published wage determinations for 
Puerto Rico and all set out the minimum amounts that contractors must 
pay. The PLA enables all contractors to comply with this minimum.

    (b) Was there any open-door public participation process, in 
leading to this PLA decision, and supporting this requirement? Were P3 
or PREPA involved or consulted?

    Answer. This was a labor strategy decision to ensure a safe, 
trained workforce and is typical for this quantity of work in other 
parts of the United States. Labor negotiations are historically private 
between the company and the employee's representative.

    (c) What plans do you have to employ and use local contractors and 
suppliers? We note that FEMA funded PREPA's reconstruction of grid 
maintenance and repairs.

    Answer. We plan to maximize the use of local contractors and 
suppliers. Given the magnitude of the reconstruction work necessary, 
labor will be in high demand and short supply. We will use all of the 
local contractors and suppliers who are able to comply with labor and 
procurement rules, policies and practices.

    (d) What Federal mandates impact your use of local contractors?

    Answer. While the Federal Government provides provisions within 
Appendix II to 2 CFR Part 200 restricting contractors from receiving 
contract awards for Debarment or Suspension as well as requiring 
compliance with a number of other mandates such as Equal Employment 
Opportunity, Davis Bacon Act, Byrd Anti-Lobbying Amendment and others, 
these Federal mandates do not address the use of local contractors.

    (e) In hiring of personnel from outside of Puerto Rico, what 
provisions are in place for compliance with Puerto Rico laws that 
requires some occupations to be locally licensed and certified? What 
provisions if any are there regarding when to outsource?

    Answer. LUMA is actively recruiting in Puerto Rico. We strive to 
hire experienced workers on island and ensure that those workers that 
are non-residents to Puerto Rico are meeting both federal and 
commonwealth employment regulations. Outsourcing contractors has been 
limited to primarily on island contractors to date.

    (f) How do you respond to the statements by the Puerto Rico's 
Manufacturers, small business groups and the local Chamber of Commerce 
earlier this week accusing LUMA of coercing or forcing out local 
contractors to bring in a single union shop from outside Puerto Rico 
with higher costs?

    Answer. We were disappointed to hear the views of the groups 
opposed to the PLA. There is no coercion involved here. We will be 
working with them to better explain the PLA, how it works, and how it 
can benefit all. PLAs are common elsewhere across North America, but 
have not been used before in Puerto Rico--we will continue to work and 
communicate with stakeholders directly. The volume of project work that 
is in the FEMA funded pipeline is unprecedented for Puerto Rico and so 
the approaches taken to effectively manage this work must consider 
this.
    In order to ensure the large amount of work gets completed in a 
timely manner, it is important to have an agreement that prevents labor 
slowdowns and strikes. The PLA provides for the arbitration of any 
labor issues without resulting in strikes and walkouts. It puts 
customers first.

    Question 5. Are there provisions in place governing competition and 
award of projects where the LUMA parent companies or other corporate 
affiliates within Quanta and ATCO would participate?

    Answer. The T&D O&M Agreement requires that LUMA, with input from 
PREPA P3A, and COR3, prepare a manual to govern the procurement of any 
contract involving federal funding, as well a manual to govern non-
federally funded capital improvements. Among other requirements, the 
manuals must address employee and organizational conflicts of interest 
(``OCI'').
    To this end, the Procurement Manual (``PM'') was prepared by LUMA 
and approved by the P3A and COR3, as well as acknowledged by PREPA's 
Governing Board. The PM requires that LUMA implement a plan to 
identify, avoid or mitigate actual or potential OCI concerns and issues 
as early in the procurement process as possible, including the 
participation of a LUMA parent company, covered affiliate or 
subsidiary, in accordance with 2 CFR Part 200 (the Uniform Rules) and 
other applicable laws and regulations (``OCI Plan'').
    LUMA is in the process of developing and submitting for P3A and 
COR3 approval an OCI Plan which will include the engagement of an 
independent third-party to undertake key stages of the procurement 
process when a LUMA parent, covered affiliate, or subsidiary 
participates in the process. The independent third-party is expected 
to, among other responsibilities, review and approve the scope of work, 
requirements, and other bid documents, lead the RFP process whenever 
there's a covered affiliate participation, as well as issue a 
recommendation for award of the contract. The P3A and COR3 are also 
expected to play a key role in the process.

    (a) What is the LUMA company policy regarding procurement directed 
by LUMA staff, to businesses owned by LUMA shareholders and employees?

    Answer. LUMA's company policy regarding the participation of 
businesses owned by LUMA shareholders in procurements conducted by LUMA 
is that such participation implies an OCI concern which requires the 
engagement of an independent third-party, as described above. 
Businesses owned by LUMA shareholders may not participate in any 
procurement conducted by LUMA in which an independent third-party has 
not been engaged.
    LUMA's company policy regarding the participation of businesses 
owned by LUMA employees in procurements conducted by LUMA is that such 
a situation has the potential to constitute a conflict of interest 
under LUMA's Conflict of Interest Policy. LUMA's employees are 
prohibited from entering or continuing to participate in a situation 
that involves a conflict of interest unless it has been properly 
disclosed and approved in writing by LUMA's Director of Compliance and 
its Chief Executive Officer.

    (b) Does your contract permit contracting your corporate parents or 
related companies?

    Answer. As explained above, the T&D O&M Agreement requires the 
implementation of procurement manuals which address OCI. In accordance 
with federal funding requirements, the PM does not prohibit that LUMA 
contract corporate parents or related companies but does require the 
avoidance or mitigation of the OCI that such situation may entail, 
including the engagement of an independent third-party to undertake key 
aspects of the procurement process.

    Question 6. As a contractor of the Puerto Rico government, under an 
exclusive contract enabled by the Puerto Rico Legislature, and 
performing projects financed with federal funds, to what extent is LUMA 
accountable to disclose information to the Puerto Rico Legislature or 
Congress regarding activities in which public funds were or will or may 
be used?

    Answer. Under the Operation and Maintenance Agreement, LUMA is 
designated agent of PREPA for certain key functions, such as collection 
of System Revenues (defined term). System Revenues collected by LUMA 
are the property of PREPA as Owner. LUMA collects such revenues as an 
agent of PREPA. Thus, any System Revenues can be categorized as public 
funds as they continue to belong to PREPA per the OMA. In connection 
with System Revenues, LUMA appreciates that it is subject to all 
applicable law on public funds, including the jurisdiction under 
Applicable Law of Governmental Bodies such as the U.S. Congress and the 
Puerto Rico Legislative Assembly.
    LUMA's role pursuant to the OMA regarding public funds is subject 
to oversight under Applicable Law. However, not all funds received or 
managed by LUMA are public funds under the definition of the Puerto 
Rico Government Accounting Act. Payments made to LUMA in payment for 
the services rendered, like with any other contractor to the 
government, they become private funds of LUMA. With regard to LUMA's 
private funds, LUMA is not subject to disclosure requirements 
applicable to public funds.

                                 ______
                                 

    The Chairman. Thank you very much. The gentleman yields, 
and I appreciate your testimony.
    Let me now invite the Executive Director of the Puerto Rico 
Public-Private Partnership Authority, P3A, Mr. Fermin Fontanes.
    Sir, you are recognized.

 STATEMENT OF FERMIN FONTANES, EXECUTIVE DIRECTOR, PUERTO RICO 
 PUBLIC-PRIVATE PARTNERSHIP AUTHORITY (P3A), SANTURCE, PUERTO 
                              RICO

    Mr. Fontanes. Good afternoon, Chairman Grijalva, Ranking 
Member Westerman, Congresswoman Gonzalez-Colon, and Committee 
members. Thank you for the opportunity to appear before you. My 
name is Fermin Fontanes and I am the Executive Director of the 
Puerto Rico Public-Private Partnerships Authority, an entity 
created pursuant to Act 29, and the government entity charged 
with transforming Puerto Rico's electricity system by securing 
private-sector partners to improve power generation, 
transmission, and distribution for Puerto Rico.
    The P3 Authority is leading the efforts toward the 
transformation, and recently oversaw the process that resulted 
in the transfer of operations of the Puerto Rico Electric Power 
Authority's transmission and distribution system to LUMA. Under 
the agreement, LUMA will operate, maintain, and modernize 
Puerto Rico's transmission and distribution system for a 15-
year term.
    My testimony today will cover the following topics: the 
delineation of responsibilities within the government agencies; 
the P3 authority's role as a party to the agreement; and the 
next steps in the transformation of Puerto Rico's electrical 
system.
    Responsibilities under the agreement are as follows: the P3 
Authority is charged with overseeing the operators and PREPA's 
compliance with the terms of the agreement; the Energy Bureau 
is responsible for regulating, overseeing, and ensuring the 
operator's compliance with applicable law and public policy; 
the Energy Bureau oversees all operational and technical 
aspects of LUMA's performance; PREPA remains the owner of the 
system, and cooperates with the operator and the P3, so that it 
can perform its obligations under the agreement.
    As the government agency responsible for overseeing the 
implementation of all public-private partnerships, the P3 
Authority is committed to the success of the project, and fully 
focused on exercising its contractual oversight functions.
    During the transition period, the P3 Authority played a 
pivotal role in ensuring that the operator was able to begin 
operating the system within the agreed time frame. The P3 
authority was responsible for assisting in reviewing and/or 
approving plans, manuals, and budgets submitted by the 
operator.
    Throughout their agreement, the P3 Authority is charged 
with reviewing and approving annual budgets, as well as the 
incentive fee, and exercising oversight in relation to the 
operator's compliance with budgets, its obligations under the 
agreement.
    In order to ensure that the P3 Authority is able to 
properly execute its mandate, the operator is required to 
deliver monthly reports to the P3 Authority. As part of its 
oversight functions, the P3 Authority also reviews the 
operator's performance metrics file on a quarterly basis, with 
the Energy Bureau. In this first metrics report, it includes 
data collected by the operator for the first 3 months since it 
commenced operations.
    In the 4 months since LUMA began performance under the 
agreement, outages continued to be a problem, and in some cases 
appeared to have worsened. However, during each outage, the P3 
Authority has been in constant communication with LUMA and 
PREPA, leading to better alignment and delineation of 
corrective actions.
    The next step in the transformation is the procurement of 
one or more private operators to assume the operation and 
maintenance functions of Puerto Rico legacy electrical 
generation facilities. LUMA and the selected operators will be 
legally bound to comply with applicable law, including the 
mandates of Act 17 for the integration of renewable energy.
    Puerto Rico's electrical system transformation will not be 
accomplished in the span of 4 months. However, with the 
government's oversight, we are confident that the operator will 
be able to achieve our goals. Transforming Puerto Rico's 
electric system is a process that will take time and effort. It 
is true that the outages continue to affect the residents of 
Puerto Rico, but we must not continue to come up with temporary 
solutions to a permanent problem.
    The Government of Puerto Rico remains confident that the 
agreement is key to Puerto Rico's transition to a modern, 
affordable, resilient, and reliable system that will serve as a 
driver of economic recovery and growth.
    Thank you. Thank you, Mr. Chairman.

    [The prepared statement of Mr. Fontanes follows:]
    Prepared Statement of Fermin Fontanes Gomez, Executive Director,
           Puerto Rico Public-Private Partnerships Authority

                              Introduction

    Chairman Grijalva, Ranking Member Bruce Westerman, Congresswomen 
Jennifer Gonzalez Colon and Committee Members, thank you for the 
opportunity to appear before you today to discuss the status of the 
Puerto Rico Energy and Power Authority (``PREPA'') post implementation 
of the LUMA LUMA Energy LLC (``LUMA'' or the ``Operator'') Transmission 
and Distribution Contract. My name is Fermin Fontanes Gomez and I am 
the Executive Director of the Puerto Rico Public Private Partnership 
Authority (the ``P3 Authority'').
    The P3 Authority is a public corporation of the Government of 
Puerto Rico created pursuant to the Public-Private Partnership 
Authority Act, Act No. 29-2009 (as amended, ``Act 29''), and is the 
government entity charged with transforming Puerto Rico's electrical 
system by securing private sector partners to improve power generation, 
transmission, and distribution for Puerto Rico. As Executive Director 
of the P3 Authority, I am leading the efforts related to the 
transformation, and I recently oversaw the process that resulted in the 
transfer of operations of PREPA's transmission and distribution system 
to LUMA. Under the agreement between the P3 Authority, PREPA and LUMA 
(``the O&M Agreement''), LUMA will operate, maintain, and modernize 
Puerto Rico's transmission and distribution for a 15-year term.
    As you are aware, Puerto Rico's electrical system faces severe 
challenges as a result of years of underfunding, lack of maintenance 
and disrepair, the devastation caused by hurricanes Irma and Maria, and 
a series of earthquakes that struck Puerto Rico in December 2019 and 
January 2020. The transformation process has been further delayed by 
strict shelter-in-place measures and other restrictions to prevent the 
spread of COVID-19.
    My testimony today will address the government framework for 
oversight of the transformation process, and will cover the following 
topics: (i) the regulatory background underlying the whole 
transformation process; (ii) the delineation of responsibilities 
between the government agencies tasked with effectuating the 
transaction for the transformation of the transmission and distribution 
system and the Operator; (iii) the status of the proposed 
reorganization of PREPA, and (iv) the next steps in the transformation 
of Puerto Rico's electrical system.
i. Regulatory Framework

    The regulatory framework underlying the PREPA transformation rests 
on three main pillars--the Puerto Rico Electric Power System 
Transformation Act, Act No. 120-2018 (as amended, ``Act 120''). the 
Puerto Rico Energy Public Policy Act, Act. No. 17-2019 (``Act 17''). 
and the Puerto Rico Transformation and RELIEF Act, Act No. 57-2014 (as 
amended, ``Act 57'').
    The Government enacted Act 120 with the objective of transforming 
Puerto Rico's electric system into one that is modern, sustainable, 
reliable, efficient, cost-effective and resilient to natural disaster. 
Further, to address the Legislative Assembly's concern that the 
Commonwealth's electric power and generation and distribution system 
was obsolete and hindered opportunities for economic development, Act 
17 was enacted requiring PREPA to delegate or transfer operation of the 
electric power generation, transmission and distribution, 
commercialization, and operation systems through contracts awarded and 
executed pursuant to Act 120 and Act 29, all to be done within certain 
specific milestones.
    Created pursuant to Act 57, the Puerto Rico Energy Bureau (the 
``PREB'') is the government agency charged with regulating, overseeing 
and ensuring compliance with the public policy on energy of the 
Commonwealth of Puerto Rico. The PREB has served, and continues to 
serve, an important function in the transformation of PREPA, including 
the approval of the energy compliance certificate assuring that the O&M 
Agreement is consistent with Puerto Rico's energy public policy.
ii. Delineation of Responsibilities Among the Relevant Parties

    The parties to the O&M Agreement specifically allocated 
responsibilities among various Government agencies as required by the 
underlying regulatory framework. Specifically:

     the P3 Authority is charged with overseeing the Operator's 
            and PREPA's compliance with the terms of the O&M Agreement;

     the PREB is responsible for regulating, overseeing, and 
            ensuring the Operator's compliance with applicable law and 
            public policy on energy. As the Island's independent 
            regulator for the energy sector, the PREB oversees all 
            operational and technical aspects of LUMA's performance as 
            operator of the transmission and distribution system; and

     PREPA continues to own the transmission & distribution 
            system and is also required to reasonably cooperate with 
            the Operator so that it can perform its obligations under 
            the O&M Agreement.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]          
            

 Role of the Puerto Rico Public-Private Partnerships Authority

    The P3 Authority is charged with overseeing Operator's compliance 
with the terms of the O&M Agreement. As the government agency 
responsible for overseeing the implementation of all public-private 
partnerships, the P3 Authority is committed to the success of the 
project, and fully focused on exercising its contractual oversight 
functions to achieve the Government's goals.
    During the transition period leading to LUMA formally taking over 
the operation of the transmission and distribution system, the P3 
Authority played a pivotal role in ensuring that the Operator was able 
to begin operation of the transmission and distribution system within 
the agreed timeframe. The P3 Authority was responsible for assisting in 
reviewing and/or approving the System Operation Principles, a System 
Remediation Plan, Performance Metrics, Initial Budgets, and Procurement 
Manuals, among others. The P3 Authority reviewed and commented on 
various drafts of these operating plans, which were required for 
handover, and participated in multiple working groups with the Operator 
to refine such plans. In addition, the P3 Authority oversaw the 
development and implementation of protocols for the review and 
validation of the Operator's invoices during the front-end transition 
period.
    Throughout the term of the O&M Agreement, the P3 Authority is 
charged with: (i) reviewing and approving the Operator's annual budgets 
as well as any incentive fee payable to LUMA for achieving certain 
performance metrics; (ii) exercising oversight in relation to the 
Operator's compliance with budgets and its performance of its 
obligations under the contract; and (iii) cooperating with the Operator 
in its efforts to obtain and effectuate any required government 
approvals. In order to ensure that the P3 Authority is able to properly 
execute its mandate and contractual obligations, the Operator is 
required to deliver monthly reports for the P3 Authority's review. 
Finally, the P3 Authority holds regular meetings and proactively 
engages in communication with LUMA in order to discuss matter 
pertaining to day-to-day execution of the O&M Agreement.
b. Role of the Puerto Rico Energy Bureau

    As the independent regulator of the energy system, the PREB has the 
ultimate responsibility to regulate, monitor, and enforce the energy 
public policy of the Government. As part of its statutory mandate, the 
PREB is charged with ensuring that electric service in the Commonwealth 
of Puerto Rico is safe, reliable, and affordable. In accordance with 
the regulatory framework established by Act 120, the PREB and the P3 
Authority collaborate in supervising LUMA's performance of the O&M 
Agreement. In addition, the P3 Authority and the PREB, together with 
PREPA, continue to work on a work plan to oversee the transaction and 
guarantee the optimum use of the resources of each entity without 
unnecessary duplicity or overlapping. As such, the PREB has been tasked 
with overseeing all technical and operational aspects of LUMA's 
performance under the O&M Agreement.
    As part of its technical oversight functions, the PREB issued a 
Resolution and Order of May 21, 2021, directing the Operator to prepare 
quarterly reports with respect to certain performance metrics, 
including customer service metrics, customer average interruption 
duration, operational and capital expenses, and certain generation 
metrics. As further explained below, the first quarterly report 
covering the period from June 2021 to August 2021 was recently filed 
with the PREB on September 20th.
    Among other responsibilities, PREB has the statutory responsibility 
to oversee rates charged to consumers. The O&M Agreement specifically 
states that nothing in the contract is intended to impair or restrict 
the PREB's right to approve final rates and charges to customers in 
accordance with applicable law. Therefore, the Operator is subject to 
regulatory oversight by the PREB and cannot increase rates without 
PREB's approval. No rate increases are contemplated in the Operator's 
Initial Budget approved by the PREB for 2022-2024.
c. Role of the Puerto Rico Electric Power Authority

    As of today, PREPA has two distinct roles with respect to Puerto 
Rico's electric energy system: (i) it is the owner of the transmission 
and distribution system and, as such, is charged with cooperating with 
the Operator in its operation and management of the transmission and 
distribution system; and (ii) it is the owner and operator of the 
legacy base-load generation plants and gas turbine peaking plants 
located throughout the island of Puerto Rico.
    Pending the completion of the procurement process to delegate the 
operation and maintenance functions of these generation facilities, 
PREPA remains responsible for operating the same to generate the 
electricity that is then transmitted and distributed by the Operator to 
the people of Puerto Rico.
d. Role of the Private Operator

    As required by law, the P3 Authority conducted a procurement 
process that led to the signing of the O&M Agreement in June 2020, and 
then oversaw a one-year-long transition of operations to LUMA. The 
transition allowed the parties to prepare for the Operator's takeover 
of the transmission and distribution system by (i) developing the 
requisite operating plans, performance metrics, procedures and policies 
needed for a successful transaction; (ii) hiring employees to operate 
the transmission and distribution system; (iii) allowing the Operator 
to establish a presence on the Island; and (iv) refining the 
arrangements between LUMA as operator of the transmission and 
distribution system and PREPA as operator of the electrical generation 
facilities.
    LUMA formally took over the operation of the transmission and 
distribution system on June 1, 2021. As the operator, LUMA is 
responsible for the day-to-day operation of the transmission and 
distribution system, which includes, among other things: (i) electric 
transmission, distribution and load servicing; (ii) asset management 
and maintenance; (iii) public and employee safety; (iv) managing and 
administering Federal funds; (v) human resources; (vi) information 
technology; (vii) customer services and communicating with the public; 
(viii) billing and collection; (ix) system planning and operations; (x) 
implementation and planning of capital improvements; (xi) accounting 
and financial services; (xii) communicating with, and appearing before, 
the PREB; (xiii) preparation of the Integrated Resource Plan; (xiv) 
emergency response; and (xv) communications with the Government, 
community and the media.
    LUMA's first Quarterly Performance Metrics Report filed with the 
PREB includes data collected by the Operator for the first three months 
since it commenced operation of the transmission and distribution 
system on June 1st. The report includes an update on both transmission 
and distribution metrics and those that involve PREPA's generation 
using data that the Operator received from PREPA. Highlights from the 
report as well as trends over the initial three-month period are as 
follows:

    Customer Service--

     the percentage of calls answered improved substantially 
            from approximately 28% to 54% in comparison to PREPA's 
            historical Fiscal Year 2020 data (used as baseline).

     the average wait time to answer calls improved 
            substantially from approximately 26 minutes to 
            approximately 9 minutes in comparison with PREPA's 
            baseline.

    T&D Reliability--The initial operating months had significant 
outages throughout all regions as the Operator worked to transition 
operations. The August data reflected the significant lack of PREPA's 
generation resulting in rotating load shedding by the Operator. With 
regards to specific indicators, the report shows as follows:

     SAIDI (System Average Interruption Duration Index) 
            decreased by 85 minutes. This is still worse than both 
            PREPA's baseline and the benchmark set by PREB in its May 
            2021 Resolution and Order.

     SAIFI (System Average Interruption Frequency Index) 
            slightly increased. This is still better than both PREPA's 
            baseline and the benchmark set by PREB in its May 2021 
            Resolution and Order.

     CAIDI (Customer Average Interruption Duration Index) 
            overall customer average interruption time improved, 
            although still worse than both PREPA's baseline and the 
            benchmark set by PREB in its May 2021 Resolution and Order.

    Human Resources--

     While absenteeism over the initial 3-month period of June-
            August increased from 1.1% to 1.9%, it is significantly 
            better than PREPA's baseline of 13.1%. It is also better 
            than the benchmark of 2.4% set by PREB in its May 2021 
            Resolution and Order.

     The OSHA Total Recordable Incident Rate (``TRIR'') 
            worsened during the initial period with injuries reported 
            in August being 8, which was up from 3 in June 2021. LUMA's 
            August TRIR of 2.9% is slightly worse than PREB's benchmark 
            of 2.3% but better that PREPA's baseline of 6.4%.

    Power Generation--

     Power plant unit availability worsened by 17% from June to 
            August for the larger base load power plant units.

     Forced Outage Hours increased by over 20% in August versus 
            June 2021.

     The lack of generation/resource adequacy situation led to 
            island-wide rotating load shedding in August and into 
            September. The lack of base load generation also led to 
            operating with the peakers units, which are less efficient 
            and also resulted in fuel cost ($74 million dollars over 
            projections)

    As noted above, in the four months since LUMA began performance 
under the O&M Agreement, outages continue to be a problem and, in some 
cases, appear to have worsened. However, during each outage, the P3 
Authority has been in constant communication with PREPA and the 
Operator to seek explanations and facilitate dialogue to remedy the 
situation as quickly and efficiently as possible. Communication with 
all parties has been effective and has led to better alignment and 
delineation of corrective actions.
    Also, it is important to point out that the operation and 
maintenance of the base-load generation plants and gas turbine peaking 
plants located throughout the island of Puerto Rico remain the 
responsibility of PREPA. Although the Operator is responsible for 
cooperating with the generators of electric energy, LUMA is not 
responsible for any of the operation, repair, replacement, maintenance 
or improvement of the legacy electrical generating facilities.
iii. PREPA Reorganization

    As part of the transformation process, PREPA is currently 
undergoing a reorganization with the view toward creating two new 
subsidiaries--GridCo and GenCo (the ``PREPA Reorganization''). Upon 
completion of the PREPA Reorganization, ownership of PREPA's 
transmission and distribution system will be transferred to GridCo and 
ownership of PREPA's Legacy Generation Assets will be transferred to 
GenCo. One of the goals of the PREPA Reorganization is to comply with 
the public policy mandated in Act 17 which provides for the unbundling 
of Puerto Rico's electrical system, the incorporation of the private 
sector in the operation of assets and the rendering of electric power 
services so to allow for the elimination of interventions fueled by 
party politics.
iv. Next Steps in the PREPA's Transformation--Procurement of Generation 
        Operator

    The next step in the transformation of PREPA is the procurement of 
one or more private operators to assume the operation and maintenance 
functions of Puerto Rico's legacy electrical generation facilities, as 
required by Act 17.
    Following that mandate, the P3 Authority commenced a procurement 
process, which purpose is to delegate the operation and maintenance 
functions of these facilities. The currently ongoing procurement 
process began with the launch of a request for qualifications to which 
15 private parties responded. In consultation with its financial, 
technical and legal advisors, the P3 Authority evaluated the statements 
of qualifications received from those private parties and submitted its 
analyses to the partnership committee established to oversee the 
process. The partnership committee short-listed eight private parties 
with best-in-class expertise and experience to participate in the 
request for proposals (``RFP'') phase.
    On November 10, 2020, the P3 Authority launched the RFP phase with 
the issuance of the RFPs to the eight qualified parties. Since the 
issuance of the RFP, this process has advanced steadily. Currently, 
interested parties are conducting site visits and continuing to conduct 
due diligence and engage on the draft contract negotiations.
    Upon award of the generation contract, the selected generation 
operator(s) and LUMA will work in parallel to operate Puerto Rico's 
electric energy system.
    Both the Operator and the generation operator(s) to be selected as 
part of this procurement process are and will be legally bound to 
comply with PREB's regulations and orders and with the applicable legal 
framework that regulates the energy industry in Puerto Rico, including 
the mandates of Act 17 for the integration of renewable energy into the 
grid. Renewable energy objectives are one of many goals set by the 
Government to achieve the modernization of Puerto Rico's electric 
system. The transformation is a multi-step process that will be 
accomplished over multiple years. The O&M Agreement is but the first 
step in this transformation and is aimed at repairing, remediating and 
strengthening the transmission and distribution system. Without that, 
Puerto Rico will never be able to develop a fully resilient energy 
infrastructure. The Government of Puerto Rico is committed to ensuring 
the creation on a sustainable electric system and creating the 
transmission and distribution system more capable to manage and 
incorporate cleaner sources of energy.

                               Conclusion

    Puerto Rico's electrical system transformation will not be 
accomplished in the span of four months. However, with the oversight of 
the P3 Authority, we are confident that the Operator will be able to 
achieve the goals the parties have set out to accomplish. Like any 
transition and as was expected, there have been certain challenges. 
From the moment the new transmission and distribution system operator 
was announced, naysayers have engaged in a campaign of misinformation 
aimed at frustrating and derailing the transaction. In addition to 
this, the Operator inherited a very frail electrical system as a result 
of years of lack of maintenance, underfunding and disrepair. Everyone 
knows that transforming Puerto Rico's electric system is not going to 
happen overnight--it is a process that will take time and effort. It is 
true that outages continue to affect the residents of Puerto Rico but 
we must not continue to come up with temporary solutions to a permanent 
problem, and to that end, the Government of Puerto Rico is committed to 
ensuring that the Operator addresses the issues faced by the 
transmission and distribution system and brings it in line with 
industry standards.
    Notwithstanding the challenges faced in the last few months, the 
Government of Puerto Rico remain confident that the O&M Agreement is an 
important part of Puerto Rico's transition to a modern, affordable, 
resilient, and reliable electric energy system that will serve as a 
driver of economic recovery and growth.

                                 ______
                                 

Questions Submitted for the Record to Fermin Fontanes Gomez, Executive 
   Director of the Puerto Rico Public-Private Partnerships Authority
              Questions Submitted by Representative Sablan

    Question 1. Can you describe the relationship and responsibilities 
between PREPA and LUMA as defined in the existing contract? For 
example, if the AES Coal Plant were to close before 2028, would LUMA 
play a role in that decision? What changes to the contract, if any, do 
you think are needed?

    Answer----

PREPA and LUMA's Relationship and Responsibilities Under the O&M 
        Agreement

    PREPA has two distinct roles with respect Puerto Rico's electric 
energy system under the O&M Agreement: (i) as required by the Puerto 
Rico Energy Policy Act of 2019, Act No. 17-2019 (``Act 17''), it is the 
owner of Puerto Rico's transmission and distribution system (the ``T&D 
System'') and, as such, is charged with cooperating with LUMA in its 
operation and management of the T&D System; and (ii) it is the owner 
and operator of the base-load generation plants and gas turbine peaking 
plants located throughout Puerto Rico (the ``Legacy Generation 
Assets''), pending the completion of the procurement process to 
delegate its operation and maintenance responsibilities to one or more 
private operators. Accordingly, PREPA continues to be responsible for 
generating the electricity that is then transmitted and distributed by 
LUMA to the people of Puerto Rico.
    LUMA's role under the O&M Agreement is to act as the ``Operator'' 
of the T&D System. In its role as Operator, LUMA is responsible for the 
day-to-day operation of the T&D System, which includes, among other 
things: (i) electric transmission, distribution and load servicing; 
(ii) asset management and maintenance; (iii) public and employee 
safety; (iv) managing and administering Federal funds; (v) human 
resources; (vi) information technology; (vii) customer services and 
communicating with the public; (viii) billing and collection; (ix) 
system planning and operations; (x) implementation and planning of 
capital improvements; (xi) accounting and financial services; (xii) 
communicating with, and appearing before, the Puerto Rico Energy Bureau 
(the ``PREB''); (xiii) preparation of the Integrated Resource Plan (the 
``IRP'') subject to approval by the PREB; (xiv) emergency response; and 
(xv) communications with the Government of Puerto Rico (the 
``Government''), community and the media (the ``O&M Services''). 
Accordingly, LUMA is responsible for cooperating with PREPA (and, upon 
completion of the ongoing procurement for the Legacy Generation Assets, 
with operators of the Legacy Generation Assets) and the other 
generators of electric energy on Puerto Rico, but it is not responsible 
for any of the operation, repair, replacement, maintenance or 
improvement of the Legacy Generation Assets or any other privately 
owned generation asset.
    In addition, under the O&M Agreement, prior to transferring to LUMA 
the operation of the T&D System on June 1, 2021 (the ``Service 
Commencement Date''), LUMA and PREPA, along with various other 
government entities, including the P3 Authority, the Central Office for 
Recovery, Reconstruction and Resiliency (``COR3'') and the PREB, were 
required to work together to prepare for the transfer to LUMA of the 
T&D System, including by collaborating to (i) develop the requisite 
operating plans, performance metrics, procedures and policies needed 
for a successful transaction; (ii) hire employees to operate the T&D 
System; (iii) establish LUMA's presence on Puerto Rico; and (iv) refine 
the arrangements between LUMA as operator of the T&D System and PREPA 
as operator of the Legacy Generation Assets.
AES Coal Plant Hypothetical

    Under the O&M Agreement, LUMA is responsible for (i) acting as 
agent of PREPA in administering certain contracts relating to the 
operation and maintenance of the T&D System (``System Contracts''), 
including the power purchase and operating agreement (the ``AES PPOA'') 
between PREPA and AES Puerto Rico (the ``AES Operator''), the private 
operator of the AES Coal Plant, (ii) ensuring that the T&D System, 
Legacy Generation Assets and all generation assets not owned by PREPA 
operate in a reliable and economic fashion, and (iii) ensuring that 
sufficient generation capacity is available and maintained to meet 
resource adequacy goals (``Resource Adequacy'') in accordance with 
Puerto Rico's energy public policy.
    If the AES Coal Plant were to close before 2028, LUMA's role under 
the O&M Agreement would be to prepare a risk assessment and analysis in 
support of Resource Adequacy concluding that the AES Coal Plant can be 
shut down at such time. In addition, prior to commencing any work in 
furtherance of such determination, LUMA would be required to obtain the 
PREB's approval to begin shutting down the AES Coal Plant.
Changes to the O&M Agreement

    The P3 Authority is of the position that no changes to the O&M 
Agreement are needed at this time.
    First, the O&M Agreement is part of the Government's broader public 
policy preference to depoliticize PREPA and incorporate the private 
sector in the operation of assets and the rendering of electrical power 
services. Such public policy aims to finance infrastructure projects 
and provide public goods and services through public private 
partnerships.
    For years, Puerto Rico's dated and fragile electric system has 
faced significant operational and reliability challenges. In 2017, 
these challenges were both highlighted and significantly aggravated by 
Hurricanes Irma and Maria, two devastating hurricanes which struck 
Puerto Rico within two weeks of each other. The combined impact of Irma 
and Maria led to a complete failure of the electrical grid, resulting 
in the longest power outage in U.S. history. Irma left approximately 
70% of Puerto Rico without power and, shortly thereafter, Maria, the 
strongest hurricane to hit Puerto Rico in close to 100 years, made 
landfall and left 100% of Puerto Rico's residents without power for 
significant periods of time. On average, households went 84 days 
without power, however it was approximately 11 months before power was 
restored to 100% of Puerto Rico's residents.
    Confronted with this reality, the Government determined that a 
critical component of the transformation of Puerto Rico's energy sector 
was to bring in private sector operators who would be able to bring to 
bear their world-class expertise, experience, and know-how to execute 
on the transformation of the island's electric system.
    Second, the O&M Agreement is the result of a two-year-long robust 
and transparent competitive procurement process, conducted pursuant to 
and in compliance with the requirements of the Puerto Rico Electric 
System Transformation Act, Act No. 120-2018, as amended (``Act 120''), 
and the Puerto Rico Public-Private Partnership Authority Act, Act No. 
29-2009 (``Act 29''). Over the course of these two years, multiple 
drafts of the contract were distributed to the proponents, with each 
new draft reflecting the comments from the proponents that the 
partnership committee established for the O&M Agreement procurement 
process (the ``Partnership Committee'') had accepted. Specifically, the 
request for proposals required that each proponent (i) provide written 
comments to and markups of three drafts of the contract and (ii) meet 
with the P3 Authority and various other government entities, including 
the FOMB, to walk through and discuss the proponent's comments to each 
successive draft of the contract. In addition, there were over 700 
diligence questions, more than 19 Partnership Committee meetings and 
over 15 diligence meetings. Accordingly, each provision of the O&M 
Agreement was carefully negotiated between the main stakeholders, which 
resulted in the best market terms and conditions.
    Finally, the Government cannot amend the O&M Agreement 
unilaterally, as it can only be amended by written agreement between 
LUMA, PREPA and the P3 Authority. Furthermore, amendments to the O&M 
Agreement do not enter into effect until (i) the parties have obtained 
approval from the PREB and the FOMB (if then in existence), to the 
extent required by applicable law, and (ii) the P3 Authority has 
received the relevant tax opinions providing that the amendment in 
question does not jeopardize the tax-exempt status of the PREPA bonds.
    In light of the above, it is not clear that reopening contract 
negotiations with LUMA or re-starting a procurement process would 
result in an agreement that is more favorable to the Government and the 
people of Puerto Rico.

            Questions Submitted by Representative Velazquez

    Question 1. How many employees within the P3 Authority are charged 
with providing oversight to the O&M Agreement?

    Answer. It is important to point out that the PREB is the entity in 
charge of overseeing all technical and operational aspects of LUMA's 
performance under the O&M Agreement. The O&M Agreement acknowledges 
PREB's authority in all matters under its jurisdiction. The P3 
Authority has a very specific role as the Administrator to the O&M 
Agreement, which is directed to making sure that LUMA complies with its 
obligations thereunder. Specifically, the P3 Authority's 
responsibilities as Administrator under the O&M Agreement are the 
following: (i) review and approve LUMA's budgets to ensure compliance 
with the rate orders issues by PREB from time to time; (ii) review and 
approve the incentive fee payable to LUMA for a given contract year; 
(iii) cooperate with LUMA such that budgets and funds are sufficient in 
amount to enable LUMA to meet the Contract Standards and provide 
reasonable opportunity for LUMA to achieve the Performance Metrics, as 
both terms are defined by the O&M Agreement; (iv) exercise oversight in 
relation to LUMA's compliance with the budgets approved by the PREB, 
performance of its obligations under O&M Contract, and compliance with 
federal funding requirements; (v) respond within 30 days to all 
requests of LUMA with respect to matters requiring approval, review or 
consent of Administrator under O&M Agreement; (vi) cooperate with LUMA 
by providing information, data and assistance as may be reasonably 
necessary; (vii) declare an event of default and exercise remedies 
under O&M Agreement; (viii) coordinate any audits that the P3 Authority 
is entitled to perform with any audits being undertaken by PREPA and 
any other governmental body; and (ix) cooperate with LUMA to obtain and 
effectuate approvals of any governmental body.
    To achieve such purposes, the P3 Authority currently has six 
employees responsible for overseeing LUMA and PREPA's performance of 
its contractual obligations. Also, the P3 Authority team communicates 
with LUMA on a daily basis, serving as liaison between Luma, other 
stakeholders and governmental agencies. The P3 Authority is in the 
process of interviewing candidates for the P3 Authority's office of 
administration of the O&M Agreement, which recruitment process must 
strictly comply with local administrative and human resources laws and 
regulations. Specifically, under local law, the P3 Authority is 
required to interview and give priority to all prospective candidates 
within the Government before announcing any job openings to the public 
and expanding its search beyond the Government.

    Question 2. Did the P3 authority have to engage outside experts to 
help with the oversight of the O&M Agreement?

    Answer. Yes, the P3 Authority has engaged outside experts to help 
with its oversight of the O&M Agreement.

    Question 3. If so, can you share the names of those experts and the 
agreements for the members of this Committee?

    Answer. The outside experts hired by the P3 Authority to help 
oversee the O&M Agreement are (i) FTI Consulting (``FTI''), (ii) 
Ximmena, LLC (``Ximmena''), (iii) Eclipse Management, LLC 
(``Eclipse''), and (iv) Scott Madden, LLC (``Scott Madden'').
    FTI assists with overseeing LUMA's technical and financial 
compliance with the O&M Agreement. Ximmena assists with overseeing the 
technical and regulatory compliance with the O&M Agreement. Eclipse 
Management assists with overseeing LUMA's compliance with certain 
financial obligations under the O&M Agreement. Scott Madden was hired 
to assist with the creation of the necessary administrative framework 
required to oversee the O&M Agreement. Copy of the Agreements with the 
named advisors are attached as Exhibit A herewith.

          Questions Submitted by Representative Gonzalez-Colon

    Question 1. Multiple groups like UPR Resiliency Law Center and even 
Members of Congress have argued that:

     The O&M Agreement should be canceled or amended.

     That FEMA should condition its recovery funds to immediate 
            action being taken by the Puerto Rican Government, so a 
            thorough investigation and report is produced on the O&M 
            Agreement.

     That Congress and FEMA should ensure that federal funds 
            are used to ``move away from fossil fuels, advancing the 
            use of renewable energy, protecting workers rights and 
            improving the health of people and the environment.''

    (a) How do you answer to that?

    (b) How much would that drag on the already painfully slow 
recovery?

