- PUERTO RICO'S POST-DISASTER RECONSTRUCTION AND POWER GRID DEVELOPMENT

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

PUERTO RICO'S POST-DISASTER

RECONSTRUCTION AND POWER GRID DEVELOPMENT

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

OVERSIGHT HEARING

before the

COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTEENTH CONGRESS

SECOND SESSION

__________

Thursday, November 17, 2022

__________

Serial No. 117-28

__________

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
49-823PDF WASHINGTON : 2023

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

David Watkins, Staff Director
Luis Urbina, Chief Counsel
Vivian Moeglein, Republican Staff Director
http://naturalresources.house.gov
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CONTENTS

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Page

Hearing held on Thursday, November 17, 2022...................... 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........................................... 5
Prepared statement of.................................... 6
Westerman, Hon. Bruce, a Representative in Congress from the
State of Arkansas.......................................... 4

Statement of Witnesses:

Panel 1

Pierluisi, Hon. Pedro, Governor of Puerto Rico............... 8
Prepared statement of.................................... 9
Questions submitted for the record....................... 13

Panel 2

Bahramirad, Dr. Shay, Vice President of Engineering, Asset
Management, and Capital Projects, LUMA Energy.............. 70
Prepared statement of.................................... 72
Questions submitted for the record....................... 81
Colon-Zavala, Emilio, Board Member, Puerto Rico Builders
Association................................................ 97
Prepared statement of.................................... 99
Questions submitted for the record....................... 101
Gossett Navarro, Charlotte, Puerto Rico Chief Director,
Hispanic Federation........................................ 90
Prepared statement of.................................... 92
Laboy, Manuel, Executive Director, Central Office for
Recovery, Reconstruction, and Resiliency................... 46
Prepared statement of.................................... 47
Questions submitted for the record....................... 55
Pardo, Eduardo, President, Puerto Rico Chapter, Associated
General Contractors........................................ 101
Prepared statement of.................................... 103
Questions submitted for the record....................... 105
Rodriguez, William, Secretary, Puerto Rico Department of
Housing.................................................... 56
Prepared statement of.................................... 58
Questions submitted for the record....................... 63
Santiago, Ruth, Community Environmental Lawyer............... 108
Prepared statement of.................................... 110

Additional Materials Submitted for the Record:

List of documents submitted for the record retained in the
Committee's official files................................. 176

CAMBIO, Ingrid M. Vila Biaggi, Statement for the Record,
November 17, 2022.......................................... 128

Puerto Rico Federal Affairs Administration, Carmen Feliciano,
Executive Director, Letter to the Committee, November 21,
2022....................................................... 136

Submissions for the Record by Representative Grijalva

Letter to Puerto Rico Electric Power Authority (PREPA) by
Chair Grijalva and Ms. Gonzalez-Colon followed by
Response............................................... 140

Submissions for the Record by Mr. Manuel Laboy

Appendix 1--FASST Energy Sector Summary, Central Office
for Recovery, Reconstruction and Resiliency............ 162
Appendix 2--Working Capital Advance--PREPA-LUMA, Central
Office for Recovery, Reconstruction and Resiliency..... 171
Appendix 3--Energy Project 404 HMGP, Central Office for
Recovery, Reconstruction and Resiliency................ 172

Submissions for the Record by Mr. Eduardo Pardo

Parole for Significant Public Benefit: Proposal Summary--
Association of General Contractors, Puerto Rico Chapter 173
Stafford Act, Title III: Use of local contractors, FEMA
recovery funds--Association of General Contractors,
Puerto Rico Chapter.................................... 175

OVERSIGHT HEARING ON ``PUERTO RICO'S POST-DISASTER RECONSTRUCTION AND
POWER GRID DEVELOPMENT''

----------

Thursday, November 17, 2022

U.S. House of Representatives

Committee on Natural Resources

Washington, DC

----------

The Committee met, pursuant to notice, at 10:04 a.m., Room
1324, Longworth House Office Building, Hon. Raul M. Grijalva
[Chairman of the Committee] presiding.

Present: Representatives Grijalva, Gallego, Leger
Fernandez, Velazquez, Soto, San Nicolas, Garcia, Tonko;
Westerman, Lamborn, Wittman, McClintock, Graves, Webster,
Gonzalez-Colon, Fulcher, Obernolte, and Bentz.

Also present: Representative Ritchie Torres from New York.

The Chairman. The Committee will come to order.