    Answer----

Response to the Argument that the O&M Agreement Should be Canceled or 
        Amended:

    The P3 Authority is of the position that the O&M Agreement should 
not be canceled and does not require amendments. The O&M Agreement is 
the result of a two-year-long robust competitive procurement process, 
conducted pursuant to and in compliance with the requirements of Act 
120 and Act 29. As such, the terms of the O&M Agreement were thoroughly 
negotiated between key stakeholders and subject to multiple rounds of 
the review and comment by, among others, technical experts, as well as 
experts in local law, environmental law, federal funding requirements, 
and the applicable regulatory framework which resulted in the best 
market terms and conditions.
    In addition, the O&M Agreement is part of the Government's broader 
public policy preference to finance infrastructure projects and provide 
public goods and services through public private partnerships. 
Specifically, the O&M Agreement is the result of the Government's 
determination that a critical component of the transformation of Puerto 
Rico's energy sector would be to bring in a private sector operator who 
would be able to bring to bear its world-class expertise, experience 
and know-how to execute on the transformation.
    Accordingly, it is not clear that reopening contract negotiations 
with LUMA or restarting the procurement process would result in an 
agreement that is more favorable to the Government and the people of 
Puerto Rico. What is certain is that reopening contract negotiations 
would result in further delays to Puerto Rico's recovery process, the 
envisioned transformation of the electric grid and significant expenses 
to the Government of Puerto Rico. Cancellation of the O&M Agreement 
would also bring the threat of protracted litigation.
Response to the Argument that FEMA Should Condition Recovery Funds:

    Any use by LUMA of FEMA recovery funds is, in fact, subject to a 
number of terms and conditions. The O&M Agreement requires LUMA to 
fully comply with State and Federal requirements and procedures that 
govern FEMA recovery funds. Further, the specific projects to be built 
using these funds must meet FEMA eligibility criteria, including the 
environmental and historic preservation reviews that apply to any 
facility built or repaired with federal funds. In light of this, LUMA 
may only use FEMA funds as permitted by FEMA's Public Assistance 
Program and in accordance with all statutory and regulatory 
requirements applicable to projects funded by Public Assistance grants.
    It is worth mentioning that FEMA does have the authority to impose 
conditions on a grant award that require funds to be used for a 
particular purpose or manner that is consistent with Federal statute, 
regulation, or Executive Order (see 2 C.F.R. Sec. Sec. 200.100(a)(1) 
and 200.211 for information on how agencies can impose conditions on 
grant awards). Therefore, the applicable regulation provides for 
sufficient Federal intervention with respect to the use of the grant 
funds destined to Puerto Rico's power generation, transmission, and 
distribution.
    Furthermore, the O&M Agreement includes certain requirements 
intended to provide additional assurance that any goods and services 
acquired by LUMA for federally funded projects are properly procured 
and administered. For example, under the O&M Agreement, prior to the 
Service Commencement Date, LUMA was required to prepare a procurement 
manual in collaboration with the P3 Authority and COR3 (the ``LUMA 
Procurement Manual''), which LUMA must now use to manage the end-to-end 
procurement or purchasing of any third-party goods and services in 
connection with its performance of the O&M Services, including its 
performance of any O&M Services related to FEMA funded projects. Of 
note, the scope and contents of the Procurement Manual was the subject 
of multiple discussions with FEMA and the OIG Office to assure 
compliance with federal regulations.
    Finally, because the argument that FEMA should condition its 
recovery funds on the Government taking immediate action to conduct a 
thorough O&M Agreement is similar to the Whitefish and Cobra contracts, 
it is worth noting two critical differences between the O&M Agreement, 
on the one hand, and the Whitefish and Cobra contracts, on the other. 
First, unlike the Whitefish and Cobra contracts, each of which was the 
result of a non-competitive procurement process for emergency 
restoration services conducted in the immediate aftermath of Hurricanes 
Irma and Maria, the O&M Agreement is the result of a two-year-long 
robust competitive procurement process conducted pursuant to and in 
compliance with the requirements of Act 120 and Act 29. Second, unlike 
the Whitefish and Cobra contracts, which were paid for using FEMA 
funds, the O&M Agreement is not a federally funded contract. Rather, 
payments made to LUMA in exchange for the O&M Services come out of the 
revenues from the tariff paid by PREPA's consumers.
Response to the Argument that Congress and FEMA Should Ensure Federal 
        Funds Are Used to Advance Renewable Energy:

    The Government is committed to increasing renewable energy in 
Puerto Rico. Act 17 establishes the Puerto Rico public policy for the 
execution of the Renewable Portfolio Standard. The Renewable Portfolio 
Standard requires, among other things, that the renewable portfolio for 
the Puerto Rico energy system increase to 20% by 2022, 40% by 2025, 60% 
by 2040 and 100% by 2050. Act 17 also requires that LUMA implement 
energy efficiency programs to obtain 30% energy efficiency savings by 
2040.
    Under the O&M Agreement, LUMA's role is limited to the operation of 
the T&D System and does not include power generation. In other words, 
the O&M Agreement does not authorize LUMA to purchase or contract for 
power generation. What is more, the O&M Agreement requires LUMA to 
comply with Act 17 and to ensure Resource Adequacy in accordance with 
the Puerto Rico energy public policy.
    Given that the PREB is the public entity generally responsible for 
the oversight and correct execution of Puerto Rico's energy public 
policy, by making the PREB entity responsible for overseeing LUMA's 
compliance with Puerto Rican law and public policy on energy, including 
renewable energy policy such as the Renewable Portfolio Standard, the 
O&M Agreement ensures that LUMA will perform the O&M Services in 
furtherance of the Government's goals with respect to the advancement 
of renewable energy in Puerto Rico.
Regarding the Impact on Puerto Rico's Already Painfully Slow Recovery 
        if the Government Were to Capitulate to Any of the Preceding 
        Three Arguments
    Capitulating to any of the three arguments outlined above will 
ultimately hurt the people of Puerto Rico by further delaying the 
Government's mission to transform Puerto Rico's electric grid and 
promote economic recovery and growth following the devastation caused 
by Hurricane Irma and Hurricane Maria. Specifically, if the O&M 
Agreement is terminated, the people of Puerto Rico will never be able 
to reap the benefits of the significant amount of time and resources 
that have already been invested into the transaction by the Government. 
In addition, if Congress and/or FEMA were to take actions to further 
delay the disbursement of federal funds to PREPA, Puerto Ricans who, at 
this point, have been waiting for FEMA to approve a permanent power 
grant for four years will have to continue waiting, which will, in 
turn, foment further public distrust in both the Government and the 
Federal Government.

    Question 2. How much would it cost to rescind the O&M Agreement? 
What would be the difference between doing it for cause, vs. as a 
policy decision? What would be the impact on the recovery and 
mitigation action plan for the electric system of a reset of the whole 
process?

    Answer----

Cost of Rescinding the O&M Agreement

    The O&M Agreement can be terminated by LUMA and/or the Government 
prior to the end of the term of the agreement under a number of 
circumstances, including, among others, bankruptcy, failure to pay 
undisputed amounts owed under the O&M Agreement and a representation 
and warranty of a party being proved to be false or inaccurate in any 
material respect when made and thereby materially and adversely affects 
the legality of the O&M Agreement or LUMA's ability to carry out its 
obligations. However, the O&M Agreement only requires the Government to 
pay LUMA a termination fee (the ``Termination Fee'') in the event that 
the O&M Agreement is terminated under certain limited circumstances not 
due to LUMA's fault.
    Specifically, the Government must pay the Termination Fee in the 
event that the O&M Agreement is: (i) terminated, revoked, nullified, 
canceled or otherwise rendered invalid by any duly enacted Puerto Rican 
law, as determined by a final non-appealable judgment by a court of 
competent jurisdiction; (ii) terminated by LUMA or the P3 Authority as 
a result of the T&D System being sold, transferred or assigned, in 
whole or in part, to a private entity; or (iii) terminated by LUMA as a 
result of any change, amendment or modification to any applicable 
Puerto Rican law or any adoption of, or change to, any administrative 
or judicial interpretation (having the force of law) of any such law or 
any regulation that (A) renders unenforceable or invalid, in whole or 
in part, any right or privilege granted to LUMA under the O&M 
Agreement, (B) subjects LUMA to rate or other substantive regulation by 
the PREB in a manner that materially and adversely affects LUMA's 
ability to perform its obligations under the O&M Agreement to the 
extent not otherwise mitigated by the terms thereof, or that 
constitutes a default by the FOMB under the terms of the FOMB Protocol 
Agreement (as such term is defined by the O&M Agreement), subject to 
certain exceptions, or (C) caps or has the effect of capping rates 
charged to customers, other than a temporary cap on rates to address an 
certain outage events.
    The Termination Fee ranges between $158 million and $104 million, 
depending on when in the 15-year term such termination occurs. 
Accordingly, the Termination Fee is only payable to LUMA under certain 
circumstances, which include termination on the basis of public policy 
but exclude termination for cause.
Impact of Rescinding the O&M Agreement

    Considering the Termination Fee described above, terminating the 
O&M Agreement would not only be costly to the people of Puerto Rico, 
but it would also deprive the people of Puerto Rico from being able to 
reap the benefits of the significant amount of time and resources that 
have been invested into the transformation of the electric grid by the 
Government. This would ultimately hurt the people of Puerto Rico by 
further delaying the Government's mission to transform Puerto Rico's 
electric grid and promote economic recovery and growth following the 
devastation caused by Hurricane Irma and Hurricane Maria.
    In addition, it is worth noting that rescinding the O&M Agreement 
would undo many of the benefits LUMA has been able to achieve to date 
in its capacity as operator of the T&D System. For example, virtually 
no permanent restoration projects had been submitted to FEMA before 
LUMA undertook the operation of the T&D System. Since Commencement 
Date, LUMA has successfully submitted more than 65 projects to FEMA. 
Further, LUMA has another 29 projects in the pipeline that are expected 
to be submitted to FEMA before 2022. Additionally, during their first 
100 days, LUMA's Net Energy Metering Program and Distributed Generation 
Interconnection teams processed over 23,000 applications, seven times 
PREPA's historical monthly average. LUMA has also been able to make an 
electric connection in a Culebra community that had been without 
electric power for more than 15 years. These are just a few of the 
multiple achievements LUMA has had since June 1, 2021.

    Question 3. On the LUMA Project Labor Agreement issue that was 
brought up, where LUMA has required of its contractors and 
subcontractors a Project Labor Agreement (PLA) modeled after its 
agreement with IBEW Union:

    (a) Does P3 Authority have any involvement or authority in that 
process and with its effect to consumers and ratepayers as well the 
economic impact in the general reconstruction?

    Answer. When the O&M Agreement was signed, LUMA stepped into 
PREPA's position in negotiating collective bargaining agreements 
including agreements with contractors and subcontractors for services 
to be provided in connection with the O&M Services. As such, LUMA was 
able to bring the experience and expertise of ATCO Ltd and Quanta 
Services, Inc. in negotiating similar contracts with unions to bear in 
its capacity as operator.
    The P3 Authority was not involved in the negotiation between LUMA 
and the International Brotherhood of Electrical Workers, Local Union 
222 (``IBEW'') regarding the Project Labor Agreement (``PLA''). Per 
LUMA's representations to the P3 Authority and the Government of Puerto 
Rico, the main purposes of the PLA are to (1) stabilize wages, hours 
and working conditions to encourage close cooperation between the 
parties; (2) enhance cooperative effort for the timely completion of 
work without interruption or delay; (3) satisfy the need for a 
substantial number of workers with craft possessing skills and 
qualifications which are vital to succeed; (4) avoid undue delays in 
the completion of the construction work as the Contractors agree to not 
engage in lockout and IBEW agrees to not engage in strike, slow-down, 
or other disruptions or interferences.

    (b) If the answer [is] it does, is there any involvement in a prior 
public participation process, or in reviewing impact on economic 
development reconstruction of such company decisions? If the answer is 
yes, then what would be the procedure for cases such as this?

    Answer. See answer to 3(a) above.

    (c) Has P3 reviewed the complaint of various private sector 
organizations, that this Agreement in effect extends LUMA's labor terms 
to the rest of the local private sector? Does that in any way violate 
the letter or spirit of the agreement or of the enabling law?

    Answer. The P3 Authority is aware of the complaints raised by 
various sector organization and has met with their representatives in 
order to discuss their concerns. Per LUMA's representations to the P3 
Authority and the Government of Puerto Rico, the PLA will only apply to 
new construction and maintenance of electrical transmission lines, 
distribution lines, catenary and trolley facilities, switch yards and 
substation in Puerto Rico on PREPA's property as specifically defined 
in the PLA. Further, the PLA will only apply to the following category 
of workers: general foreman, foreman, journeyman lineman, heavy 
equipment operator, operator, cable splicer, groundman-truck driver, 
and apprentice lineman.

    Question 4. Future Generation:

    (a) What is the current status of the Renewable Energy and Storage 
RFPs?

    Answer. The P3 Authority is not currently managing any RFPs for 
Renewable Energy and Storage. Those RFPs are currently managed by 
PREPA.

    (b) What is the status of proposals for privatizing the legacy 
generation fleet?

    Answer. The currently ongoing procurement process to delegate the 
operation and maintenance functions of the Legacy Generation Assets 
began with the launch of a request for qualifications to which 15 
private parties responded.
    The P3 Authority evaluated the statements of qualifications 
received from those private parties and submitted its analyses to the 
partnership committee established to oversee the process. The 
partnership committee short-listed eight private parties with best-in-
class expertise and experience (the ``Proponents'') to participate in 
the request for proposals (``Generation RFP'') phase. On November 10, 
2020, the P3 Authority launched the Generation RFP phase with the 
issuance of the Generation RFPs to the Proponents.
    Since the issuance of the Generation RFP, this process has advanced 
steadily. The P3 Authority has shared with Proponents a draft operation 
and maintenance agreement and held multiple videoconferences with 
Proponents to clarify certain business and legal elements of the 
agreement, as well as various regulatory features of the project in 
general. Currently, interested Proponents are conducting due diligence 
on the opportunity and engage on the draft contract.
    The P3 Authority expects that a proponent will be selected by the 
end of December 2021.

    Question 5. Is there any entity in Puerto Rico that has the legal 
power to unilaterally command the elimination or non-use of a system or 
a power plant, NOT due to imminent security/safety problems or for 
causes listed in the law and regulation, but simply as a matter of 
choice or policy?

    Answer. Ultimately, the decision to eliminate or cease use of a 
system or power plant is a matter of public policy. As the island's 
independent regulator, PREB is the entity with jurisdiction to 
implement the public policy in the energy sector and approves the IRP 
which establishes the energy generation sources. The O&M Agreement, in 
conjunction with the Puerto Rico Power Authority Act of 1941, Act 83-
1941, requires that LUMA submit an IRP to the PREB, which must include, 
among other things, an evaluation of the existing electric power plants 
or facilities of PREPA that takes into account the improvements in the 
operations efficiency of plants, the useful life of existing plants, 
and the retirement date and decommissioning costs thereof. Once 
received, the PREB reviews the submitted IRP and issues findings and 
orders related to, among other things, the retirement date and 
decommissioning costs of existing plants.

                                 *****

The following document was submitted as an attachment to Mr. Fontanes' 
responses. This document is part of the hearing record and is being 
retained in the Committee's official files:

    --Exhibit A: Agreements with Named Advisors

Available at page 12 in the following link:
https://docs.house.gov/meetings/II/II00/20211006/114107/HHRG-117-II00-
Wstate-FontansF-20211006-SD001.pdf

                                 ______
                                 

    The Chairman. Thank you very much, sir.
    And let me now ask the Executive Director of the Central 
Office of Recovery, Reconstruction, and Resiliency, Mr. Manuel 
Laboy, for your comment, sir.

 STATEMENT OF MANUEL LABOY, EXECUTIVE DIRECTOR, CENTRAL OFFICE 
 OF RECOVERY, RECONSTRUCTION, AND RESILIENCY (COR3), SAN JUAN, 
                          PUERTO RICO

    Mr. Laboy. Thank you. In the interest of time, if I may, I 
will skip several paragraphs of my written testimony.
    Dear Chairman Grijalva, Ranking Member Westerman, 
Congresswoman Gonzalez, and Members of Congress, in Puerto 
Rico, the devastation caused by Hurricanes Irma and Maria paved 
the way for a historic obligation of Federal funds from the 
public assistance program of the Federal Emergency Management 
Agency, FEMA, including approximately $10.5 billion destined 
for permanent reconstruction work related to the Puerto Rico 
Electric Power Authority, PREPA. We expect a significant amount 
of funds from public assistance hazard mitigation measures and 
FEMA's Hazard Mitigation Grant Program, a total allocation of 
$4 billion in Federal funding, for mitigation measures related 
to Hurricane Maria, of which about $1 billion are expected to 
be assigned for PREPA projects.
    As related to FEMA PA and hazard mitigation funding for 
Hurricane Maria, it is very important to point out that non-
Federal cost share requirements will be covered by CDBG-DR or 
CDBG-MIT.
    To manage this enormous sum of Federal monies and ensure 
not only adequate project execution, but full transparency, 
accountability, and compliance with applicable laws and 
regulations, the Government of Puerto Rico created the Central 
Office for Recovery, Reconstruction, and Resiliency, COR3, 
which, in turn, acts as the recipient of FEMA PA and hazard 
mitigation monies.
    Furthermore, COR3's Executive Director also serves as the 
Governor's authorized representative. Accordingly, after the 
occurrence of a major disaster and subsequent Presidential 
declaration, FEMA awards PA and/or hazard mitigation funds to 
COR3 as a recipient, while COR3 enters into subaward agreements 
with subrecipients, and serves as a pass-through entity to 
provide funding to carry out part of the PA or hazard 
mitigation activities.
    As recipient, COR3 is also responsible for providing 
technical assistance, and ensuring that subrecipient activities 
are carried out in full compliance with FEMA and other Federal, 
state, and local requirements. On the other hand, subrecipients 
are responsible for actual procurement and project execution, 
pursuant to applicable Federal, state, and local regulations, 
which in most cases mandate a full and open competition 
process.
    The fact that LUMA is an agent of PREPA for disaster 
recovery has required for everyone involved to familiarize with 
the basic terms of this transaction at the O&M contract.
    The qualified O&M agreement, where PREPA's transmission and 
distribution and other assets remain their own, is something 
that was consulted with FEMA and carefully carved as part of 
the P3 procurement and contracting process, inasmuch as they 
had to remain as PREPA assets for purposes of receiving the 
above-mentioned disaster recovery funding. Thus, PREPA remains 
the applicant and subrecipient of Federal funds before FEMA and 
COR3.
    At this point, we are immersed in what is known as the 
post-award process, which requires individual project 
obligation before moving forward with actual construction work. 
To comply with FEMA policies for PA projects obligated under 
what is known as the FEMA Accelerated Award Strategy, or FAASt, 
LUMA and PREPA filed a joint 90-day work plan, which covers 
project execution for such period, and the work plan must be 
updated and filed every 90 days before FEMA and COR3, and all 
relevant parties frequently meet to discuss and resolve pending 
issues.
    Although the FAASt $10.5 billion obligation for PREPA 
occurred on September 24, 2020, the reality is that it only 
represents a fixed PREPA reconstruction work budget for said 
amount. Currently, only funds for architectural and engineering 
design services are authorized to be utilized for purposes of 
submitting scopes of work for FEMA review and approval. The 
aforementioned amount does not consider what could potentially 
be millions of dollars in additional funding for hazard 
mitigation measures, as allowed by the PA program under the 
Stafford Act.
    We are currently working with FEMA, PREPA, and LUMA to 
address preconstruction disbursements, hazard mitigation 
evaluation and budget allocation for PREPA projects under the 
FAASt obligation, and several other issues surrounding this 
post-award process, including those related to the evaluation 
and compliance with FEMA Environmental and Historic 
Preservation requirements, which, in turn, concerns several 
Federal regulatory agencies.
    At this stage, another key player, known as the Puerto Rico 
Energy Bureau, our independent state regulator for all energy-
related matters, is deeply involved in the reconstruction 
process, inasmuch prior approval of every single project in the 
pipeline must be approved by the regulator to ensure 
consistency with applicable state laws and regulations.
    While most damages caused by Hurricane Maria were on the 
transmission and distribution system, including buildings, 
posts, substations, transmission lines, and other assets, which 
is, in turn, represented in the distribution of the $10.5 
billion FEMA obligation for permanent work, there are also 
several projects to be funded under FEMA PA and hazard 
mitigation programs that will impact generation assets.
    Furthermore, yet-to-be-completed obligations related to the 
2020 earthquake disaster are sure to positively impact the 
generation side of PREPA's operations.
    Our mission at COR3, as recipient and administrator of the 
FEMA PA and hazard mitigation funds, and our inherent 
responsibility over efficiency, compliance, and transparency of 
the Federal funds flowing to the subrecipients, is to provide 
all the technical assistance required for LUMA and PREPA, in 
furtherance of the obligation and execution of their recovery 
and reconstruction projects.
    Current projections show that procurement and a number of 
impactful projects shall begin during 2022. Moving forward, we 
expect to continue improving disbursement processes and 
collaborating with all relevant parties and other Federal 
agencies to build back a better, more resilient Puerto Rico 
energy infrastructure. Thank you.

    [The prepared statement of Mr. Laboy follows:]
 Prepared Statement of Manuel A. Laboy Rivera, PE, MBA, COR3 Executive 
             Director, Governor's Authorized Representative

                            I. INTRODUCTION

    This country is no stranger to natural disaster chaos, having 
directly experienced massive storms such as Hurricane Katrina in 2005, 
Hurricane Sandy in 2012, and most recently Hurricane Ida during the 
summer of 2021, all of which impacted several jurisdictions in the 
contiguous United States. In Puerto Rico, the devastation caused by 
Hurricane Irma,\1\ and even more so, Hurricane Maria,\2\ both only a 
couple of weeks apart in September 2017, paved the way for a historic 
obligation of federal funds from the Public Assistance (PA) program of 
the Federal Emergency Management Agency (FEMA), currently set at over 
$24 billion,\3\ and approximately $9.5 billion of that amount is 
destined for reconstruction works related to the Puerto Rico Electric 
Power Authority (PREPA).\4\
---------------------------------------------------------------------------
    \1\ The major disaster declaration for Hurricane Irma is identified 
as FEMA-DR-4336-PR.
    \2\ The major disaster declaration for Hurricane Maria is 
identified as FEMA-DR-4339-PR.
    \3\ The PA program is authorized by Sections 406 (traditional) and 
428 (alternate procedures) of the Stafford Act, 42 U.S.C. 
Sec. Sec. 5172 and 5189f. PREPA PA projects are covered under Section 
428 as per FEMA requirements.
    \4\ See Appendix 1. The federal cost share for Hurricane Maria 
permanent work obligations under the FEMA PA program, including the 
PREPA obligation, is set at 90%, and the corresponding non-federal cost 
share is set at 10%. The total PREPA PA obligation, including federal 
and non-federal share amounts, is set at $10.5 billion. As will be 
discussed later on, the non-federal share for Hurricane Maria PA 
projects shall also be covered by federal funding.
---------------------------------------------------------------------------
    The extent of federal aid being distributed to Puerto Rico, both 
during the emergency period after the impact of Hurricane Maria, and 
for purposes of permanent reconstruction work, is as historic as the 
destruction that preceded it, and just as the amount of PA program 
funding for Puerto Rico as a jurisdiction is the largest in the history 
of FEMA, so is PREPA's individual subrecipient obligation of funds for 
permanent work. We expect this amount to increase as hazard mitigation 
measures under the PA program are incorporated into PREPA 
reconstruction projects.
    In addition to the abovementioned and yet to be seen hazard 
mitigation funding under the PA program, we expect a significant amount 
of funds from FEMA's Hazard Mitigation Grant Program (HMGP) total 
allocation of $3 billion in federal funding for mitigation measures 
related to Hurricane Maria,\5\ of which about $1 billion are expected 
to be assigned for PREPA mitigation works, including energy generation 
initiatives. It should be noted that while the PA program is focused on 
attending to damages caused by a disaster, HMGP funding is used to 
provide protection to undamaged parts of a facility or to prevent or 
reduce damages caused by future disasters.
---------------------------------------------------------------------------
    \5\ HMGP is authorized by Section 404 of the Stafford Act, 42 
U.S.C. Sec. 5170c. Cost-share requirements for HMGP consists of a 75% 
federal share and a 25% non-federal cost share. For Hurricane Maria, 
HMGP non-federal cost share requirements will be covered by federal 
funding, as further explained below.
---------------------------------------------------------------------------

       II. THE NEED TO CREATE COR3 TO MANAGE THE RECOVERY PROCESS

    To manage this enormous sum of federal moneys and ensure not only 
adequate project execution, but full transparency, accountability and 
compliance with applicable laws and regulations, the Government of 
Puerto Rico created the Central Office for Recovery, Reconstruction and 
Resiliency (COR3),\6\ which in turn acts as Recipient of FEMA PA and 
HMGP moneys. Furthermore, COR3 Executive Director also serves as the 
Governor's Authorized Representative for purposes of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act of 1988 (Stafford 
Act).\7\ Accordingly, COR3 has a prominent role in the recovery 
process, along with FEMA and each subrecipient, including 
municipalities, certain private non-profit entities, and state agencies 
and public corporations and instrumentalities, such as PREPA. After the 
occurrence of a major disaster and subsequent Presidential declaration, 
FEMA awards PA and/or HMGP funds to COR3 as Recipient, while COR3 
enters into subaward agreements with subrecipients and serves as pass-
through entity to provide funding to carry out part of the PA or HMGP 
activities. As Recipient, COR3 is responsible for providing technical 
assistance and ensuring that subrecipient activities are carried out in 
full compliance with FEMA and other federal, state, and local 
requirements. On the other hand, subrecipients are responsible for 
actual procurement and project execution pursuant to applicable 
federal, state and local regulations, which in most cases mandate a 
full and open competitive process.
---------------------------------------------------------------------------
    \6\ COR3 was created by Executive Order No. 2017-065, as 
subsequently amended, as a division of the Puerto Rico Public-Private 
Partnerships Authority (P3A).
    \7\ Pub. L. No. 100-707, 102 Stat. 4689.
---------------------------------------------------------------------------
    After its inception, and as required by the federal government, 
COR3 contracted experienced disaster recovery professional firms to 
ensure that it had all necessary resources to manage a very complex 
recovery process, considering the magnitude of the damages caused by 
Hurricane Maria. These firms assisted with the development of a long 
list of policies and procedures that govern all of COR3's processes 
related to FEMA awards, known as the COR3 Disaster Recovery Federal 
Fund Management Guide, which is divided into 14 chapters and covers 
everything related to the PA process, from initial inspections, damage 
assessments, and project formulation and obligation, to reimbursement 
processes, compliance, fraud prevention and subrecipient monitoring 
procedures, appeals and arbitrations, and the project closeout process. 
Notably, Chapter 7 of the Guide specifically covers the disbursement 
process between COR3 and subrecipients under the PA program, which was 
recently revisited to ensure a more streamlined and effective 
reimbursement review and validation process, while still complying with 
a 100% validation requirement as exclusively required by FEMA for 
Puerto Rico disaster recovery activities, which we further explain 
below. These policies and procedures were also required by the federal 
government for purposes of eventually transferring related FEMA 
processes to COR3.
    Regarding disbursements, after Puerto Rico received a major 
disaster declaration for Hurricane Maria, FEMA implemented a manual 
drawdown process for eligible PA projects that restricted COR3 from 
exercising the responsibilities normally authorized for Recipients 
under the Stafford Act and the governing regulations.\8\ This was 
highly unusual and is only authorized by the applicable regulation if a 
Recipient is formally declared as high risk by FEMA, which was not the 
case of Puerto Rico. The manual drawdown process, referred to as the 
``270 process,'' required a detailed review by FEMA of the documents 
provided in support of a request for reimbursement (``RFR'') prior to 
disbursing funds to a subrecipient. During the manual drawdown process, 
FEMA's validation review prior to reimbursement, entailed performing a 
100% completeness review and a 20% compliance review prior to the 
approval of any disbursement. Even though FEMA was not conducting a 
100% validation (completeness and compliance review), in order to 
eliminate the 270 process, which had proven to be lengthy and failed to 
address the cash-flow needs of the subrecipients, FEMA required Puerto 
Rico to implement a reimbursement process which required the 
performance of a 100% validation review (100% completeness and 100% 
compliance review) prior to any reimbursement. However, FEMA and COR3 
came to an agreement that for low risk subrecipients Puerto Rico would 
be able to perform a 100% completeness review and expedite disbursement 
of no more than 75% of the RFR and then perform a 100% compliance 
review prior to reimbursing the remaining 25% of the RFR. This 
requirement was formalized in what was referred to as the 270 Agreement 
or 2019 Agreement, which became effective on April 1, 2019. Prior to 
this date, all reimbursements were reviewed and disbursed directly by 
FEMA.
---------------------------------------------------------------------------
    \8\ See 44 C.F.R. Part 206 and 2 C.F.R. Part 200.
---------------------------------------------------------------------------
    As such, on April 1, 2019, Puerto Rico began performing the 
aforementioned review for low risk subrecipients. However, prior to 
disbursing any funds to high risk subrecipients, COR3 would have to 
perform a 100% validation review (100% completeness and 100% compliance 
review) prior to the disbursement of any funds. Nonetheless, on July 1, 
2021, COR3 implemented a revised reimbursement policy wherein the 
completeness and compliance review are combined to be performed 
simultaneously, thereby considerably reducing the review time and 
therefore the rate in which funds are disbursed. Although this process 
still requires the performance of a 100% validation review prior to any 
disbursement, combining the completeness and compliance review has made 
the process much more efficient. Furthermore, we note that FEMA 
recently informed that the 2019 Agreement would be left without effect, 
thus granting a related petition from the Government of Puerto Rico 
requesting the same treatment as other U.S. jurisdictions and allowing 
for additional revisions to speed up COR3's reimbursement process and 
accelerate the reconstruction process.
    For purposes of adequately tracking compliance with applicable 
policies, laws and regulations, FEMA implemented the Validate As You Go 
(``VAYGo'') pilot program to test PA and certain other disaster grant 
expenditures for Hurricanes Harvey, Irma, and Maria in response to 
appropriations act provisions and Office of Management and Budget 
guidance that agencies implement additional measures to identify and 
address improper payments for disaster programs expending more than $10 
million in any one fiscal year. As part of VAYGo, FEMA reviews project 
documentation for a sample of funds as they are drawn down by 
recipients and conducts testing to verify whether the project funding 
was appropriately expended by the subrecipient. One goal of VAYGo is to 
identify potential problems earlier, allowing FEMA and recipients--
including PA recipients--to correct or mitigate issues earlier in the 
process instead of waiting until grant closeout. As informed by the 
FEMA, the primary goal of VAYGo is to test for ineligible costs, which 
can serve as a gateway for the agency to be on notice of issues of 
fraud, waste, or abuse in the PA program. FEMA's improper-payments-
testing methodology tests payments from FEMA to PA recipients and 
recipients to subrecipients. VAYGo, however, looks to see whether the 
subrecipient properly expended funds. For FEMA's VAYGo team to 
successfully report a Recipient's expenditure of Federal funding has 
been proper, all documentation associated with the expended amount must 
be available for review by the VAYGO team.
    In 2019, FEMA implemented the VAYGo program in Puerto Rico. To 
date, we have participated in two (2) VAYGo reviews for fiscal years 
2018 and 2019 and have taken significant strides with subrecipients to 
validate most of the sampled disbursements. It should be noted that 
VAYGo audits for fiscal year 2019 mostly correspond to disbursements 
done directly by FEMA (as per the manual drawdown process that was 
previously discussed), while the entirety of the 2020 VAYGo process and 
any future audit will take into account that COR3 manages the 
reimbursement process. FEMA has informed that it intends for the VAYGo 
process to occur on a quarterly basis.
    In response to Presidentially declared disasters, Congress may 
appropriate additional funding for the Community Development Block 
Grant (CDBG) Program as Disaster Recovery grants to rebuild the 
affected areas and provide crucial seed money to start the recovery 
process. Since CDBG Disaster Recovery (CDBG-DR) assistance may fund a 
broad range of recovery activities, the U.S. Department of Housing and 
Urban Development (HUD) can help communities and neighborhoods that 
otherwise might not recover due to limited resources. In Puerto Rico, 
the Department of Housing is the Recipient of these funds. As related 
to FEMA PA and HMGP funding for Hurricane Maria, it is very important 
to point out that non-federal cost share requirements under both 
programs, that is, the out-of-pocket money that the state and/or 
subrecipient must provide to receive federal assistance, will be 
covered by CDBG-DR or CDBG-MIT funds that had been previously allocated 
by Congress, also because of Hurricane Maria, as allowed by HUD.

       III. LUMA AS AGENT OF PREPA FOR DISASTER RECOVERY PURPOSES

    The reconstruction process of an already ailing and fragile PREPA 
electric power infrastructure, exacerbated by a government-wide 
bankruptcy process under Title III of the Puerto Rico Oversight, 
Management, and Economic Stability Act of 2016 (PROMESA),\9\ including 
PREPA, and a profound financial and economic crisis and, of course, the 
impact of devastating natural disasters, encompasses building back a 
better and more resilient Puerto Rico by making use of existing FEMA 
policies and procedures and the enactment of the Bipartisan Budget Act 
of 2018 (BBA).\10\ As the federal government is well aware, four (4) 
years after these disastrous hurricanes, these conditions not only 
still exist but have been further aggravated by the passing of two (2) 
additional Presidentially-declared major disasters, the 2020 seismic 
activity hat impacted the southern region of Puerto Rico,\11\ including 
important PREPA generation assets in the area where most of our 
island's energy generation takes place, and the global pandemic, health 
crisis and consequential economic issues caused by COVID-19.\12\
---------------------------------------------------------------------------
    \9\ 130 Stat. 549, 48 U.S.C. Sec. 2101 et seq.
    \10\ Pub. L. No. 115-123, 132 Stat. 64.
    \11\ The major disaster declaration for the 2020 earthquakes 
identified as FEMA-DR-4473-PR.
    \12\ The major disaster declaration for COVID-19 is identified as 
FEMA-DR-4493-PR.
---------------------------------------------------------------------------
    The above-mentioned numbers and the unsurmountable federal support 
received by our island are certainly significant, but the execution of 
reconstruction works that will benefit the over 3 million American 
citizens living in Puerto Rico are not without challenges that are also 
significant in nature. One of these challenges--although a positive one 
in terms of what the island needs for its short, medium and long-term 
recovery and sustainability of its energy infrastructure--is the 
public-private partnership (P3) transaction for the Operation and 
Maintenance (O&M) of PREPA's Transmission and Distribution (T&D) assets 
and other customer-centric services between the Government of Puerto 
Rico,\13\ through the Puerto Rico Public Private-Partnerships Authority 
(P3A), PREPA, and a consortium of two well-known and reputable 
companies who are experts in the energy sector, known as LUMA Energy 
LLC.\14\ Although more details of the O&M transaction, including its 
robust procurement process, and how it affects the daily operations of 
PREPA and its long list of residential and commercial customers, will 
be shared by P3A's Executive Director for the benefit of this 
Committee, it is important to mention that for matters covered in the 
qualified O&M agreement--which includes managing a capital improvement 
plan and budget funded with disaster recovery moneys--and before FEMA 
and COR3, LUMA acts as an agent, on behalf of PREPA.
---------------------------------------------------------------------------
    \13\ We note that a separate competitive process is currently being 
conducted by P3A for a similar transaction concerning PREPA's energy 
generation assets and operation.
    \14\ LUMA is a joint venture between U.S. based Quanta Services, 
Inc., and ATCO Ltd., which is based in Canada. In addition, and 
Innovative Emergency Management, Inc. (IEM), an expert in disaster 
recovery, serves as LUMA contractor for such purposes and appeared as 
part of the consortium during the competitive process for the T&D O&M 
contract.
---------------------------------------------------------------------------
    The fact that LUMA is an agent of PREPA for disaster recovery 
purposes is a novelty and has required for everyone involved in the 
reconstruction process to familiarize with the basic terms of the O&M 
transaction, even before LUMA took over as PREPA's T&D operations on 
June 1, 2021. The qualified O&M agreement, where PREPA's T&D and other 
assets remain their own, is something that was consulted with FEMA and 
carefully carved as part of the P3 procurement and contracting process 
inasmuch they had to remain as PREPA assets for purposes of receiving 
the above-mentioned disaster recovery funding. Thus, even now, PREPA 
remains the applicant and subrecipient of FEMA funds before said 
federal entity and COR3.
    Among other conditions precedent prior to formally commencing 
operations on such date, LUMA had to prepare a procurement manual for 
all purchases to be made by LUMA as agent of PREPA, including those to 
be made with federal funds, which in turn had to be approved by P3A and 
COR3, and consequently acknowledged by the PREPA Board of Directors. 
Although not a party to the O&M agreement, FEMA and the Office of the 
Inspector General of the Department of Homeland Security also reviewed 
the procurement manual for consistency with federal procurement 
standards. After June 1, 2021, and LUMA having formally entered the 
playing field as agent of PREPA, the private consortium is now 
responsible for planning and executing recovery and reconstruction 
projects on behalf of PREPA as subrecipient, and LUMA's Manual will 
govern the procurement processes for FEMA-funded projects carried out 
by LUMA in accordance with its responsibilities as operator of the T&D 
system under the O&M agreement. A crucial part of the procurement 
manual effectively attends to any actual or potential conflict of 
interest when a LUMA affiliate company participates in any procurement 
process. In these cases, procurement must be done externally, and P3A 
and COR3 intervene to make sure guidelines are followed and potential 
organizational conflicts of interest are avoided.

               IV. STATUS OF LUMA/PREPA RECOVERY PROJECTS

    At this point, we are immersed on what is known as the post-award 
process, which requires individual project obligation before moving 
forward with actual construction work. In order to comply with FEMA 
policies for PA projects obligated under what is known was the FEMA 
Accelerated Award Strategy (FAASt), LUMA and PREPA filed a joint 90-day 
Workplan which covers project execution for such period, and the 
workplan must be updated and filed every 90 days before FEMA and 
COR3.\15\ In addition, to comply with FAASt project guidelines, LUMA, 
PREPA, COR3 and FEMA hold weekly and monthly meetings at all levels of 
their respective organizations, for purposes of ensuring alignment, 
identifying and resolving issues, and overall speeding the recovery of 
our energy system.\16\ Furthermore, the government parties are 
constantly involved in productive discussions with LUMA executives and 
other state entities as part of the Steering Committee created by 
Governor Pedro R. Pierluisi under Executive Order No. 2021-012 to 
ensure the successful implementation of the O&M agreement and 
transition of T&D, customer support and other services from PREPA to 
LUMA. Also, relevant state entities, including COR3, P3A and PREPA, 
continuously hold meetings with Governor Pierluisi regarding 
reconstruction works, and with other members of the cabinet and the 
Office of the Governor, as part of the Reconstruction Council created 
by the Governor under Executive Order No. 2021-011.
---------------------------------------------------------------------------
    \15\ In addition, and although not required by FEMA nor COR3, PREPA 
presented a 10-year Infrastructure Plan, which was last updated as of 
June 2021. We further note that although IEM is a COR3 contractor for 
HMGP projects, we use a separate contractor for matters related to 
PREPA as to avoid any potential or actual conflict of interest.
    \16\ As to the recurrence of the meetings, we note that on July 29, 
2021, COR3 sent a letter to FEMA leadership suggesting rethinking the 
schedule to promote more efficient discussions and avoid work 
interruption and discussing other concerns regarding the FAASt post-
obligation process.
---------------------------------------------------------------------------
    As would have been the case even if LUMA were not in the equation, 
at COR3 we are fully focused on project obligation and execution. 
However, LUMA and their T&D expertise, along with disaster recovery in-
house and contractor support, are poised to smooth the edges of an 
incredibly complex and long-term project. Although the FAASt $10.5 
billion obligation for PREPA occurred on September 24, 2020,\17\ the 
reality is that it only represents a fixed PREPA reconstruction work 
budget for said amount based on an innovative statistical sampling 
method. Currently, only funds for architecture and engineering design 
services (A&E) are authorized to be utilized, for purposes of 
submitting a Scope of Work (SOW) for FEMA review and approval. Notably, 
the aforementioned amount does not consider what could potentially be 
millions of dollars in additional funding for hazard mitigation 
measures as allowed by the PA program under the Stafford Act, and such 
measures will be part of each project SOW to be developed. Accordingly, 
we are currently working with FEMA, PREPA and LUMA to address 
preconstruction disbursements, hazard mitigation evaluation and budget 
allocation for PREPA projects under FAASt, and several other issues 
surrounding the FAASt post-award process and what is known as the FEMA 
Post-Fixed Cost Estimate Obligation Course of Action Guide, which 
hinder program and project execution, such as meeting necessity and 
recurrence, concerns regarding evaluation and compliance with 
Environmental and Historic Preservation (EHP) (which involves various 
federal agencies), subrecipient identification of all locally adopted 
construction codes and standards and/or FEMA-approved industry 
standards instead of allowing design firms to provide said information, 
A&E reimbursement processes, and flooding zone code requirements in 
light of the fixed budget.
---------------------------------------------------------------------------
    \17\ Project Worksheet No. 6099 under FEMA-DR-4339-PR.
---------------------------------------------------------------------------
    The fourth and latest iteration of the 90-day Workplan was 
submitted by LUMA and PREPA on September 23, 2021. While PREPA is still 
in charge of recovery projects in the Generation and Dams, Hydro, and 
Irrigation asset categories, LUMA is responsible for projects in the 
Transmission, Distribution, Substations, IT/Telecom, Buildings, and 
Environmental asset categories (T&D Projects). Firms that will provide 
A&E have already been procured and selected, and LUMA and PREPA are 
working on the SOWs to be submitted for COR3 and FEMA review, a process 
that has been continuously emphasized by COR3 and FEMA leadership in 
order to move forward with projects.
    Furthermore, at this stage another key player, known as the Puerto 
Rico Energy Bureau (PREB), our state (and PREPA's) regulator for all 
energy-related matters, is deeply involved in the reconstruction 
process inasmuch prior approval of every single project in the pipeline 
must be approved by the regulator to ensure consistency with applicable 
laws and regulations, most notably the Integrated Resource Plan (IRP) 
and its clean and renewable energy targets, prior to formally 
submitting each project to COR3 and FEMA for obligation.\18\ Certainly, 
prior PREB approval is also relevant for HMGP projects. As such, 
careful coordination must take place between LUMA, PREPA, COR3 and the 
PREB to ensure that projects are compliant from an IRP and regulatory 
perspective and expeditiously approved.
---------------------------------------------------------------------------
    \18\ PREB approves projects via resolutions & orders that are 
publicly available on the internet.
---------------------------------------------------------------------------
    As of today, the PREB has approved 112 projects, for an amount of 
over $8 billion, while 9 other projects representing an amount of $100 
million are currently submitted and remain under PREB evaluation.\19\ 
On the other hand, there is currently another batch of 45 projects that 
will be soon submitted by LUMA/PREPA to the PREB, totaling $800 
million. In addition, there are several projects in A&E development, 
including 15 T&D projects, and another 18 T&D projects are projected to 
kick-off development in mid-October; 2 water asset projects; and 2 
generation projects. While most the damages caused by Hurricane Maria 
were to the T&D system--including buildings, posts, substations, 
transmission lines, and other assets--which is in turn represented in 
the distribution of the $10.5 billion FAASt obligation for permanent 
work, there are also several projects to be funded under FEMA PA and 
HMGP programs that will impact generation assets. Furthermore, yet to 
be completed project formulation and obligations related to the 2020 
earthquakes disaster and the damages caused to the important PREPA 
generation plant known as Costa Sur are sure to positively impact the 
generation-side of PREPA's operations.
---------------------------------------------------------------------------
    \19\ See Appendix 2.
---------------------------------------------------------------------------
    Specifically, as to projects to be funded under the HMGP, we are 
currently working with PREPA, FEMA and the PREB to develop two 
generation projects (San Juan area Generation and Simple Cycle 
Turbines) that had already been approved by FEMA but are still facing 
some regulatory concerns, and other projects such as seismic retrofit 
for and Early Warning System for PREPA-owned dams, as well as a number 
of alternate project submissions in the pipeline. In relation to the 
foregoing, the U.S. Department of Energy is currently conducting a 
technical study for purposes of assisting Puerto Rico's clean and 
renewable energy efforts, with a focus on resiliency and hurricane 
preparedness, which will help align HMGP projects with federal and 
state regulations. The current deadline to submit HMGP proposals 
related to Hurricane Maria is October 31, 2021, but the Government of 
Puerto Rico requested a time extension to allow for the DOE study to be 
completed and taken into account for energy related HMGP projects and 
to ensure that available funding is maximized.