The Committee is meeting today to receive testimony on the
status of Puerto Rico's reconstruction and recovery after
recent natural disasters, beginning with Hurricane Maria in
2017, a series of earthquakes that occurred in 2020, and
Hurricane Fiona just this past September.
We are also here to discuss the restoration and
modernization of Puerto Rico's power grid, which has
experienced numerous major failures with significant impacts to
the residents of Puerto Rico.
Under Committee Rule 4(f), any oral opening statements at
the hearing are limited to the Chair and the Ranking Minority
Member, or their designees. This will allow us to better hear
from our witnesses sooner and help Members keep to their
schedules.
Therefore, I 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
this hearing, whichever comes first.
Hearing no objections, so ordered.
Without objection, the Chair may also declare a recess,
subject to the call of the Chair.
Without objection, the Member from New York, Representative
Torres, is authorized to question the witnesses in today's
hearings after permanent Members have had their opportunity.
As described in the hearing notice, statements, documents,
or motions must be submitted to the electronic repository at
[email protected]. Members physically present should
provide a hard copy for staff.
Additionally, please note that Members are responsible for
their own microphones. As with our fully in-person meetings,
Members may be muted by the staff only to avoid inadvertent
background noise.
Finally, Members or witnesses experiencing technical
problems should inform Committee staff immediately.
I now want to recognize the Vice Chair of the Insular
Affairs Committee, Mr. Sablan, if he has any opening statement.
Hearing none, let me turn to Vice Ranking Member of that
Committee, Representative Gonzalez-Colon. Commissioner?
Miss Gonzalez-Colon. Thank you, Mr. Chairman.
The Chairman. You are recognized for 5 minutes.

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

Miss Gonzalez-Colon. Thank you, Mr. Chairman. I really
appreciate this Committee doing this hearing and actually
deferring the time from the original date that was near
Hurricane Fiona. I think it is important, what we are doing
today. I think Puerto Rico has been facing many----
[Audio malfunction.]
Miss Gonzalez-Colon [continuing]. Also from the physical
situation----
[Audio malfunction.]
The Chairman. I think we are having some technical
problems. We are not able to hear the Commissioner directly.
Miss Gonzalez-Colon. Can you hear me now, sir?
The Chairman. Now we can. Thank you. You are recognized.
Miss Gonzalez-Colon. Thank you.
[Audio malfunction.]
Miss Gonzalez-Colon [continuing]. Federal funding that has
been approved for the island, and many of those funds, the
funding is not being used because of the hurdles and the red
tape of many Federal agencies to use on the island.
For example, we are talking about more than $11.8 billion
are coming from HUD to do an upgrade of the electrical system
on the island. That is one of the major issues we are facing
because of the situation. Sometimes we have a week, and we have
cellular----
[Audio malfunction.]
Miss Gonzalez-Colon [continuing]. That is going to put the
island----
[Audio malfunction.]
The Chairman. This is going to be a problem.
Miss Gonzalez-Colon [continuing]. Have an old system with a
lot of lack of maintenance during all those years, and we may
require doing, literally, an upgrade. And that means not just
equipment outdated by decades, but also in terms of the
determent and some bad habits of all administrations just to
cancel whatever projects were approved during the prior
administration. And that is just a wasting of time and, of
course, a wasting of funds.
One of the issues that we have been facing in PREPA, or the
local company since 2017, is that every component of the power
has not only----
[Audio malfunction.]
Miss Gonzalez-Colon. So, many issues are being discussed
here. And my colleagues in Congress came with me to the island
after Maria. Many of them saw firsthand what was going on.
After Fiona, a few Members of Congress, as well, went to the
island. They saw what happened. But results have been slow.
First, major obligations for permanent infrastructure
rebuilding were announced only late 2020. And getting the money
out from the Federal agencies is just--it is just a situation
that over $80 billion in recovery funds are being allocated,
but just one-third of them have been actually disbursed. Why is
that? And I think the Governor of Puerto Rico and government
officials can answer all those hurdles and problems they are
facing in terms of getting that money out.
So, with that, Mr. Chairman, 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
Thank you, Mr. Chairman and Ranking Member Westerman.