              V. NEXT STEPS FOR THE PREPA RECOVERY PROCESS

    Our mission at COR3, as Recipient of FEMA PA and HMGP funds and our 
inherent responsibility over compliance and transparency of the federal 
funds flowing to subrecipients, is to provide all required technical 
assistance to LUMA and PREPA in furtherance of the obligation and 
execution of their recovery and reconstruction projects, which will 
allow for a better, more resilient Puerto Rico, a stable energy system, 
and the opportunity to lower dependency on fossil fuels, reduce costs 
and create better economic opportunities for our citizens, all of which 
are goals that we are confident are shared by FEMA, this Congress, and 
the rest of the federal government.
    Current projections show that procurement and a number of impactful 
projects should begin during 2022. Moving forward, we expect to 
continue improving disbursement processes and collaborating with all 
relevant parties and other federal agencies to build back a better, 
more resilient Puerto Rico critical energy infrastructure. As 
authorized by the BBA, we expect LUMA and PREPA to use available FEMA 
tools such as Improved, Alternate and Consolidated Projects, which will 
allow LUMA and PREPA to maximize available PA funding and invest in 
projects that are forward-looking and which effectively mitigate any 
future disasters, are more efficient and environmentally and climate 
change conscious, and allow for long-term economic growth and job 
creation.
    On behalf of the entire COR3 team, we thank Congress and the U.S. 
Government for their continued support toward a better life for 
everyone in Puerto Rico.

                                 *****

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
                                 

Questions Submitted for the Record to Manuel A. Laboy Rivera, PE, MBA, 
     COR3 Executive Director, Governor's Authorized Representative

          Questions Submitted by Representative Gonzalez-Colon

    Question 1. About FEMA Projects:

    (a) What have been the major problems with getting FEMA obligations 
flowing?

    (i) Has there been any special difficulty or challenge with knowing 
what FEMA considers a completed Scope of Work submission?

    (ii) How does the status of PREPA projects compare with that of 
COR3-related projects in general?

    (iii) Are there any actions you would recommend to accelerate FEMA 
project approval?

    (b) Do we know and can you provide us what are the current 
timelines for submitting project Scope of Work documentation to FEMA?

    Answer. The Public Assistance (``PA'') program of the Federal 
Emergency Management Agency (``FEMA'') works on a reimbursement basis. 
Ordinarily, once a project has gone through all steps of the FEMA 
National Delivery Model and is thus considered as ``obligated'' by 
FEMA, the subrecipient may present a Request for Reimbursement 
(``RFR'') before COR3 in relation to non-federal funds that have 
already been expended by the subrecipient with regards to the obligated 
project. Thereafter, after a comprehensive evaluation of compliance 
with all applicable federal, state, and local laws and regulations, 
COR3 approves, partially approves, denies, or requests additional 
information to validate the RFR, as the case may be.
    In the case of the Puerto Rico Electric Power Authority 
(``PREPA''), as related to the damages caused by Hurricane Maria in 
2017 (identified as FEMA-DR-4339-PR) and subsequent presidential major 
disaster declaration, an initial project obligation was made using an 
innovative statistical sampling method known as the FEMA Accelerated 
Award Strategy (``FAASt''). The purpose of the FAASt initiative was to 
allow PREPA and other subrecipients \1\ to perform a thorough 
evaluation of their facilities and develop a master plan to rebuild 
while better addressing the needs of the people of Puerto Rico, instead 
of just restoring them to pre-disaster conditions. Given that PREPA 
provides critical services as defined in Section 406(a)(3)(B) of the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988 
(``Stafford Act''),\2\ projects are meant to include the disaster-
damaged components to restore the function of the facility or system to 
industry standards, without regard to its pre-disaster condition, and 
to restore components not damaged by the disaster when necessary, as 
authorized by Section 20601 of the Bipartisan Budget Act of 2018 
(``BBA'').\3\ Furthermore, the FAASt strategy was meant to reduce the 
administrative burden on all parties and expedite the FEMA project 
formulation process.
---------------------------------------------------------------------------
    \1\ The other subrecipients under the FAASt initiative are the 
Puerto Rico Department of Education (PRDE), and the Puerto Rico 
Aqueduct and Sewer Authority (PRASA).
    \2\ Pub. L. No. 100-707, 102 Stat. 4689.
    \3\ Pub. L. No. 115-123, 132 Stat. 64. See also FEMA Recovery 
Policy FP-104-009-5 Version 2 (BBA), Implementing Section 20601 of the 
2018 Bipartisan Budget Act through the Public Assistance Program.
---------------------------------------------------------------------------
    To execute the FAASt strategy, FEMA established that its Cost and 
Analysis Validation team (``CAV Team'') would be in charge of 
developing the Statistical Sampling Methodology (``SSM'') to reduce the 
number of sites requiring inspections, Damage, Description and 
Dimensions (``DDD''), scopes of work (``SOW''), and cost estimates, all 
of which are traditional components of a FEMA PA Project Worksheet. The 
SSM provided FEMA with a robust statistical approach to expeditiously 
generate reliable cost estimates for entire sample populations, to 
formulate the fixed cost estimate (``FCE'') required under Section 428 
(Alternative Procedures) of the Stafford Act and the master recovery 
budget for PREPA.\4\ As with other Section 428 projects, PREPA projects 
under FAASt can be used toward a Consolidated Project, an Improved 
Project or an Alternate Project as allowed under applicable FEMA 
policies and procedures. In the case of Alternate Projects, they must 
still include a critical service and must be constructed to an approved 
industry standard. FEMA will evaluate the proposed use for 
reasonableness to ensure funds are used in an appropriate manner, and 
with the intent to improve the resiliency of such critical services.
---------------------------------------------------------------------------
    \4\ The PA program is authorized by Sections 406 (traditional) and 
428 (alternate procedures) of the Stafford Act, 42 U.S.C. 
Sec. Sec. 5172 and 5189f. PREPA PA projects are covered under Section 
428 as per FEMA requirements.
---------------------------------------------------------------------------
    Under the FAASt initiative, a main, single project obligation was 
initially done by FEMA on September 24, 2020, based on the SSM of 
damaged PREPA facilities throughout the island, which resulted in a 
total, fixed project amount of approximately $10.5 billion, of which 
$9.5 billion correspond to the federal share,\5\ with a $1 billion non-
federal cost share requirement.\6\ The foregoing amount allows PREPA to 
repair damages related to the following types of facilities:
---------------------------------------------------------------------------
    \5\ PREPA allocated $193,746,436 of its anticipated insurance 
proceeds as part of the permanent work Project Worksheet (PW) under the 
FAASt strategy, amount which must be subtracted from the total fixed 
cost estimate of $10,704,730,227.54 as per FEMA requirements. 
Therefore, the exact amount of federal funding for PREPA under the PA 
program, as per the FAASt obligation, is $9,459,885,412.39.
    \6\ Notably, the non-federal cost share requirement for PA 
permanent work related to Hurricane Maria, including PREPA, will be 
covered by Community Development Block Grant--Disaster Recovery (CDBG-
DR) funds as allowed by the U.S. Department of Housing and Urban 
Development (``HUD''). The Puerto Rico Department of Housing 
(``PRDOH'') is the recipient of CDBG-DR funds assigned to Puerto Rico 
after Hurricane Maria.

---------------------------------------------------------------------------
     buildings (101)

     substations/transmission centers (404)

     distribution lines/conductors (3,249 miles overhead & 
            underground)

     streetlights (342,569)

     transmission lines (3,254 circuit miles)

     poles and hardware (397,843)

     transformers (18,812)

     mega generators (4)

     soil stabilization (708 locations)

     telecommunications sites (49)

     generation plants (9)

     Black Start generators (4)

     sediment removal (from 11 reservoirs)

     hydroelectric power plants (10)

     dams (19)

     irrigation channels (9)

     water conveyance systems (7)

     telecommunications infrastructure

    The cost estimate per sector is divided as follows:

    1.  Buildings--$ 125,088,362.54

    2.  Transmission--$ 2,642,131,654.47

    3.  Substations--$ 781,890,093.70

    4.  Telecommunications and Information Technology--$ 685,928,720.98

    5.  Generation--$ 108,927,715.08

    6.  Distribution--$ 5,499,837,404.90

    7.  Water Assets--$ 860,926,275.87

    Given that these categories are allocated in a single PW 
obligation, LUMA/PREPA have the flexibility to use the funds as needed. 
In other words, the funds can be transferred from one sector to 
another, with prior approval from COR3 and/or FEMA, by using available 
FEMA tools for Section 428 projects as outlined above.
    FEMA established a period of performance for five (5) years from 
the date of PW obligation, as set forth in 44 CFR 206.204(c). However, 
unlike regular PA projects, FAASt projects would not be processed 
through the FEMA National Delivery Model nor the Atlantic Consolidated 
Resource Center (``CRC'') to develop the cost estimates. Thus, we are 
currently immersed in what is known as the post-award process, which 
requires individual subproject obligation under the FEMA National 
Delivery Model before moving forward with actual construction work. In 
order to obligate such individual projects, on November 18, 2020, FEMA 
developed a Post-Fixed Cost Estimate Obligation Course of Action Guide 
(COA Guide), for purposes of defining the procedures to develop 
individual subprojects. Among other things, the COA Guide requires 
PREPA to submit a 90-day Workplan--to be updated every 90-day period--
and to hold monthly meetings and weekly working sessions with FEMA, 
COR3 and LUMA Energy, LLC (``LUMA''), to discuss the workplan and 
subprojects in the pipeline. Furthermore, PREPA must specify locally 
adopted construction codes and standards and/or FEMA-approved industry 
standards to be used and describe how they are going to be incorporated 
in the construction project.
    In addition, the COA Guide requires subrecipients to submit a 
proposed SOW for each facility, for the review of FEMA and COR3. This 
is particularly important because SOWs for subprojects must be 
submitted prior to commencing any construction works, to ensure that 
there is sufficient time for FEMA to complete PA eligibility 
assessments and Environmental and Historic Preservation (``EHP'') 
compliance reviews. However, to prepare a SOW, architecture and 
engineering (``A&E'') design services must be procured and relevant 
studies and designs must be conducted for each subproject. At this 
juncture we must note that the abovementioned $10.5 billion budget does 
not take into account what could represent millions in potential 
additional funding from mitigation measures under Section 406 of the 
Stafford Act, inasmuch these measures would be part of the SOW of each 
subproject. To date, we are working with FEMA to agree upon a standard 
methodology to incorporate Section 406 mitigation works in proposed 
SOWs.
    As can be inferred from the discussion above, FAASt projects differ 
from traditional PA project obligation in that the FAASt obligation 
only represents a master recovery budget, as every subproject must be 
thereafter obligated following FEMA's National Delivery Model and the 
COA Guidelines. Furthermore, in the case of PREPA, the road to 
subproject obligation has an additional complexity, that is, all 
projects must count with prior approval from the Puerto Rico Energy 
Bureau (``PREB''), our independent state energy industry regulator, 
prior to submitting to FEMA and COR3. Among other things, the PREB 
evaluates projects for compliance with what is known as the Integrated 
Resource Plan (``IRP''), a comprehensive document that was approved by 
the PREB pursuant to state Act No. 17-2019, as amended, known as the 
Puerto Rico Energy Public Policy Act, with ample participation from the 
public which sets forth a roadmap for meeting aggressive renewable 
energy generation targets for the next couple of decades. Thus, proper 
alignment must be found between all relevant parties--including FEMA, 
COR3, PREB, PREPA, and as of June 1, 2021, LUMA--in order to move 
forward with all necessary approvals and commencing the construction 
phase of a specific PREPA subproject.
    COR3 is engaged in continuous discussions with FEMA, PREPA, LUMA, 
and the PREB for purposes of accelerating subproject formulation, 
obligation and execution. On July 29, 2021, we sent a letter to FEMA 
expressing various concerns with the FAASt post-obligation process and 
the COA Guide.
    Although FEMA has not yet responded, we have had multiple 
discussions and have made progress after the July 29, 2021 letter, most 
notably with the Puerto Rico Aqueduct and Sewer Authority (``PRASA''). 
However, there is still areas of opportunity that are under discussion 
with FEMA to continue improving the FAASt post-obligation process.
    Considering all of the above, the process for formulating and 
obligating each specific PREPA project under the general FAASt 
obligation is as follows. The first step is for LUMA (as agent of PREPA 
for Transmission & Distribution and related assets) or PREPA (for 
generation-side assets) must first submit a project before the PREB. 
After the PREB considers and approves a project, the project 
description is submitted by LUMA/PREPA to COR3 and FEMA, and the 
project is created and assigned a number on Grants Portal, FEMA's 
proprietary digital system which must be used by subrecipients during 
the project formulation process. Thereafter, project A&E development 
starts, with support from COR3 and FEMA for purposes of policy and 
program eligibility guidance. Once the minimum required A&E percentage 
is met for a project, LUMA/PREPA may submit the ``Detailed SOW'' into 
Grants Portal for Environmental and Historic Preservation (EHP); Cost 
scoping; 406 Hazard Mitigation proposal; and Regular, Improved or 
Alternate project review.
    As soon as the steps outlined in the preceding paragraph are 
completed, FEMA obligates the project, and only then is the 
subrecipient authorized to initiate construction activities as per the 
current COA Guide. As mentioned earlier, there are several issues 
surrounding SOW development that have a significant impact on 
subproject obligation, which in turn represent construction delays.
    Notwithstanding the above, as of October 14, 2021, LUMA expects to 
submit detailed SOWs before COR3 and FEMA as per the timeline set forth 
in Appendix 1. As for PREPA, they expect to submit detailed SOWs as per 
the timeline set forth in Appendix 2.

    Question 2. While we work toward the 100% renewables target and 
even once it is in effect, is it not true that on-demand base and peak 
capacity is still necessary to have? Can storage batteries alone assure 
this?

    (a) Can the generation side provide resiliency in case of another 
catastrophic hurricane, without installation of on-demand climate-
independent units such as LNG generators?

    (b) FEMA funds include $2.4 Billion for Transmission and $4.9 
Billion for Distribution.

    (i) The recipient of these funds is PREPA as the public owner of 
the assets, but LUMA is the operator of T&D: how is the process 
expected to be managed to minimize bureaucratic steps?

    (ii) Who is going to answer for maximizing the use of those funds 
to build a system that people can trust?

    Answer. As mentioned in our response to Question No. 1 above, the 
PREB, as our state energy industry regulator, must evaluate and approve 
each LUMA/PREPA subproject prior to submitting to FEMA and COR3. Among 
other things, the PREB evaluates projects for compliance with the IRP 
and state Act No. 17-2019 and the IRP, which set forth the mandate for 
renewable energy targets.
    As Recipient of FEMA PA and HMGP grants, COR3's responsibilities 
are limited to providing technical assistance for ensuring that 
subrecipient activities are carried out in full compliance with FEMA PA 
and HMGP program requirements, and other federal, state, and local laws 
and regulations. Any technical questions related to the on-demand base, 
peak capacity, and battery storage, and any other similar questions of 
technical nature, should be addressed by LUMA, PREPA, or any other 
party with the required technical expertise in energy utilities and 
projects.
    A very relevant party with technical expertise in the energy sector 
is the U.S. Department of Energy (``DOE''), who is currently working on 
a study focused on feasible alternatives to the 400 MW Combined Cycle 
HMGP project in Palo Seco, to serve load when cross-island transmission 
lines are unavailable after a disaster or other event that compromises 
the energy grid. This study encompasses three major efforts: defining 
threats and needs; evaluating the capacity of potential for alternative 
generation and creating candidate scenarios, including Liquified 
Natural Gas (``LNG''); and finding optimized energy generation 
portfolios which maximize priority metrics. Once this portfolio is 
available, COR3 will be able to determine which alternatives comply 
with HMGP requirements for resiliency, mitigating future blackouts in 
the northern area of the island, and which has a Benefit-Cost Analysis 
(BCA) greater than one (1).
    As explained in our written statement and testimony, PREPA's 
recovery process is unique in that additional key players are engaged 
in the process. In addition to prior approval from the PREB, we must 
also consider the particularities of the public-private partnership 
(``P3'') transaction for the Operation and Maintenance (``O&M'') of 
PREPA's Transmission and Distribution (T&D) assets and other customer-
centric services between the Government of Puerto Rico,\7\ through the 
Puerto Rico Public Private-Partnerships Authority (``P3A''), PREPA, and 
a consortium of two well-known and reputable companies who are experts 
in the energy sector, known as LUMA Energy LLC.\8\ After June 1, 2021, 
the date LUMA formally took over PREPA's T&D operations, the private 
entity also acts as PREPA's agent for recovery purposes, including 
those related to FEMA and COR3. As per the qualified O&M agreement, 
PREPA's T&D and other assets remain their own, which is something that 
was consulted with FEMA and carefully carved as part of the P3 
procurement and contracting process inasmuch they had to remain as 
PREPA assets for purposes of receiving PA and HMGP disaster recovery 
funding from FEMA. Thus, even now, PREPA remains the applicant and 
subrecipient of FEMA funds before said federal entity and COR3, even if 
LUMA is an agent for T&D and other related non-generation assets.
---------------------------------------------------------------------------
    \7\ We note that a separate competitive process is currently being 
conducted by P3A for a similar transaction concerning PREPA's energy 
generation assets and operation.
    \8\ LUMA is a joint venture between U.S. based Quanta Services, 
Inc., and ATCO Ltd., which is based in Canada. In addition, and 
Innovative Emergency Management, Inc. (IEM), an expert in disaster 
recovery, serves as LUMA contractor for such purposes and appeared as 
part of the consortium during the competitive process for the T&D O&M 
contract.
---------------------------------------------------------------------------
    In relation to its responsibilities as agent of PREPA for recovery 
purposes, LUMA had to prepare a procurement manual for all purchases to 
be made by LUMA as agent of PREPA, including those to be made with 
federal funds, which in turn had to be approved by P3A and COR3, and 
consequently acknowledged by the PREPA Board of Directors. Although not 
a party to the O&M agreement, FEMA and the Office of the Inspector 
General of the Department of Homeland Security also reviewed the 
procurement manual for consistency with federal procurement standards. 
After June 1, 2021, and LUMA having formally entered the playing field 
as agent of PREPA, the private consortium is now responsible for 
planning and executing recovery and reconstruction projects on behalf 
of PREPA as subrecipient, and LUMA's Manual will govern the procurement 
processes for FEMA-funded projects carried out by LUMA in accordance 
with its responsibilities as operator of the T&D system under the O&M 
agreement. A crucial part of the procurement manual effectively attends 
to any actual or potential organizational conflict of interest when a 
LUMA affiliate company participates in any procurement process, and any 
mitigation plans to avoid such conflicts must approved by P3A or COR3 
prior to implementation.
    It is important to note that all FEMA PA and HMGP requirements--
including FAASt requirements such as the 90-day workplan and frequent 
meetings required under the COA Guidelines--are applicable to all 
subrecipients, including PREPA, and regardless of whether LUMA is 
involved in the equation or not. Therefore, when acting as agent of 
PREPA for recovery purposes, LUMA must comply with every rule that 
would otherwise be applicable to PREPA as subrecipient. In this sense, 
the O&M transaction and LUMA's role as agent does not add any 
additional bureaucracy to the recovery process. However, as outlined in 
our response to Question No. 1 above, COR3 has identified several 
issues surrounding the FAASt post application process, and is 
continuously engaged with FEMA, PREPA, LUMA and the PREB to find 
opportunities to make the recovery process more efficient and providing 
technical assistance, while complying with applicable laws and 
regulations, and promoting full accountability and transparency in the 
use of federal funds.
    COR3 was created after Hurricane Maria to manage FEMA PA and HMGP 
moneys, and ensure not only adequate project execution, but full 
transparency, accountability and compliance with applicable laws and 
regulations \9\ Furthermore, COR3 Executive Director also serves as the 
Governor's Authorized Representative for purposes of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act of 1988 (Stafford 
Act).\10\ Accordingly, COR3 has a prominent role in the recovery 
process, along with FEMA and each subrecipient, including PREPA. After 
the occurrence of a major disaster and subsequent Presidential 
declaration, FEMA awards PA and/or HMGP funds to COR3 as Recipient, 
while COR3 enters into subaward agreements with subrecipients and 
serves as pass-through entity to provide funding to carry out part of 
the PA or HMGP activities. As Recipient, COR3 is responsible for 
providing technical assistance and ensuring that subrecipient 
activities are carried out in full compliance with FEMA and other 
federal, state, and local requirements. On the other hand, 
subrecipients are responsible for actual procurement and project 
execution pursuant to applicable federal, state and local regulations, 
which in most cases mandate a full and open competitive process.
---------------------------------------------------------------------------
    \9\ COR3 was created by Executive Order No. 2017-065, as 
subsequently amended, as a division of the Puerto Rico Public-Private 
Partnerships Authority (P3A).
    \10\ Pub. L. No. 100-707, 102 Stat. 4689.
---------------------------------------------------------------------------
    As Recipient and administrator of PA and HMGP grants, COR3 is 
responsible for reimbursements and 100% validation (completeness and 
compliance) thereof, audits (including FEMA Validate As You Go 
(VAYGo)), subrecipient monitoring, and the closeout process. During all 
of these steps, COR3 provides technical assistance to ensure 
subrecipients are aware of and comply with all program requirements, to 
minimize risk and avoid de-obligations.

    Question 3. Do the terms for the Obligation of the FEMA funds in 
any way compel any of the entities that they must or must not install 
one or another form of generation? That is, does the FEMA funding in 
any way mandate preference for installing renewables or LNG units, or 
conversely or forbid it?

    Answer. The FEMA funds under COR3's purview, specifically, funds 
derived from the PA and HMGP programs, are different in nature. On one 
hand, PA funds are tied to damages suffered by facilities of a 
subrecipient as a consequence of a major disaster declaration. Thus, 
generally, PA funds are used to restore damaged facilities to their 
pre-disaster condition. In PREPA's case, since it provides critical 
services as defined in the Stafford Act, the BBA authorizes PREPA (and 
LUMA, as its agent) to include the disaster-damaged components of a 
facility to restore the function of the facility or system to industry 
standards, without regard to its pre-disaster condition, and to restore 
components not damaged by the disaster when necessary. This way, and 
through the use of FEMA tools available for projects formulated under 
the Alternative Procedures set forth in Section 428 of the Stafford 
Act, through careful planning PREPA can maximize available (and capped, 
save for 406 hazard mitigation funding) PA funding under the FAASt 
initiative by taking advantage of Improved, Alternate or Consolidated 
project mechanisms, to effectively build back a better, more resilient 
energy infrastructure for Puerto Rico. It should be noted that when 
using these mechanisms, which imply redistribution of available capped 
funds, PREPA must make sure that there is enough money left to attend 
to all damaged facilities identified as part of the FAASt SSM, for 
purposes of complying with FEMA requirements.
    On the other hand, after the occurrence of a major disaster and 
subsequent Presidential declaration, HMGP may be authorized under 
Section 404 of the Stafford Act.\11\ Generally, while PA is tied to 
damaged facilities, HGMP funds are used toward long-term and cost-
effective mitigation measures that reduce the risk of loss of life and 
property from future disasters, regardless of whether the facility was 
damaged or not.\12\ HMGP may fund projects for structure elevation, 
floodwater prevention, structural and utility retrofits, slope 
stabilizations, drainage improvements, construction of safe rooms, and 
emergency power generators for critical facilities such as fire 
stations, hospitals, and water and sewer treatment facilities, and 
green infrastructure projects, among other mitigation measures as 
allowed under applicable FEMA guidance and regulations. Specifically, 
as to PREPA projects to be funded under the HMGP, we are currently 
working with PREPA, FEMA and the PREB to develop two generation 
projects (San Juan area Generation and Simple Cycle Turbines) that had 
already been approved by FEMA but are still facing some regulatory 
concerns, and other projects such as seismic retrofit for and Early 
Warning System for PREPA-owned dams, as well as a number of alternate 
project submissions in the pipeline. As with PA projects, all PREPA/
LUMA HMGP projects must also count with prior approval from the PREB 
pursuant to Act No. 17-2019 and the IRP.
---------------------------------------------------------------------------
    \11\ 42 U.S.C. Sec. 5170c. Current cost-share requirements for HMGP 
consists of a 75% federal share and a 25% non-federal cost share. For 
Hurricane Maria, HMGP non-federal cost share requirements will be 
covered with CDBG-MIT funds through the Global Match Program.
    \12\ Damaged facilities or components thereof should take advantage 
of Section 406 Hazard Mitigation measures and funding. COR3 works with 
PREPA and other subrecipients to maximize available funding under both 
PA and HMGP.
---------------------------------------------------------------------------
    With regards to implementation of renewable energy sources or 
other, cleaner alternatives for our current diesel backed PREPA 
generators, such as LNG, it is imperative to reiterate that state Act 
No. 17-2019 and the IRP, which set forth the mandate for renewable 
energy targets, are applicable to PREPA and, thus, also to LUMA. As 
such, regardless of FEMA or other federal statues or regulations that 
may be applicable, state law itself mandates PREPA to incorporate 
renewables and meet aggressive targets toward a completely renewable 
energy power grid by the year 2050. Precisely, this is the reason why 
PREPA/LUMA recovery projects must first be approved by the PREB.
    In addition, as mentioned before, the DOE is conducting a study 
that shall, among other things, help PREPA and the PREB to determine 
whether transitioning to LNG at this point in time would be beneficial 
in the long run for renewable energy efforts, which would impact PA and 
HMGP projects in the pipeline. The fact that the DOE is conducting this 
study to help Puerto Rico in the reconstruction process while achieving 
renewable energy targets should not surprise anyone, given the strong 
public policy of President Biden's Administration toward renewable 
energy and initiatives to tackle climate change.\13\ Furthermore, and 
although not strictly required, FEMA fosters climate change adaptation 
in their policies and procedures. These, tied with Act No. 17-2019, IRP 
and other PREB requirements, make a strong case for renewable and clean 
energy implementation during the PREPA recovery process.
---------------------------------------------------------------------------
    \13\ See Executive Order 13990 of January 20, 2021, titled 
``Protecting Public Health and the Environment and Restoring Science to 
Tackle the Climate Crisis''; Executive Order 14007 of January 27, 2021, 
titled ``President's Council of Advisors on Science and Technology''; 
Executive Order 14008 of January 27, 2021, titled ``Tackling the 
Climate Crisis at Home and Abroad''; Executive Order 14027 of May 7, 
2021, titled ``Establishment of the Climate Change Support Office''; 
Executive Order 14030 of May 20, 2021, titled ``Climate-Related 
Financial Risk''; H.R. 3684--Bipartisan infrastructure bill titled 
``Infrastructure Investment and Jobs Act'' (which is still pending 
before Congress); and FEMA Press Release-Biden Administration Commits 
Historic $3.46 Billion in Hazard Mitigation Funds to Reduce Effects of 
Climate Change--August 5, 2021.

    Question 4. Is LUMA expected or required to (and if so, have they) 
provide you an estimated impact regarding increased labor cost from the 
proposed PLA with the IBEW and how it affects the original 
Reconstruction cost estimates prepared by PREPA as to skilled labor 
infrastructure reconstruction and ability to comply with FEMA's 
programs in place for revitalizing local enterprises post Hurricane 
---------------------------------------------------------------------------
Maria?

    Answer. PREB requires LUMA and PREPA to present cost estimates for 
consideration and approval of projects. Furthermore, as per FEMA 
requirements, SOW development must include cost estimates for each 
subproject under the FAASt obligation, which we mentioned functions as 
a fixed-cost estimate and budget for all PREPA projects under the PA 
program. Certainly, the foregoing includes all T&D and related 
infrastructure PA projects within the purview of LUMA as per the 
qualified O&M agreement, as well as PREPA's generation-side PA 
projects. On the other hand, as Recipient and subrecipient, COR3 and 
PREPA are responsible for grant management and compliance with 
applicable policies, procedures, laws, and regulations.
    In any case, COR3 is not, and would not be a party to any Project 
Labor Agreement (``PLA'') to be executed between LUMA, any other 
contractor, and a labor union, and how PLAs may impact FCEs for Section 
428 projects is yet to be seen. At this point, and recognizing 
potential issues that may arise, COR3 continues to work with all 
relevant parties, including FEMA, P3A as administrator of the qualified 
O&M agreement, LUMA and PREPA in order to minimize any risks stemming 
from PLA implementation or any other matter that may unexpectedly 
increase cost estimates for capped projects or somehow impact local 
businesses, while keeping in mind that all facilities identified in the 
FAASt SSM as damaged need to be addressed in order to comply with FEMA 
policies.

    Question 5. What would be the impact on the recovery and mitigation 
action plan to rescind the LUMA contract and reset the whole changes in 
the electric system?

    Answer. The administrator of the O&M agreement for PREPA's T&D 
system is the P3A, and not COR3. Therefore, any contract-related 
questions should be addressed by P3A. As we have reiterated, COR3 is 
responsible, as Recipient of PA and HMGP grants, for managing funds 
assigned to Puerto Rico after the devastation caused by Hurricane Irma, 
Maria, the 2020 earthquakes, COVID-19, and other disasters, and 
providing related technical assistance to PREPA and other subrecipients 
to maximize available funding while ensuring compliance with applicable 
laws and regulations and providing for full transparency and 
accountability in the management of such federal funds.
    Pursuant to the above, we respectfully ask the Committee to 
redirect this question to the P3A.

    Question 6. More in general terms, as a way of framing this in the 
greater Puerto Rico scope--what is the status today of recovery 
projects in general that have been approved by COR3 vs. how many 
applications are still outstanding? How is going the progress on the 
pace of reviewing and approving recovery projects that are shovel 
ready, and which can take advantage of already appropriated money, but 
that are awaiting COR3 approval? Is there a list or portal where that 
can be accessed? What would help accelerate FEMA's project approval?

    Answer. As of October 20, 2021, the PREB has approved 120 projects 
related to the PREPA FAASt obligation and HMGP, for an amount of over 
$8 billion. Of these, 118 projects are from the FAASt PA obligation, of 
which 96 projects are related to T&D and managed by LUMA, which 
represent an amount of almost $7 billion, while the other 22 projects 
are generation and water assets managed by PREPA and represent an 
amount of approximately $968 million. The remaining two (2) projects 
approved by the PREB are PREPA generation side HMGP projects and 
represent an amount of over $665 million.
    Many of the above-mentioned projects are already in the A&E design 
phase for the development of the detailed SOWs, which together sum 42 
projects and a total project amount of over $1.8 billion. These include 
37 T&D projects under FAASt (representing an amount of approximately $1 
billion), 3 generation-side projects under FAASt (representing 
approximately $138 million), and the 2 generation-side projects under 
HMGP that were mentioned above. Notably, last week, COR3 disbursed an 
initial $7.1 million for A&E work necessary to develop and submit SOWs 
for four PREPA recovery projects. Current projections show that 
procurement and/or initial construction for about 65 projects 
representing an investment of $2.8 billion should occur during 2022.
    So far, there have been a total of 89 projects submitted to FEMA 
via Grants Portal, of which 73 are LUMA T&D related projects and 16 are 
PREPA non-T&D projects. We note that these numbers differ from the PREB 
total approved projects because PREB approves some projects as bundles 
or programs.
    While most the damages caused by Hurricane Maria were to the T&D 
system--including buildings, posts, substations, transmission lines, 
and other assets--which is in turn represented in the distribution of 
the $10.5 billion FAASt obligation for permanent work, there are also 
several projects to be funded under FEMA PA and HMGP programs that will 
impact generation assets. Furthermore, yet to be completed project 
formulation and obligations related to the 2020 earthquakes disaster 
and the damages caused to the important PREPA generation plant known as 
Costa Sur are sure to positively impact the generation-side of PREPA's 
operations.
    In general terms, since the beginning of the current term on 
January 2021, COR3 has undertaken several initiatives to accelerate the 
recovery process and take advantage of the incredible amount of federal 
funding available for such purposes, specifically through the FEMA PA 
and HMGP programs. The initiatives in COR3's strategic plan may be 
summarized as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    .epsAs of October 18, 2021, the following represents general FEMA 
PA obligation status, including emergency work (FEMA PA Categories A 
and B for debris removal and emergency protective measures, 
respectively, of which a large part was assigned for PREPA emergency 
work), and permanent work obligations and disbursements. As for 
permanent work, we note that this process is only just beginning, and 
we expect disbursement to accelerate as more competitive processes, A&E 
studies and SOW development are conducted, and construction work 
initiates in 2022.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    .epsAs for HMGP, current available funding and project status is 
available below. It should be pointed out that the current deadline to 
submit letters of intent for HMGP projects for the Hurricane Maria 
grant is set to expire on October 31, 2021, but COR3 timely requested 
an extension of time which is currently under FEMA's evaluation. 
Although the time extension, if granted, would allow us to work with 
applicants to provide more detailed LOIs, as well as additional time to 
consider energy generation project alternatives which in turn take into 
account the DOE study that was previously discussed, COR3 is ready to 
submit remaining LOIs by the October 31 deadline if needed, for 
purposes of securing available funding.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    .epsPlease refer to COR3's prior answers for additional information 
and insight regarding the recovery process and our role in general.
              Questions Submitted by Representative Moore

    Question 1. You mentioned that Puerto Rico is the largest recipient 
of FEMA disaster dollars. Can you describe for us how this funding is 
being used to ensure resiliency so that future storms are not as 
disruptive?

    Answer. We respectfully direct this Committee to our answers to 
Questions No. 1, 2, 3, and 6 from Rep. Gonzalez-Colon above, which 
together we understand effectively answer this question from Rep. Blake 
Moore. If needed, we can elaborate a separate, similar response for 
purposes of meeting Committee requirements.

    Question 2. Can you compare the effectiveness of renewables and 
fossil fuels in the context of disaster preparedness and recovery?

    Answer. As per Act No. 17-2019, public policy pertaining to the 
energy sector is under the PREB's jurisdiction, and there is a state 
law mandate to incorporate renewable energy generation for the next 
couple of decades, which is reflected on the PREB's IRP. This, in turn, 
is the reason why all PREPA/LUMA recovery projects must be approved by 
the PREB prior to submitting before FEMA and COR3.
    COR3 cannot comment or compare with regards to the effectiveness of 
renewables and fossil fuels, as our role is limited to managing PA and 
HMGP funds as Recipient, and assisting subrecipients, such as PREPA, 
through the recovery process, while ensuring compliance with applicable 
laws and regulations, in an accountable and transparent manner. As 
such, technical questions related to energy sources should be directed 
to the PREB, LUMA, PREPA, or any other party with technical expertise 
on energy matters. We also reiterate that the DOE is currently 
conducting a technical study that will help relevant parties implement 
measures that resilient before future disasters, including whether or 
not LNG implementation is viable at this point.
    For additional information regarding this topic, please refer to 
COR3's answers to Questions No. 1, 2 and 3 from Rep. Gonzalez-Colon.

    Once again, we thank this Committee for the opportunity to comment 
on this crucial issue for the people of Puerto Rico. We are available 
to provide additional insight or discuss our previous answers at your 
convenience.

                                 *****
                                 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
                                 

    The Chairman. Thank you. And let me now recognize Ms. Ruth 
Santiago, Community and Environmental Attorney.
    The floor is yours. You are recognized, Ms. Santiago.
    Ms. Santiago. Thank you. Good afternoon, Chair Grijalva and 
all.
    I am about to find my statement. OK, so sorry about this.
    [Pause.]
    Ms. Santiago. For some reason I can't find it. Sorry about 
that.
    The Chairman. Would you like us to go to another witness, 
and come back to you?
    Ms. Santiago. Sure, that would be great. Thank you.
    The Chairman. OK, thank you. Let me now recognize Professor 
Agustin Irizarry, Professor of Electrical Engineering at the 
University of Puerto Rico.
    Professor, you are recognized for 5 minutes. Thank you.