Puerto Rico has been facing a long and tough recovery in every
sense of the word.
It has been 5 years since Hurricanes Irma and Maria, yet the
effects still linger.
Since then, we have been impacted by other disasters: earthquakes;
the COVID-19 pandemic; economic slowdowns; and, on the eve of Maria's
fifth anniversary along came, Hurricane Fiona. All while still trying
to undertake a fiscal and economic recovery.
The effects of Fiona and the ongoing rains have brought back to our
attention that the necessary public works to make our infrastructure
more resilient, are going at a snail's pace.
We still have a vast amount of transportation and public utility
infrastructure waiting for the required permanent replacement and
improvement to more resilient, climate resistant standards, so it keeps
failing again, and we keep having to repair it, again.

The electric grid is the biggest example. Even before Maria hit us
it suffered from:

equipment outdated by decades, suffering from deferred
maintenance;

new plans would be made with every incoming administration
at the Puerto Rico Electric Power Authority, wasting time
and funds;

revenues being directed to first pay current expenses, EPA
fines, and rising bond debt, leaving none for capital
investment.

And, since 2017, PREPA, PRASA, and every other component of our
public infrastructure sector has not only needed physical rebuilding,
but also fiscal restructuring under the PROMESA Law, that continues to
this day.
Following Hurricane Maria, several Members of Congress and
Administration officials have visited the Island to assess the damages
and provide the resources to assist in its recovery.
But results have been too slow. The first major obligations for
permanent infrastructure rebuilding were announced in late 2020. Of
over 80 billion dollars in recovery funds, just a third has been
disbursed to date.
My constituents hear about all those billions, and they ask a
simple question, where are they? They need to see infrastructure
recovery TODAY. Not in 2030 or 2040.
Last year, PREPA granted an Operation and Management contract for
Transmission and Distribution to LUMA Energy. It was hoped this would
bring greater efficiency in the rebuilding of the energy grid. It
hasn't!
But what do the people of Puerto Rico see on the ground? Still
unreliable service, with constant brownouts: power plants going offline
for days and weeks, substations blowing up in a gulf of fire, down
transmission lines. And the monthly bill keeps increasing month after
month, making our electric bill the most expensive in the nation. Just
a couple of months ago my constituents were paying .33 cents a kwh,
while receiving the worst electrical power service in the country.
The power utility has been working on virtually no reserves,
keeping power plants running that needed to be cycled off for
maintenance work and therefore risking damaging them even more.
This past year even before Fiona the electrical grid interruptions
continued and when we asked FEMA about it, it turned out that only a
small fraction of permanent work projects had been submitted.
I am disappointed that PREPA and the Energy Bureau are not here
today: I would have wanted all components of the Energy Sector to be at
the same table so that we could end the ongoing blame game and do what
the people are screaming at the government to do, give them reliable,
stable electrical power service.
So, my constituents rightfully ask, what is being done with the
billions of dollars in aid? What are the plans? When will we see
results? I truly hope we can get some clear answers to these
fundamental questions today. Our people deserve no less.

______

The Chairman. The gentlelady yields. Thank you very much.
Let me attempt to recognize Mr. Sablan, if he has joined us,
for any opening statement or comment he may have.
[Pause.]
The Chairman. Let me now ask the Full Committee Ranking
Minority Member for any statement he may have.
Mr. Westerman.

STATEMENT OF THE HON. BRUCE WESTERMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS

Mr. Westerman. Thank you, Mr. Chairman. I thank everybody
for being here today, and I do look forward to continue to work
with the Resident Commissioner to ensure that Puerto Rico has a
stable footing.
I also look forward to the day when we are all in person
back in the hearing room again, and we are not doing remote
testimonies or remote voting, as we see again the trouble that
we often face with technology.
I believe that attaining financial stability, repairing
infrastructure, and ensuring access to affordable and reliable
energy for the residents of Puerto Rico will set the island on
a solid and prosperous path forward.
I appreciate the ongoing and tireless work of Miss
Gonzalez-Colon here in Congress on behalf of the residents of
Puerto Rico.
Devastatingly, Hurricane Fiona made landfall in Puerto Rico
on September 21, 2022, crossing the southwest corner of the
island. It brought 85-mile-per-hour winds and heavy rainfall on
the island, almost unimaginable rainfall, totaling 32 inches in
72 hours near the southern coast, the City of Ponce. If we
could figure out how to move that rain from Puerto Rico to
California and the West, that would solve a lot of our
problems. But, unfortunately, we don't have that technology
yet.
Those hurricane force winds and the heavy rains caused an
island-wide blackout and severe flooding. The storm taxed
Puerto Rico's already fragile electrical grid, which had been
patched but never fully repaired or upgraded after Hurricane
Maria in 2017.
In early October, I traveled with the Resident Commissioner
to Puerto Rico and met with the Governor, who I am glad to see
is here today. We met with local agencies, Federal officials,
and power grid operators to learn about the recovery efforts
underway after Hurricane Fiona and to assess damages in several
municipalities firsthand. We also discussed ongoing challenges
to restoring electricity across the island in the wake of
Hurricane Fiona.
It was reassuring to see the amount of progress that had
been made in restoring power and water systems on the island
less than 3 weeks after Fiona made landfall. But there is still
much work to do to restore critical infrastructure, homes, and
communities after the devastating storm and flooding. Federal
agencies need to continue working with the Puerto Rico
Government and local municipalities to recover from the natural
disasters that have impacted Puerto Rico.
We should strive to increase the resiliency of the island
so that when there are future natural disasters, we can see
even quicker recoveries and less damage.
The Puerto Rico Electric Power Authority, or PREPA, has
been plagued for decades by issues leading to inefficiency of
operations. In 2021, LUMA Energy won a contract to operate
PREPA's electricity transmission and distribution system. I
have recognized that there have been several challenges with
LUMA's operations on the island. We all need to work together
to ensure the island's electric grid is strong and, again, a
grid that provides affordable and reliable electricity to the
people of Puerto Rico.
As I have said before, I support an all-of-the-above energy
approach, but it has to be an energy approach that works and
delivers. We need to work for affordable and reliable energy
that meets the needs of local communities. We will continue
working for that and assisting in any way that we can.
I yield back.

The Chairman. The gentleman yields. Thank you, and let me
recognize myself.

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

The Chairman. I want to begin by thanking my colleagues for
taking the time to join us for this Full Committee oversight
hearing on Puerto Rico's post-disaster reconstruction and power
grid development.
In the last 5 years, Puerto Rico has been impacted by one
major natural disaster after another, and the litany is there,
and everybody is aware of them, the latest being September
2022. Just this morning, a Magnitude 5 earthquake struck the
island. The territory's structural issues, including fragile
infrastructure and some of the nation's highest poverty rates,
make Puerto Rico extremely vulnerable to the compounding
effects of climate change, especially the increase in the
frequency and the intensity of hurricanes and storms.
The purpose of today's hearing is to receive testimony from
key stakeholders regarding post-disaster reconstruction efforts
in Puerto Rico. We will also discuss a legislative proposal
designed to provide lifesaving, post-disaster energy resources
to those least able to access them. We will hear from local
government officials, the electric utility private operator,
local non-profit and community leaders, and professional
associations.
Although FEMA's administrator was unable to join us today,
I want to thank the Biden administration for its rapid and bold
actions to ensure Puerto Rico has the resources it needs to
recover from Hurricane Fiona and previous natural disasters.
After Hurricane Irma and Maria impacted Puerto Rico,
Congress appropriated disaster aid for the territory. But the
reconstruction process has moved slowly, very slowly. For
almost 3 years, the previous administration withheld billions
of dollars for critical projects on the island.
Further, although FEMA provided significant support to
Puerto Rico, the agency's response was hindered by its
adherence to protocols that failed to account for Puerto Rico's
structural issues, including the territory's financial
situation.
The Government of Puerto Rico has been criticized for its
inability to apply disbursed funds in a timely manner toward
critical projects, community organizations, and small
businesses.
In June 2021, operational control of Puerto Rico's energy
grid was transferred from Puerto Rico Electric Power Authority,
PREPA, to private operator, LUMA Energy, which was tasked with
rebuilding the grid and improving service. Since then, Puerto
Rico has not seen an improvement in the frequency of outages
but, problematically, has seen an increase in their duration.
The local government must conduct aggressive oversight of
LUMA's contract to operate, maintain, and modernize the
electric grid. Additionally, additional accountability is
necessary. The residents of Puerto Rico deserve a reliable
electric service.
To increase resilience on the island, the Government of
Puerto Rico made significant infrastructure investments. This
includes prioritizing projects to modernize the electric grid
toward a more reliable system for residents that is
decentralized and less reliant on fossil fuels. But Puerto Rico
doesn't have the funding to go it alone, and the Federal
disaster funds that have been appropriated so far cannot
provide the resiliency that Puerto Rico's most vulnerable
populations need.
I am seeking to include in a post-Hurricane Fiona Emergency
Supplement $5 billion for the Department of Energy to provide
rooftop solar and battery storage systems for low-income
households and households with people with disabilities in
Puerto Rico. I want to thank Secretary Jennifer Granholm for
supporting the proposal.
And amidst the island-wide blackout caused by Hurricane
Fiona, pockets of solar power generation were able to keep the
lights on. A preliminary study from the National Lab of
Renewable Energy PR100 program found that Puerto Rico's high
exposure to sunlight could produce over four times the amount
of energy that it needs for rooftop solar power.

[The prepared statement of Mr. Grijalva follows:]
Prepared Statement of the Hon. Raul M. Grijalva, Chair, Committee on
Natural Resources
I want to begin by thanking my colleagues for taking the time to
join us for this Full Committee oversight hearing on Puerto Rico's
Post-Disaster Reconstruction and Power Grid Development.
In the last 5 years, Puerto Rico has been impacted by one major
natural disaster after the other, including Hurricanes Irma and Maria
in 2017, the earthquakes of 2020, and Hurricane Fiona in September
2022. Just this morning, a magnitude 5 earthquake struck the island.
The territory's structural issues--including fragile infrastructure and
some of the nation's highest poverty rates--make Puerto Rico extremely
vulnerable to the compounding effects of climate change, especially the
increase in the frequency and intensity of hurricanes and storms.
The purpose of today's hearing is to receive testimony from key
stakeholders regarding post-disaster reconstruction efforts in Puerto
Rico. We will also discuss a legislative proposal designed to provide
life-saving post-disaster energy resources to those least able to
access them.
We will hear from local government officials, the electric utility
private operator, local nonprofit and community leaders, and
professional associations.
Although FEMA's Administrator was unable to join us today, I want
to thank the Biden administration for its rapid and bold actions to
ensure Puerto Rico has the resources it needs to recover from Hurricane
Fiona and previous natural disasters.
After Hurricanes Irma and Maria impacted Puerto Rico, Congress
appropriated disaster aid for the territory, but the reconstruction
process has moved slowly. For almost 3 years, the Trump administration
withheld billions of dollars for critical projects on the island.
Further, although FEMA provided significant support to Puerto Rico, the
agency's response was hindered by its adherence to protocols that
failed to account for Puerto Rico's structural issues, including the
territory's financial situation.
The Government of Puerto Rico has also been criticized for its
inability to apply disbursed funds in a timely manner toward critical
projects, community organizations, and small businesses.
In June 2021, operational control of Puerto Rico's energy grid was
transferred from the Puerto Rico Electric Power Authority to private
operator LUMA Energy, which was tasked with rebuilding the grid and
improving service. Since then, Puerto Rico has not seen an improvement
in the frequency of outages but, problematically, has seen an increase
in their duration.
The local government must conduct aggressive oversight of LUMA's
contract to operate, maintain, and modernize the electric grid.
Additional accountability is necessary. The residents of Puerto Rico
deserve reliable electric service.
To increase resilience on the island, the Government of Puerto Rico
must make significant infrastructure investments. This includes
prioritizing projects to modernize the electric grid toward a more
reliable system for residents that is decentralized and less reliant on
fossil fuels.
But Puerto Rico doesn't have the funding to go it alone. And the
Federal disaster funds that have been appropriated so far cannot
provide the resiliency that Puerto Rico's most vulnerable populations
need. I am seeking to include in a post-Hurricane Fiona emergency
supplemental $5 billion for the Department of Energy to provide rooftop
solar and battery storage systems for low-income households and
households with people with disabilities in Puerto Rico. I want to
thank Secretary Jennifer Granholm for supporting the proposal.
Amidst the island-wide blackout caused by Hurricane Fiona, pockets
of solar-powered generation were able to keep the lights on. A
preliminary study from the National Lab of Renewable Energy's PR100
program found that Puerto Rico's high exposure to sunlight could
produce over four times the amount of energy it needs from rooftop
solar power.

______

The Chairman. Now I want to welcome all our witnesses.
Thank you for joining us today. We welcome your insight and
recommendations.
But first, let me remind all the witnesses and my
colleagues on the dais that the 5-minute rule will be more
aggressively monitored. We have a lot of witnesses, and it is a
voting day, and I have heard from Members that have made plans
to leave and go back to their districts and their homes. So, in
order to maintain as much participation by Members, I would
hope that everybody strictly takes to that 5-minute rule. And I
will remind Members as we go forward.
Let me now introduce our first witness, the distinguished
Governor of Puerto Rico, the Honorable Pedro Pierluisi.