    STATEMENT OF AGUSTIN IRIZARRY, PROFESSOR OF ELECTRICAL 
  ENGINEERING, UNIVERSITY OF PUERTO RICO AT MAYAGUEZ (UPRM), 
                     MAYAGUEZ, PUERTO RICO

    Dr. Irizarry. Thank you. Chair Grijalva and members of the 
House Committee on Natural Resources, I appreciate the 
opportunity to testify and submit written comments on PREPA 
post-implementation of the LUMA transmission and distribution 
contract. I am Dr. Agustin Irizarry, and I have been studying 
and working with electric power systems, in general, and the 
Puerto Rico power system in particular, for over 25 years.
    I believe LUMA Energy's operation of our electric system 
has been detrimental to the well-being of hundreds of thousands 
of residents of Puerto Rico. I will join Ruth Santiago's 
message to this Committee to urge the Federal Government to 
earmark the FEMA funds allocated for the Puerto Rico electric 
system to be used for rooftop solar and battery systems, and 
energy efficiency programs that will provide resilient electric 
service, sustainability, and economic benefits to the residents 
of Puerto Rico, as shown by many studies.
    Under LUMA, we have experienced longer and more frequent 
outages and widespread problems with severe voltage 
fluctuations. LUMA publishes on its website, under service 
interruption, a table indicating the number of clients without 
service, updated every 10 minutes. Note that the client is a 
meter, not a person. Thus, the number of people without 
electricity is three to four times the numbers of clients 
without electricity. After processing the data, we estimate 
that the average number of clients without service at any 
moment during September 2021 was 4,943. This estimate does not 
include load shed days or outliers. The almost 5,000 average 
clients without service is two to three times worse than it was 
during 2012 and 2014, when I was an elected member of PREPA's 
Governing Board. By then, the average number of clients without 
service, on an ordinary day, was between 1,500 and 2,000.
    And service is also much worse than it was compared to the 
period directly prior to LUMA's takeover of the system. 
According to reliability indices filed by LUMA with the Puerto 
Rico Energy Bureau, the time it takes to restore electric 
service after an interruption has increased significantly in 
all regions of the island under LUMA. The average system-wide 
time to restore electric service after an interruption 
increased from 2 hours and 18 minutes during March, April, and 
May 2021, with PREPA, to 5 hours and 23 minutes during June, 
July, and August 2021, under LUMA.
    Why is this happening? I believe the problem fundamentally 
stems from a shortage of skilled and experienced workers. On 
June 1, 2021, 3,119 PREPA workers were transferred to other 
government agencies. How many linemen has LUMA hired to replace 
the ones that left? How well trained are these workers? How 
much experience, if any, did they have with the Puerto Rico 
electric system prior to June 1?
    We do not know the answer to these questions, even though 
the Puerto Rico Legislature asked LUMA weeks ago. LUMA refused 
to answer and went to court to not answer. All courts in Puerto 
Rico, including the Puerto Rico Supreme Court, have ordered 
LUMA to answer. We are still waiting for a resolution on the 
second reconsideration LUMA filed before the Puerto Rico 
Supreme Court.
    In my opinion, a well-trained workforce is the most 
important part of any infrastructure. Poles, conductors, 
switches, and generators are all bought with money. People must 
be hired and trained, and this is a process that takes more 
than money. It takes well-trained people to train the newly 
hired, and training takes time. Human capital cannot be 
replaced in a few months, and in the case of specialized 
positions such as power system dispatchers and high-voltage 
linemen, it will take years of training for a person to become 
truly proficient. Is the lack of well-trained and enough people 
the cause of worse reliability and voltage surges? I believe it 
is.
    I am part of the Queremos Sol multi-sectoral coalition of 
Puerto Rican community, environmental, and labor organizations 
that put forward in 2018 a policy proposal for the renewable 
energy transformation of Puerto Rico's electrical system under 
a reformed public ownership model. The proposal emphasized 
efficiency and distributed renewable electric energy, 
particularly rooftop solar and behind-the-meter storage, as a 
strategy to provide resilience to households, to reduce the 
impact on agricultural and ecologically valuable lands from 
utility-scale renewable energy projects, and to reduce the 
island's dependence on imported fossil fuels and extensive 
transmission systems.
    In early 2021, we completed a study where we used advanced 
modeling tools to make detailed simulations of the electrical 
grid and modeled, probably for the first time, most of the 
distribution system. We used data obtained from PREPA to 
perform an in-depth modeling of the scenarios with increasing 
penetration of renewable energy, up to 75 percent (with over 
half of that from residential installations) of total 
electricity consumption by 2035.
    Our study shows that a grid with distributed generation 
based on rooftop solar and storage for homes and businesses can 
operate safely and reliably, saving money and stabilizing 
prices. The distribution system can support high levels of 
penetration of such systems with minimal investments.
    In conclusion, for the reasons summarized in this 
testimony, we urge the Committee to investigate PREPA's 
agreement with LUMA Energy and, in particular, the lack of 
trained personnel to properly operate the electric system. We 
request that the House Committee on Natural Resources include 
an inquiry on the status of FEMA funds for Puerto Rico electric 
system work, to ensure that the funds are used in a cost-
effective manner to provide affordable, distributed, renewable, 
and resilient electric energy for Puerto Rico.
    Thank you.

    [The prepared statement of Mr. Irizarry follows:]
    Prepared Statement of Agustin A. Irizarry-Rivera, Professor of 
     Electrical Engineering, University of Puerto Rico at Mayaguez
    I appreciate the opportunity to testify and submit written comments 
on PREPA Post Implementation of the LUMA Transmission and Distribution 
Contract. I am Dr. Agustin Irizarry and I have been studying electric 
power systems, in general, and the Puerto Rico power system in 
particular for over 25 years. I believe LUMA Energy's operation of our 
electric system has been detrimental to the well-being of hundreds of 
thousands of residents of Puerto Rico.
    I join Ruth Santiago's message to this Committee to urge the 
Federal government to earmark the FEMA funds allocated for the Puerto 
Rico electric system to be used for rooftop solar and battery systems 
and energy efficiency programs that will provide resilient electric 
service, sustainability and economic benefit to the residents of Puerto 
Rico as shown by many studies.\1\
---------------------------------------------------------------------------
    \1\ Puerto Rico Low-to-Moderate Income Rooftop PV and Solar Savings 
Potential, National Renewable Energy Laboratory (NREL), 2020, Puerto 
Rico Low-to-Moderate Income Rooftop PV and Solar Savings Potential 
(nrel.gov); We Want Sun and We Want More (Summary), Fact Sheet, Puerto 
Rico Distributed Energy Resource Integration Study: Achieving a 
Renewable, Reliable, and Resilient Distributed Grid--Telos Energy, 
Puerto Rico Distribution Modeling--EE Plus, Puerto Rico Distributed 
Energy Resource Integration Study: Load, Energy Efficiency, and System 
Cost--Energy Futures Group, Sol + Techos--Pagina principal 
(cambiopr.org); Achievable Renewable Energy Targets (``ARET''), https:/
/www.uprm.edu/aret/docs/Ch_4_Solar_resource_ and_solar_thermal.pdf).
---------------------------------------------------------------------------

         I. Deterioration of Electric Service Under LUMA Energy

    Under LUMA we have experienced longer and more frequent outages and 
widespread problems with severe voltage fluctuations.
    LUMA publishes on its website,\2\ under ``service interruption'', a 
table indicating the number of clients without service, updated every 
10 minutes. Note that a ``client'' is a meter not a person, thus the 
number of people without electricity is 3 to 4 times the number of 
clients without electricity.
---------------------------------------------------------------------------
    \2\ https://miluma.lumapr.com/outages/outageMap.
---------------------------------------------------------------------------
    After processing the data, we estimate that the average number of 
clients without service at any moment during September 2021 was 
4,943.\3\ This estimate does not include load shed days or outliers. 
The almost 5,000 average clients without service is two to three times 
worse what it was during 2012-2014 when I was an elected member of 
PREPA's Governing Board. By then the average number of clients without 
service, on an ordinary day, was between 1,500 and 2,000.
---------------------------------------------------------------------------
    \3\ During the first half of September, Sept 1st thru 15th, the 
average number of clients without service was 4,804 and during the last 
half of September, Sept 16th thru 30th, it was 5,098.
---------------------------------------------------------------------------
    And service is also much worse than it was compared to the period 
directly prior to LUMA's takeover of the system. According to 
reliability indices filed by LUMA with the Puerto Rico Energy Bureau, 
the time it takes to restore electric service after an interruption has 
increased significantly in all regions of the island under LUMA. The 
average system-wide time to restore electric service after an 
interruption increased from 2 hours and 18 minutes during March, April 
and May with PREPA to 5 hours and 23 minutes during June, July and 
August 2021 under LUMA.
    Why is this happening? I believe the problems fundamentally stem 
from a shortage of skilled and experienced workers. On June 1st, 2021 
3,118 PREPA workers were transferred to other government agencies. How 
many linemen has LUMA hired to replace the ones that left? How well 
trained are these workers? How much experience, if any, did they have 
with Puerto Rico's electrical system prior to June 1?
    We do not know the answer to these questions even though the Puerto 
Rico Legislature asked LUMA weeks ago. LUMA refused to answer and went 
to court to not answer. All courts in Puerto Rico, including the Puerto 
Rico Supreme Court, have ordered LUMA to answer. We are still waiting 
for a resolution of the second reconsideration LUMA filed before the 
Puerto Rico Supreme Court.
    In my opinion a well-trained workforce is the most important part 
of any infrastructure. Poles, conductors, switches, generators are all 
bought with money. People must be hired and trained and this is a 
process that takes more than money; it takes well-trained people to 
train the newly hired and training takes time. Human capital cannot be 
replaced in a few months and in the case of specialized positions such 
as power system dispatchers and high-voltage linemen it will take years 
of training for a person to become truly proficient. Is the lack of 
well-trained, and enough, people the cause of worse reliability and 
voltage surges? I believe it is.\4\
---------------------------------------------------------------------------
    \4\ And we have seen it happening for a good while now. In 2016 a 
report was presented, by Fisher and Horowitz, to the Puerto Rico Energy 
Bureau (in case no. CEPR-AP-2015-0001) on problems PREPA was facing. 
From page 30 of the report, on the subject of staff availability and 
competence:

    ``Ms. Miranda's panel discusses that forced outages are due, in 
part to ``skilled labor leaving operational roles and not being 
replaced.'' PREPA's own internal documentation backs up and expands 
this contention, blaming the outages on a ``loss of significant number 
of experienced personnel,'' and that ``new employees do not have the 
required expertise and knowledge.''
---------------------------------------------------------------------------

  II. The Solution We Propose: Queremos Sol Proposal and Integration 
       Study of Distributed Solar Energy on Rooftops with Storage

    I am part the Queremos Sol (``We Want Sun''), multi-sectoral 
coalition of Puerto Rican community, environmental and labor 
organizations, that put forward in 2018 a policy proposal for the 
renewable energy transformation of Puerto Rico's electrical system 
under a reformed public ownership model. The proposal emphasized 
efficiency and distributed renewable electric energy, particularly 
rooftop solar and behind-the-meter storage, as a strategy to provide 
resilience to households, to reduce the impact on agricultural and 
ecologically valuable lands from utility-scale renewable energy 
projects, and to reduce the island's dependence on imported fossil 
fuels and extensive transmission systems.\5\
---------------------------------------------------------------------------
    \5\ https://www.queremossolpr.com/.
---------------------------------------------------------------------------
    In early 2021 we completed a study where we used advanced modeling 
tools to make detailed simulations of the electrical grid and modelled, 
probably for the first time, most of the distribution system. We used 
data obtained from PREPA, to perform in depth modelling of scenarios 
with increasing penetration of renewable energy, up to 75% (with over 
half of that from residential installations) of total electricity 
consumption by 2035. The results were used to estimate the costs of 
achieving the Queremos Sol goals.\6\
---------------------------------------------------------------------------
    \6\ https://cambiopr.org/solmastechos/.
---------------------------------------------------------------------------
    Our study shows that a grid with distributed generation based on 
rooftop solar and storage for homes and businesses CAN OPERATE SAFELY 
AND RELIABLY, SAVING MONEY AND STABILIZING PRICES. The distribution 
system can support high levels of penetration of such systems with 
minimal investment.

    The main results of our study show:

     100% household resiliency can be achieved with 2.7 kW 
            rooftop solar systems and 12.5 kWh batteries and with 
            commercial installations. This will reduce household and 
            community vulnerability after hurricanes;

     It is cost-effective to use $9.6 billion in federal funds 
            to implement this plan, which would reduce electric system 
            costs to less than 15 cents/kWh by 2035;

     Puerto Rico could achieve 75% renewable energy in 15 years 
            and spend only $430 million annually on fuel (fuel costs 
            exceed $1.4 billion in 2019 and 2020);

     There is no need for investment in new fossil fuel-based 
            power plants or conversion of existing plants to natural 
            gas;

     CO2 emissions can be reduced nearly 70%, 
            placing Puerto Rico at the forefront of addressing climate 
            change with urgency;

     It is possible to retire fossil fuel-based generation, 
            starting with the AES coal plant;

     With modest investments in the distribution system--$650 
            million--the grid can support the reliable integration of 
            75% rooftop renewable energy and battery storage;

     The proposal is more economical than PREPA's proposed 
            plans such as the Integrated Resource Plan (and the cost of 
            the current system).

                            III. Conclusion

    For the reasons summarized in this testimony, we urge the Committee 
to investigate PREPA's Agreement with LUMA Energy, LLC and in 
particular the lack of trained personnel to properly operate the 
electric system. We request that the House Committee on Natural 
Resources include an inquiry on the status of FEMA funds for Puerto 
Rico electric system work to ensure that the funds are used in a cost-
effective manner to provide affordable, distributed, renewable and 
resilient electric energy to Puerto Rico.

--End of oral testimony

--Written testimony continues----

IV. Comparison of Reliability Indices as Reported by LUMA to the Puerto 
                           Rico Energy Bureau

    Reliability metrics--SAIDI, SAIFI and CAIDI--reported by LUMA to 
the Puerto Rico Energy Bureau show the deterioration of the system 
under LUMA's management.
    SAIDI is the ``System Average Interruption Duration Index''. SAIDI 
is the average, non-momentary,\7\ outage duration for each customer 
served over a defined period of time (usually 1 year) and is usually 
measured in minutes or hours. The average SAIDI during 2019 for U.S. 
electric utilities was 92 minutes. This SAIDI does not consider major 
interruption events caused by hurricanes, earthquakes, etc.
---------------------------------------------------------------------------
    \7\ A momentary service interruption last for less than 5 minutes.
---------------------------------------------------------------------------
    LUMA reported, from June thru August 2021, a SAIDI which is worse 
than the one reported by PREPA from March thru May 2021. LUMA's 
performance is worse than PREPA's, in most cases by a factor of 2, in 
every distribution system region in Puerto Rico.
    SAIFI is the ``System Average Interruption Frequency Index''. SAIFI 
is the average number of interruptions that a customer would experience 
over a defined period of time (usually 1 year) and is usually measured 
in interruptions per customer. In the U.S. the average SAIFI is 1.1 
interruptions per year without including major events.
    During June thru August 2021 LUMA reported that fifteen (15) out of 
26 distribution system regions experience more interruptions under 
LUMA.
    CAIDI is the ``Customer Average Interruption Duration Index''. 
CAIDI gives the average outage duration that any given customer would 
experience over a period of time, usually 1 year. CAIDI can also be 
viewed as the average restoration time, the time it takes to the 
electric utility to restore service once an interruption occurs. In the 
U.S. the average CAIDI is about 82 minutes (81.6 minutes).
    Again, for all distribution system regions, the restoration time 
after an interruption increased significantly during June thru August 
2021 under LUMA. The average system-wide time to restore electric 
service after an interruption increased from 2 hours and 18 minutes 
during March, April and May with PREPA to 5 hours and 23 minutes during 
June, July and August 2021 under LUMA.

  V. The LUMA Contract, Even if Properly Executed, Will Create a 20th 
            Century Utility, We Want a 21st Century Utility

    Puerto Rico Law 120 was enacted with the objective to ``transform 
the Puerto Rico energy system into a modern, sustainable, reliable, 
efficient, cost-effective, and resilient system''. The contract between 
LUMA and PREPA on its Recitals quotes the purpose of this Law 120 that 
gives rise to the contract:

    WHEREAS, in accordance with Act 120, Owner \8\ desires to transform 
Puerto Rico's energy system into a modern, sustainable, reliable, 
efficient, cost-effective and resilient system;
---------------------------------------------------------------------------
    \8\ In the contract PREPA is identified a ``Owner''.
---------------------------------------------------------------------------
    In a traditional, 20th century, electric power system the 
architecture was based on large-scale generation; centralized, a one-
way control strategy of the system; and passive loads. The traditional 
system was not designed to meet many emerging trends, such as greater 
adoption of relatively low inertia generation sources, increasing 
penetration of distributed generation resources, and the need for 
greater resilience.
    A modern electric power system must be flexible, robust, agile. It 
must have the ability to dynamically optimize grid operations and 
resources, rapidly detect and mitigate disturbances, integrate diverse 
generation sources, on both the supply and demand sides, integrate 
demand response and energy-efficiency resources, enable consumers to 
manage their electricity use, and provide strong protection against 
physical and cyber risks.\9\
---------------------------------------------------------------------------
    \9\ Quadrennial technology review: An assessment of Energy 
Technologies and research opportunities, Chapter 3: Enabling 
Modernization of the Electric Power System, US Department of Energy, 
September 2015.
---------------------------------------------------------------------------
    A modern electric power system must include more distributed 
control, two-way flows of electricity and information, more energy 
storage, more energy justice, more sustainable sources of energy, and 
consumers as energy producers thru assertive deployment of resilient 
and distributed renewable energy resources and as participants of 
demand management and efficient use of electricity programs.\10\
---------------------------------------------------------------------------
    \10\ International Energy Agency. ``Technology Roadmap: Smart 
Grid.'' OECD/IEA. Paris, France, 2011. http://www.iea.org/publications/
freepublications/publication/smartgrids_ roadmap.pdf.
---------------------------------------------------------------------------
    Even a casual read of the LUMA contract shows that the contract 
aims at achieving, if LUMA performs admirably--a condition that is not 
happening--a 20th century utility.

                        VI. Generation Problems

    In recent weeks, Puerto Rico has experienced a series of problems 
at its power plants--including both those owned by PREPA and privately 
owned plants--that have led to large-scale power outages. These outages 
come on top of the worsened reliability of the transmission and 
distribution system, as described above.
    The problems at PREPA's power plants result from a long-standing 
failure to adequately fund the maintenance of the plants. An expert 
report to the Puerto Rico Energy Bureau in 2016 described the 
``reliability crisis'' that the power plants were already experiencing 
five years ago. The report noted that the outage rate of PREPA's power 
plants had increased directly in proportion to the decline in spending 
on operation and maintenance.\11\ PREPA's budgets for generation system 
maintenance have not increased since that time. In the most recent 13 
weeks for which data is available from the Puerto Rico Fiscal Agency 
and Financial Advisory Authority (from mid-June to mid-September), 
PREPA has apparently spent only 51% of its maintenance budget.\12\
---------------------------------------------------------------------------
    \11\ Expert Report of Jeremy Fisher and Ariel Horowitz, Puerto Rico 
Energy Bureau Case No. CEPR-AP-2015-0001, November 23, 2016, pp. 11 and 
30.
    \12\ Fiscal Agency and Financial Advisory Authority. PREPA 13-Week 
Cash Flow Updates dated May 19, July 21 and September 15, 2021.
---------------------------------------------------------------------------
    I am deeply concerned that the privatization of PREPA's power 
plants--the solution proposed by the government of Puerto Rico--will 
not resolve the generation problems. What is needed is a financial 
commitment to improve the reliability of the plants, which the 
ratepayers of Puerto Rico will pay for regardless of whether the plants 
are publicly or privately owned. Indeed, if privatization results in 
the loss of competent and experienced workers and mid-level managers at 
the plants, similar to what has occurred with the LUMA contract, there 
is every reason to expect plant availability to deteriorate further.

                                 *****

    This testimony is presented by Agustin A. Irizarry Rivera as his 
testimony and it does not represent the testimony of the Universidad de 
Puerto Rico, employer of Dr. Irizarry Rivera.

                                 ______
                                 

   Questions Submitted for the Record to Agustin A. Irizarry-Rivera, 
   Professor of Electrical Engineering, University of Puerto Rico at 
                            Mayaguez (UPRM)
              Questions Submitted by Representative Sablan
    Question 1. How do you think LUMA and PREPA can best prevent 
blackouts in the future? How much would such efforts cost? Would a 
transition to renewable energy sources help improve power reliability 
for Puerto Rico long term?

    Answer. The widespread outages experienced recently in Puerto Rico 
are due to two causes: (1) LUMA Energy's inability to properly manage 
the transmission and distribution system; and (2) many years of 
deferred maintenance of Puerto Rico's power plants.
    Fundamentally, as stated in my testimony, the longer outage times 
experienced under LUMA are due to the company's lack of skilled and 
experienced labor. This situation could be resolved by amending or 
canceling the LUMA contract in order to restore the thousands of 
displaced ex-PREPA workers to their former positions in the 
transmission and distribution system.
    A transformation to distributed (i.e. rooftop) solar and storage is 
key to improving power reliability in Puerto Rico. Locating power 
generation close to consumption would dramatically reduce Puerto Rico's 
dependence on the south-to-north transmission system that failed during 
Hurricane Maria. Rooftop solar and storage has been proven to be able 
to continue to provide power to households and meet critical loads 
during a grid emergency. According to detailed grid modeling of Puerto 
Rico's electrical system, the island could achieve 75% penetration of 
distributed renewable energy, including equipping every home on the 
island with a small-scale solar and storage system, by 2035 with modest 
improvements to the island's distribution system infrastructure. If 
$9.6 billion of the FEMA and CDBG funds allocated for Puerto Rico's 
electrical system were used to further this transformation, it would 
result in a stable average rate of 15 cents per kWh, as well as 
transforming the resiliency situation of Puerto Rican households. For 
more details, see: Vila Biaggi, Kunkel and Irizarry, We Want Sun and We 
Want More: 75% Distributed Renewable Generation in 15 Years in Puerto 
Rico is Achievable and Affordable, 2021.

                                 ______
                                 

    The Chairman. Thank you, the gentleman yields. Let me now 
return to Ms. Santiago.
    Ms. Santiago. Yes.
    The Chairman. You are recognized for 5 minutes, thank you.

    STATEMENT OF RUTH SANTIAGO, COMMUNITY AND ENVIRONMENTAL 
                 ATTORNEY, SALINAS, PUERTO RICO

    Ms. Santiago. Thank you, Chair Grijalva. And hello again, 
good afternoon.
    On behalf of the Puerto Rico and stateside groups joining 
in this testimony, we appreciate the opportunity to testify on 
the PREPA post-implementation of the LUMA transmission and 
distribution contract. The groups joining in this testimony 
have substantial concerns with both the LUMA operation of the 
electric system, and the control that LUMA wields over Federal 
funds for electric system work in Puerto Rico.
    We ask this Committee to investigate the LUMA contract, and 
to urge the Federal Government to earmark the FEMA funds for 
on-site and rooftop solar and battery systems, and similar 
alternatives that will provide lifesaving electric service to 
the residents of Puerto Rico.
    Multiple studies have shown the viability, reliability, and 
economic benefits of rooftop solar and storage. The Government 
of Puerto Rico has $9.6 billion allocated by FEMA at its 
disposal to solve the current energy crisis by deploying 
rooftop solar and storage. The Federal Government must ensure 
that taxpayer funds are invested in accordance with Federal 
laws and policies that promote cost effectiveness, tackling the 
climate crisis, and centering environmental justice. Solar 
energy deployment in Puerto Rico is expected to create nearly 
20,000 jobs by 2030.
    Since LUMA took over operation of the system, Puerto Rico 
has suffered constant power outages, destructive voltage 
fluctuations, fires caused by electric malfunctions, where 
hundreds of thousands of residents and businesses have been 
deprived of electric service for extended periods of time. 
People are now referring to the constant outages as Hurricane 
LUMA.
    Lately, LUMA has alleged that the outages are attributable 
to lack of generation from PREPA plants. LUMA's numbers do not 
add up, and I implore you to look at the specific numbers in my 
written testimony. The documented evidence disproves LUMA's 
excuses. An Emergency Management KPI Dashboard report shows 
that Puerto Rico has hundreds of megawatts of available 
capacity above maximum demand.
    Under the contract, LUMA is responsible for determining 
which plants inject or dispatch energy into the T&D system. The 
malfunction of part of the PREPA fleet still leaves enough 
generation available to supply demand. Another alternative that 
LUMA has to avoid outages is to work with large customers to 
use their own generation units, totaling about 234 megawatts. 
That is additional to what is in the PREPA system.
    Why has LUMA failed to dispatch the available PREPA units 
or use demand response alternatives? Does the fact that 
dispatching peaker units increases costs have something to do 
with LUMA's decision? Does the fact that the Government of 
Puerto Rico has asked FEMA to fund new gas plants or plans to 
sell the plants to private investors have anything to do with 
not dispatching the existing units?
    PREPA's maintenance budget has been decreasing in the past 
few years. We asked the commission to investigate the role of 
the FOMB, which controls PREPA's budget.
    LUMA is even delaying interconnection of rooftop solar for 
the few residents that can afford them, which could also 
contribute to alleviating energy demand, and thus reduce the 
incidence of outages.
    The investment by PREPA of Federal funds for rooftop solar 
and storage achieves three goals: (1) access to energy 
resilience, equity, and justice, especially for lower-income 
sectors; (2) establish a uniform procedure where the public 
corporation, with local talent and organized communities, 
accelerate renewable energy deployment; and (3) break the cycle 
of repeated destruction and reconstruction of the transmission 
system that often disrupts service, and avoid the waste of 
taxpayer funds on transmission that will be devastated by 
future hurricanes.
    Because PREPA is in bankruptcy, FEMA funds are the only 
viable way to achieve renewable energy goals and accessible 
electric rates. Financing PPOAs with PREPA as a credit 
counterparty would entail prohibitively high interest rates and 
costs.
    The Stafford Act requires FEMA to determine the cost 
effectiveness of projects, reduce the risk of, or increase the 
resilience to, future damage, hardship, loss, or suffering.
    The electricity crisis manufactured by LUMA and the 
Government of Puerto Rico not only inflicts economic costs, it 
can also cost lives. The LUMA contract grants LUMA control over 
Federal funds, and points to conflicts of interest and 
potential self-dealing by LUMA.
    Lastly, we urge the Committee to investigate the LUMA 
contract and the role of FOMB in its imposition and in the 
electric crisis. We ask this Committee to urge the Federal 
Government to earmark FEMA funds for on-site and rooftop solar 
and battery systems, and similar alternatives that will provide 
the lifesaving electric service, and include an inquiry on the 
proposed use of FEMA funds to ensure that they are invested in 
a cost-effective manner to provide affordable, renewable, 
reliable, and resilient electric energy.
    The use of this historic amount of funds allocated for the 
electric system will determine the viability of Puerto Rico for 
generations to come. Thank you.

    [The prepared statement of Ms. Santiago follows:]
   Prepared Statement of Ruth Santiago, Community and Environmental 
                     Attorney, Salinas, Puerto Rico
    On behalf of the groups listed in the attachment to this letter, we 
appreciate the opportunity provided by the House Committee on Natural 
Resources to testify and submit written comments on the PREPA Post 
Implementation of the LUMA Transmission and Distribution Contract. As 
further explained below, the groups joining this testimony have 
substantial concerns with both the LUMA Energy operation of the 
electric system and the control that LUMA Energy proposes to wield over 
federal funds for electric system work in Puerto Rico.
    We urge the House Committee on Natural Resources to investigate 
PREPA's Transmission and Distribution System Operation and Maintenance 
Agreement with LUMA Energy, LLC and the role of the Federal Oversight 
and Management Board in the imposition of the LUMA contract and the 
Puerto Rico electric crisis. We ask this Committee to urge the Federal 
Government to earmark the historic and once-in-a-lifetime amount of 
Federal Emergency Management Agency (``FEMA'') funds allocated for the 
Puerto Rico electric system for on-site and rooftop solar and battery 
systems and energy efficiency programs that will provide life-saving 
electric service to the residents of Puerto Rico. Multiple studies have 
shown the viability, reliability and economic benefits of rooftop solar 
and storage in Puerto Rico.\1\ Last year, the National Renewable Energy 
Laboratory concluded that is rooftop solar more than sufficient to 
power local areas, solar energy sited on rooftops are offsets and 
reduce the overall amount of energy needing transmission and 
distribution. According to that study, Puerto Rico has the potential to 
produce four to five times as much solar energy than is needed to meet 
its current residential demand. More than a decade ago, the University 
of Puerto Rico found that solar is ``the least environmentally 
intrusive.'' Because Puerto Rico followed the Los Angeles model of 
development and urbanization, with housing sprawl and shopping malls, 
we have what we call ``rooftop resource.'' The report recommended 
generating power locally through solar and, in certain cases, creating 
microgrids, such as for high-rise buildings. More recently, Cambio PR 
and the Institute for Energy, Economics and Financial Analysis set out 
a plan to achieve 75 percent renewable power generation in 15 years. 
Solar energy deployment in Puerto Rico is expected to create nearly 
20,000 jobs by 2030.\2\
---------------------------------------------------------------------------
    \1\ Meghan Mooney & Katy Waechter, Puerto Rico Low-to-Moderate 
Income Rooftop PV and Solar Savings Potential, National Renewable 
Energy Laboratory (2020), https://www.nrel.gov/docs/fy21osti/78756.pdf; 
Estudio de Integracion de Recurso Solar Distribuido en Puerto Rico, Sol 
+ Techos, Cambio PR (2021), https://cambiopr.org/solmastechos/
#downloads; Ingrid M. Vila Biaggi et al., We Want Sun and We Want More 
(Summary) (2021), https://cambiopr.org/wp-content/uploads/2021/03/
Modeling-Study-Fact-Sheet-03_21.pdf; Puerto Rico Distributed Energy 
Resource Integration Study: Archieving a Renewable, Reliable, and 
Resilient Distributed Grid, Telos Energy (December 2020), https://
cambiopr.org/wp-content/uploads/2021/03/Puerto-Rico-Distributed-Energy-
Resource-Integration-Study-Telos-Energy.pdf; Puerto Rico Distribution 
Modeling, EE Plus (2021), https://cambiopr.org/wp-content/uploads/2021/
03/Puerto-Rico-Distribution-Modeling-EE-Plus.pdf; Puerto Rico 
Distributed Energy Resource Integration Study: Load, Energy Efficiency, 
and System Cost, Energy Futures Group (2021), https://cambiopr.org/wp-
content/uploads/2021/03/Puerto-Rico-Distributed-Energy-Resource-
Integration-Study-Energy-Futures-Group.pdf; Achievable Renewable Energy 
Targets (``ARET'') ch. 4 Solar Resource, https://www.uprm.edu/aret/
docs/Ch_4_Solar_resource_and_solar_thermal.pdf), Agustin A. Irizarry-
Rivera et al., Achievable Renewable Energy Targets (``ARET'') (2008), 
https://bibliotecalegalambiental.files.wordpress.com/2013/12/
achievable-renewable-energy-targets-fo-p-r.pdf.
    \2\ Interstate Renewable Energy Council (IREC), Solar Workforce 
Development (2021), https://irecusa.org/programs/puerto-rican-solar-
business-accelerator/solar-workforce-development/.
---------------------------------------------------------------------------
    The Government of Puerto Rico has $9.6B allocated by FEMA at its 
disposal to solve the current energy crisis in Puerto Rico by deploying 
rooftop solar and storage. Instead, in the 10 Year Infrastructure Plan, 
the Government of Puerto Rico is requesting around $14B in federal 
funds for the electric system, most of which would be for transmission 
and new gas-fired plants and nothing for renewables.\3\
---------------------------------------------------------------------------
    \3\ Updated 10-Year Plan, submitted July 6th in PREB docket NEPR-
MI-2021-0002, p. 15. https://energia.pr.gov/wp-content/uploads/sites/7/
2021/07/20210706-Joint-Motion-Submitting-Updated-10-Year-
Infrastructure-Work-Plan.pdf.
---------------------------------------------------------------------------

     I. ``Hurricane LUMA'', LUMA's Generation Numbers Don't Add Up

    The Puerto Rico Transmission and Distribution System Operation and 
Maintenance Agreement dated June 22, 2020 between the Puerto Rico 
Electric Power Authority as Owner, the Puerto Rico Public-Private 
Partnerships Authority as Administrator, Luma Energy, LLC as 
ManagementCo, and Luma Energy Servco, LLC as ServCo (the LUMA contract) 
is a long, expensive and exclusive scheme that creates a private 
monopoly over energy transmission, distribution, generation dispatch, 
customer service, planning and all other electric system functions with 
the exception of operation of the generation plants. Under the 
contract, PREPA must use ratepayer funds to pay LUMA a service fee that 
ranges from $83 million to $125 million per year, in addition to LUMA's 
costs, so-called Operator T&D Pass-Through Expenditures, some capital 
expenses and expenses during outage events. LUMA has no obligation to 
invest its own funds. LUMA has already exceeded its budget and is 
recently requested a rate hike notwithstanding its deficient service. 
Puerto Rico ratepayers have already shouldered four rate increases this 
year alone.\4\
---------------------------------------------------------------------------
    \4\ Ultimos ajustes por compra de combustible y energia: un ABC, 
Microjuris, Oct. 1, 2021, https://aldia.microjuris.com/2021/10/01/que-
significa-el-ajuste-por-compra-de-combustible/.
---------------------------------------------------------------------------
    Since LUMA Energy took over the operation of the electric system, 
Puerto Rico has suffered constant power outages, destructive voltage 
fluctuations, fires caused by electric malfunctions where hundreds of 
thousands of Puerto Rico electric consumers have been deprived of 
electric service for extended periods of time.\5\ People have taken to 
calling the frequent and extended outages, ``Hurricane LUMA''. Lately, 
LUMA has alleged that the outages are attributable to lack of 
generation from the PREPA power plants. The documented evidence 
disproves LUMA's excuses about its deficient service. On January 29, 
2021, the Puerto Rico Electric Power Authority (``PREPA'') filed a 
report with the Puerto Rico Energy Bureau that provides a breakdown of 
electricity generation resources and energy demand. The report, titled 
Emergency Management KPI Dashboard, reflects that electricity demand 
was at 1960 MW, compared to the maximum capacity of the generating 
units in service of 3,361 MW with installed capacity of the units at 
4596 MW. Moreover, according to the report, PREPA has additional units 
that could be placed into service with an extra maximum capacity of 935 
MW and with an installed capacity of 1,722 MW.\6\ We are aware that 
many of the plants no longer function at the original-installed 
capacity. Considering only functional capacity of the plants, a simple 
mathematical exercise shows that PREPA's excess generating capacity of 
at least 1401 MW, plus 935 MW from the units that were not in service 
but are functional. Although demand is higher in the summer months, 
PREPA still has excess generation capacity and sufficient reserves. 
Puerto Rico has about twice the available electricity capacity compared 
to peak (maximum) energy demand.

    \5\ Partial list of articles published in Puerto Rico media on 
LUMA:

    Yaritza Rivera, LUMA reconoce que sus plataformas digitales estan 
abrumadas y no funcionan correctamente, June 4, 2021, https://
www.elvocero.com/gobierno/luma-reconoce-que-sus-plataformas-digitales-
est-n-abrumadas-y-no-funcionan-correctamente/article_194d6304-c4cb-
11eb-b464-df919d17eb73.html.
    Primeros dos meses de Luma: retrasos, danos y servicio deficiente, 
Sin Comillas, Aug. 16, 2021, https://sincomillas.com/primeros-dos-
meses-de-luma-retrasos-danos-y-servicio-deficiente/.
    Paciente de esclerosis multiple clama a LUMA Energy por servicio de 
electricidad, Cybernews, June 15, 2021, https://
www.periodicolaperla.com/paciente-de-esclerosis-multiple-clama-a-luma-
energy-por-servicio-de-electricidad/.
    Alcalde de Ponce emplaza a LUMA Energy por deficiencias en el 
servicio electrico que afecta a residentes y comerciantes, Redaccion 
Digital, June 11, 2021, https://www.periodicolaperla.com/alcalde-de-
ponce-emplaza-a-luma-energy-por-deficiencias-en-el-servicio-electrico-
que-afecta-a-residentes-y-comerciantes/.
    Jose Rafael Hernandez, Reclaman a LUMA Energy atienda los problemas 
de electricidad en Caguas, June 17, 2021, http://www.presenciapr.com/
reclaman-a-luma-energy-atienda-los-problemas-de-electricidad-en-
caguas/.
    Luis Penchi, Municipio de San Juan activa brigadas ante problemas 
con LUMA, July 12, 2021, https://www.elforodepuertorico.com/municipio-
de-san-juan-activa-brigadas-ante-problemas-con-luma/.
    Alcalde de Villalba alega que no logra comunicacion efectiva con 
LUMA, Telemundo, Aug. 15, 2021, https://www.telemundopr.com/noticias/
puerto-rico/alcalde-de-villalba-alega-que-no-logra-comunicacion-
efectiva-con-luma/2248393/.
    PIP pide investigar deficiencias operativas de LUMA, Noticel, June 
11, 2021, https://www.noticel.com/legislatura/ahora/pip/politica/
20210611/pip-pide-investigar-deficiencias-operativas-de-luma/.
    Istra Pacheco, LUMA confronta problemas con la facturacion a 
clientes, Sept. 29, 2021, https://www.elvocero.com/gobierno/agencias/
luma-confronta-problemas-con-la-facturaci-n-a-clientes/
article_adee728a-1c11-11ec-a567-470d7815aba2.html.
    Cathy Kunkel, Retrasos, danos y mal servicio: los dos primeros 
meses de LUMA Energy ponen de relieve los defectos de la privatizacion, 
Aug. 16, 2021, https://ieefa.org/retrasos-danos-y-mal-servicio-los-dos-
primeros-meses-de-luma-energy-ponen-de-relieve-los-defectos-de-la-
privatizacion/.
    Elivan, Martinez, Apagones empeoraron desde la entrada de LUMA, 
reconoce un documento de la empresa, Sept. 30, 2021, https://
periodismoinvestigativo.com/2021/09/apagones-empeoraron-desde-la-
entrada-de-luma-reconoce-un-documento-de-la-empresa/.
    Mas de 270,000 abonados sin servicio electrico en Puerto Rico, EFE, 
Sept. 28, 2021, https://www.diariolibre.com/usa/actualidad/mas-de-
270000-abonados-sin-servicio-electrico-en-puerto-rico-EI29036772.
    Investigan el origen de la explosion que produjo apagon en Puerto 
Rico, EFE, June 11, 2021, https://www.swissinfo.ch/spa/p-rico-
apag%C3%B3n_resumen-_investigan-el-origen-de-la-explosi%C3%B3n-que-
produjo-apag%C3%B3n-en-puerto-rico/46699210.
    Cynthia Lopez, Alza en tarifa de la luz es cuestion de tiempo, Luma 
dice que tuvo perdidas de $80 millones, Sept. 9, 2021, https://
jayfonseca.com/alza-en-tarifa-de-la-luz-es-cuestion-de-tiempo-luma-
dice-que-tuvo-perdidas-de-80-millones/.
    Aseguran que LUMA es responsable de problemas recientes con el 
sistema electrico, Radio Isla, June 17, 2021, https://radioisla.tv/
aseguran-que-luma-es-responsable-de-problemas-recientes-con-el-sistema-
electrico1/.
    LUMA pone en peligro vidas y propiedades de residentes a traves de 
la isla, Redaccion Digital, June 28, 2021, https://
www.periodicolaperla.com/luma-pone-en-peligro-vidas-y-propiedades-de-
residentes-a-traves-de-la-isla/.
    Yaritza Rivera, Reconocen problemas de LUMA Energy, El Vocero, Aug. 
3, 2021, https://www.elvocero.com/gobierno/reconocen-problemas-de-luma-
energy/article_307e48bc-f48d-11eb-b865-ef16ecc194b3.html.
    Siguen los problemas con LUMA: Tras apagones, restablecen el 
servicio de energia, Sala de Redaccion, Aug. 23, 2021, https://
www.elforodepuertorico.com/siguen-los-problemas-con-luma-tras-apagones-
restablecen-el-servicio-de-energia/.
    Juan Marrero, LUMA no revela querellas por enseres electricos 
danados en apagones, Sept. 16, 2021, https://www.metro.pr/pr/noticias/
2021/09/16/luma-no-revela-querellas-enseres-electricos-danados-
apagones.html.
    Yennifer Alvarez, Sin mecanismo para presentar reclamaciones 
clientes con enseres danados por apagones, June 16, 2021, https://
jayfonseca.com/sin-mecanismo-para-presentar-reclamaciones-clientes-con-
enseres-danados-por-apagones/.
    Sofia Rico, Aunque LUMA este en transicion, no es excusa para 
perjudicar los derechos del consumidor, Noticel, July 12, 2021, https:/
/www.noticel.com/ahora/gobierno/20210712/aunque-luma-este-en-
transicion-no-es-excusa-para-perjudicar-los-derechos-del-consumidor/.
    Luis Penchi, Comisionada pedira rendicion de cuentas a LUMA y AEE 
por mala administracion en el sistema de energia de Puerto Rico, Sept. 
17, 2021, https://www.elforodepuertorico.com/comisionada-pedira-
rendicion-de-cuentas-a-luma-y-aee-por-mala-administracion-en-el-
sistema-de-energia-de-puerto-rico/.
    Gerardo Alvarado, Fallas en el sistema de facturacion de LUMA 
Energy frenaron un aumento mayor para los consumidores, Sept. 22, 2021, 
https://www.elnuevodia.com/noticias/locales/notas/fallas-en-el-sistema-
de-facturacion-de-luma-energy-frenaron-un-aumento-mayor-para-los-
consumidores/.
    Vuelven los cacerolazos: protestan contra LUMA y constantes 
apagones, Telemundo, Sept. 28, 2021, https://www.telemundopr.com/
noticias/puerto-rico/vuelven-los-cacerolazos-protestan-contra-luma-y-
constantes-apagones/2263504/.

    \6\ See, Motion to Present Status and Final Progress Report and 
Request for Release of Order at 23; Mocion-para-Presentar-Reporte-de-
Estatus-y-Progreso-Final-y-Solicitud-de-Relevo-de-Orden-NEPR-AP-2020-
0001-1.pdf.
---------------------------------------------------------------------------
    In a motion dated September 8, 2021, LUMA Energy submitted a report 
to the Energy Bureau that indicates that available capacity was 3245 
MW.\7\ While the figure is less than PREPA's earlier filing this year 
it is still more than enough generation to cover peak demand which LUMA 
estimates is 2750 MW.
---------------------------------------------------------------------------
    \7\ See, Motion Submitting Slides Projected by LUMA During 
Technical Conference of September 3, 2021, Motion-Submitting-Slides-
Projected-by-LUMA-During-Technical-Conference-of-September-3-2021-NEPR-
MI-2021-0014.pdf.
---------------------------------------------------------------------------
    Under the contract between the PREPA and LUMA Energy, LUMA is 
charged \8\ with determining which plants inject or dispatch energy 
into the transmission and distribution (T&D) system to provide 
electricity to customers and not leave any residence, business, 
industry, government agency or public lighting without electric 
service. The malfunction of part of the Palo Seco plant and Unit 1 of 
the Aguirre Power Complex, which has a maximum capacity of 400 MW 
(installed capacity of 450 MW), allegedly affected by sargassum, making 
them inoperative still leaves enough generation available to supply 
energy demand if the remaining PREPA units are placed in service. 
Another alternative that LUMA has at its disposal to avoid outages is 
to lower peak demand by working with large customers to use their own 
self-generation units, totaling about 234 MW, at peak times.\9\ Why has 
LUMA Energy failed to dispatch the available PREPA units as required by 
the contract or use demand response alternatives? Does the fact that 
dispatching peaker units increases costs have something to do with 
LUMA's decision? Does the fact that the Government of Puerto Rico has 
asked FEMA to fund new ``natural'' methane gas plants in Palo Seco and 
throughout Puerto Rico or the government's intention to sell the plants 
to private investors or both have anything to do with not dispatching 
the existing units?
---------------------------------------------------------------------------
    \8\ The Puerto Rico Transmission and Distribution System Operation 
and Maintenance Agreement, June 22, 2020 at 35, 42, 73, https://
www.p3.pr.gov/wp-content/uploads/2020/06/executed-consolidated-om-
agreement-td.pdf.
    \9\ PREPA estimated that large customers had 234 MW of self-
generation in Slide 15 of PREPA's presentation during Panel A of the 
Integrated Resource Plan evidentiary hearing. See, Autoridad de Energia 
Electrica, January 2020 Earthquakes: Effect on Existing Resources, 
https://app.box.com/s/fuvsx24ceblv64drlskvohiru8thsywt.
---------------------------------------------------------------------------
    This is analogous to the situation in 2020, when the earthquakes 
damaged the two large units at the Costa Sur (810 MW) and part of the 
EcoElectrica plant. The PREPA Executive Director at the time, Jose 
Ortiz claimed there was insufficient generation capacity in the system. 
The Energy Board approved the issuance of a request for proposals for 
temporary generation to be financed by FEMA. Civil society groups 
opposed the RFP as a waste of funds because PREPA had peaking units 
available to cover the demand. In the end, the case was withdrawn and 
no new temporary generation was required.\10\
---------------------------------------------------------------------------
    \10\ Expedientes--NEPR, NEPR-AP-2020-0001.
---------------------------------------------------------------------------
    We are aware that PREPA's maintenance budget has been decreasing in 
the past few years and that this may have led to lack of funds to 
maintain cooling water intake structures to prevent sargassum from 
clogging the filters at the Aguirre Power Complex.\11\ We ask the 
Commission to investigate the role of the Federal Oversight Management 
Board (FOMB) which controls and must authorize changes in PREPA's 
budget.
---------------------------------------------------------------------------
    \11\ Laura M. Quinter,
---------------------------------------------------------------------------
    Another way that LUMA could limit outages would be to expedite 
resolution of the pending interconnection requests for rooftop solar 
and storage made by the relatively few residents of Puerto Rico that 
can afford to finance the cost of these systems.\12\ However, LUMA is 
delaying even those ready-to-go requests. These rooftop solar and 
storage installations, although only available to the privileged few 
could also contribute to alleviating energy demand from the centralized 
grid and thus reduce the incidence of outages. LUMA has exacerbated the 
crisis by failing to allow timely interconnections of rooftop solar 
systems; LUMA has a backlog of more than 5,000 systems still to be 
interconnected, and the Puerto Rico Energy Bureau is considering 
issuing daily fines of $1,000 until LUMA clears the backlog.\13\
---------------------------------------------------------------------------
    \12\ See, Maximo Solar Industries, Inc. Vs. Autoridad de Energia 
Electrica de Puerto Rico, Docket No. NEPR-QR-2020-0029, https://
energia.pr.gov/expedientes/?docket=nepr-qr-2020-0029.
    \13\ Puerto Rico Energy Bureau Resolution & Order, August 6, 2021, 
Docket NEPR-MI-2019-0016, https://energia.pr.gov/wp-content/uploads/
sites/7/2021/08/20210806-MI20190016-Resolucion -y-Orden.pdf.
---------------------------------------------------------------------------
    The electricity crisis manufactured by LUMA Energy and the 
government of Puerto Rico not only inflicts economic costs, it can also 
cost lives.

                     II. Disaster Recovery Funding

    FEMA disaster recovery funds allocated to PREPA present a unique 
opportunity to provide a lifeline to Puerto Rico residents and 
businesses with rooftop solar and battery energy storage. The 
investment by PREPA of federal funds allocated to it for rooftop solar 
and storage systems through a transparent process for large-scale 
deployment of renewable energy technology achieves three primary goals: 
1) provide access to energy resilience, equity and justice, especially 
for lower-income sectors of the population; otherwise, most people in 
Puerto Rico would not be able to obtain loans or leases for solar 
systems and batteries; 2) establish a uniform procedure through the 
public corporation, together with local talent and organized 
communities to accelerate the installation of solar and storage systems 
at or near the place of consumption/use; and 3) break the cycle of 
repeated destruction and reconstruction of the vulnerable long-distance 
transmission system that often disrupts power service in Puerto Rico 
and avoid the waste of federal taxpayer funds on a transmission system 
that will be devastated by future hurricanes.
    Puerto Rico is at a crossroads with respect to its electric system. 
One of the main issues confronting the territory is whether to use FEMA 
funds to double down on rebuilding antiquated 20th century 
infrastructure or to embark on the creation and construction of a 21st 
century electric system, based on laws that require the Puerto Rican 
government to shift to renewable energy and enable Puerto Rico 
residents to participate in this essential public service. Over 97% of 
Puerto Rico's electric energy comes from burning fossil fuels.\14\ The 
Queremos Sol civil society proposal (``We Want Sun,'' 
queremossolpr.com), endorsed by the groups joining in this testimony 
vigorously calls for the transformation of the Puerto Rico electric 
system as a public service including PREPA governance and the 
technology that empowers citizen participation as ``prosumers''--
producers and consumers of energy to achieve resiliency to the more 
frequent and intense hurricanes brought on by the climate crisis. Civil 
society in Puerto Rico favors rooftop solar as opposed to land-based 
utility scale projects that impact scarce agricultural land, ecological 
sensitive areas and open spaces.
---------------------------------------------------------------------------
    \14\ U.S. Energy Information Administration (EIA), Puerto Rico--
Territory Profile and Energy Estimates Overview, https://www.eia.gov/
state/?sid=RQ.

    Because PREPA and the Commonwealth of Puerto Rico are in 
bankruptcy, FEMA funds are the only viable way in which Puerto Rico can 
achieve its Renewable Portfolio Standard, renewable energy goals, and 
attain accessible electric rates. Financing of new power purchase 
agreements with PREPA as a credit counterparty would entail 
prohibitively high interest rates and financing costs that would lead 
to skyrocketing of the already astronomical electric rates that are 
---------------------------------------------------------------------------
currently about double the average U.S. rate.

    Section 404 (``Hazard Mitigation'') of the Stafford Act, as amended 
by the Disaster Recovery Reform Act of 2018 (Public Law 115-254, Oct. 
5, 2018), provides that ``The President may contribute up to 75 percent 
of the cost of hazard mitigation measures which the President has 
determined are cost effective and which substantially reduce the risk 
of, or increase resilience to, future damage, hardship, loss, or 
suffering in any area affected by a major disaster or any area affected 
by a fire for which assistance was provided under section 420. Such 
measures shall be identified following the evaluation of natural 
hazards under section 5165 of this title . . . and shall be subject to 
approval by the President.'' Stafford Act Sect. 404(a); 42 USC 
5170c(a). Some of the projects to rebuild Puerto Rico's electric grid 
are proposed as hazard mitigation measures that must be guided by the 
goal of minimizing future damage to that grid and the suffering that 
results from such damage. Accordingly, FEMA is required to perform a 
cost-effectiveness analysis prior to funding projects such as those 
proposed by the Government of Puerto Rico. The Cambio-IEEFA study cited 
above shows that rooftop solar and storage is more cost effective than 
the projects proposed by the Government of Puerto Rico.
    The current plan for FEMA funds would not only perpetuate 
dependence on the existing fossil fuel plants, but actually fund 
construction of new fossil fuel plants in Puerto Rico: the very first 
three very first three ``Notable Projects'' in PREPA's Updated 10-Year 
Plan are new gas-fired plants.\15\ PREPA senior executives have 
indicated that the funds for methane gas infrastructure and the 
reconstruction of the current T&D system will come from federal 
sources. Implicit in this approach is the presumption that the people 
of Puerto Rico will be getting a ``free lunch'' and that they can 
request large sums for infrastructure of doubtful utility and security 
because it is paid by the federal government and ultimately, taxpayers. 
This reflects a mentality of dependence driven by the methane gas/LNG 
industry and corporations that sell fossil generation units. The 
``free'' methane gas infrastructure would tie Puerto Rico to methane 
gas-burning plants for decades and endanger public health and safety, 
almost certainly requiring repeated injections of federal funds to 
restore transmission lines downed, time and again, by storms and 
earthquakes.
---------------------------------------------------------------------------
    \15\ New Black Start at Costa Sur, Emergency Generation at Yabucoa, 
Thermal Generation Feasibility Study at Palo Seco. Updated 10-Year 
Plan, submitted July 6th in PREB docket NEPR-MI-2021-0002, p. 15. See, 
https://energia.pr.gov/wp-content/uploads/sites/7/2021/07/20210706-
Joint-Motion-Submitting-Updated-10-Year-Infrastructure-Work-Plan.pdf.

    A true understanding of three points: price, reliability, and 
resiliency leads to the conclusion that FEMA funds should be invested 
in rooftop solar and storage to provide ratepayers accessible, 
---------------------------------------------------------------------------
reliable, and resilient energy.

        Price: Multiple studies, cited in this testimony have shown the 
        economic viability and benefits of rooftop solar and storage in 
        Puerto Rico. The avoidance of transmission system costs makes 
        rooftop/on-site solar more viable than centralized generation. 
        Transmission costs represent a huge opportunity cost that 
        displaces investments in renewables. Furthermore, fossil-fired 
        plant externalities are imposing costs on environmental justice 
        communities and increasing the social cost of carbon in Puerto 
        Rico.

        Reliability: The studies cited in this testimony demonstrate 
        that a grid powered by rooftop solar and storage is more 
        resilient, reliable and affordable than one powered by large, 
        centralized plants. In the meantime, PREPA's dashboard of its 
        system showed generation capacity, enough to meet peak load 
        with the necessary reserve margin--when dispatched properly. 
        Puerto Rico does not need new gas-fired plants.

        Resiliency: The Puerto Rico grid depends on vulnerable long-
        distance transmission to provide power to northern Puerto Rico, 
        especially the San Juan metropolitan area. Electrons from the 
        plants in the south did not reach San Juan for months after 
        Hurricane Maria: this demonstrates the vulnerability of the T&D 
        system vertical poles, lines, towers and substations to 
        hurricanes and multiple other natural events.\16\ Rebuilding 
        and hardening the T&D system will not provide the resilience of 
        rooftop solar and storage. These alternatives also have the 
        advantage of avoiding impacts to scarce agricultural land, 
        ecological sensitive areas, and open spaces. These alternatives 
        also have the advantage of avoiding impacts to scarce 
        agricultural land, ecological sensitive areas and open spaces.
---------------------------------------------------------------------------
    \16\ In 2005, Congress determined that rebuilding these lines over 
and over was not a cost-effective strategy: ``. . .electric power 
transmission and distribution lines in insular areas [including Puerto 
Rico] are inadequate to withstand damage caused by the hurricanes and 
typhoons which frequently occur in insular areas and such damage often 
costs millions of dollars to repair;'' 48 U.S.C.A. Sec. 1492(5).

    Law No. 550, the Land Use Plan Act, as amended by Law No. 6 of 
January 3, 2014, requires guaranteeing that a minimum of 600,000 acres 
of agricultural land are reserved. The Land Use Plan and all planning 
instruments must establish a process to ensure that land suitable for 
agricultural production and animal husbandry is preserved. Puerto Rico 
has lost about 133,000 acres of agricultural land every five years, 
according to census data between 2002 and 2007. Agricultural land in 
Puerto Rico was reduced from 584,987 cuerdas/acres in 2012 to 487,774 
acres in 2018, equivalent to a loss of 17%, or an annual loss of 16,202 
acres. According to Dr. David Sotomayor Ramirez, Professor of Soils at 
the College of Agricultural Sciences of the University of Puerto Rico, 
Mayaguez Campus, most countries dedicate at least 41% of the area to 
agriculture, compared to 22% of Puerto Rico.

III. LUMA Energy Control Over Federal Funds, Conflicts of Interests and 
                         Potential Self-Dealing

    The LUMA contract grants LUMA Energy control over federal funds 
assigned for the Puerto Rico electric system as detailed below.

  1.  LUMA participates and has veto power in the selection of the 
            federal funds grant manager. Contract Section 1.1, page 17.

  2.  LUMA can request changes or modifications to the federal funding, 
            including modifications to, or reallocations between, the 
            project worksheets related to the T&D System prepared by 
            FEMA pursuant to Section 428 of the Stafford Act or the 
            Integrated Resource Plan. Contract Section 4.3(j), Pages 
            50-1.

  3.  LUMA, in conjunction with the Administrator determines that 
            capital improvements are done to maximize the potential 
            realization of the federal funding anticipated or received. 
            Contract Section 5.9, Page 70.

  4.  LUMA has ``complete flexibility, subject to compliance with the 
            Contract Standards and prior consultation with, but not 
            subject to approval by, Administrator or PREB, to (i) 
            reallocate, accelerate or postpone expenditures within the 
            approved Operating Budget, (ii) reallocate, accelerate or 
            postpone expenditures within the approved Capital Budget--
            Federally Funded, subject to the Federal Funding 
            Requirements,'' . . . Section 7.3, Page 89.

  5.  LUMA and its subcontractor will ``deal with federal funds 
            management'' to manage ``longterm recovery using federal 
            funding on behalf of the Owner''. Page Annex II-39, Page 
            (pdf) 207.

  6.  LUMA Energy, LLC, was created by Quanta Services and ATCO, an 
            affiliate of Canadian Utilities these companies are 
            expected to benefit from the billions of dollars in federal 
            funds. LUMA's parent company, Quanta Services plans to 
            ``compete for work associated with Puerto Rico's electric 
            T&D system modernization efforts that are separate from its 
            ownership interest in LUMA'', ``expected to be funded by 
            U.S. federal disaster relief agencies and managed by 
            LUMA.'' \17\
---------------------------------------------------------------------------
    \17\ ``Quanta believes there is opportunity for it to compete for 
work associated with Puerto Rico's electric T&D system modernization 
efforts that are separate from its ownership interest in LUMA. Puerto 
Rico's electric T&D system is at a critical juncture after the 
destruction caused by Hurricanes Maria and Irma. As a result, the 
government of Puerto Rico, through the P3 and in collaboration with 
PREPA, have embarked on a plan to rebuild, modernize, harden and 
``green'' its power grid, a majority of which is expected to be funded 
by U.S. federal disaster relief agencies and managed by LUMA. The P3 
estimates that more than $18 billion of electric T&D capital investment 
could be required through 2028 for this initiative.'' Quanta Services 
and ATCO-Led Consortium Selected by the Puerto Rico Public-Private 
Partnership Authority for the Operation and Maintenance of Puerto 
Rico's Electric Power Transmission and Distribution System, https://
investors.quantaservices.com/news-events/press-releases/detail/277/
quanta-services-and-atco-led-consortium-selected-by-the.

  7.  The contract states that the Operator (LUMA) will work with IEM 
---------------------------------------------------------------------------
            (as its subcontractor) to manage federal funds.

  8.  LUMA establishes a governance framework to manage longterm 
            recovery using federal funds on behalf of PREPA. (VII. 
            Federal Funds Procurement Manual).

  9.  LUMA may request changes or modifications to federal funding 
            (including modifications or reassignments between project 
            worksheets related to the T&D system prepared by FEMA 
            pursuant to Section 428 of Stafford Act) or the Integrated 
            Resource Plan. (LUMA contract page II-39, pdf 207).

 10.   Luma Energy objects to PREPA using funds allocated for the 
            electric system by FEMA and other federal agencies to 
            install rooftop solar systems and batteries. LUMA and its 
            affiliated companies Quanta and ATCO plan to use the funds 
            for transmission projects. In a proceeding before the 
            Energy Bureau, one of the LUMA Energy representatives, Lee 
            Wood, falsely alleged that FEMA would not allow the use of 
            funds for behind the meter generation, that is, located in 
            the residence or business of the consumer, mainly rooftop 
            solar.\18\ Several recent communications from Members of 
            Congress belie LUMA's allegations.\19\
---------------------------------------------------------------------------
    \18\ In the recording of the proceedings before the Energy Bureau, 
Luma's representative tries to argue that PREPA cannot use the FEMA 
funds assigned to it to install solar systems with batteries for its 
subscribers. See, https://www.youtube.com/watch?v=oGYujWJ8S7s (minute 
1:49).
    \19\ Jose Delgado, Alexandria Ocasio Cortez, Nydia Velazquez y 
Charles Schumer reclaman priorizar la energia renovable en Puerto Rico, 
Feb. 25, 2021, https://www.elnuevodia.com/corresponsalias/washington-
dc/notas/alexandria-ocasio-cortez-nydia-velazquez-y-charles-schumer-
reclaman-priorizar-la-energia-renovable-en-puerto-rico/.
---------------------------------------------------------------------------

                 IV. Environmental and Climate Justice

    The LUMA contract establishes that the grid work must ``align'' 
with the Grid Modernization Plan, which is the Puerto Rico government's 
proposal to rebuild the existing grid rather than transform the 
electric system to provide the resilience that would make the 
difference between life and death in the face of disaster and shock 
events. PREPA's Transmission and Distribution System Operation and 
Maintenance Agreement with LUMA Energy promotes the operation of 
centralized generation that lacks the life-saving resiliency of 
distributed renewable energy and storage and perpetuates environmental 
injustice. Rebuilding the T&D system to connect to these plants 
perpetuates their operation.

    In addition to Executive Order 12,898 on Environmental Justice, the 
Biden Administration's Executive Order, ``Tackling the Climate Crisis 
at Home and Abroad'' provides a further foundation for environmental 
justice claims and states in part as follows:

        To secure an equitable economic future, the United States must 
        ensure that environmental and economic justice are key 
        considerations in how we govern. That means investing and 
        building a clean energy economy that creates well-paying union 
        jobs, turning disadvantaged communities--historically 
        marginalized and overburdened--into healthy, thriving 
        communities, and undertaking robust actions to mitigate climate 
        change while preparing for the impacts of climate change across 
        rural, urban, and Tribal areas.\20\
---------------------------------------------------------------------------
    \20\ See, Exec. Order No. 14008, 86 C.F.R. 7619, Executive Order on 
Tackling the Climate Crisis at Home and Abroad, Jan. 27, 2021, Section 
219, https://www.whitehouse.gov/briefing-room/presidential-actions/
2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-
abroad/.

    The communities near the existing fossil-fired power plants, most 
of which are located in southern Puerto Rico, are overburdened by the 
operation of the plants. The Guayama region is an environmental justice 
community with high poverty rates and where the majority of residents 
are Afro-Puerto Ricans.\21\ According to the Toxic Release Inventory 
this region suffers the greatest contamination of any region in Puerto 
Rico. The Guayama region also has among the highest poverty, 
unemployment, and school dropout rates in Puerto Rico. Simultaneously, 
the region has experienced a sharp decrease in medical services 
available to this environmental justice community with the closure of 
two hospitals and only one hospital currently in operation.
---------------------------------------------------------------------------
    \21\ Hilda Llorens, In Puerto Rico, Environmental Injustice and 
Racism Inflame Protests over Coal Ash, December 8, 2016. http://
theconversation.com/in-puerto-rico-environmental-injustice-and-racism-
inflame-protests-over-coal-ash-69763; Hilda Llorens, Puerto Rico's 
Coal-Ash Material Publics and the Summer 2019 Boricua Uprising, 
February 25, 2020. https://www.societyandspace.org/articles/puerto-
ricos-coal-ash-material-publics-and-the-summer-2019-boricua-uprising; 
Catalina De Onis, Energy Islands, Metaphors of Power, Extractivism, and 
Justice in Puerto Rico, June 2021, https://www.ucpress.edu/book/
9780520380622/energy-islands.
---------------------------------------------------------------------------
    The LUMA contract will exacerbate PREPA's current system 
vulnerabilities and harm public health and safety. Hurricanes Irma and 
Maria demonstrated that the 230kV and 115 kV lines that carry power 
from the large, centralized power plants in the south to the north were 
a key vulnerability of the system. The LUMA contract entails continued 
reliance on centralized fossil fuel combustion plants and these 
transmission lines, and even contemplates more large, centralized 
plants, also connected to the grid through the same vulnerable 
transmission lines. The south-to-north transmission lines are 
vulnerable to extreme weather events, vegetation growth, wildlife 
impacts, lack of investment in maintenance, and difficult access to 
servitudes and easements, among others. The seismic events of 2020 
further demonstrated the vulnerability of large, centralized plants and 
the affiliated transmission system: Costa Sur and EcoElectrica were 
both damaged.
    The U.S. Geological Survey has determined that the areas where the 
San Juan and Palo Seco plants are located present high risk of 
liquefaction in the event of earthquakes. The Great Southern Puerto 
Rico Fault Zone runs through the Jobos Bay area where the Aguirre Power 
Complex and the AES coal burning power plants are located.\22\ The Palo 
Seco plant, depot and accompanying infrastructure are in a tsunami 
flood area. The Federal Energy Regulatory Commission earlier this year 
issued an Order acknowledging that regulators have not sufficiently 
analyzed the risk impacts to powerplants from more frequent and intense 
earthquakes in Puerto Rico.\23\
---------------------------------------------------------------------------
    \22\ Bachhuber, Hengesh, & Sunderman, Liquefaction Susceptibility 
of the Bayamon and San Juan Quadrangles, Puerto Rico, at Figure 6, PDF 
p. 30 (2008), https://earthquake.usgs.gov/cfusion/external_grants/
reports/03HQGR0107.pdf (noting very high susceptibility zones in areas 
along the Bayamon coastal plain, Bahia de San Juan, and Laguna San 
Jose); Hengesh & Bachhuber, Liquefaction susceptibility zonation map of 
San Juan, Puerto Rico, in Mann, P. (ed.), Active tectonics and seismic 
hazards of Puerto Rico, the Virgin Islands, and offshore areas: 
Geological Society of America Special Paper 385, at 249-262 (2005).
    \23\ Federal Energy Regulatory Commission Order Establishing 
Briefing, Docket CP95-35-000. ``There has been an increase in frequency 
and intensity of earthquakes on Puerto Rico since 2003.''
---------------------------------------------------------------------------
    The operation of all fossil fuel plants in Puerto Rico emit 
multiple contaminants that adversely impact public health and the 
environment. The Applied Energy System (AES) Corporation coal-fired 
power plant and the Aguirre Power Complex, located in southeastern 
Puerto Rico are the two primary sources of toxic emissions in Puerto 
Rico and disproportionately impact some of the poorest communities. 
These two plants also extract large amounts of freshwater from the 
South Coast Aquifer and have contributed to the water scarcity that led 
to water rationing in summer 2019 and in previous years. The AES coal 
burning power plant in Guayama transmits electricity to northern Puerto 
Rico, including the San Juan metro area and accumulates hundreds of 
thousands of tons of coal ash waste at its plant site. The facility and 
its polluting practices already contaminated part of the South Coast 
Aquifer, the sole source of potable water for tens of thousands of 
people in Puerto Rico.\24\
---------------------------------------------------------------------------
    \24\ EPA, 2019 TRI Factsheet--Guayama, PR (Oct. 2020), https://
enviro.epa.gov/triexplorer/
tri_factsheet.factsheet?pzip=&pstate=PR&pcity=GUAYAMA&pcounty=&pyear=201
9&pParent= TRI&pDataSet=TRIQ1; U.S. Dept. of Interior, USGS Water Use 
Data for Puerto Rico (2021), https://waterdata.usgs.gov/pr/nwis/wu; 
Jason Rodriguez, Acuifero del Sur: Retrocede la unica Fuente de agua 
potable de 30 mil surenos, May 29, 2021, https://
www.periodicolaperla.com/acuifero-del-sur-retrocede-la-unica-fuente-de-
agua-potable-de-30-mil-surenos1/; Report On Corrective Measures 
Assessment Aes Puerto Rico--AgremaxTM Staging Area Guayama, 
Puerto Rico Haley & Aldrich, Inc. (2019), https://
www.aespuertorico.com/sites/default/files/2021-02/Corrective-Measures-
Assessment-English.pdf; AES Puerto Rico Coal Combustion Residuals Rule 
Compliance Data and Information, https://aespuertorico.com/ccr/.
---------------------------------------------------------------------------
    The Costa Sur and EcoElectrica plants in southwestern Puerto Rico 
both burn imported methane gas and also transmit energy long distance. 
Gas combustion is the substitution of one group of contaminants for 
others. The myth that methane gas is a cleaner energy source is a 
fallacy.
    The LNG imported to Puerto Rico must be stored under cryogenic 
conditions and revaporized/regasified before it can used at the plants. 
These additional processes add to the total emissions of LNG use in a 
way that exceeds the CO2 emissions of other fossil fuels. Methane gas 
combustion also emits increased Volatile Organic Compounds (VOCs) such 
as formaldehyde, benzene, toluene, hexane, and styrene.\25\
---------------------------------------------------------------------------
    \25\ Public Comments by Pediatric Environmental Health Specialty 
Unit (PEHSU), Mount Sinai Medical School, FERC Docket CP13-193-000 at 
1-2. https://elibrary.ferc.gov/eLibrary/file download?fileid=01c6d80b-
66e2-5005-8110-c31fafc91712.
---------------------------------------------------------------------------
    Multiple scientific studies, including a Harvard University report 
found that, ``A small increase in long-term exposure to PM2.5 leads to 
a large increase in COVID-19 death rate, with the magnitude of increase 
20 times that observed for PM2.5 and all-cause mortality. to air 
pollution and COVID-19 mortality in the United States. The study 
results underscore the importance of continuing to enforce existing air 
pollution regulations to protect human health both during and after the 
COVID-19 crisis.'' The specific findings demonstrate that, an increase 
of only 1 ug/m3 in PM2.5 is associated with a 15% increase in the 
COVID-19 death rate, at a 95% confidence interval.\26\ Particulate 
matter is emitted by electric power plants, motor vehicles and other 
sources of air contamination. Continued reliance on these plants for 
energy transmission to San Juan and northern Puerto Rico is another 
climate disaster in the making.
---------------------------------------------------------------------------
    \26\ Wu, X., Nethery, R.C., Sabath, M.B., Braun, D. and Dominici, 
F., Air pollution and COVID-19 mortality in the United States: 
Strengths and limitations of an ecological regression analysis Science 
advances, 6(45), p.eabd4049, (2020), https://projects.iq.harvard.edu/
covid-pm.
---------------------------------------------------------------------------
    Although the LUMA contract has especially ominous implications for 
environmental justice communities, the LUMA scheme does not bode well 
for the health and safety of the general population in Puerto Rico. 
LUMA can abandon the tasks required under the contract after PREPA has 
been dismantled and when reinforcements for the electric system are 
most needed and almost at any time. In an extended force majeure event, 
LUMA, as Operator has the right to terminate the contract, in the event 
that the force majeure event continues for a period longer than 
eighteen (18) consecutive months and materially interferes, delays or 
increases the cost of initial transition services (front-end) or 
operation and maintenance services (O&M). (LUMA contract page 125, pdf 
132). In addition, according to the contract, ``force majeure event'' 
is defined so broadly that it excuses LUMA from performing the services 
required for almost any reason, including an interruption or blackout 
event (page 22, 29), computer sabotage or virus, quarantine, epidemic, 
or civil disobedience; any event that causes any Puerto Rico or federal 
government agency to declare any part of the geographical area of the 
T&D system as part of a ``disaster zone'', ``state of emergency'' or 
any other similar declaration; and a change in the law. (LUMA contract 
pages 14-5, pdf 22. In sum, the definition of force majeure in the 
contract is very broad and allows LUMA to evade responsibility after 
receiving the benefits of the contract.

                             V. Conclusion

    For the reasons summarized in this written testimony, we urge the 
House Committee on Natural Resources to investigate PREPA's 
Transmission and Distribution System Operation and Maintenance 
Agreement with LUMA Energy, LLC and the role of the Federal Oversight 
and Management Board in the imposition of the LUMA contract and the 
Puerto Rico electric crisis. We ask this Committee to urge the Federal 
Government to earmark the historic amount of FEMA funds allocated for 
the electric system for on-site and rooftop solar and battery systems 
and similar alternatives that will provide life-saving electric service 
to the residents of Puerto Rico and include an inquiry on the proposed 
use of FEMA funds for electric system work to ensure that they are 
invested in a cost-effective manner to provide accessible, affordable, 
renewable, reliable and resilient electric energy. The use of the 
historic amount of FEMA funds allocated for the electric system will 
determine the viability of Puerto Rico for generations to come.

                                 *****

                               Attachment

            List of Puerto Rico and Stateside Organizations

                   that join in the testimony on the

  PREPA Post Implementation of the LUMA Transmission and Distribution 
                                Contract

                    Presented by Ruth Santiago, Esq.