Sir, thank you so much for the time to be here. You are
recognized, sir, for 5 minutes.

STATEMENT OF THE HON. PEDRO PIERLUISI, GOVERNOR OF PUERTO RICO

Governor Pierluisi. Chairman Grijalva, Ranking Member
Westerman, Resident Commissioner Gonzalez-Colon, and members of
the Committee, thank you for holding this hearing about the
recovery of Puerto Rico.
I am pleased to report that Puerto Rico is emerging from a
challenging period with strength and optimism into a new era of
stability evidenced by the island's economic upswing. As our
economy recovers, we are working to ensure that Puerto Rico's
energy system is reliable and resilient, speeding up our
reconstruction, and seeking fair treatment in Medicaid and
Medicare, as well as inclusion in the SNAP program.
Puerto Rico, Congress, and the Biden administration have
committed significant resources to the island's recovery after
the 2017 hurricanes, the subsequent earthquakes, the pandemic,
and the most recent Hurricane Fiona. As of today, 70 percent of
the CDBG-DR disaster funds have been obligated. Out of over
12,000 eligible families, more than 6,400 families have had
their homes rebuilt or received housing vouchers.
In addition, over 2,300 residences are under construction
or pre-construction. FEMA has obligated over 91 percent of the
funding allocated for emergency and permanent work projects,
and almost 20 percent has already been disbursed. We now have
2,132 projects under construction for a total cost of $800
million, and over 1,600 projects totaling over $1.4 billion are
in the permitting process and should start construction soon.
The transformation of our electric system is one of our
highest priorities. We are committed to moving away from fossil
fuels and toward renewable energy, converting our fragile and
integrated electric grid into a modern, resilient, and
interdependent one that can serve Puerto Rican residents and
businesses without blackouts.
The great reconstruction is underway--with multiple
substations repaired, thousands of poles and streetlights
replaced, and over 33,000 new solar customers connected. Also,
90 energy projects are in the design phase, 43 are awaiting
FEMA approval, 51 have been approved, and 40 projects are under
construction.
Furthermore, 1,000 megawatts in utility-scale renewable
energy generation projects, including 200 megawatt battery
storage, are in design or construction. And we are about to
finish an RFP process for additional renewable energy projects
that will generate 1,000 megawatts, along with 500 megawatts in
battery storage.
In addition, we are installing solar and battery systems on
all homes rebuilt under the R3 program and have allocated $500
million of CDBG-MIT funding for assisting low-income households
in acquiring solar panels and batteries.
Moreover, work has begun to deploy $1.3 billion in CDBG-
MIT-DR funds for microgrids and energy storage systems in
remote communities and first response agencies. However, given
Hurricane Fiona's recent impact on Puerto Rico, our electric
system has suffered additional damages.
After I requested emergency assistance to stabilize our
power system, FEMA agreed to provide resources to assist Puerto
Rico in increasing its power generation capacity and improving
our transmission and distribution of energy. The plan proposes
to install temporary generation through power barges and high
capacity portable generators, and to perform short-term repair
work in our existing generation plants and electric grid. This
will allow Puerto Rico to concentrate all efforts on advancing
the transformation and modernization of its electric system,
while our people have stable service.
Our asks to this Committee and Congress include providing
100 percent Federal share match for energy-related FEMA-funded
projects; giving congressional authorization to FEMA to adjust
fixed cost estimates of approved projects, given the recent
increase in the cost of construction materials and supply chain
disruptions; amending the Stafford Act to authorize FEMA to
consolidate disasters into a single award of Federal
assistance; and supporting the proposal of Chairman Grijalva
and other Members of Congress to allocate $5 billion in
directed CDBG-DR funding for residential solar energy systems
on the island.
Finally, I must remind this Congress that, even after the
successful restructuring of our public debt and rebuilding of
our infrastructure, Puerto Rico will remain hindered until our
century-long status question is resolved. The people of Puerto
Rico voted and chose statehood as their path forward. Congress
should call for a vote on the political future of Puerto Rico
and commit to implementing the will of the majority. After all,
that is what democracy is all about.
I thank you for favorably reporting H.R. 8393 out of this
Committee, and I urge Congress to approve it. Thank you.