Puerto Rico Organizations

   1.  Alianza Comunitaria Ambientalista del Sureste

   2.  Amigos del Rio Guaynabo

   3.  Amnistia Internacional-Puerto Rico

   4.  Asociacion de Empleados Gerenciales de la AEE

   5.  Asociacion de Psicologia de Puerto Rico

   6.  Boutique Comunitaria

   7.  Campamento Contra Las Cenizas en Penuelas, Inc.

   8.  Ciudadanos en Defensa del Ambiente

   9.  Clinica Legal Psicologica

  10.  Coalicion Organizaciones Anti Incineracion

  11.  Colectivo Editorial Luscinia

  12.  Colegio de Profesionales del Trabajo Social de Puerto Rico

  13.  Comite Dialogo Ambiental, Inc.

  14.  Comite Yabucoeno Pro-Calidad de Vida

  15.  Cuatro Costas

  16.  El Puente: Enlace Latino de Accion Climatica

  17.  El Punto en la Montana

  18.  Frente Unido Pro-Defensa Del Valle De Lajas, Inc.

  19.  Hermanxs de la Calle

  20.  Hispanic Federation

  21.  Impacto Juventud

  22.  Intercambios Puerto Rico

  23.  JunteGente

  24.  Mayaguezanos por la Salud y el Ambiente

  25.  Proyecto Vida. Accion. Salud (VAS)

  26.  Red Continental Cristiana por la Paz

  27.  Sierra Club Puerto Rico

  28.  Surfrider Foundation Rincon

  29.  Taller de Psicologia Social Comunitaria

  30.  Union de Trabajadores de la Industria Electrica y Riego

  31.  Urbe A Pie

Stateside Organizations

   1.  350 New Orleans

   2.  ANAD

   3.  Boricuas Unidos en la Diaspora (BUDPR)

   4.  Businesses for a Livable Climate

   5.  CA Businesses for a Livable Climate

   6.  Call to Action Colorado

   7.  Catholic Network US

   8.  Cleveland Owns

   9.  CO Businesses for a Livable Climate

  10.  CODEPINK Golden Gate Chapter

  11.  Community Power

  12.  Cooperative Energy Futures

  13.  Earthjustice

  14.  Fairbanks Climate Action Coalition

  15.  Hispanic Federation

  16.  I-70 Citizens Advisory Group

  17.  Labor Council for Latin American Advancement NYC Chapter

  18.  Local Clean Energy Alliance

  19.  Montbello Neighborhood Improvement Association

  20.  Network for a Sustainable Tomorrow

  21.  North Range Concerned Citizens

  22.  People Power Solar Cooperative

  23.  RapidShift Network

  24.  Redwood Energy

  25.  Renewable Energy Worcester

  26.  Roxanna Smith Communications

  27.  Sierra Club

  28.  Small Business Alliance

  29.  Solar United Neighbors

  30.  SolidarityINFOService

  31.  Soulardarity

  32.  System Change Not Climate Change

  33.  The Boricua Solidarity Movement

  34.  The Democracy Collaborative

  35.  The Green House Connection Center

  36.  Unite North Metro Denver

  37.  Wall of Women

  38.  Womxn from the Mountain

                                 ______
                                 

    The Chairman. Thank you very much. Let me thank the 
witnesses for their valuable testimony, and now turn to the 
members of the Committee for their questions and comments.
    I will forego my initial questioning, and turn to my 
colleague, the Chair of the Insular Affairs and Vice Chair of 
the Committee, Mr. Sablan.
    You are recognized for 5 minutes, if you have any 
questions.
    Mr. Sablan. Yes, I do, Mr. Chairman, thank you very much.
    I cannot seem to find Mr. Fernando Gil on my screen.
    Mr. Gil, are you with us, sir?
    Mr. Gil. Yes, sir. As I mentioned, we had technical 
difficulties in my testimony. That is why we are basically 
navigating without any type of visibility.
    Mr. Sablan. Can you hear me?
    Mr. Gil. I can hear you, sir----
    Mr. Sablan. All right, thank you. And let's be mindful of 
my 5 minutes.
    Mr. Gil, what involvement have you had, and what specific 
actions have you taken to ensure FEMA and CDBG monies are 
invested in full alignment with the President's climate goals 
for Puerto Rico's renewables public policy?
    And who do you believe is responsible for the persistent 
delays in the flow of funds, and what congressional action do 
you think would help?
    Two questions in one.
    Mr. Gil. Thank you for the question. For what I grasp about 
it, actually, in terms of a CDBG funding, right now we have--
the Department of Housing, which I don't manage any more, or 
being there any more, has $1.9 billion authorized for it. They 
are working on the action plan that actually goes through a 
process that tends to have community participation.
    Regarding the FEMA funding, we have regular oversight from 
not only FEMA, but from the COR3. There is a plan in place for 
it, and that plan complies with the IRP and all the 
applicable----
    In order to speed up the process, we actually--within the 
means that we have, we can see which kinds of projects actually 
can be accelerated in a more speedy way, and also see which 
other projects that are not as visible or important, in terms 
of IP technology and other things, can run parallel to, instead 
of waiting for other quarters to implement it.
    Mr. Sablan. Well, yes, thank you. But there have been, from 
what I have heard from testimonies, persistent delays in the 
flows of funds. So, who do you believe is responsible for these 
delays?
    Mr. Gil. Sir, actually, the delay was basically put out 
there by the Office of Inspector General of HUD, and where 
basically it is determined that the HUD Administration may, 
more probably than not, back in the last administration, 
withheld funds.
    And, obviously, from that time of having all the action 
plans approved to--the signature of that grant agreement that 
basically gives you the ability to execute all the programs, 
more than 300 days went by, and that is unacceptable, because 
then what happened was it takes you out from the planning 
process, and then keeps you navigating on a dark sea, in that 
sense, that you cannot see what is going to happen, because you 
are not aware, or you are not secure that that funding is 
secure there.
    So, being that, I know that this Administration----
    Mr. Sablan. So, it is HUD. HUD has been responsible for the 
delay of the funds, in your opinion.
    Mr. Gil. Well, in the funds, there was actually $1.9 
billion that was appropriated back in the supplemental of 2018. 
That $1.9 billion related to the power energy--the notice came 
out recently, after the Biden administration took over.
    Mr. Sablan. Yes, thank you.
    Chairman, I have other questions I will submit for the 
record.
    The Chairman. Thank you, Mr. Sablan. Let me now turn to the 
gentlelady from Puerto Rico, Miss Gonzalez-Colon.
    You have 5 minutes. Thank you.
    Miss Gonzalez-Colon. Thank you, Mr. Chairman. I know this 
is a good panel, we have many people here. And with the 
situation on the island that today you have power, maybe 
tomorrow you will not, I think there are several questions that 
need to be answered.
    The first--and I will submit some questions for the record, 
as well--but I think we are hearing here about--I see three 
major issues.
    The first one, how good is our infrastructure right now? Is 
it going to handle any hurricane? Can it handle any other 
situation?
    The second one, how reliable would that be, knowing that 
there is a goal of 2050 to have 100 percent renewables. But 
then Puerto Rico right now just got 2 percent of renewables 
happening.
    And I know some of the witnesses established their goal, or 
their aspiration, to have Federal money be earmarked for 
renewable communities in terms of establishing that kind of 
reliable service. But my concern here is this is not just using 
batteries or solar panels. We are talking about industry. We 
are talking about commercial, residential. Are we ready to move 
completely to renewables today, without having the proper 
backups in terms of satisfying the demand?
    I think we should be working to do both ends, in terms of 
looking to the renewable integration that should be achieved, 
but at the same time allowing stable energy on the island, 
certainty in terms of the energy that is provided for not just 
communities, but the industry itself.
    So, my question will be to PREPA. It could be answered both 
by the Chairman of the Board or the current CEO of PREPA, 
Engineer Colon.
    And the first one will be in terms of the grid itself. Is 
it in a condition to handle the load of PREPA's generation?
    And second, how resistant is the infrastructure today to 
handle a hurricane?
    And I would love if you can go directly to the point, and 
be mindful of the time.
    Mr. Gil. Mr. Colon will answer that question, since it is a 
technical one.
    Mr. Colon. Thank you, Madam Congresswoman. I am Josue 
Colon, I am the newly appointed CEO for PREPA. And my answer 
for your question is that the generation system of Puerto Rico, 
as today, is not as reliable as it should be.
    As you should know, we were handling many outages on load 
shedding in the past 2 months. Right now, we are better 
handling the load the system is carrying out, but in general, 
our system is still fragile, and we are trying with the 
resources that we have to improve the fleet that we have, day 
by day.
    Miss Gonzalez-Colon. Question: how much integration of 
renewables can we really achieve by 2025?
    I know the law mandates it, so I would like to know if it 
is possible. And with the results that you have in the current 
situation that is real, can you have at 2025, or even 2050, the 
complete goal of renewables?
    Mr. Gil. OK, I will handle that question, based on the 
analyses we are running, Congresswoman Gonzalez. Basically, 
there is a total of 3,750 megawatts that are being programmed 
for it, and we are running out of space for it. Like, already, 
the first phase is for 1,000 mega, with 500 of battery power, 
also.
    And there is another one, other tranches that are coming up 
for 500 megawatts and 250 megawatts for storage capacity--six 
months of difference.
    So, basically, before 2025, we are trying to achieve that 
goal. Obviously, there are other factors to consider, based on 
the grid. And actually, the new batteries that we have, or the 
existing batteries right now, as it is, our grid was designed 
to provide energy, not to receive it in that sense.
    So, it is not that it is not feasible or it is not 
possible, but the grid, as it is right now, is not as efficient 
as it will be when the grid is ready.
    Miss Gonzalez-Colon. Answer me this question yes or no. The 
dozen or so LNG power units proposed in the PREPA and FEMA 
action plan, will these in any way prevent the continuance of 
the conversion to renewables?
    Mr. Colon. Well, I am going to answer that question. In my 
personal opinion, the answer is yes.
    Any modernization that can be accomplished to the actual 
fleet with new technology that uses natural gas are going to 
help PREPA help the system to handle it better, the 
introduction of new renewable energy sources. That is a matter 
of technical issues, and those kind of technologies are going 
to be more helpful for the system to handle new injection of 
renewable to the generation of PREPA.
    Miss Gonzalez-Colon. Thank you. My time is up, so I yield 
back, Mr. Chairman.
    The Chairman. Thank you. The gentlelady yields. Let me now 
turn to the gentlelady from New Mexico, Representative 
Stansbury.
    You are recognized for 5 minutes.
    Ms. Stansbury. Thank you, Mr. Chairman, and thank you to 
everyone for convening today's important hearing.
    I recently had the opportunity to visit Puerto Rico and 
Vieques, and saw firsthand myself the beauty of the island and, 
of course, the continued impacts that the hurricanes have had 
on basic infrastructure, including the electric grid. In fact, 
while I was visiting, numerous people shared that they had 
lived for months without electricity on Vieques in the wake of 
Hurricane Maria. And, as we have heard this morning, many have 
continued to experience blackouts across the island as part of 
their daily lives.
    Access to electricity is not only a necessity, but a basic 
human right. Without it, medical facilities cannot operate. 
Children cannot study. Businesses cannot remain open. And daily 
life is disrupted in countless ways.
    Since LUMA took over energy transmission and distribution, 
residents are reporting that they are paying twice as much as 
mainland customers for electricity, and that power is going out 
three to four times a day. These blackouts affect, as we have 
heard this morning, hundreds of thousands of people, and 
demonstrate the clear need to modernize Puerto Rico's electric 
grid and address these operational issues.
    This challenge is particularly acute in Puerto Rico, in 
large part because it is an island, but it is also a challenge 
that communities across the United States are facing. In fact, 
just last year we saw in Texas, as a downed electric grid 
affected millions who had no heat and water for days in the 
wake of a major storm.
    The need to modernize our grid across the United States has 
reached a major inflection point, in terms of ensuring the 
safety and well-being of our communities, and meeting the 
moment of our clean energy revolution and addressing climate 
change. That is why in New Mexico, I worked with colleagues on 
both sides of the aisle to help pass a bipartisan grid 
modernization bill just this last year, because modernizing our 
grid is both a humanitarian issue and a necessity for tackling 
climate change.
    The people of Puerto Rico, as has been discussed, recognize 
the importance of this transition and the need for renewables. 
But unfortunately, in February of this year, 16 commercial 
solar projects that would have generated 593 megawatts of 
electricity were rejected, leaving the island dependent on a 
coal-fired power plant and non-renewable resources. The 
transition to renewables and modernization of the grid are 
crucial to the residents of the island, and also to climate 
action across the country and the planet.
    As the devastation of Hurricane Maria has demonstrated, and 
as the world watched, we know that the Federal Government did 
not respond and act in good faith, and we are still seeing 
those impacts today, and I believe it is the Federal 
Government's responsibility to ensure that our communities are 
safe and their basic needs are met.
    So, I believe it is our responsibility, as Congress, to not 
only conduct oversight, but to also support the needs of Puerto 
Rico and the communities in addressing these issues. The people 
of New Mexico and my district stand united with the people of 
Puerto Rico in demanding energy justice and grid modernization, 
and the social, economic, and environmental imperative of doing 
so.
    With that, I would like to just take a moment to ask a 
question of Mr. Gil.
    Mr. Gil, thank you so much for being here today. It 
appears--and as was just asked--the Fiscal Oversight and 
Management Board recently voted to reject this 450 megawatts of 
solar projects, and has recently stated that it may reject up 
to 1,000 megawatts of renewable projects that are currently 
being teed up. Combined with the other challenges that we have 
heard about this morning in terms of providing electricity, it 
is clear that the system is in dire need of modernization.
    We have heard from a few of the witnesses this morning, but 
can you please share with us: (1) what you believe can be done 
and what is needed to bring these renewables on-line and 
transition the grid to a more stable and resilient power 
system; and (2) how the Federal Government, especially as we 
are working right now to pass an infrastructure and 
reconciliation bill, can help and support Puerto Ricans and the 
utility as it is embarking on building a more resilient grid?
    Mr. Gil. Thank you, Congresswoman, for that question. And 
from the complexity of it, obviously, I mean, there is a 
process that they started back in 2012. And almost the same 
amount that we are putting out there for renewable energy, more 
than 3,000 megawatts, was supposed to be already built.
    Things happened, that they took away those. Actually, 
recently, we submitted to the FOMB around 150 megawatts only 
that they were requested that they comply with our MTRs, and 
they were also the amount that--right now.
    So, answering to your question, it is not that we are 
saying that it cannot be done, but right now it is not 
feasible, and it can bring some problems to the grid, as it is. 
Nonetheless, some combination of repairs of the turbines, that 
they are completely broken, or they can be changed with 
different sorts of power or gas--for example, changing bunker 
fuel for LNG--will give a more sustainable--and can help us, 
obviously, move into the future with a more stable generation 
fleet, and at the same time looking forward to comply with all 
the Act 17 mandates regarding renewables.
    The Chairman. Thank you.
    Ms. Stansbury. Thank you. And with that, Mr. Chairman, I 
yield back.
    The Chairman. The gentlelady yields, thank you very much. 
Let me now recognize Representative Wittman for his 5 minutes 
of questions, comments.
    Sir, you are recognized.
    Dr. Wittman. Thank you, Mr. Chairman. I would like to yield 
my time to Representative Gonzalez-Colon. And thanks again, Mr. 
Chairman.
    The Chairman. Thank you, sir.
    Miss Colon?
    Miss Gonzalez-Colon. Thank you, Representative Wittman, for 
yielding, I really appreciate that.
    My question will be to the LUMA CEO now. And I want to say 
thank you to both of the panelists, witnesses, that are here 
today.
    We did a roundtable 2 weeks ago with stakeholders, just to 
know where is the status of all the Federal funds that are 
being allocated to the island. We are talking about $9.6 
billion that were approved by Congress in 2018 and 2019 for the 
reconstruction of the power grid on the island, and some 
generation maintenance.
    At this time, none of those funds are being used--again, 
$9.6 billion that are a Federal mandate. And one of the reasons 
for that is that FEMA just made those funds available last 
year. So, that means that LUMA needs to provide the scope of 
work to FEMA just to get an approval for that plan, and then 
begin those projects and receive part of the funds in a 
reimbursement process.
    I know FEMA recently changed the way to manage big projects 
like this, to try to make them faster. And I know COR3, the 
agency on the island, and PREPA are working to that end.
    But again, I think the short explanation I just did is one 
of the main concerns. Why, if we do have $9.6 billion in 
Federal funds to get a renewable system, to change the power 
grid, make it more resilient, and help with the generation, as 
well, why are those funds not being used?
    My question to LUMA right now will be how long it would 
take LUMA to provide to COR3 or PREPA the scope of work for the 
change and the breakthroughs from transformers and many others 
in the transmission and distribution area?
    Mr. Stensby. Thank you very much, Commissioner, and I 
appreciate the opportunity again.
    And I do want to say that grid modernization is exactly a 
fundamental element of what LUMA is here to do.
    Today, we are building this pipeline of projects, and today 
there are 65 projects that represent approximately $2.8 billion 
that presently have received FEMA initial statements of work, 
and that allows us to proceed with preliminary engineering, 
with hazard mitigation efforts, and with development of EHP, or 
environmental and historic preservation requirements. Those 65 
projects consist of approximately 23 transmission projects, 23 
distribution projects, and 15 substations.
    The next step is to carry out that preliminary engineering. 
There are six architecture engineering firms engaged, and we 
then bring back a revised or more fully developed statement of 
work for FEMA approval. Once we receive FEMA approval, we then 
move into detailed engineering and procurement, and eventual 
construction.
    We are optimistic that the leading project--so those 
projects that are most advanced--are able to be out in the 
marketplace for construction contracts into 2022, and we are 
optimistic that we will be able to put a shovel in the ground 
in the second quarter of 2022.
    I think it is vitally important that we start priming the 
pump, if you like. There are many other projects behind that 
that have received PREB approval. And as I say, this is a large 
pipeline of work, but I think it is critical that those first 
projects start.
    As my fellow witness from COR3 described in his testimony, 
there are many complexities with regard to matching, and many 
other----
    Miss Gonzalez-Colon. I know, I know the complexities. What 
is going to be the timeline for submitting the scope of work 
recommendations to FEMA to see the transmission and 
distribution of funds?
    Mr. Stensby. For those very early projects, we would hope 
to get those statement of works back into FEMA by the end of 
the year, or early next.
    Miss Gonzalez-Colon. OK. So, you agree with me that some of 
the transformers and the breakers can be taking 1 or 2 years of 
manufacturing, correct?
    Mr. Stensby. Absolutely. Large power transformers, 
breakers, certainly in today's supply chain environment, often 
have between 6 and 18 month lead times.
    We are presently doing work to work with manufacturers and 
to develop a supply chain way, if you like, to pre-order some 
breakers and some transformers in order that we can better take 
advantage of actually getting substations into operation.
    Miss Gonzalez-Colon. Thank you. And I want to be mindful of 
the time, but I just make this question to let the people know 
that it is not just when the documentation is going to be 
submitted to FEMA, it is how long it would take to have 1 or 2 
years of just manufacturing to get the transformer.
    With that, I yield back.
    The Chairman. OK, the gentlelady yields. Let me now turn to 
the gentlelady from New York.
    Representative Velazquez, you are recognized.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Gil, can you please expand on the outages in Monacillo 
and Costa Sur? Were they caused by transmission issues?
    Mr. Gil. I am sorry, I would like to yield that question to 
the technical engineer, Josue Colon.
    Mr. Colon. Thank you for your question, Madam 
Congresswoman.
    Recently, events that happened in the generation feed that 
caused load shedding that happened in the last 2 months were 
related to some technical or mechanical problems that happened 
on the south coast, Units 5 and 6.
    Ms. Velazquez. Were they caused by transmission issues? 
That is my question.
    Mr. Colon. OK, now I understand.
    Well, on Unit number 6, the failure that happened on the LP 
pressure of the turbine, we have information that the cause 
initiated with a failure on a transmission line. But 
specifically, if we can achieve or assign that failure to the 
transmission line alone, no, we don't have that kind of 
information at this point.
    Ms. Velazquez. Mr. Gil, you make reference to Costa Sur, 
where, in your statement, you alluded about generation issues, 
didn't you?
    Mr. Gil. Yes, I did, Congresswoman. And actually, it was on 
August 22, and the transmission line fault led to a voltage 
fluctuation that affected generating facilities in the south, 
including Costa Sur.
    Ms. Velazquez. OK.
    Mr. Gil. Those fluctuations actually caused Costa Sur's 
Unit 6 to go off-line, and damaged the steam turbine rotor----
    Ms. Velazquez. OK. Thank you. My time is limited.
    Mr. Stensby, if generation is the issue, then why is it 
taking longer to repair interruptions since LUMA took over?
    Mr. Stensby. I think we need to understand, Congresswoman, 
that both the transmission distribution and the generation 
system is in a very challenging and precarious state. I don't 
think it is one or the other. I think it is both, for sure.
    Some people are seeing shorter outages. Some people are, 
indeed, seeing longer outages since LUMA took over, and I did 
talk about some of the early----
    Ms. Velazquez. Well, in fact, during the months of June, 
July, and August 2021, the average time for repairs was 323 
hours, compared to PREPA's 155 hours last year, when PREPA was 
managing transmission and distribution.
    Mr. Stensby. Yes, and those----
    Ms. Velazquez. And those are the facts.
    Mr. Stensby. And those are under-reported statistics that 
we showed in front of the PREB from last year, and I did talk 
about some of the challenges we had in actually getting our 
equipment and our teams to work in June because of, frankly, 
union blockades.
    But yes, we are indeed----
    Ms. Velazquez. Sir, how many linemen does LUMA currently 
have who are employees and not hired contractors?
    Mr. Stensby. We have approximately 900 employees in the 
field that you would call the equivalent of what PREPA used to 
refer to as line workers.
    Ms. Velazquez. And given the current energy crisis in 
Puerto Rico today, are you planning to hire more?
    Mr. Stensby. We will continue to train, and we will 
continue to hire more, indeed, especially for the large amount 
of FEMA and rebuilding work that will be required----
    Ms. Velazquez. OK, out of the 900 workers that you have 
today, how many of those had no experience working on Puerto 
Rico's electrical system prior to June 1?
    Mr. Stensby. I would say a very large portion of those have 
Puerto Rican experience, but I don't have the exact number, 
ma'am.
    Ms. Velazquez. Can you please provide the exact numbers to 
the Committee?
    Mr. Stensby. Yes.
    Ms. Velazquez. Sir, how many LUMA employees and executives 
earn over $200,000? And how many earn over $500,000?
    Mr. Stensby. I am not going to provide salary information 
regarding our employees, ma'am.
    Ms. Velazquez. You are not? So, sir, do you believe in 
transparency?
    Mr. Stensby. I completely do, which is why we were posting 
customer outages when PREPA did not----
    Ms. Velazquez. So, why do you refuse to this day to comply 
with the request from the Puerto Rican Legislature, whose 
responsibility is to enact public policy based on what is 
working and what is not? And if they don't have that 
information, how do you think the Puerto Rican Government could 
exercise oversight?
    Mr. Stensby. There is substantial oversight under our 
contract. It follows Act 120, both from the PREB, from the P3 
Authority, and from PREPA. And LUMA is in complete compliance 
with that oversight, and all of that, all of those laws.
    The Chairman. Thank you.
    Ms. Velazquez. I yield back, Mr. Chairman.
    The Chairman. The gentlelady yields. Let me now invite 
Representative Gohmert.
    You have 5 minutes. Sir, you are recognized.
    Mr. Gohmert. Thank you, Mr. Chairman. And I appreciate the 
witnesses being here today.
    Since the Texas grid was mentioned earlier, let me point 
out Texas had been spending a great deal of its resources in 
moving toward what is called green energy, with more solar, 
more windmills, and what not. If that is what any area relies 
on, there are going to be times when you don't have energy, and 
that means you have to have twice as many transmission lines 
going from something that you know you can count on to the same 
users.
    But aside from the additional cost, the Texas grid went 
down earlier this year, but there had been a study previously, 
an analysis, that indicated that Texas needed to winterize its 
natural gas facilities so that that would always be there. 
Well, Texas was so busy trying to be green that they didn't 
winterize what was needed in time of emergency. So, those were 
areas that froze up because of the winter storm.
    That is probably not going to be a major problem for Puerto 
Rico, having facilities freeze up. But it does point to the 
fact, again, if you are relying totally on green energy, you 
better have standby ready to go. And Texas, unfortunately, 
didn't, due to this pushing of more green energy without taking 
care of what you could rely on in a disaster.
    And by the way, the $2.2 billion in grants and Federal 
loans to the green energy concave mirrors that magnified 
sunlight at three different towers, they burned up one of the 
towers. So, in a quick, cheap way to deal with it, they quickly 
built a natural gas facility. So, I would just encourage that 
for Puerto Rico's consideration. It is cheap. It helps clean up 
the air, and can be amazingly helpful.
    Mr. Laboy, I wanted to ask you--and if it has been 
answered, I missed it, and I apologize--but how much damage 
remains unrepaired, unfixed, unreplaced from prior hurricanes 
and storms with regard to the grid, or the generation of 
electricity?
    Mr. Laboy. Yes. So, first of all, again, as I stated in my 
testimony, our role, as recipients and administrators, is to 
provide the technical support to the subrecipient--in this 
case, PREPA.
    Mr. Gohmert. OK, so you don't know.
    Let me ask, is there anybody that knows how much was 
damaged in prior storms in the way of generating facilities or 
capacity or grid that is not repaired?
    [No response.]
    Mr. Gohmert. Anybody know?
    Well, if nobody knows, out of these experts--yes, please.
    Mr. Stensby. I can offer--and perhaps Fernando Gil can 
chime in--but the vast majority of the FEMA funding that has 
been assigned for the T&D system here is a result of the 
storms, and then the Build Back Better exercise.
    I can tell you today that very little of it has been fully 
restored to a new and fully functioning system. That is, in 
fact, the exercise that is in front of us.
    Mr. Gohmert. Well, OK, that is what I wanted to know, and 
that sounds like----
    Dr. Irizarry. Congressman?
    Mr. Gohmert. Yes, go ahead.
    Dr. Irizarry. My name is Agustin Irizarry.
    Mr. Gohmert. Right, right.
    Dr. Irizarry. About a year after Hurricane Maria, 99 
percent of the people in Puerto Rico had electricity. It took a 
year or so, but the system was restored.
    Mr. Gohmert. Yes, but apparently there is still a lot of 
equipment and things that need to be replaced or repaired. But 
I mean, we have that situation here. You run out of 
electricity, you can get it up and going, but for the long term 
it is not helpful.
    Thank you, Professor. It just sounds like we have a lot of 
work remaining to do in Puerto Rico, and I appreciate your 
being here.
    I yield back.
    The Chairman. Thank you, Mr. Gohmert. Let me now invite the 
gentleman from Florida.
    Congressman Soto, you are recognized, sir.
    Mr. Soto. Thank you, Chairman. Puerto Rico faces major 
challenges. The people need reliable power. The blackouts need 
to stop. And we also need to work together to boost renewable 
and clean energy.
    I want to talk first about reliable power. As a brief 
history, Puerto Rico had a nearly totally government-run 
utility system, PREPA. This is an outlier. No state has a fully 
run government system. All states have public and private 
systems to encourage competition and avoid political patronage 
and corruption.
    As a result, their focus for years was on keeping rates 
low, without making long-term investments to maintain and 
upgrade the grid. Add in an economic crisis, the debt, 
Hurricane Maria, and earthquakes. That has all decimated, 
together, a poorly maintained system. And now the people suffer 
as a result.
    The Puerto Rican Government finally made a decision to 
increase competition by contracting with LUMA to handle 
transmission this summer. LUMA's job is to maintain and fix the 
very power lines that have been neglected for decades. We 
applaud LUMA for working with IBEW. IBEW trains some of the 
best electrical workers on the planet.
    Sadly, the transition hasn't been smooth. Many PREPA 
employees--I have heard over a third, and we will get to that 
in a moment--didn't transfer to work over to LUMA. I understand 
the disappointment of some local unions in Puerto Rico who 
opposed the transition, even after the transfer happened. But 
sadly, this discouragement slowed down the process of repairing 
and maintaining the grid. It slowed down the hiring of new 
people, and training of new people and existing folks from 
PREPA, and contributed to the blackouts.
    We need to conduct meaningful oversight of LUMA and stop 
the blackouts. But this Committee also can't be blind to the 
facts that they inherited--LUMA and IBEW--inherited a disaster 
of a grid just a few months ago this summer.
    The second point I want to make is on renewable energy. We 
applaud the Puerto Rico Legislature for 100 percent renewable 
by 2050. This goal was incredible to boost renewables, 
especially rooftop solar, wind, hydro, and other clean 
electricity. The reality, though, is a stark difference. There 
are six diesel plants: four fuel oil plants, one coal plant, 
and one gas plant currently operating.
    First of all, diesel and fuel oil, it is the most 
expensive, it is the highest pollution, and it is the stone 
ages. No one in the states has this anymore. The diesel fuel 
oil and coal plants have to go, and that is my message to PREPA 
and to the Fiscal Board.
    Natural gas is a good bridge fuel, and the future is in 
wind and solar. PREPA must take seriously the Puerto Rico 
Legislature's new renewable goals. This Committee supports 
those goals. We urge PREPA and the Fiscal Board and, most 
importantly, the Puerto Rico Government to work with community 
solar organizations for rooftop solar, make conscious efforts 
to increase wind, including in the south, and, overall, to 
increase resiliency to combat climate change and energy 
independence.
    The bottom line: we need to conduct meaningful oversight. 
And the good news is we have Hurricane Maria recovery funds, 
and soon Build Back Better funds to help with this transition: 
$1.9 billion for grid funds that have already gone out to 
notice; $12.1 billion in HUD funds that have been released 
recently by the Biden administration.
    Mr. Stensby, my question to you, what was the percentage of 
employees that didn't transfer over from PREPA to LUMA, and how 
has that affected blackouts?
    Mr. Stensby. Thank you very much, Congressman. Two points 
that I would like the opportunity to make is that through our 
recruitment process, we put training and safety of all of our 
people first, and so we were very thorough----
    Mr. Soto. Mr. Stensby, I apologize, but my time is limited. 
I just need to know how many folks transferred over.
    Mr. Stensby. So, of the slightly over 3,000 employees we 
have today, almost 1,300, or roughly 1,300, came from PREPA.
    Mr. Soto. OK, so a large share did not make the transition.
    Mr. Gil, what do you think it is going to take to 
transition away from diesel, coal, and fuel oil, the dirtiest 
of fuels, the most expensive of fuels for Puerto Rico?
    Mr. Gil. Congressman Darren Soto, thank you for everything 
that you do for Puerto Rico.
    But, basically, the goodwill, the ability, and the 
possibility of the people making that, we need to change that. 
That is not one thing or the other, that we have to be in 
balance here, that we have to drive--like, obviously, LNG, 
there is a combination that you can use, like hydrogen in it, 
and create green hydrogen. It is more efficient, it reduces 70 
percent the CO2 emissions from it.
    So, it is a combination, and then transition when that 
technology is even more advanced. Solar technology and 
renewable technology advance in a second, as computers did back 
in the day. So, we need to, obviously, make that balance, and 
be careful about the environment, but we have to also take into 
consideration Puerto Rico is a small island.
    The PV panel systems, they cannot be disposed in landfills. 
They should be recycled in the United States. There are not 
enough recycling facilities for PV panels. So, those are the 
things that, in terms of taking care of the environment, we 
have to consider for energy, and specifically for the 
betterment of our people.
    Mr. Soto. Colleagues, let's stop the blackouts, and let's 
make sure we ensure a more clean energy and renewable energy. 
Let's focus on the achievable, and we can do it together.
    Thank you, Chairman. I yield back.
    The Chairman. The gentleman yields. Thank you. Let me now 
ask Representative Graves.
    You are recognized for 5 minutes.
    Mr. Graves. Thank you, Mr. Chairman. I want to thank the 
witnesses for joining us today. Certainly, a topic that we have 
spent a lot of time on in this Committee. And again, thanks for 
being with us.
    I guess the first question, maybe for Mr. Fontanes--I am 
not certain if you have expertise here or not, but I heard 
questions earlier about the cost effectiveness of this 
agreement with LUMA. Was that a sole source process? Was it an 
open competition? How did that occur?
    Mr. Fontanes. Thank you, Congressman. This was, actually, a 
long process that took close to 2 years. We had five 
participants in the procurement process, originally.
    At the end, we received two different proposals. And LUMA 
was the entity selected, so it wasn't a sole source. It was a 
competitive process through the P3 Act, and our structure and 
our process, and we ended up with two solid proponents out of 
the five that were originally qualified presenting proposals.
    Mr. Graves. Thank you. And is it your opinion that LUMA, at 
this point, is complying with the contract requirements that 
they are obligated to comply with?
    Mr. Fontanes. From a contract perspective, they are 
complying with the requirements of the contract. Yes.
    Mr. Graves. OK, thank you. It was noted earlier that there 
was some lack of transparency, or there wasn't value to 
taxpayers, and I guess I was struggling with understanding 
that. But I thank you for clarifying.
    Mr. Stensby, this really is an amazing situation. I 
represent South Louisiana, which we certainly have been subject 
to hurricanes. But every time I look back at this, I look at 
the amount of money that is being spent in building the system 
back.
    Certainly, you all have experience operating around the 
United States and Canada, I believe. Have you ever seen a 
situation where you have a utility operating like this, perhaps 
with the percentage of debt that is out there, the number of, I 
guess, the amount of theft of electricity that is out there? 
Have you all ever operated in an environment like this?
    Mr. Stensby. No. I would say, frankly, PREPA--and not to 
cast any aspersions on my current colleagues at PREPA, but 
PREPA is unquestionably--call it the worst performing utility 
in the United States, and by each and every measure.
    But I think that what that speaks to, Congressman, is the 
need to, in fact, make meaningful change. And it also probably 
speaks to some of the resistance that we have been seeing, 
whether it is on customer service, whether it is on outage 
response, whether it is on labor relations, whether it is that 
reinvestment.
    Certainly, there is lots of experience with the 
reinvestment of this large capital program, and that is a very 
important part of this. And there is lots of experience with 
reconfiguring and bringing in better business processes. But I 
would say, in terms of the basic--it took two decades for PREPA 
to get in this state, we shouldn't forget, and that is why it 
is so important to get started, and continue to push ahead.
    Mr. Graves. And I want to associate myself with Congressman 
Soto's comments--Puerto Ricans deserve electricity, they 
deserve better service, and we are investing extraordinary 
amounts of taxpayer dollars to get there.
    Could you talk a little bit about the role, maybe, that the 
project labor agreement has in either benefiting or perhaps 
challenging your ability to do your job?
    Mr. Stensby. For certain. As I mentioned, we have a 
collective bargaining agreement now with our own workers. We 
have also rolled out a project labor agreement, which will be 
critical to supporting stability and predictability, as this 
large amount of FEMA funding is used to rebuild the grid.
    I mean, it is very important that we get qualified, 
skilled--we put safety first. And, really, we do put workers at 
the front of this equation, and Puerto Rican workers. And that 
was why, between LUMA and the IBEW, we have rolled out the PLA 
to bring that certainty so that we can deliver for customers.
    Mr. Graves. OK, thank you, and I am going to ask you a 
question for the record on that one.
    But last question, I am seeing some of these targets for 
renewables in the future. One, as I understand, the current 
effort to try to add $.04 to the bill is being rejected right 
now, because folks are saying they can't afford it. What is 
your----
    [Audio malfunction.]
    Mr. Graves [continuing]. Achieve these renewable direction 
obligations or goals, and the cost associated with that?
    Mr. Stensby. Well, I think what LUMA is really focused on 
is to get a larger amount of renewable integration here, you do 
require a reliable transmission and distribution system. So, 
our focus is--at the end of the day, if you like, we are the 
transportation company, right?
    And we all know, and we believe at LUMA, that the better 
the T&D system is, the more renewables can be integrated into 
the system and, in the end, still provide reliable and 
affordable electricity. So, that is where our focus is, 
Congressman.
    Mr. Graves. Thank you, Mr. Stensby.
    Mr. Chairman, I want to thank you. I just want to make note 
that I think, as we move forward, we need to be looking 
carefully at the price sensitivity of the investments that are 
being made to ensure that we are not going to be pricing Puerto 
Ricans out of power with the price sensitivity they apparently 
have.
    I yield back.
    The Chairman. The gentleman yields. Thank you. Let me now 
recognize Representative Torres.
    Mr. Torres, you have 5 minutes. Thank you.
    Mr. Torres. Thank you, Mr. Chair. I have a quick yes-or-no 
question for the CEO of LUMA.
    Does your company operate the total energy distribution and 
transmission system on the island?
    Mr. Stensby. We are responsible for the transmission and 
distribution system. PREPA today remains responsible for the 
operation of the generation system.
    Mr. Torres. But everywhere on the island, right?
    Mr. Stensby. Sorry, yes, all across the island, and also--
--
    Mr. Torres. Because I have heard the word ``competition.'' 
But if one company is managing all the energy distribution and 
transmission infrastructure, that is not competition, that is 
objectively a monopoly.
    So, LUMA's management of Puerto Rico's electric grid is 
cause for concern for me. Power outages and service disruptions 
remain prevalent. Customer complaints are said to have risen. 
Response times are said to have fallen. I have heard multiple 
mayors fault LUMA for the lack of communication.
    The Mayor of Juana Diaz, for example, said it would have 
taken PREPA 4 to 5 hours to arrive at his town. By contrast, it 
takes LUMA 2 to 3 days. So, by every indication, LUMA is 
failing the people of Puerto Rico.
    And my first question is directed to PREPA. If LUMA 
continues to under-perform, does the operation and maintenance 
agreement allow the Government of Puerto Rico to reverse the 
privatization of the electric grid?
    Mr. Gil. Congressman Torres, we would like to be the 
expertise on that, and the monitor of that contract is the P3 
Authority. So, that question should be addressed to the P3 
Authority----
    Mr. Torres. Are you a party to the agreement?
    Mr. Gil. We are a party of the agreement, yes.
    Mr. Torres. So, as a party to the agreement, you should 
know if the new operator under-performs, whether you have the 
right to retrieve control of the electric grid. As a party to 
the agreement, that is a relavant fact to now.
    Mr. Gil. Well, obviously, if it is declared in default by 
any chance, but they will have to take care of it.
    Mr. Torres. Are you suggesting to me that the people of 
Puerto Rico are stuck with LUMA, regardless of performance, for 
the next 15 years?
    Mr. Gil. I am sorry, I am saying, obviously, we have to 
respect contracts. If not, if we don't do that, there is a 
constitutional----
    Mr. Torres. I am asking are there performance standards 
built into the contracts?
    Mr. Gil. Performance standards built into their contract 
are evaluated. If they are not performing that well, they don't 
receive the payment that they should receive for it, in that 
sense.
    If we stuck to it, it is a matter of, we have the force 
here, also. But in the meantime, we have to respect their 
contracts, and that is our position in that sense. 
Transitioning one day to another is almost impossible.
    We took a year with LUMA actually on a front-end 
transition, and then afterwards----
    Mr. Torres. Let me move on. I just want to reclaim my time. 
As everyone knows, Puerto Rico is fundamentally dependent on 
imported fossil fuels. In order to facilitate the transition to 
clean energy, Puerto Rico passed a law, the Puerto Rico Energy 
Policy Act, which requires 40 percent clean energy by 2025; 60 
percent by 2040; 100 percent by 2050.
    Several obstacles, however, have emerged on Puerto Rico's 
path to clean energy, and the greatest among those obstacles is 
the Financial Management and Oversight Board, which rejected 16 
solar projects that would have brought renewable energy from 2 
to 20 percent of Puerto Rico's electricity. So, I feel like we 
are reminded once again that the United States is colonizing 
Puerto Rico in more ways than one. Not only is the United 
States subjecting Puerto Rico to higher fossil fuel costs via 
the Jones Act, but the United States, through the Financial 
Management and Oversight Board, is also actively preventing 
Puerto Rico from escaping those higher costs and transitioning 
to clean energy.
    Climate change is a financial risk, and by sabotaging the 
transition to clean energy, the Financial Control Board is 
planting the seeds of financial instability on the island.
    Now I have a question for PREPA. According to the COO of 
Applied Energy Services, he said the following quote: ``We have 
the intention of transforming our energy production from coal 
to renewables before the 2027 deadline. If we reach an 
agreement today, we could do it in 2 years.''
    My question for PREPA is, when are you going to reach an 
agreement with AES? Can you get an agreement done immediately, 
so that the coal power plant can be closed within the next 2 
years?
    Mr. Gil. Congressman Torres, I will take that question. And 
obviously, right now, we are running RFP processes, as 
requested by the FOMB. Later on, the FOMB changed the story, 
and says that we don't have to run the procurement process. In 
that sense----
    Mr. Torres. I am with you on that piece. But can you reach 
an agreement with AES today, or in the near future, that could 
lead to closing of the plant?
    Mr. Gil.  It will be irresponsible on my behalf to take 
that position. Actually, right now, without the consent of the 
whole board and everything----
    Mr. Torres. Before my time is up, what is the due date for 
the latest RFP regarding renewable energy? I know it was 
originally May, but it was delayed. What is the new due date?
    Mr. Gil. There is already a first tranche. Second tranche 
is coming up next week in October, like the notice. And 
afterwards, every 6 months we will have another RFP for it.
    Mr. Torres. OK, thank you.
    The Chairman. The gentleman yields. Thank you very much. 
And let me now ask Mrs. Radewagen--she is recognized for 5 
minutes.
    Mrs. Radewagen. Thank you, Mr. Chairman, and thank you for 
holding this important hearing.
    At this time, I would like to just yield all of my time to 
Representative Gonzalez-Colon.
    Miss Gonzalez-Colon. Thank you, Amata, and thank you, 
Chairman.
    And coming from an island, I know she understands how 
difficult it is for islanders, like often in Puerto Rico, just 
to rely on the generation of electricity, not knowing if we are 
going to have power tomorrow or not. So, the next question will 
be for me, in terms of PREPA and LUMA both.
    Is our system near to a complete collapse here soon?
    I mean, not just in terms of generation, but in 
transmission. I just need a yes or no answer. Engineer Colon?
    Mr. Colon. Thank you for the question, Madam Congresswoman.
    The answer is no, but I want to expand my answer. Our 
system is in a critical condition right now in the generation 
side. As you know, we have many of our generating units not 
available because a lack of maintenance, and we are in an 
effort to bringing them back.
    And in the transmission system, also, as you may know, and 
the other Congressmen, the system was repaired after the 
hurricane, but not restored.
    So, to answer your question properly, both sides of the 
equation are under critical condition, but not to collapse at 
this point.
    Miss Gonzalez-Colon. Is the transmission distribution 
system near to a collapse?
    [Pause.]
    Miss Gonzalez-Colon. LUMA?
    Mr. Stensby. I would answer in a very similar way. No, but 
it is critical that the re-investment continue.
    And as we think about generation outages, it is only 
through the generation load shedding that we have been able to 
avoid the collapse. That is why it is so critical that we 
continue on with repairs on generation, and repairs on 
restoration and transmission.
    Miss Gonzalez-Colon. OK, then I will submit some questions 
for the record, as well.
    The first one will be for PREPA and for LUMA. The FEMA 
funds that are allocated to the island are $2.4 billion for 
transmission distribution and $4.9 billion for distribution. I 
would like to know, how is the process expected to be managed, 
what is the timeline for PREPA and for LUMA to submit for FEMA 
for those scope of work, and COR3, the status of all of it, who 
is going to be answering for maximizing the use of those funds 
to build a system that people can trust.
    I know that there is a lot of comments about works in the 
shovel-ready projects that were requested for renewables in 
PREPA that were not approved by the Board. My question to Mr. 
Fermin and to Mr. Gil--again, for the record--if PREPA or the 
P3 challenge that FOMB decision of canceling those renewable 
contracts, and why. If there is any way to get those in the 
line, when they are shovel-ready, and what was the main reason 
for that. I think that that is not the scope of the award, that 
is something that should be in the hands of PREPA, in the case 
of generation.
    My next question will be, how long will it take for all 
those units that are going to be receiving maintenance in the 
next month. Even private generators and the government 
generators are going to be receiving maintenance. So, are we 
going to see more of these related outages across the island?
    Do you have a plan that has been informed to the public in 
that sense?
    And remember, there are many communities that rely on 
energy to pump their water. So, if you don't have power in some 
rural communities, they will not have water usage at the same 
time. That is the reason how this is so difficult to manage to 
the rest of the island.
    Mr. Gil?
    Mr. Gil. Thank you, Congresswoman Gonzalez-Colon, for a----
    The Chairman. If the gentleman would answer as quickly as 
possible, because time is over already.
    Mr. Gil. I will. Actually, from our end, we have about 40 
projects totaling $2.5. There are already $78 million invoices 
and cost, and we still have pending $7.3 for the outstanding 
reimbursement for it.
    In terms of the FOMB, no, they shouldn't, but they did, 
based on the amount of money, actually, that it will cost, or 
the amount of money that it was projected, based on the fiscal 
plan for it, and the IRP. And hence, if those projects were 
made back in the day, today we wouldn't have that problem. 
Nonetheless, politics--and because it was done by the last 
administration--they took it out.
    And then the FOMB recently, after more than 80 years, 
actually requested the Governing Board to see that project. We 
went out there, we negotiated with more than 16 of those. And 
then afterwards they make the decision that only two of them 
were going to be. If we have the hands tied to it--yes, we do--
but that is the way that our company is working right now.
    The Chairman. Time is up, thank you, sir. I understand that 
there is a lot of specificity to answers, but being long-winded 
is another issue. Let me now recognize Mr. Tonko.
    You have 5 minutes, sir.
    Mr. Tonko. Thank you, Mr. Chair. Thank you for bringing 
such great focus to a very important concern for the people of 
Puerto Rico.
    As Puerto Rican communities recover and rebuild from the 
COVID-19 pandemic, as many work or attend school virtually, and 
as temperatures rise and storms worsen, Puerto Ricans need 
reliable and affordable electricity, more than ever. And yet 
the island's electric grid, with less than 3 percent renewable 
electricity, continues to plague Puerto Ricans with, often, 
life-threatening outages, while costing them double the average 
U.S. rate.
    So, Mr. Gil, what plans do you have in place to meet the 
renewable energy goals established by Act 17?
    Mr. Gil. Well, as it is right now, Congressman, we are 
running the RFPs requested to pick the best option for the 
island, and at the same time, when all the grid modernization 
comes into play, then the idea of the virtual power plants can 
come to fruition, and we may have an excess of those.
    Mr. Tonko. Professor Irizarry, as extreme weather events 
become more frequent, what risks will the current plan pose, 
and how would solar energy bring more reliability and cost 
savings to Puerto Ricans?
    Dr. Irizarry. Thank you, Congressman. We already saw what 
happens when we face a Category 4 or Category 5 hurricane. The 
transmission system collapses. And that will happen again, even 
if you rebuild it. If you rebuild it up to code, current codes, 
it will still not withstand a Category 5 hurricane.
    What we are proposing is renewable energy on the rooftop of 
homes and commerce, with storage. That proved to be the most 
resilient alternative to the hurricanes, like Maria. People 
that had a solar rooftop system with batteries continued with 
electricity provided from their solar PV systems.
    I don't see how investing in a technology of the 20th 
century will bring us to a 21st century condition. We need to 
embrace new technology, and we have the know-how on the 
technology, and it is today cheaper than the alternative. So, 
we encourage the government to review their plans to invest in 
old technology that is vulnerable to stronger storms, as the 
ones we are seeing right now.
    Mr. Tonko. Thank you very much.
    And Ms. Santiago, what obstacles currently impede a greater 
investment in energy sources like solar on the island?
    Ms. Santiago. Thank you for the question, Congressman. 
Primarily, the LUMA contract right now is the largest obstacle 
we are seeing for integration of renewables. In fact, at a 
hearing before the Energy Board, one of LUMA's representatives, 
a guy named Lee Wood, said that FEMA funds could not be used 
for rooftop solar. He was corrected immediately by the board 
personnel, but that has been LUMA's position.
    They want to, as Professor Irizarry just mentioned, rebuild 
the old 20th century transmission system, that will be knocked 
down by the next hurricane. And that is taxpayer money to the 
tune of $9.6 billion or more that will just be wasted.
    So, what we are proposing is--and what is really popular in 
Puerto Rico, and anyone with any kind of means is doing--is 
acquiring rooftop solar. So, PREPA, with that allocation from 
FEMA, can do that for low- and middle-income, and businesses 
and residents all over Puerto Rico, and provide lifesaving 
resiliency.
    Mr. Tonko. Thank you. And I would think an island such as 
Puerto Rico would be a classic example of solar opportunity. 
That would just be a natural go-to.
    Ms. Santiago. Yes.
    Mr. Tonko. Mr. Stensby, Ms. Santiago's testimony mentions a 
backlog of more than 5,000 systems on the island waiting to 
implement solar technology.
    So, what are you folks doing to address this backlog, and 
what challenges remain?
    Mr. Stensby. Yes, thank you very much for the question, 
Congressman.
    In fact, when we began on June 1, it was a very long 
backlog. And as we pointed out, some people have been waiting 
for as long as 2 years. We have made substantial efforts in 
reducing that backlog. We are processing new solar connections 
more than seven times what PREPA had been able to do prior to 
that. And we believe, by the end of this year, we will have 
completely eliminated the backlog.
    And I think LUMA--people are trying to portray us as anti-
solar, and it is absolutely not true. We just released, in 
fact, a hosting map on our website, so that people who are 
interested in solar can more easily connect and make decisions 
about their solar investments. So, we want to be very clear. We 
are supportive of rooftop solar, and we are doing everything in 
our power to support that.
    Mr. Tonko. And I would hope that includes storage.
    With that, my time is up. Mr. Chair, I yield back, and 
thank you so much for the hearing.
    The Chairman. Thank you, Congressman. The Congressman 
yields. Let me now recognize Mr. McClintock.
    Sir, you are recognized.
    [Pause.]
    The Chairman. Mr. McClintock, sir, you are recognized.
    [Pause.]
    The Chairman. If not, let me go to the next colleague on 
the list.
    Representative Tiffany, you are recognized for 5 minutes. 
We will hold that other for Mr. McClintock if and when he comes 
forward.
    Representative Tiffany?
    [Pause.]
    The Chairman. OK, let me now recognize Congressman Garcia.
    Sir, you are recognized for 5 minutes.
    Mr. Garcia. Thank you, Mr. Chairman.
    Electricity, of course, is something that many of us take 
for granted. But for people in Puerto Rico, it is a matter of 
life and death. Hundreds of thousands on the island are 
currently experiencing outages lasting several days, all while 
already paying twice as much for electricity than what most of 
us in the states pay.
    We are seeing classes suspended, people being forced to 
throw out food, disruptions in medical services, and a family 
in Aguadilla losing everything after a power surge burned their 
house. This would not be acceptable anywhere else. So, why do 
we allow it to happen in Puerto Rico?
    Last year, this Committee held a hearing to pre-emptively 
address concerns around the privatization of Puerto Rico's 
power grid. Yet, a year later, with Puerto Rico on the brink of 
power supply crisis, we have this situation.
    A question for Mr. Fontanes. We heard earlier that, as of 
June 1, more than 3,000 ex-PREPA employees transferred to other 
government agencies. Why did P3 allow for thousands of PREPA 
employees to be transferred, rather than to work for LUMA?
    Mr. Fontanes. Thank you, Congressman, for the question, and 
for the opportunity to address this topic.
    The way Act 120 is established, what the law required was 
that we allowed the PREPA employees the opportunity to make the 
decision that they would like to make, in terms of whether they 
wanted to join a private entity, or they wanted to remain 
within the Government of Puerto Rico.
    During the transition period we did everything within our 
power to try to provide information to the employees at PREPA, 
so that they could weigh in on what was better for them, in 
particular, and they could make the decision they would like to 
make.
    So, at the end of the day, most of those employees decided 
to stay with the government rather than to join PREPA. I would 
have to say, in my opinion, that it is a shame. LUMA provided 
better salaries, the same or better benefits than most of 
these----
    Mr. Garcia. Yes, thank you for your answer. It feels really 
wasteful to let skilled electrical workers serve as drivers or 
security workers, especially at this time of Puerto Rico's 
energy crisis.
    A question for Mr. Stensby. Consumers have reported 
difficulties with accessing LUMA's customer service, especially 
when widespread outages occur. How have employees at call 
centers been trained and resourced to respond to these events?
    And do you feel that LUMA's customer service operation is 
currently meeting the demand for consumers?
    Mr. Stensby. Thank you very much for the question, Mr. 
Congressman.
    What I can tell you is that we trained, ahead of service 
commencement, a very large number of call center agents. We now 
have four call centers around Puerto Rico. It was important to 
us that they were in Puerto Rico. We have almost 10 times as 
many agents as PREPA had, as we moved into the transition.
    What we are seeing is a very large volume of calls. We have 
rolled out a number of digital channels for people, but we are 
seeing large numbers of calls. And frankly, we attribute that 
to the fact that we are answering the phone. Our average answer 
time is in approximately the 10-minute mark, and we are 
beginning to fix the system, so that is----
    Mr. Garcia. Forgive me for reclaiming my time. Is it 
inadequate, sir, yes or no?
    Mr. Stensby. Yes, for today it is, sir, yes.
    Mr. Garcia. Thank you.
    Ms. Santiago, I want to make sure you get a word in. How 
has LUMA engaged with community stakeholders prior to and 
following its acquisition of the T&D system?
    Do you feel that LUMA has sufficiently responded to the 
questions and concerns of community members?
    And you have about 35 seconds.
    Ms. Santiago. OK. No, not at all. Not before, not during, 
not now has LUMA communicated with communities. In fact, we are 
working with a group of 10 community organizations in the LUMA 
performance metrics case, and LUMA this week said that they did 
not have to answer questions about the emergency response plan.
    Now, we have plans here in Salinas, Puerto Rico, that--for 
example, the Aguirre Power Complex is the largest electrical 
complex in Puerto Rico, that the surrounding communities need 
to know what the emergency response plan is for that 
infrastructure, and the transmission system that comes out of 
that infrastructure.
    So, LUMA is not responding at all to community requests for 
information.
    Mr. Garcia. Thank you, Ms. Santiago.
    Mr. Chairman, I yield back.
    The Chairman. Thank you, Mr. Garcia.
    Let me ask the Ranking Member, Miss Gonzalez-Colon, are 
there any Members on your side?
    Miss Gonzalez-Colon. Yes, Mr. Chairman. I can see Mr. 
Obernolte is connected, as well as Mr. Moore.
    The Chairman. Does he seek to be recognized on that?
    Miss Gonzalez-Colon. Yes.
    The Chairman. Mr. Obernolte, you are recognized for 5 
minutes, sir.
    Mr. Obernolte. Thank you very much, Mr. Chairman, and thank 
you to our witnesses on this really critical topic for the 
people of Puerto Rico.
    I had a question for Mr. Gil. I would like to follow up on 
the line of inquiry that Congresswoman Velazquez was pursuing 
earlier. Recently there was an outage on the island of Puerto 
Rico that was tied to several of the power plants going down 
because of clogging of intakes for the generators with brown 
seaweed. And on Friday afternoon, there was a protest by 
hundreds of Puerto Ricans in front of the Governor's mansion 
against these outages. And many of those protesters were angry 
with LUMA.
    But my question to you is should they be angry with LUMA, 
or should they be angry with PREPA, given the fact that PREPA 
is responsible for generation, and LUMA is just responsible for 
distribution?
    Mr. Gil. Congressman, actually, at that time they could 
have been mad at both--it was a matter of generation with us--
you have the sargassum or seaweed, in that sense. Those filters 
are already being procured in that scenario. They are extremely 
expensive. There was something that--it shouldn't happen.
    But at the same time, there being other outages not related 
to generation, that has been creating the emotions around there 
and, obviously, other political motivations, and the opposition 
to it. It is fueling that fire.
    Mr. Obernolte. OK, so what could LUMA have done about that 
particular outage?
    Mr. Gil. In terms of the generation, I mean, they don't 
have any type of control in the generation. They do have the 
dispatching of it, of the generation by itself, meaning we can 
start transmitting and distributing.
    So, when it is related to outages because of transformers, 
substations, or any other particular poor wiring, or something 
like that, it is related to the T&D. When it is related to 
generation by itself, any machine that broke or whatever, it is 
related to us, in PREPA.
    Mr. Obernolte. Right, OK. So, talking about that outage in 
particular, can you give us kind of a layman's explanation of 
what happened with the seaweed, and why it caused such a 
problem at those two plants?
    Mr. Gil. Well, basically, to give you the proper answer and 
the correct answer, Mr. Colon is the expert in generation, so 
he will take that question.
    Mr. Colon. Thank you for that question, Mr. Congressman.
    As Fernando explained, what happened over there was that a 
high amount of seaweed or sargassum entered the intake of water 
that is used in the power plant for the steam that it is used 
to move the turbine. The reason for that was that we have five 
sets of screens that are using for filter or prevent those 
seaweed to enter the channels that are tied to the condensers. 
But at that time, when this happened, all of the five filters 
failed, and that was the main reason that led to the shutdown 
of the units on Aguirre, and also to reduce the amount of 
energy that one of the generation can produce.
    And LUMA doesn't have anything to do with that. It was a--
--
    Mr. Obernolte. OK, are they at surface level, or are they 
below the surface?
    Mr. Colon. Both, but the majority of the seaweed was on the 
surface, but also are below the water level.
    Mr. Obernolte. Right. And, as I understand it, these are 
large, floating mats of brown seaweed. Is that correct?
    Mr. Colon. Yes.
    Mr. Obernolte. So, I am just a layman, I am not an expert, 
but why even allow those mats of seaweed to come close to the 
inlets?
    I mean, couldn't you just take some surface watercraft and 
go collect that, or push it away, or erect a floating boom or 
something, if you knew that was a hazard?
    Mr. Colon. Well, actually, that was a failure from our 
people in the Aguirre power station. Actually, the power plant 
has watercraft and equipment to prevent those seaweed from 
getting close to the intake, but they also have a lack of 
personnel to conduct that kind of maintenance service for this 
kind of process. And all of this leads to what happened, and we 
are now taking the actions required to prevent that.
    Since that time, the unit returned to service without any 
problem from the seaweed. And we are putting all of our efforts 
to prevent that from happening again, even though we don't have 
the equipment, the new equipment that is needed to replace the 
broken ones.
    The Chairman. The gentleman yields. Now let me turn to the 
next, thank you for the questions, and the gentleman yields. 
Let me recognize Representative Tlaib for her questions.
    Representative, you are recognized.
    Ms. Tlaib. Thank you, Chairman. I am so sorry, I have been 
having technical difficulty today--phone on my laptop, so 
please bear with me. Thank you so much for holding this 
important hearing.
    While Puerto Rico may be very far from my district, the 
problems we are talking about seem so familiar. I mean, this 
summer, hundreds of thousands of people in the Metro Detroit 
area, in my community, lost power, some for as many as 6 to 7 
days, Chairman. Our investor-owned, shareholder-centered 
electrical utility company, called DTE, has raised rates by 
nearly $1 billion in the last decade, while having some of the 
worst reliability and performance in the whole nation. So, it 
is incredibly important for us to understand the connection 
between many of our districts and what is happening to the 
Puerto Rican people.
    In the last several weeks, numerous press accounts have 
emerged about the impact, as you all know, of the ongoing, 
unreliable, and substandard electrical service for Puerto Rican 
residents. These include reports of constant and extended 
outages that we have been talking about, lasting more than 24 
to 48 hours in communities with many elderly residents, and 
residents with chronic illnesses. And we all, as Members of 
Congress, have experienced and heard from our residents about 
how their health and everything is connected to that access to 
electricity.
    I know the Mayor of San Juan is spending nearly $1 million 
to buy generators for water pumps, so that power outages do not 
continue to result in water outages. And the Secretary of 
Commerce and Economic Development has denounced the impact of 
poor service on economic development, and so forth.
    We heard reports of power surges regularly destroying 
people's appliances--you all know that--even causing house 
fires, like an incident of a family that lost everything in 
Aguadilla after a power surge burned their house down.
    So, Mr. Chairman, we know that this terrible level of 
service isn't acceptable for the Puerto Rican people. It isn't 
acceptable in Michigan either, and it shouldn't be acceptable 
anywhere in our country or in our world.
    Privatizing electrical service is a disaster for the Puerto 
Rican people, because private utilities serve investors, not 
the public. I am going to say that again. Private utilities 
serve their investors, not the public. Reliability has worsened 
when it became private, and so we need to basically make sure 
that we are speaking that truth as we talk about these issues.
    Mr. Stensby, as of June 1, more than 3,000 ex-PREPA 
employees transferred to other government agencies, rather than 
work for LUMA. How many workers and crews does LUMA have 
assigned to the municipalities of Aguadilla and, is it Ponce?
    Mr. Stensby. As I testified earlier, we have 900 employees 
that are in the field today. I can't tell you precisely how 
many are assigned to those two municipalities, Congresswoman.
    Ms. Tlaib. Yes, so they left, they left LUMA. How many left 
LUMA?
    Mr. Stensby. How many left LUMA?
    Ms. Tlaib. So, more than 3,000 ex-PREPA employees 
transferred--you said 3,000--and then they left, and you said 
900 went to the municipalities.
    Mr. Stensby. No. I think it is a mischaracterization. LUMA 
recruited and, as Mr. Fontanes had testified, for an employee 
that was working for the Government of Puerto Rico, they had a 
choice to join LUMA or take a transfer to another agency within 
the government.
    Ms. Tlaib. And 3,000 of them said, ``We are going to leave 
LUMA.''
    OK, what is the average crew response time for outages?
    Mr. Stensby. The average response time across the most 
recent month is, in round numbers, in the 5- or 6-hour time 
frame.
    Ms. Tlaib. How many complaints has LUMA Energy received 
regarding voltage--what they call fluctuations--damaging home 
appliances?
    Mr. Stensby. I don't have that specific number with me.
    Ms. Tlaib. I would love if the Committee can follow up and 
get that information.
    How much money has LUMA Energy received so far under its 
contract?
    Again, I apologize if this was answered before, but I would 
like to know for something else.
    Mr. Stensby. LUMA Energy, during this interim period until 
the point in time when PREPA would eventually move out of 
bankruptcy, earns approximately $7 million a month.
    Ms. Tlaib. OK. How many LUMA employees, executives, earn 
over $200,000, and how many earn over $500,000?
    Mr. Stensby. I think I was asked that question earlier, 
but----
    Ms. Tlaib. And you didn't want to answer, right?
    Mr. Stensby. I am not able to disclose employee salaries.
    Ms. Tlaib. Yes. If you want to get in the business of 
providing a public good, and for the Federal Government to 
subsidize it, or for us to play a part in it, then you 
understand that those salaries are also the public salary. Do 
you understand?
    So, just know that it doesn't make sense that you don't 
want to reveal that. You don't even have to tell me the names 
of it. I think Velazquez and I are just curious how many of 
your employees earn over $200,000, and how many of them earn 
$500,000? I don't need names. I just want to know how many. So, 
if you can follow up, and talk to your legal folks, I think 
they will come back and tell you that that should be actually 
transparent and open.
    Do you know what the median household income is in Puerto 
Rico, sir?
    Mr. Stensby. No, I do not, Congresswoman.
    Ms. Tlaib. It is $20,000, according to the Census Bureau, 
$20,000. So, LUMA has received millions of dollars, and stands 
to receive billions more in an attempt to privatize the grid in 
Puerto Rico over the next 15 years. But the last 4 months have 
been a disaster for the people of Puerto Rico. And 
privatization, I know, will only worsen it.
    So, I just want you, sir, to understand that, if you are 
going to serve the people, you should know what the medium 
income is. You should know what the impact is. And the fact of 
the matter is you failed them just alone in the last 4 months. 
So, please understand that my frustration with all of this is 
because they deserve to make sure that they have access to 
something that is very much a lifeline to medical issues they 
are struggling with, being able to provide for their families, 
of course, food, all those things, appliances, everything is so 
connected to that.
    With that, Chairman, I yield. Thank you very much.
    The Chairman. Thank you, the gentlelady yields. Let me call 
again on my colleague, Representative McClintock, if he is 
available now. If not, Representative Tiffany, if he is 
available. They are recognized, either/or.
    [Pause.]
    The Chairman. If not, let me go to Representative Espaillat 
for his 5 minutes.
    Sir, you are recognized.
    Mr. Espaillat. Thank you, Mr. Chairman. Thank you. I wanted 
to ask a very simple question. I want, really, an honest yes or 
no answer.
    Since LUMA assumed responsibility, have power outages and 
other service disruptions increased, Mr. Gil?
    Mr. Gil. Sorry, we don't have the actual data for that. It 
is something that is related to LUMA, and LUMA should answer 
the amount that they had before, and the amount of outages that 
they have since June 1.
    Mr. Espaillat. Mr. Stensby for LUMA, since you took 
control, or responsibility, have outages and service 
disruptions increased?
    Mr. Stensby. The frequency of outages has gone down, sir, 
and in some months the duration of outages has gone up.
    Mr. Espaillat. Have service complaints increased from your 
customers?
    Mr. Stensby. The calls that we receive have absolutely 
increased, and I believe that is fundamentally because we are 
actually beginning to make a difference, and people are now 
reporting issues in order for us to correct them.
    Mr. Espaillat. So, you are saying that outages have 
decreased, while service complaints have increased? Usually, it 
is the other way around. Usually service complaints increase 
when you have problems, when you have outages and service 
disruptions. But what you are saying is that service complaints 
have decreased--rather, that the outages have decreased, and 
service complaints have increased.
    Mr. Stensby. What I am saying, Congressman, is that with 
PREPA, I think people had a certain level of expectation. And 
now that LUMA has arrived, those expectations have risen, and 
people are indeed engaging with us, and they are beginning to 
see some action. We are replacing more poles, we are improving 
services. And that in itself is causing increased calls and 
interest in its hopes, or it is helping people understand that 
we can and we are making a difference.
    Mr. Espaillat. So, are you saying that responsiveness to 
these complaints have declined, or have increased?
    Mr. Stensby. I am saying the responsiveness has increased. 
We just completed our most recent JD Power survey, and customer 
satisfaction is actually slightly up from before June 1.
    Mr. Espaillat. Mr. Chairman, for the record, I just want to 
state that our records and our office have received information 
to show that, in fact, customer service complaints have 
increased, and responsiveness to the complaints have declined.
    Now I have another question, which is regarding the 
renewable energy transition. Reports provided to my office show 
that PREPA has experienced multiple delays in the Energy 
Bureau's IRP and resulting RFP schedule for procuring large 
amounts of solar power battery storage. Are you aware of this 
issue, and what has been causing the delays in PREPA's purpose 
procurement process? This is for PREPA.
    Mr. Gil. Sir, Congressman Espaillat, actually, in terms of 
an answer to relate this question to the PREB, in that sense, 
but we have the obligation, actually, to present the problem to 
the PREB, and once the PREB authorizes, we can go out, 
actually, and procure those.
    In terms of any statement or anything, the PREB that is 
actually one of the witnesses can attest better to that.
    Mr. Espaillat. Well, what is the cause for these delays, in 
your opinion?
    Mr. Gil. Sir, I mean, in terms of what we seen here, there 
might be a delay of a couple of weeks or something, but it is 
not a delay of years, or withholding projects for years. It 
might be something procedural. I mean, it can be regarding, 
obviously, the person, and how they are handling things. But in 
that sense, I feel comfortable with the pace that we have right 
now. That first RFP already notified--or the line of people 
that can basically can get a contract, it might go to 12.
    And, obviously, next week actually, we will issue the 
second one, and so forth. So, it is about keeping that rhythm, 
and into that direction in order for us to be able to produce 
the public policy goals of that 40 percent for 2025----
    Mr. Espaillat. Mr. Chairman, let me just, for the record, 
state my concern regarding these delays, and the potential that 
other interests may be involved in causing these long-standing 
delays. I yield back.
    The Chairman. The gentleman yields. Let me now ask once 
again if Representative Tiffany or Representative McClintock, 
Minority side, if they are present, either/or can be 
recognized.
    [Pause.]
    The Chairman. If not, let me go to the gentleperson from 
California, Chair of this Committee's Oversight and 
Investigations.
    Chair Porter, you are recognized.
    Ms. Porter. Thank you so much. We are here to talk about a 
coal ash plant run by LUMA. And I have a picture of it here, 
and you can see a mountain of coal ash right here. And, spoiler 
alert, it is highly toxic, and poisoning residents of the 
nearby community of Guayama.
    [Slide.]
    Ms. Porter. Mr. Stensby, you are here today. And despite 
concerns about staffing and competence that my colleagues and I 
had earlier this summer, and still have, LUMA began operating 
Puerto Rico's electricity system, called a grid, on June 1. We 
are glad that you took Congress up on its invitation to appear 
today and testify this time.
    I wanted to ask you, how would you characterize LUMA's 
transition to managing Puerto Rico's electrical grid so far, 
with 1 being a total disaster and 10 being a remarkable 
success?
    Mr. Stensby. I think, as I set out, Congresswoman, it has 
certainly been a challenging transition. There have been many 
factors at play.
    But when I look at it on balance, I would give us a B. I 
think we have a lot to do.
    Ms. Porter. OK, so 1 to 10, you would give yourself, like, 
a 6?
    Mr. Stensby. I would give us a 7, considering what we----
    Ms. Porter. A 7, OK. How many blackouts--I know this has 
been covered, but how many blackouts have been reported since 
LUMA took over on June 1?
    Mr. Stensby. The system has a very large number of outages, 
Congresswoman, both before and after----
    Ms. Porter. Can you count them? Is it so big you can't even 
keep track of them all?
    Mr. Stensby. There are outages every single day, 
Congresswoman.
    Ms. Porter. Every single day. So, if you are having trouble 
doing this, and there are voltage spikes, destroyed appliances, 
house fires, complaints about customer service, why should LUMA 
be allowed to continue to manage the plant, if it is not 
actually delivering electricity?
    Mr. Stensby. Two things. I want to be very clear. The 
picture that you showed, LUMA has nothing to do with the AES 
coal plant. Our job is to operate the electric system.
    Ms. Porter. Do you not get energy from this plant that you 
then move along the grid?
    Mr. Stensby. Puerto Rico receives energy from that plant, 
yes.
    Ms. Porter. And then you move it along the grid.
    Mr. Stensby. That energy is flowed through the grid to 
customers, yes.
    Ms. Porter. OK. I want to talk about customer service. How 
many customer service reps did you have on June 1?
    Mr. Stensby. I don't have the exact number, but we----
    Ms. Porter. How many today?
    Mr. Stensby. Sorry?
    Ms. Porter. You have a large number of customer service 
reps, which is good, because you have a large number of 
blackouts. How many customer service reps do you have today?
    Mr. Stensby. We have more than 350 agents. And, in 
addition, many more people that are customer service people.
    Ms. Porter. And how many experienced linemen do you have 
today?
    Mr. Stensby. I think, as I described earlier----
    Ms. Porter. Nine hundred?
    Mr. Stensby. The way that PREPA would describe them, we 
have more than 900 people in the field today.
    Ms. Porter. OK. I want to turn to--last hearing we had a 
witness describing that his aunt is dead, his wife and daughter 
might be dying. A doctor testified about terrible illnesses. Is 
the AES plant worth running, in your opinion, given the lost 
lives and serious illnesses?
    Mr. Stensby. As I say, I think the conversation about AES 
is not a conversation for LUMA. LUMA's job is to transform the 
transmission and distribution system, Congressman.
    Ms. Porter. Are you equally able to transmit energy that 
comes from renewable sources?
    Mr. Stensby. Yes. And I think, as I testified earlier, 
Congresswoman, we have been working hard to reduce the waiting 
and connecting new renewable resources as we speak.
    Ms. Porter. So, you commit to doing everything in your 
power to transition to renewables?
    Mr. Stensby. We are very supportive of renewables.
    Ms. Porter. Do you think Puerto Rico is on track to meet 
its renewable goals?
    Mr. Stensby. Once again, I think it is important that 
people understand. LUMA's role is to operate the transmission 
and distribution system, and rebuild that system. Many of your 
questions are perhaps better for----
    Ms. Porter. Sorry. We heard testimony today that you are 
delaying ready-to-go rooftop solar and storage installations, 
and there is a backlog of these systems that are still waiting 
to be connected. Why is that, if you are so committed to clean 
energy?
    Mr. Stensby. No, I think that is a mischaracterization. I 
think my testimony actually said we are accelerating those 
systems. We are moving at seven times the pace that they were 
being moved out before we came into operation.
    We are confident there will be no backlog by the end of the 
year, and we just posted hosting maps on our website to support 
more renewables.
    Ms. Porter. How long do you think it will be until LUMA can 
deliver the energy in a consistent and reliable way, with 
blackouts that are comparable to what we see in the United 
States, and what you saw at your prior employer?
    Mr. Stensby. I believe that it is going to take many years 
to transform all of Puerto Rico's electric system. It is going 
to require the FEMA funding, and it requires a complete 
overhaul. It took decades to get where we are today, and it is 
going to get better month by month by month. But, frankly, it 
is going to take many years to get a world-class electric 
system here in Puerto Rico.
    Ms. Porter. Thank you, I yield back.
    The Chairman. The gentlelady yields.
    Representative Gonzalez-Colon, is there any Member on your 
side of the dais that wishes to be recognized?
    Miss Gonzalez-Colon. Not at this time, sir.
    The Chairman. Thank you. Let me just go over some quick 
questions and a comment.
    Mr. Stensby, according to economic analysis and experts at 
the University of Puerto Rico, the cost of electricity is one 
of the expenses straining most Puerto Rican citizens and small 
businesses. When can we expect--and it follows up with a 
question--that LUMA's control of PREPA's transmission and 
distribution system is going to lead to a reduced cost, 
increase reliability for service for the consumers and the 
people of Puerto Rico? When is the end game on this?
    Mr. Stensby. Thank you, Mr. Chairman. And what I want to 
say is, we submitted our plans to the PREB, and the PREB has 
approved those investment plans.
    I do believe it will get better each and every month. But, 
as I said, it is going to take a number of years for that 
overall reliability, through reinvestment, to get the system 
here in Puerto Rico to what many people in the mainland United 
States would expect from their power system.
    The Chairman. Thank you. This next question is for Mr. 
Fontanes or Mr. Laboy.
    Will LUMA be the sole control of the $9.5 billion Federal 
cost share payment that FEMA will provide for rebuilding the 
grid? That is one question.
    Also, will LUMA be able, on their own, to select off-island 
contractors, such as their parent company or other affiliates, 
to complete the work to modernize the grid?
    Mr. Laboy. So, Mr. Chairman, for the first question, it is 
very important to state that the only administrator and the 
recipient of the Federal funds obligated by FEMA for the 
permanent work for the electrical grid is the COR3. We are the 
responsible entity. It is stated in the FEMA state agreements, 
according to the Stafford Act and Federal regulations, and we 
are the entity that is responsible to manage and----
    The Chairman. So, effectively, LUMA cannot make those kinds 
of contracting decisions, all that, without your concurrence, 
right?
    Mr. Laboy. Every project which needs to be approved by 
FEMA----
    The Chairman. No, I'm saying they want to hire a 
contractor, it has to come to you. Is it your approval that 
drives that, or not? That is my question.
    Mr. Laboy. LUMA and PREPA have to follow the procurement 
requirements according to Federal, local, and state. And when 
we receive a reimbursement request, we verify and validate that 
each project has been procured according to Federal, state, and 
local requirements, and we validate 100 percent, according to 
those FEMA requirements.
    The Chairman. Yes, as we conclude the meeting, let me just 
thank the witnesses, thank the Members for their questions. 
Many of the questions that I had developed were asked by other 
Members and redundancy is not something we want to encourage.
    But I do want to say a couple of things that were made, and 
I think Members made the point. I think somebody said that the 
issue of what happened with the grid and the power loss, the 
blackouts in Texas during the winter, was as a result of trying 
to green the energy grids too soon.
    Well, other, more informed conclusions, were that it was a 
fully privatized energy delivery system, unregulated and with 
limited oversight and control on the part of the state 
government. And I certainly wouldn't want the Federal 
Government, with the investment that it is making to the Puerto 
Rican people, to be in the position, as the Texas Legislature 
and their administration are, of not providing oversight and, 
essentially, deregulating their energy distribution system, 
which many--I believe--caused the outages.
    But, anyway, the other point that was made today is that I 
think we need some answers on the two questions, the earmark 
issue for rooftop and storage, for individuals and for 
neighborhoods regarding renewable energy, and the development 
of those microgrids to deal with that. I think we need to look 
at that, and follow up with FEMA as to the ability to indicate 
that.
    And further, look at the contract--at the agreement--with 
LUMA and PREPA, and all the responsible parties. I think that 
needs to be looked at much deeper, and some questions came up 
today.
    The issue is reliability and dealing with the urgency of 
having reliable power to the consumers in Puerto Rico, period. 
Nobody denies that. And there is going to have to be some 
patches. There has to be some corrections, some improvements, 
some repairs in order to guarantee that during that transition.
    But transition is the goal. It is the goal under public law 
in Puerto Rico, and it is the goal under the present 
Administration in the White House. And as such, I think 
accountability and transparency with this contract is 
essential, so that we don't get into foot dragging, we don't 
get into double dealing, and we don't get into preferences that 
take away from meeting that transition goal, because I think 
you can do both, chew gum and walk. And to constantly use the 
excuse of a system that is not up to standards, which we all 
know, as the reasons we can't make the transition, I think, is 
a false choice.
    So, we are going to follow up. Members have indicated some 
follow-ups around investigative issues. And also, in terms of 
FEMA and the other issue, we will be forwarding to LUMA some 
specific requests, in terms of information. In the past, they 
have said that it is proprietary, and they cannot provide it to 
Congress. We will issue that. We hope they are responsive. If 
they are not, then we will proceed to the next step to compel 
that information to come forward.
    With that, let me thank all the witnesses, thank my 
colleague, the Ranking Member, Miss Gonzalez-Colon.
    The meeting is adjourned. Thank you very much.

    [Whereupon, at 3:43 p.m., the Committee was adjourned.]

            [ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

                        Statement for the Record
                            AES PUERTO RICO
                            October 6, 2021

    AES Puerto Rico, L.P. (AES-PR) appreciates the opportunity to 
provide an update on significant developments since the Oversight and 
Investigations Subcommittee's June 30, 2021 hearing and to once again 
share with the House Committee on Natural Resources (``Committee'') 
that it supports a responsible transition to renewable energy in Puerto 
Rico.\1\
---------------------------------------------------------------------------
    \1\ See Comments of AES Puerto Rico Submitted to the House Natural 
Resources Committee (June 30, 2021).
---------------------------------------------------------------------------
    To be clear: AES-PR is committed to a responsible and orderly 
transition from baseload coal-fueled power to renewable energy. This 
transition can be achieved with state-of-the-art solar power and 
battery storage before the coal-powered plant is scheduled to close at 
the end of 2027, while ensuring the reliability of the grid and 
respecting AES-PR's contract rights. Indeed, as recent power outages 
across Puerto Rico have shown again,\2\ Puerto Rico must have 
sufficient, reliable baseload electricity generating resources to 
provide electricity or risk continuously disrupted life across the 
island.
---------------------------------------------------------------------------
    \2\ E.g., The Weekly Journal, ``PREPA Assessing Damages to Unit 6 
in Costa Sur,'' (Sept. 27, 2021) (available at https://
www.theweeklyjournal.com/online--features/prepa-assessing-damages-to-
unit-6-in-costa-sur/article_4905178a-0ce8-11ec-a9f5-5b7ab3711e76.html).

    The AES Corporation. AES-PR is an affiliate of The AES Corporation 
(``AES''), a global company that provides reliable, affordable, and 
sustainable energy in 14 countries in the Americas, Asia, and Europe. 
AES' portfolio includes solar, wind, hydro, natural gas, and coal, as 
well as energy solutions such as smart distribution networks and 
battery energy storage systems. AES operates more than 30,000 MW and is 
the global leader in utility scale energy storage.
    AES is taking real steps to accelerate a more sustainable energy 
future. In the past five years, AES has added tens of thousands of 
megawatts of renewable capacity and reduced by more than 10,500 MW its 
oil and coal capacity. In 2020, AES achieved (early) its goal to reduce 
electricity generation from coal in its portfolio to less than 25% and 
has set a new goal to reduce that to 10% by 2025 and achieve net zero-
carbon emissions from electricity globally by 2040.

    AES Puerto Rico. AES-PR was selected by the government of Puerto 
Rico in 1994 to build a new coal-fueled power plant to modernize the 
island's ailing fleet. AES-PR invested $800 million to construct a 510 
MW plant, including state-of-the art emission controls approved by the 
U.S. Environmental Protection Agency. In operation since 2002, AES-PR's 
thermal power plant reliably supplies up to 25% of the island's 
electricity every day.
    Under AES-PR's Power Purchase and Operating Agreement (PPOA) with 
the Puerto Rico Electric Power Authority (PREPA), AES-PR is Puerto 
Rico's lowest cost baseload power provider and has saved consumers 
billions of dollars in energy costs over the past two decades. AES-PR 
has also funded, designed, developed, and now operates AES Ilumina, a 
20 MW utility-scale solar generation facility. Launched in 2012, AES 
Ilumina was at the time the largest Caribbean solar energy project, and 
the first large-scale solar power plant connected to PREPA. Today, AES-
PR provides direct and indirect employment to more than 700 people.
1. AES-PR is committed to a responsible, orderly transition from 
        baseload coal-fueled power to renewable energy before 2027.

    AES-PR supports Puerto Rico's goal to achieve 100% renewable power 
generation by 2050, as well as responsible efforts to accelerate that 
transition before 2027 through investments in renewable energy. AES-PR 
has already outlined to Puerto Rico officials concrete solutions that 
would achieve a responsible transition of the 500+ MW of baseload 
energy produced from coal to renewable energy and battery storage, 
without interrupting the reliable electricity that AES-PR provides 
today. AES-PR has proposed to replace the energy from coal-fueled 
generation with brand new, state-of-the-art solar facilities with 
battery storage. The new facilities would include the Maverick 5B 
technology,\3\ which uses 50% less land than a traditional solar 
project and can be built three times faster than other solar resources. 
This is a resilient and proven technology, able to withstand Category 4 
hurricanes. As the renewable resources come online, electricity 
produced from coal would be systematically reduced, while the plant 
would remain available to ensure grid reliability during emergencies.
---------------------------------------------------------------------------
    \3\ https://www.aes.com/5b-and-aes-unfold-power-solar-energy.
---------------------------------------------------------------------------
    AES can help Puerto Rico achieve this transition by working 
together with PREPA and Puerto Rico to enter into a revised agreement 
that is in accordance with the existing contractual rights and 
responsibilities under the current PPOA. PREPA's previous leadership 
had raised concerns about entering into a revised PPOA, but Puerto Rico 
Law 17-2019, Article 4.11 expressly promotes an early transition of 
AES-PR's coal-fueled power to new generating assets through a revised 
PPOA. Moreover, there is increasing support for this sensible approach.
    On October 4, 2021, Puerto Rico Governor Pedro Pierluisi publicly 
recognized that AES-PR is ready to convert its thermal plant to another 
source of energy, and he has directed PREPA's new leadership to carry 
out the negotiations needed to accelerate the transition of AES-PR 
before 2027. Likewise, the Financial Oversight and Management Board for 
Puerto Rico (FOMB) recently concluded--as already was clear from the 
plain text of Article 4.11--that PREPA has the discretion to enter into 
negotiations for a revised PPOA, and that FOMB would review any new 
agreement reached to ensure it is fiscally sound. The Governor's and 
FOMB's supportive statements spell good news for the people of Puerto 
Rico: once an agreement between PREPA and AES-PR is reached, AES-PR's 
transition to renewable energy resources can be completed in less than 
two years.
2. AES-PR has been a reliable supplier of low-cost electricity--and 
        will continue to make its best efforts to support Puerto Rico 
        during the current energy generation shortfall.

    When Puerto Rico has most needed electricity, AES-PR has been 
available to provide reliable low-cost baseload power.\4\ The same is 
true during today's energy crisis in Puerto Rico, during which AES-PR 
will make best efforts to ensure it continues to serve the island 
safely and reliably.
---------------------------------------------------------------------------
    \4\ AES-PR was available shortly after Hurricane Maria, long before 
many other resources. Following the 2019/2020 earthquakes on the 
island, AES-PR was the first large-scale electricity generation 
resource to be 100% available.
---------------------------------------------------------------------------
    The current crisis is simply the result of a shortage of reliable 
electricity generation. Over the past several months, key units within 
the PREPA system have had technical failures. That has forced the units 
offline and compelled PREPA to interrupt service, because it lacked 
sufficient reliable generating capacity to step in for the out-of-
service units.\5\ Throughout this crisis, the AES-PR thermal power 
plant has continued to supply approximately 25% of the island's 
electricity. Just as importantly, it has provided power reliably, with 
one of the lowest forced outage rates on the island.\6\ However, the 
current energy generation crisis on the island is stretching the 
thermal plant to its limits. Like any thermal power plant, AES-PR's two 
units and associated equipment require regular maintenance to ensure 
reliable service. As such, especially for larger units, maintenance 
outages are scheduled well in advance to allow personnel to safely 
inspect, repair, and replace equipment. AES-PR was due to begin a long-
scheduled, maintenance outage on September 25, 2021, but upon LUMA/
PREPA's urgent request,\7\ AES-PR deferred that maintenance to ensure 
Puerto Ricans have power during the current crisis. LUMA/PREPA has 
asked AES-PR to delay the maintenance until at least January 2022. AES-
PR is working with LUMA/PREPA to select an optimal time to perform the 
maintenance without compromising grid reliability and operational 
safety.
---------------------------------------------------------------------------
    \5\ The Weekly Journal, ``More Selective Blackouts Over Low Energy 
Generation,'' (Sept. 30, 2021) (available at https://
www.theweeklyjournal.com/online--features/more-selective-blackouts-
over-low-energy-generation/article_00808a5a-222b-11ec-bc58-
c352b791ebd3.html).
    \6\ The ``forced outage rate'' measures the percentage of time a 
unit suddenly stops working, and thus, a lower forced outage rate means 
a more reliable unit that is available to provide electricity. The two 
AES-PR thermal units have a forced outage rate of 3%--comparable PREPA-
owned units face forced outage rates of 18-20%.
    \7\ This is not the first time PREPA has asked AES-PR to defer 
maintenance. AES-PR was so critical to the grid in 2020 that PREPA 
asked the company to postpone scheduled maintenance and keep its 
thermal plant online. Without AES-PR, many Puerto Ricans would have 
been without power, because PREPA had no alternative resource.
---------------------------------------------------------------------------
    Yet, deferring maintenance is not a long-term solution to the 
energy crisis in Puerto Rico. Rather, these power outages across Puerto 
Rico have reaffirmed that it is essential that the people of Puerto 
Rico have reliable baseload resources over the long run to provide 
electricity, including while the island moves forward to meet the 
Puerto Rico legislature's direction to transition to renewable sources 
of energy, or risk continuously disrupted life across the island. 
Without such capacity and without an orderly transition, we would 
expect the cost of electricity to rise, environmental impacts to 
increase (when PREPA is compelled to turn to unreliable and higher 
emitting oil-fueled power to try to meet demand), and Puerto Rico to 
face even more significant power outages, leaving many without 
electricity.

                                 *****

    AES-PR appreciates the Committee's interest in attempting to 
accelerate Puerto Rico's transition to renewable energy and modernizing 
the electrical grid. As part of AES--one of the most important 
renewable energy developers in the world with more than 40 years of 
global experience developing, operating and innovating safe and 
reliable energy solutions--AES-PR is ready to contribute our expertise 
and knowledge to the energy transition in Puerto Rico. AES's experience 
supporting countries pursuing similar energy transitions, has taught 
the importance of ensuring that transitions are done in an orderly and 
responsible manner, and of having the necessary investments, not only 
in renewable energy, but also in other key links in the electricity 
supply chain.
    AES-PR is confident that Puerto Rico is ready to accelerate this 
transition and that we can be a part of this process. Done responsibly, 
this transition could reduce the cost of electricity in Puerto Rico and 
contribute directly to the island's sustainability and climate change 
goals, while helping to drive economic growth. AES-PR believes that all 
parties would welcome the constructive engagement of this Committee to 
help us achieve this goal. AES-PR looks forward to continuing to work 
productively with the Committee on this matter.

                                 ______
                                 

                               CAMBIO PR

                       Sierra Club of Puerto Rico

                               El Puente

      UTIER (Union of Electrical and Irrigation Industry Workers)

                                                   October 14, 2021

    Dear Chairman Grijalva and members of the Natural Resources 
Committee:

    During the October 6th House Natural Resources Committee hearing, 
many questions were raised about the lack of renewable energy in Puerto 
Rico's electrical mix and the possibility of using FEMA grid 
reconstruction funds to further the integration of greater amounts of 
renewable energy.

    We are writing to clarify the importance of distinguishing between 
rooftop solar and utility-scale solar. Rooftop solar in Puerto Rico 
enjoys several key advantages over utility-scale renewable energy:

     Reducing dependence on the long-distance transmission 
            system. Currently, two-thirds of Puerto Rico's power 
            generation capacity is along the south coast and about two-
            thirds of the population lives in the north. Thus, the 
            island is highly dependent on a south-to north transmission 
            system through the mountains, which failed catastrophically 
            during Hurricane Maria.

      The widespread dissemination of rooftop solar and storage, 
            especially in the San Juan metropolitan area, has the 
            potential to largely eliminate power imports into the 
            metropolitan area, greatly reducing the vulnerability of 
            the system.\1\ Utility-scale renewable energy cannot 
            provide this benefit.
---------------------------------------------------------------------------
    \1\ Telos Energy. Puerto Rico Distributed Energy Resource 
Integration Study. December 2020.

     A less expensive way to provide resiliency. Properly 
            installed rooftop solar and storage systems are a proven 
            resiliency solution in Puerto Rico; they kept the lights on 
            after Hurricane Maria, while tens of thousands of island 
            residents waited six months to a year for the lights to 
---------------------------------------------------------------------------
            come back on.

      Instead of investing massively in rooftop solar and storage 
            solutions for resiliency, however, PREPA proposed to the 
            Puerto Rico Energy Bureau to improve the resiliency of the 
            grid by hardening the transmission system and creating 
            eight ``mini-grids'' across the island designed to isolate 
            from each other in the event of a severe storm. The 
            transmission investment required to do this work was 
            estimated at $5.9 billion.\2\ Utility-scale renewable 
            energy provides no resiliency benefits and therefore would 
            rely on these sorts of expensive and unproven grid-
            hardening proposals.
---------------------------------------------------------------------------
    \2\ Puerto Rico Energy Bureau. Final Resolution and Order on the 
Puerto Rico Electric Power Authority's Integrated Resource Plan. Case 
No. CEPR-AP-2018-0001. August 24, 2020. paragraph 717.

      By contrast, the amount of distribution work needed to upgrade 
            the grid to support the widespread integration of rooftop 
            solar and storage--specifically 75% distributed renewable 
            energy penetration by 2035--is estimated at only $650 
            million.\3\
---------------------------------------------------------------------------
    \3\ Energy Futures Group. Puerto Rico Distributed Energy Resource 
Integration Study: Load, Energy Efficiency and System Cost. February 
2021.

     A better use of land. Unlike many regions of the United 
            States, Puerto Rico does not have large expanses of land 
            available for renewable energy development. And given that 
            the island also imports more than 90% of its food, land for 
            agricultural use should not compete with land for energy 
            development. By contrast, rooftop solar and storage make 
---------------------------------------------------------------------------
            use of available roof spaces that are not being utilized.