[The prepared statement of Governor Pierluisi follows:]
Prepared Statement of the Hon. Pedro R. Pierluisi, Governor of Puerto
Rico
Chairman Grijalva, Ranking Member Westerman, Resident Commissioner
Gonzalez-Colon, and Members of the Committee:

Thank you for holding this hearing regarding the post-disaster
reconstruction efforts and the transformation of the electric system of
the U.S. territory of Puerto Rico. I am pleased to report that Puerto
Rico is emerging from a challenging period with strength and optimism.
Successfully restructuring our public debt to sustainable levels is
helping us rise from bankruptcy with renewed momentum. This new era of
economic stability and progress-oriented policies is already working to
restore investor confidence on the Island, which is evidenced by the
economic upswing being felt across Puerto Rico.
We also strategically allocated federal funds related to the
pandemic to mitigate the effect on our public health and our economy.
This has helped provide a sustained rise in economic activity indexes
for the past twenty months. In fact, even accounting for inflation and
historic high fuel prices, our economy is growing, businesses are
expanding, and tax collections are rising consistently.
All banks and co-ops in Puerto Rico have shown steady growth in the
past two years, with increasing personal loans, positive movement in
the mortgage sector, manufacturing indexes rising and bankruptcies
decreasing.
Additionally, with an increase in the local minimum wage, and the
impact of this Congress's inclusion of Puerto Rican families in the
Child Tax Credit and the federal funding you allocated to increase our
local Earned Income Tax Credit, the poverty rate on the island has
decreased by 2 percent and is expected to decrease by 7 percent by next
year.
Moreover, we have been able to create over 105,000 jobs in less
than twenty months since I took office, and Puerto Rico's unemployment
rate is at 5.8%, its lowest point in our history. Also, more people
have joined the workforce, reaching levels we have not seen in almost
15 years, and last month 44 percent of businesses on the Island
reported plans to increase their workforce.
As our economy recovers and we continue to promote our
socioeconomic development, we must also ensure that Puerto Rico's
energy system is reliable and resilient, we must speed up our
reconstruction, and most critically, continue to protect the health of
our people working with Congress to receive fair treatment in Medicaid
and Medicare, as well as inclusion in the SNAP program.
RECOVERY & RESILIENCY

Puerto Rico, this Committee, Congress, and the Biden Administration
have committed significant resources to Puerto Rico's recovery after
the ravages of the 2017 Hurricanes and their human and economic toll,
as well as subsequent earthquakes, the COVID-19 pandemic, and the most
recent Hurricane Fiona two months ago. I am pleased to report
significant advances in these efforts during my administration.
The Puerto Rico Department of Housing (PRDOH), as the designated
CDBG-DR Grantee, and the Central Office for Recovery, Reconstruction
and Resiliency (COR3), as the designated FEMA Grantee, are working
nonstop for the recovery of the Island. Both agencies will share a
detailed update with this Committee, but I would like to highlight some
important advancements. I also want to underline that the assistance
provided by the Biden Administration to speed up access to these funds
has been instrumental.
PRDOH has successfully obligated 70 percent (approximately $7
billion) of the more than $10 billion in CDBG-DR disaster recovery
funds. In its Repair, Reconstruction and Relocation Program, out of
over 12,000 eligible families, more than 6,400 families have been
served, with 4,376 homes rebuilt and 2,027 housing vouchers granted. In
addition, 1,341 residences are under construction and 973 in pre-
construction.
The Buyer Assistance Program, with an allocation of $295 million,
has already helped 4,131 families acquire a new home. Under the Low-
Income Housing Tax Credit Program, which has an allocation of $963
million, 6 projects with 981 units under construction in its first
phase, and the second phase aims to achieve the construction of 2,535
housing units through 17 projects that have already been selected and
one has already begun construction.
As for COR3, FEMA has obligated over 91 percent (nearly $30
billion) of the funding allocated for emergency and permanent work
projects (which totals over $32 billion), and almost 20 percent has
already been disbursed. By thinking outside the box, COR3 developed the
Working Capital Advance Program to advance 25 percent of the FEMA
approved cost of a project, which now provides necessary cash-flow for
projects that were delayed due to municipalities or agencies not having
enough capital to begin the design and construction processes.
This program has been so successful in the few months since it was
established that FEMA has approved its use for all public and private
sector entities that have approved projects, and now has been expanded
to up to a 50 percent advance for compliant recipients.
As of today, we have 2,132 projects under construction for a total
cost of $800 million in FEMA funding. Also, 1666 projects totaling over
$1,400 million are in the permitting process and should start
construction soon. These are projects of all sizes and types, such as
critical infrastructure, community improvements and utilities, all over
Puerto Rico.
Furthermore, we have had significant progress in water and sewer
infrastructure reconstruction, with multiple large projects already
under construction, valued at $116.3 million, along with others
totaling $294 million that are in the process of architectural and
engineering work. Likewise, 26 additional water and sewer projects have
been obligated by FEMA for another $828 million.
ENERGY TRANSFORMATION