     Less expensive than current electric rates. Puerto Rico's 
            residential electric rate is about 24 cents/kWh--and 
            rising, due to increasing fossil fuel prices. According to 
            the Puerto Rico Electric Power Authority, a customer can go 
            off-grid and generate their own electricity via a rooftop 
            solar and battery system for less than the current rate.\4\ 
            In other words, rooftop solar and storage is an 
            economically viable alternative in Puerto Rico--for those 
            customers who can afford the upfront cost or financing 
            cost.
---------------------------------------------------------------------------
    \4\ Puerto Rico Electric Power Authority. Puerto Rico Integrated 
Resource Plan, Appendix 4: Demand Side Resources. June 2019.

      Recent grid modeling studies commissioned by CAMBIO PR 
            demonstrate that using a portion of the available federal 
            funds to invest in rooftop solar and storage island-wide to 
            achieve 75% distributed renewable energy by 2035 would 
            result in a stable average rate of approximately 15 cents/
            kWh, or nearly 40% below current residential rates.\5\
---------------------------------------------------------------------------
    \5\ Energy Futures Group. Puerto Rico Distributed Energy Resource 
Integration Study: Load, Energy Efficiency and System Cost. February 
2021.

     Less investment required in the distribution system to 
            integrate the same quantity of renewable energy. As noted 
            previously, comprehensive grid modeling studies have 
            demonstrated that Puerto Rico could integrate 75% 
            distributed renewable energy--including equipping every 
            home on the island with a solar and battery storage 
            system--with only modest investment ($650 million) in the 
            distribution system and no additional investment in the 
            transmission system, beyond what is needed under any 
            circumstance to bring the grid up to basic safety code. The 
            grid investments needed to integrate distribute renewable 
            energy are relatively modest because the location of 
            electric generation near the point of consumption minimizes 
            use of the distribution system.\6\ By contrast, integrating 
            an equivalent amount of utility-scale renewable energy 
            would result in significantly larger investments in the 
            transmission and distribution systems.
---------------------------------------------------------------------------
    \6\ EE Plus. Puerto Rico Distribution Modeling. March 2021.
---------------------------------------------------------------------------
    For these reasons, we strongly urge the Committee to ensure that 
rooftop solar and storage systems are a priority for federal funding in 
order to rebuild a truly resilient and more affordable electrical 
system in Puerto Rico.

            Sincerely,

            CAMBIO PR
            Sierra Club of Puerto Rico
            El Puente
            UTIER (Union of Electrical and Irrigation Industry Workers)

                                 ______
                                 

            INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS

                          Washington, DC 20001

                                                    October 5, 2021

Hon. Raul M. Grijalva, Chairman,
Hon. Bruce Westerman, Ranking Member,
Natural Resources Committee,
1324 Longworth House Office Building,
Washington, DC 20515.

    Dear Chairman Grijalva and Ranking Member Westerman:

    On behalf of the more than 775,000 active and retired members of 
the International Brotherhood of Electrical Workers (IBEW), I am 
writing in regards to the upcoming hearing on the Puerto Rico Electric 
Power Authority (PREPA). As you are aware, the electric power 
infrastructure of Puerto Rico is in a state of disrepair due to years 
of neglect that Hurricanes Irma and Maria tragically exacerbated in 
2017. While there is no overnight fix for this situation, I am 
confident that the IBEW can play a key role in its restoration with our 
members' skills, expertise, and training.
    The IBEW has partnered with LUMA Energy, which maintains the power 
infrastructure in the commonwealth, and signed the first collective 
bargaining agreement at the utility in more than a decade. With it, the 
IBEW will ensure a skilled, professionalized workforce that will 
finally lead to the energy transformation in Puerto Rico. Additionally, 
the IBEW and LUMA have reached a project labor agreement that 
guarantees any utilization of federal funding will only be executed by 
qualified IBEW members earning fair wages under local hire provisions. 
This will ensure that the community-sustaining benefits of union 
careers stay in Puerto Rico. The PLA framework also assures that 
federal funds will be effectively spent on transforming the electricity 
system, not wasted on temporary, inadequate fixes by under-trained 
technicians.
    After years of underinvestment, delivering Puerto Rico's modern, 
sustainable, world-class energy system requires a successful 
partnership between the utility and its workers. Shortcuts will only 
result in further failure. The IBEW's continued collaboration is a 
major first step in the energy infrastructure's transformation, and our 
members appreciate your support for this critical effort.

            Sincerely yours,

                                      Lonnie R. Stephenson,
                                            International President

                                 ______
                                 

                             WINDMAR GROUP

                                                   October 12, 2021

Hon. Raul M. Grijalva, Chairman,
Hon. Bruce Westerman, Ranking Member,
Natural Resources Committee Members and Staff,
1324 Longworth House Office Building,
Washington, DC 20515

Re: Unsolicited comments on the problems residential and small 
        commercial customers of PREPA/LUMA are having and how the 
        Congress of the United States could help

    Dear Chairman Grijalva, Ranking Member Westerman and Members of the 
House Committee on Natural Resources:

    As has been widely reported, the Puerto Rico electric grid is 
unable to provide reliable, affordable, resilient and clean electric 
energy.
    At the recently concluded hearings, you heard from some but not all 
the Puerto Rican electric sector stakeholders. I would like to share 
with you these unsolicited comments from a Puerto Rican businessman.
    I have been a participant of renewable energy projects in Puerto 
Rico since 1978. I have had success with some and failure with 
others.\1\
---------------------------------------------------------------------------
    \1\ Windmar Group, a local renewable energy company, has installed 
over 10,000 solar (``PV'') plus storage (``BESS'') residential and 
small business systems since Hurricane Maria devastated Puerto Rico in 
September 2017. In the last 12 years, Windmar Group has developed over 
100MW of PV solar and installed over 150MWh of battery storage systems. 
Currently, we employ over 1,000 men and women. The Windmar Training 
Center graduates 40 new employees every month. For many of them, 
installing residential solar systems is their first job.
---------------------------------------------------------------------------
    Currently, the role of a regulated grid to provide electric service 
to a residential or small business \2\ client is not exclusive. Solar 
(``PV'') plus storage (``BESS'') provides the reliable, resilient, 
affordable and clean energy we all aspire to.
---------------------------------------------------------------------------
    \2\ Puerto Rico as of May 2021 had 1,348,097 Residential customers. 
They are responsible for 42% of the electricity sold. Most residential 
clients and small commercial clients in Puerto Rico have enough roof 
space on their homes and buildings to deploy the solar panels they need 
to self-generate the electricity they consume.
---------------------------------------------------------------------------
What is making possible the growth of residential solar and how the US 
        Congress could help?

    The realization by lenders that a long-term, typically 20 years, 
loan to finance a PV solar and BESS system to a residential customer 
with a FICO score above 650 \3\ is a safe bet has been a game changer. 
The loan payment for such a system is less than the electric bill for 
the electricity the system provides. Furthermore, the BESS avoids the 
extra expenses for spoiled food and medicine or back-up generation when 
the grid goes out.
---------------------------------------------------------------------------
    \3\ The average FICO score is Puerto Rico is 678.
---------------------------------------------------------------------------
    As Hurricane Maria demonstrated, by adding storage to the PV, the 
PV asset is no longer stranded; guaranteeing the consumer continued 
electricity supply. Thus, ensuring quality of life of the consumer and 
providing the revenue to pay for the system.
    While PREPA, LUMA, FOMB, COR3, and PREB go back and forth not 
getting much done, tens of thousands of Puerto Rican households have 
switched to PV+BESS systems. They currently generate for self-
consumption more electrical energy than the existing utility scale 
solar installations provide to the grid. It only takes a day to install 
5kW of panels and a battery at a house. Thousands of Puerto Rican 
workers hit the road every day installing thousands of systems every 
month.
    If you want to help, there are a few easy fixes to the existing 
federal renewable energy incentives and loan guarantee programs that 
could facilitate and accelerate the residential and particularly the 
small business rollout of PV+BESS.
    First, amend the ITC to extend a cash in lieu of the ITC (Section 
1603 of ARRA) or to provide Direct Pay to Puerto Rican taxpayers. 
Currently, only US taxpayers can capture the ITC from the PV+BESS 
systems that are installed in Puerto Rico. The tax equity by-pass to 
capture the ITC does not work for small installations.
    Second, provide loan guarantees to small business to entice lenders 
to provide 20-year financing. Currently financial institutions provide 
only 7 to 10-year commercial loans to small businesses.
    Third, provide a payment guarantee for 85% of the loan to 
residential customers with FICO scores below 650.
    Lastly, the US Congress can put a carbon tax on the LNG, coal and 
oil that is imported into Puerto Rico. The funds collected can be used 
to pay the PREPA unfunded pension liability and the money owned to the 
bond holders. No need for a SOLAR TAX to pay the legacy debts of PREPA.

            Sincerely,

                                        Victor L. Gonzalez,
                                                          President

                                 ______
                                 
Submissions for the Record by Hon. Javier A. Aponte Dalmau, Majority 
        Speaker, Puerto Rico Senate

                                 Senado

                  Estado Libre Asociado De Puerto Rico

                         San Juan, Puerto Rico

                                                    October 5, 2021

Hon. Raul M. Grijalva, Chairman,
Natural Resources Committee,
1324 Longworth House Office Building,
Washington, DC 20515.

Re: Energy Crisis in Puerto Rico

    Dear Chairman Grijalva:

    On September of 2017, the electric system of Puerto Rico suffered a 
devastating blow when the Island was hit by Hurricane Maria. Most 
Puerto Ricans were without electric power for several months. In the 
aftermath of the hurricane, the Government of Puerto Rico enacted Law 
120-2018 to implement a new public policy in favor of the privatization 
of our electric system.
    Later, on June 22, 2020, a contract entitled ``Puerto Rico 
Transmission and Distribution System Operation and Maintenance 
Agreement'' was signed between the Puerto Rico Electric Power Authority 
(PREPA) (owner), the Puerto Rico Public-Private Partnerships Authority 
(Administrator), Luma Energy, LLC. (management operator) and Luma 
Energy ServCo, LLC (service operator).
    The terms of said contract, as well as the irregular and deficient 
transition process, was controversial and the legislature of Puerto 
Rico proposed legislation to postpone the implementation of the 
agreement in response to the requests of our constituents.
    Unfortunately, the Governor vetoed the initiative and falsely 
argued that Luma Energy was ready to the assume its contractual 
responsibilities.
    On January 28th, 2021 the Senate of the Commonwealth of Puerto Rico 
ordered the Committee of Energy and Special projects to carry out a 
legislative inquiry into the terms, scope and implementation of the 
contract subscribed between the local Government and Puma Energy PR, 
LLC. Energy PR, LLC. (S.R. 1). As part of that process, on June 28th, 
2021 the Committee issued a preliminary report listing several 
disturbing findings (enclosure). However, the legislative process has 
been disrupted by Luma's refusal to comply with several orders of the 
Supreme Court of Puerto Rico to provide documents and information to 
the legislative committees with jurisdiction in this matter.
    It should be noted that, despite the fact that the contract 
assigned Luma Energy the responsibility over the transmission and 
distribution of energy, it also allowed Luma to create a subsidiary to 
provide energy generation services (Shared Services Agreements). In 
that case, Luma would be in position to control the entire energy 
operation in Puerto Rico. That is particularly troublesome if we 
consider that the Federal Emergency Management Agency (FEMA) has 
allocated close to 9 billion dollars for the renovation of our energy 
generation grid.
    In other words, with the blessing of the Financial Oversight and 
Management Board created by the Puerto Rico Oversight, Management and 
Economic Stability Act of 2016, the local government transferred a 
public monopoly into private hands using federal funds. We are 
concerned that policy decision and the possibility of Shared Service 
Agreements could jeopardize the much needed resources if FEMA 
reconsider its allocation by virtue of the provisions of the Stafford 
Act, Public Law 100-707.
    Even worse, since Luma Energy took over the operation from the 
Puerto Rico Electric Power Authority few months ago, the condition of 
our electric system has deteriorated dramatically. In sum, under Luma, 
constant power outages and several tariff increases have become a daily 
reminder of a failed policy and a permanent hurdle for all Puerto 
Ricans and our languished economy.
    According to the Executive Director of the Public-Private 
Partnership Agency, this aforementioned transaction was ``endorsed and 
promoted by the federal government''.
    Given these remarks, and the critical situation that we are facing, 
it is of the utmost importance that the congressional committee that 
you chair assume immediate jurisdiction to assess the energy policy in 
Puerto Rico and its implementation.

            With nothing further,

                                   Javier A. Aponte Dalmau,
                                            Portavoz de la Mayoria.

                                 *****

Attachment: Senate Resolution 1, First Partial Report, dated June 28, 
2021

This document is part of the hearing record and is being retained in 
the Committee's official files. Available at:

https://docs.house.gov/meetings/II/II00/20211006/114107/HHRG-117-II00-
20211006-SD003.pdf

                                 ______
                                 

Submissions for the Record by Hon. Luis Raul Torres-Cruz, Puerto Rico 
        House of Representatives

                        CAMARA DE REPRESENTANTES

                         San Juan, Puerto Rico

                                                 September 30, 2021

Hon. Raul M. Grijalva, Chairman,
Natural Resources Committee,
1324 Longworth House Office Building,
Washington, DC 20515.

Re: Transformation of the Electric System of Puerto Rico

Introduction
    After more than four years of PREPA's bankruptcy, under the advice 
of the Financial Oversight and Management Board for Puerto Rico (FOMB), 
and the implementation of a privatization strategy promoted by the 
Commonwealth Government, the electric system of Puerto Rico has become 
more unreliable and costly than ever. The entities in charge of the 
reconstruction of the electric system, including the Public Private 
Partnerships Authority (P3A) and the Puerto Rico Energy Bureau (PREB), 
do not have the necessary expertise to guide the system through its 
transformation. Moreover, the recovery process after the hurricanes was 
shrouded by obscure processes, such as the contracts with Whitefish and 
Cobra, one of them resulting in criminal prosecution of former FEMA 
officers and Cobra executives by the federal justice system. All of 
these constitute good reasons for searching for a different approach to 
achieve the transformation of Puerto Rico's electrical system.
    Based on all the above, we respectfully come before you to request 
your assistance in finding a sound alternative to achieve the 
transformation of our electrical system. Notwithstanding, our concern 
is whether Puerto Rico's needs can be addressed in a timely fashion 
before the federal funds assigned for the reconstruction are used 
contrary to the wellbeing of all residents of Puerto Rico. As we will 
discuss, PREPA has signed a Transmission and Distribution System 
Operation and Maintenance Agreement (The Agreement) with LUMA Energy, 
LLC and LUMA ServCo, LLC. (Together known as LUMA.) that became 
effective on June 1, 2021. The first three months of the contract have 
shown that LUMA is ill prepared to operate the electric system and, 
furthermore, it has the potential to hinder the economic growth in 
Puerto Rico. We are confident that your commitment to the people of 
Puerto Rico will move you to intervene in this matter.
    It appears that a few months from now, any intervention from 
Congress could be moot, since Puerto Rico is on the verge of executing 
a great number of projects to reconstruct the electrical system, under 
the present guidance of the FOMB, and maybe still influenced by 
exogenous political influence that could result in arbitrary and non-
effective spending of federal funds. Even worse, LUMA will manage all 
the projects and federal funds, through the Agreement.
    We urge Congress to act immediately and take action to designate an 
entity to oversee the transformation of Puerto Rico's electric system 
as a project under its supervision, assuring that federal funds are 
used efficiently and revisiting the laws and contracts, including the 
Agreement, executed by PREPA and the Government of Puerto Rico to 
prescribe the path to this transformation.
PREPA under PROMESA, FOMB, FEMA, and Related Others
    On August 14, 2014, the Puerto Rico Electric Power Authority 
(PREPA) entered into a debt strategy agreement, the Forbearance 
Agreement for PREPA, with owners and insurers of more than 60% of 
PREPA's bonds and banks that have loaned PREPA monies to operate, since 
it had failed to make required Bond Service and Redemption Accounts 
deposits on July 25, 2014.
    On July 2, 2017, the Puerto Rico Fiscal Agency and Financial 
Advisory Authority (AAFAF) said PREPA had filed in the United States 
District Court of Puerto Rico for protection under Title III of the 
2016 Puerto Rico rescue law known as PROMESA, which gave the Government 
of Puerto Rico, its agencies and instrumentalities, access to a workout 
process akin to U.S. bankruptcy.
    As we are writing, an unfair Restructuring Support Agreement (RSA) 
is being questioned as filed, by other creditors, congressional members 
and interested parties. Some parties are arguing for the appointment of 
a trustee under Puerto Rico law or an independent, private sector firm 
(IPSIG). In the past, the Financial Oversight and Management Board for 
Puerto Rico (FOMB) tried to appoint a CEO, but this attempt to control 
PREPA by the FOMB was rejected by the Title III Court.
    Since PREPA first defaulted on July 25, 2014, it has paid more than 
an estimated one billion dollars in consultants, legal representation 
for both itself and the bondholders, as required by the agreements 
reached between both parties.
    Notwithstanding, PREPA's finances have not improved, even after 
receiving millions of dollars from the federal government to rebuild 
the electric system of the island. The costs related to the Agreement, 
together with LUMA's incompetency, have caused PREPA's finances to 
weaken to the point that the cost of energy will have risen to a 35% 
during the last nine months if the latest submission for reconciliation 
of the fuel and power purchase adjustments are approved by the PREB. At 
this point, it is relevant to mention that a member of PREPA's 
Governing Board and a former Executive Director have publicly 
questioned the claims made by LUMA regarding this latest submission, 
which if approved would represent an increase of 16.4% in the cost of 
the kilowatt-hour.
    We argue that PREPA's top management purposely delayed \1\ the 
much-needed maintenance and reconstruction of the Transmission and 
Distribution System and Energy Production System, in order to justify 
the privatization of the public corporation and to fulfill a promise 
made during the political campaign of 2016, reaffirmed by former 
governor Ricardo Rossello on January 2018, later implemented by former 
governor Wanda Vazquez, and vehemently defended by governor Pedro 
Pierluisi, without apparent support of the actual facts.
---------------------------------------------------------------------------
    \1\ An example of this can be found on page 10 of the 2020 PREPA 
Fiscal Plan (the Fiscal Plan) certified on June 29, 2020 by the 
Financial Oversight and Management Board for Puerto Rico (FOMB), on 
which it is stated that: ``At the end of FY2020, PREPA expects a $153 
million surplus, driven by underspending in vegetation management and 
necessary maintenance expenses.''
---------------------------------------------------------------------------
    A similar situation is occurring at the present time with the 
generation system. Over half of the installed generation is not 
available or limited, while the rest of the fleet is under-maintained. 
This becomes obvious by looking at how the maintenance budget for the 
generation system has been diminished consistently during the last 
years. Moreover, this lack of compliance with the required conservation 
of the generating units has caused several forced outages during the 
past months, on top of outages due to failures in the transmission and 
distribution system, which some say are a direct result of LUMA's lack 
of ability and knowledge about Puerto Rico's electric system.
    The non-compliance with the proper conservation of the generating 
units is not a result of incompetence or lack of interest on the part 
of PREPA's employees. Up to a few years ago, PREPA counted on highly 
educated, skilled, and experienced professionals devoted to the public 
corporation, but the interference of some politicians, going after 
their political and personal benefit, ultimately ruined PREPA. This is 
the primary root cause of PREPA's demise, as concluded by some 
restructuring experts that were contracted for PREPA's restructuring 
process.
    The Puerto Rico Integrated Resource Plan (IRP) 2018-2019, prepared 
by Siemens Industry, Inc. on February 12, 2019 (final draft submitted 
for the approval of Puerto Rico Energy Bureau), contemplates (Section 
8.3.1) 2,716 MW generation capacity additions from now until 2029. Not 
even a 1 MW capacity has been added since 2019. Also, this IRP includes 
the retirement of 2,905 MW capacity between now and 2028.
    All of these happened under the supervision of the FOMB. Sadly, 
after spending an estimated one billion dollars, there are no results 
to show.
    Under the advice of the FOMB, PREPA discarded several contracts for 
utility scale renewable energy generation projects that were being 
renegotiated and could have been ready to provide clean, economic, and 
reliable energy to the island. Moreover, this would allow for the 
definite retirement and decommission of the oil fueled generating 
plants, some of which have been declared as Limited Use Units under the 
Mercury and Air Toxics Standards (MATS) regulation.
    As it is widespread known, in September 2017, the island was hit by 
two major hurricanes, causing devastation, and causing a blackout 
island wide. It took over a year for the electric system to be 
restored, but not necessarily up to code, and definitely including no 
improvements to the system. At the time of these hurricanes, PREPA was 
working on implementing an Integrated Resource Plan (IRP), which had to 
be rethought after the effects of the hurricanes.
    Recently, the Puerto Rico Energy Bureau (PREB) approved a new IRP, 
redefining the electric system of the island after considering the 
impacts of the 2017 hurricanes. Nevertheless, this IRP was based on 
unlikely scenarios not including a proper sensitivity analysis. This 
could lead the island into investing the limited resources available, 
on the wrong projects. This is why the intervention of Congress is 
needed on a timely fashion.
LUMA Contract
    As a result of the unlikely scenarios adopted by the Government of 
Puerto Rico for the formulation of the IRP, a Transmission and 
Distribution System Operation and Maintenance Agreement was executed 
between PREPA, the Puerto Rico Public-Private Partnerships Authority 
(P3A), and LUMA (a new corporation formed by a consortium between 
QUANTA Services, Inc. and ATCO Group).
    As explained by the Institute for Energy Economics and Financial 
Analysis (IEEFA), ``the contract with LUMA is not solely a T&D 
operation and management agreement. The LUMA contract identifies a 
scope of services that goes beyond management of PREPA's transmission 
and distribution assets and gives LUMA responsibility for planning, 
rate setting, asset management, budgeting, procurement, collections, 
public relations and other financial matters. It is a full 
privatization of PREPA's operational functions.'' \2\
---------------------------------------------------------------------------
    \2\ See: Contract Between Puerto Rico, LUMA Energy Sets up Full 
Privatization, Higher Rates for Island Grid, page 10 https://ieefa.org/
wp-content/uploads/2020/10/Contract-with-LUMA-Energy-Sets-up-Full-
Privatization_Higher-Rates_October-2020.pdf.
---------------------------------------------------------------------------
    Considering this analysis, some questions might come to mind. For 
one, can the shell public corporation that will remain after the 
reorganization of PREPA and the execution of the LUMA contract be 
recipient of federal funds for the repair, restoration, and replacement 
of damaged facilities? This question has not been specifically answered 
to this day. According to the provisions of the Stafford Act, Sec. 406. 
Repair, Restoration, and Replacement of Damaged Facilities (42 U.S.C. 
5172), only state and local governments, and private non-profit 
organizations that provide critical services are allowed to receive 
contributions from the federal government for the repair, restoration, 
reconstruction, or replacement of a facility damaged or destroyed by a 
major disaster and for associated expenses.

    This contract has several provisions that are contrary to the legal 
framework and against the best interest of the people of Puerto 
Rico.\3\ Some of those provisions are:
---------------------------------------------------------------------------
    \3\ Idem.

     According to publicly available documents, the projections 
            of the variables used to justify the Contract are overly 
            optimistic and fail to include a sensitivity analysis to 
            handle the uncertainty of important variables. PREB should 
            require the PREPA and P3A to perform a more complete 
            analysis to validate projections. Even with these 
            optimistic projections, LUMA has already requested an 
            increase in the electricity cost. This is proof that the 
            contract docs not provide for a reduction in the cost of 
---------------------------------------------------------------------------
            electricity in Puerto Rico.

     The Contract provides more protection to LUMA's interests 
            than to the public interest. It establishes conditions that 
            could lead to a conflict of interest, as LUMA could hire 
            its parent companies to carry out rehabilitation or 
            construction works for both transmission and distribution, 
            and generation.

     The Contract stripped employees and PREPA retirees of the 
            rights acquired and earned over many years and jeopardizes 
            the subsistence of the retirement funding for pensions.

     The Contract provides for the payment to LUMA of an 
            Incentive Fee in case the expected performance metrics are 
            exceeded for a particular year. However, it does not 
            establish penalties in the event that the expected metrics 
            are not reached. The metrics, as set out in Annex IX of the 
            Contract, are non-binding and are still under revision by 
            the PREB. Currently there are no metrics to adequately 
            supervise the performance of LUMA.

     The Contract includes no adequate provisions as to 
            guarantee that the reconstruction projects performed by 
            LUMA will carried out in such a way that the Federal 
            Emergency Management Agency (FEMA) will reimburse the money 
            invested.

     LUMA is a newly created, limited liability corporation, so 
            the public interest must be protected through a Parent 
            Company Guarantee. We understand that the maximum warranty 
            amount of $105 million for the entire term of the Contract 
            is not sufficient when compared to other electricity 
            industry contracts that have been awarded in Puerto Rico. 
            Also, QUANTA Services reports to the Security and Exchange 
            Commission (SEC) reveal some red flags regarding the 
            financial stability of this parent company.

     The process of drafting, awarding, and finalizing the 
            Contract was carried out without transparency. Nor was the 
            public interest, customers, employees, let alone retirees, 
            defended. This Agreement was treated as one of adhesion. 
            Today, after several court processes, LUMA still refuses to 
            comply with a court order mandating LUMA to provide the 
            information requested under a legislative investigation 
            being carried out by the House of Representatives of the 
            Commonwealth of Puerto Rico.

     The Contract is potentially bad for PREPA's customers, 
            employees, and retirees, and could hinder the goal of 
            providing a customer-centric system, with financial 
            viability, reliable and resilient, that is a sustainability 
            model, and that becomes the engine of Puerto Rico's 
            economic development.

     The Contract, as proposed, takes away from the Government, 
            its main role in establishing social justice, promoting 
            programs to eliminate poverty, creating an adequate 
            environment of economic development and growth, and 
            establishing and implementing a sound public policy on 
            energy resources, given the geography of the island.

Conclusion
    FEMA assigned approximately, $10.7 billion for the renovation and 
restauration of the PREPA's Transmission and Distribution System 
(T&DS). Management of these funds has been assigned to LUMA Energy, LLC 
under the Agreement. This contract is not good for PREPA, nor for the 
people of Puerto Rico. For example, the contract provides for LUMA's 
parent companies, affiliates, and subsidiaries to be among the 
contractors selected to perform the works for reconstructing the 
Transmission and Distribution System. This would give LUMA, its parent 
companies, and affiliates an unduly advantage due to the access to 
privileged inside information, casting doubt and possible conflict of 
interests on the management of the federal funds.
    The above cited defects of the IRP and the LUMA contract, will 
negatively impact and will constitute an obstacle to the economic 
development of the island. This, in turn, will delay ending the 
bankruptcy of the Government of the Commonwealth of Puerto Rico. Also, 
the IRP and the 10-Year Infrastructure Plan, which provides an overview 
of PREPA's infrastructure investment strategy, must be revised under 
the provisions of President Joseph R. Biden, Executive Order 14008 of 
January 27, 2021 for Tackling the Climate Crisis at Home and Abroad.
    Therefore, LUMA contract must be annulled or substantially modified 
to provide the right tools for the much-needed transformation of the 
electrical system of Puerto Rico, in compliance with the Energy Public 
Policy Law of Puerto Rico, requiring that 100 percent of the energy 
demand on the island be generated from renewable energy sources, and to 
promote the economic development needed to put an end to the 
bankruptcy. Also, Congress should take action to appoint an 
administrator or trustee to oversee the reconstruction of the electric 
system.
    The Commission I preside has conducted a thorough investigation of 
the awarding, execution, and implementation of the LUMA contract. 
Attached is a copy of the final report of this investigation.
    My goal in writing this letter is to shed light upon the path 
chosen by the Government of Puerto Rico and the FOMB for the 
transformation of Puerto Rico's electric system, since this 
transformation is vital to the livelihood of all Puerto Ricans.

            Respectfully,

                                     Luis Raul Torres Cruz,
                                                         Presidente

                                 *****

Attachment: H.R. 136 Final Report, Dated May 11, 2021

This document is part of the hearing record and is being retained in 
the Committee's official files. Available at:

https://docs.house.gov/meetings/II/II00/20211006/114107/HHRG-117-II00-
20211006-SD001.pdf

                                 ______
                                 

Submissions for the Record by Ruth Santiago, Esq.

LUMA Energy Report


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 



                                 
                                                   October 14, 2021

Hon. Raul M. Grijalva, Chairman,
Hon. Bruce Westerman, Ranking Member,
Natural Resources Committee,
1324 Longworth House Office Building,
Washington, DC 20515.

    Dear Chairman Grijalva and Ranking Member Westerman:

Supplemental Information for Hearing on the PREPA Post Implementation 
        of the LUMA Transmission and Distribution Contract

    Dear Chair Grijalva and Members of the House Committee on Natural 
Resources:

    Thank you for the opportunity to testify on the hearing regarding 
PREPA Post Implementation of the LUMA Transmission and Distribution 
Contract. In addition to the written testimony submitted on October 4, 
2021, I submit this supplemental letter and the written comments of 
David Sotomayor-Ramirez, Ph.D., Professor of Soil Science, University 
of Puerto Rico, Mayaguez, College of Agricultural Sciences titled, The 
case for preserving agricultural land area in Puerto Rico and green-
energy projects. In his comments, Dr. Sotomayor highlights the 
importance of preserving agricultural land in Puerto Rico in the 
context of proposals to build utility scale renewable energy projects 
on these important resources. The comments and graph show that Puerto 
Rico lost approximately 70% of agricultural land-area between 1964 and 
2018.
    Other scholars have noted the importance of preserving agricultural 
land in Puerto Rico noting that, ``Given the relatively small size and 
mountainous terrain of Puerto Rico, innovation will be important to 
keep key watersheds and mountain slopes forested, and to increase 
sustainability and productivity on all working lands.'' Land Use, 
Conservation, Forestry, and Agriculture in Puerto Rico, William A. 
Gould, Frank H. Wadsworth, Maya Quinones, Stephen J. Fain and Nora L. 
Alvarez-Berrios, Forests 2017, 8, 242; doi:10.3390/f8070242, http://
www.mdpi.com/journal/forests, P.14. The study further documents that, 
``In recent decades, 14 percent of the island's prime agricultural land 
has been converted to urban use through development, with arguably more 
being restricted by non-agricultural uses, such as residential (lawns) 
or recreational (golf courses) uses.'' Id, P.15. The authors coincide 
with Dr. Sotomayor's comments on the importance of the preservation of 
remaining agricultural land to ensure food security for future 
generations.
    Dr. Sotomayor's comments emphasize the advantages and the important 
role of rooftop or on-site solar systems to preserve agricultural land 
in Puerto Rico. However, as indicated in my written testimony dated 
October 4, 2021, there is a backlog in interconnection of rooftop solar 
and storage installations. LUMA Energy claims that it is addressing the 
backlog however a document prepared by LUMA acknowledges that the 
interconnections are incomplete. The attached document titled, Net 
Metering Program Update indicates that, ``The Final completion of 
projects and Service Agreement still awaits completion of remaining 
steps in the Portal (Study, Supplemental Study, etc)'' Id, p.8. LUMA's 
delays in completing interconnections and issuing the requisite Service 
Agreements has a chilling effect on the deployment of rooftop solar in 
Puerto Rico and aggravates the energy crisis.

    Please feel free to contact me if you have any questions.

            Sincerely,

                                             Ruth Santiago,
                                               Salinas, Puerto Rico

                                 ______
                                 

   The Case for Preserving Agricultural Land Area in Puerto Rico and 
                         Green-Energy Projects

David Sotomayor-Ramirez, Ph.D.
Professor of Soil Science
University of Puerto Rico, Mayaguez
College of Agricultural Sciences
PO Box 9000
Mayaguez, PR 00680-9000

14 October 2021

A major portion of this brief essay was taken from: Sotomayor-Ramirez, 
D., G. Martinez, F. Garcia, G. Gouveia. 2021. Nutrient management for 
sustainable agriculture in the Caribbean. In Preparation, to be 
submitted to J. Agric. Univ. P.R.

    Puerto Rico presents an interesting case scenario for current and 
potential food production. After the 1950s, the island experienced a 
dramatic structural transformation from an agricultural to an 
industrial-based economy. The process involved population migration to 
cities and a gradual abandonment of agricultural lands in rural areas 
(Rudel et al., 2000; Lopez et al., 2001; Martinuzzi et al., 2006). For 
example, in 1964 the agricultural land area was estimated at 1,595,866 
acres and in 2018 at 474,332 acres (USDA-NASS, 2018) (Figure 1). This 
dramatic reduction amounts to an agricultural land-area loss of about 
70% of that in 1964. In the last five years Puerto Rico lost 94,534 
acres, part of which was associated with inventory loss due to 
Hurricanes Irma and Maria. The Puerto Rico 2015 Plan de Uso de Terrenos 
(2015 PUT),\1\ separated near 636,000 acres of land area for 
agricultural production. The current agricultural land-area inventory 
suggests that a major part of the agricultural land area that was 
identified and separated in the 2015 PUT will now never be available.
---------------------------------------------------------------------------
    \1\ 2015 Puerto Rico Land-Use Plan. Junta de Planificacion de 
Puerto Rico. 2015. Reglamento conjunto para la evaluacion y expedicion 
de permisos relacionados al desarrollo y uso de terrenos. 1090 p.
---------------------------------------------------------------------------
    At present, Puerto Rico has one of the highest land-area carrying 
capacities in the Caribbean with 3.4 people/ha-total area and 15.7 
people/ha-agricultural land area (Table 1). The consistent decrease in 
agricultural land area in Puerto Rico has occurred as a result of urban 
expansion into agricultural areas, and agricultural land-area 
abandonment and reversion to secondary forests (Lopez et al. 2001; 
Pares-Ramos et al. 2008; Yuan et al. 2017). Although potential working 
lands could reach as high as 42% of the land-area (Gould et al. 2017), 
current agricultural land area in Puerto Rico is 22% of the total land 
area (USDA-NASS, 2018). This proportion is lower than most countries 
with greater land area in the Caribbean and Central America, which have 
similar crops, flora, fauna, landscape characteristics and climate 
(Figure 2), and for the continental United States in general.
    Prior to 2017, Puerto Rico was estimated to import 80% of its food 
supply (Comas-Pagan, 2009) making its food security vulnerable to 
fluctuations in global food prices, shortages, climate phenomena and 
climate change. Puerto Rico's economic stability, food security and 
availability of fresh and quality products can be enhanced by 
maintaining or increasing land-area for agricultural production and by 
increasing agricultural productivity. Agricultural intensification 
through sustainable nutrient management practices can reduce the 
agricultural footprint and maintain ecologically sensitive areas 
(Cassman and Grassini, 2021). Preliminary work by Baez et al. (2021) 
demonstrates that Puerto Rico could easily be self-sufficient in 
selected commodities of major consumption. The agricultural sector in 
Puerto Rico has a very important role in the local economy, even with a 
gross agricultural income at the farm level estimated at near $900 M. 
Agriculture contributes to direct and indirect employment. Current 
estimates suggest that agricultural activities could support up to 
50,000 jobs in the local economy. The Puerto Rico dependence on 
imported food supplies makes the island vulnerable to natural disasters 
and global economy market fluctuations and dependent on the US 
Government for food-aid transfers.
    It is unknown the current land-area dedicated to green energy solar 
and wind projects. Estimates range from 2,100 to 4,200 acres of land 
area. Sotomayor-Ramirez et al. (2015) described the negative impact of 
wind-energy project in Santa Isabel municipality on high-valued 
agricultural land-area. Preliminary evidence suggests that there may be 
as many as 16 solar energy projects in the pipeline, projected to 
generate near 1,800 MW-AC (Siemens Industry, 2019). The agricultural 
land-area that could be directly impacted could be as much as 13,500 
acres. Puerto Rico needs to achieve a greater proportion of energy 
generation on green energy and decrease dependence on fossil fuels. 
Yet, agricultural land-area cannot be sacrificed for green energy 
generation as this will further exacerbate Puerto Rico's dependence on 
imported food and aid transfers from the federal government, among 
other negative consequences.
    Various studies recommend the siting of photovoltaic equipment on 
rooftops to provide the bulk of energy demand in Puerto Rico (Telos 
Energy, 2020; O'Neill-Carrillo et al. 2018; Mooney and Waechter, 2020). 
The advantages of on-site, rooftop solar or solar installations close 
to the point of use are many. They include the use of existing 
sprawling housing development and commercial rooftops to avoid further 
impacts to open spaces, agricultural land and ecologically sensitive 
areas. Rooftop solar eliminates the need for large investments in 
transmission infrastructure. It avoids transmission losses. Grid 
maintenance costs are reduced and impacts to tropical forests and 
vegetation as a result of tree cutting and pruning are minimized. The 
on-site solar alternative doesn't require establishing extensive 
easements or servitudes on private property while helping to lower 
temperatures within the structures and providing protection to the 
buildings. Rooftop solar installations add value to the structures and 
promote local wealth. Distributed renewable generation on rooftops 
creates greater reinvestment in the local economy than utility-scale 
projects. It enables ratepayers to become producers or `prosumers' of 
energy.

Literature cited

Baez, F., D. Sotomayor-Ramirez, M. Cortes. 2021. A preliminary analysis 
of land-use needed to satisfy local consumption in Puerto Rico. In 
preparation.

Cassman, K.G. and P. Grassini. 2020. A global perspective on 
sustainable intensification research. Nature Sustainability. 3: 262-
268.

Comas-Pagan, M. 2009. Vulnerabilidad de las cadenas de suministros, el 
cambio climatico y el desarrollo de estrategias de adaptacion: El Caso 
de las cadenas de suministros de alimento de Puerto Rico. Doctoral 
Dissertation. University of Puerto Rico, Rio Piedras. 235 p.

Gould, W.A., F.H. Wadsworth, M. Quinones, S.J. Fain, N.L. Alvarez-
Berrios. 2017. Land use, conservation, forestry and agriculture in 
Puerto Rico. Forests. 8: 242. doi:10.3390/f8070242.

Lopez, T. del M., T.M. Aide, and J.R. Thomlinson, 2001. Urban expansion 
and the loss of prime agricultural lands in Puerto Rico. Ambio 30: 49-
54.

Martinuzzi, S., W.A. Gould, O.M. Ramos-Gonzalez, 2006. Land 
development, land use, and urban sprawl in Puerto Rico integrating 
remote sensing and population census data. Landscape and Urban 
Planning. 79. 288-297. Doi:10.1016/j.landurbplan.2006.02.014.

Mooney, M., and K. Waechter. 2020. Puerto Rico Low-to-Moderate Income 
Rooftop PV and Solar Savings Potential, National Renewable Energy 
Laboratory. Available at: https://www.nrel.gov/docs/fy21osti/78756.pdf.

O'Neill-Carrillo, E., I. Jordan, A. Irizarry-Rivera, R. Cintron. 2018. 
The long road to community microgrids. IEEE Electrification Magazine. 
12 p.

Pares-Ramos, I., W.A. Gould, T.M. Aide. 2008. Suburban growth and 
forest expansion following agricultural abandonment n Puerto Rico 
(1991-2000). Paper prepared for presentation at: 2008 Berlin Conference 
``Long-Term Policies: Governing Social-Ecological Change'' 
International Conference of the Social-Ecological Research February 21-
23, 2008. 24 p.

Rudel, T.K., M. Perez-Lugo, H. Zichal. 2000. When fields revert to 
forest: Development and spontaneous reforestation in post-war Puerto 
Rico. Professional Geographer 52: 386-397.

Siemens Industry. 2019. Puerto Rico Integrated Resource Plan 2018-2019. 
Draft for the review of the Puerto Rico Energy Bureau. Prepared for the 
Puerto Rico Electric Power Authority. 330 p.

Sotomayor Ramirez, D., R. Rodriguez Perez, I. Pagan Roig. 2015. 
Terrenos agricolas y energia renovable: Caso de estudio Pattern Energy 
Inc. en Santa Isabel. 2015. Revista de Administracion Publica. 45: 1-
27. Volumen especial bajo el tema ``La Administracion Publica de la 
Energia: Clave para la Sostenibilidad Puertorriquena''.

Sotomayor-Ramirez, D., J. Barragan, J. Caraballo, G. Lozada-Ramirez. 
2013. Trends in fertilizer consumption in Puerto Rico. J. Agric. Univ. 
P.R. 97(1-2):15-32.

Telos Energy. 2020. Estudio de Integracion de Recursos Energeticos 
Distribuidos para Puerto Rico. Telos Energy. 113 p.

Vicente-Chandler. 1993. Una agricultura para los 90. Prepared for 
Department of Agriculture of Puerto Rico. 185 p.

Yuan, F., J.J. Lopez, S. Arnold, A. Brand, J. Klein, M. Schmidt, E. 
Moseman, M. Michels-Boyce. 2017. Forestation in Puerto Rico, 1970s to 
present. Journal of Geography and Geology; 9(3): 30-41.



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]