The transformation of our electric system is certainly one of our
highest priorities. The Puerto Rico Electric Power Authority is still
in bankruptcy, saddled with over $9 billion in bonded debt, and
burdened with an antiquated infrastructure that was devasted by
Hurricanes Irma and Maria, and for which emergency restoration work
took over a year to repair. The Government of Puerto Rico is hard at
work with the Oversight Board trying to restructure its debt to
affordable levels. We are also committed to achieving our comprehensive
and ambitious public policy to transform our existing power generation
assets, moving away from fossil fuels toward renewable energy, and
converting our fragile and integrated electric grid into a modern,
resilient and interdependent one that can serve Puerto Rican residents
and businesses without blackouts.
By way of background, on June 20, 2018, the Government of Puerto
Rico enacted the ``Puerto Rico Electric Power System Transformation
Act, Act No. 120-2018 (``Act 120''), with the stated goal of
transforming Puerto Rico's energy system into a modern, sustainable,
reliable, efficient, resilient, and cost-effective system.
On April 11, 2019, the Government of Puerto Rico then enacted Act
17-2019 (``Act 17''), further advancing our public policy, which
mandates the delegation or transfer of the operation of the Puerto Rico
Power Authority (``PREPA'') electric power generation, transmission and
distribution, commercialization, and operation systems to the private
sector through the execution of publicprivate partnership contracts
(``P3 Contracts''), all to be done within certain specific milestones.
The first P3 Contract in connection with Puerto Rico's energy
transformation was executed between PREPA, the P3 Authority, and LUMA
Energy. LUMA is now in charge of the operation and management of the
transmission and distribution assets of PREPA.
LUMA also must lead the redesign and reconstruction of our electric
grid to make it more modern, reliable, able to function
interdependently with generation units to avoid island wide outages,
and able to provide for the interconnection of microgrids and renewable
energy systems. It is also important to recognize that the $9.5 billion
in awarded by FEMA for the energy system reconstruction were approved
in the later months of 2020. Since then, significant advances have been
achieved.
While we recognize there have been delays, the path toward
modernization has been set and we are committed to providing modern and
reliable electric service to all on the island. The grid reconstruction
by LUMA is underway, with hundreds of substations repaired, thousands
of poles and streetlights replaced, and over 33,000 new solar customers
connected.
Also, more than 389 FEMA funded projects have been approved by the
Puerto Rico Energy Bureau, 90 projects are in the design phase, 43
projects are awaiting FEMA approval, 51 projects have already been
approved by FEMA, and 40 projects are under construction.
Furthermore, work continues to safely integrate 1,000 MW of
utility-scale renewable energy generation and 250 MW of energy storage
into our system. Likewise, we are completing an RFP process for
additional utility-scale renewable energy projects totaling 1000 MV
with 500 MV of storage and proponents will be chosen soon by the Puerto
Rico Energy Bureau.
In addition, the Puerto Rico Department of Housing is installing
solar and battery systems on all homes rebuilt under its R3 program. It
also has begun the process for the administration of $1.3 billion in
CDBG-DR funds for microgrids and energy storage systems for remote
communities and first response agencies. The first of these projects
will be built in our primary medical center, Centro Medico, for which
proposals for its design and construction should be ready by the
beginning of next year.
Further, the Department of Housing and the Green Energy Trust will
use $500 million in CDBG-MIT funds, which my administration has
allocated to assist low- and moderate-income households in acquiring
renewable energy systems. With this allocation, we expect to have
25,000 additional solar systems and solar communities across our
Island.
The Green Energy Trust will also pursue other funding venues,
including but not limited to the Investment and Infrastructure Jobs Act
and the Inflation Reduction Act, which can finance programs that
promote the development of green energy projects.
However, given Hurricane Fiona's recent impact on Puerto Rico,
which brought over thirty inches of rain to some municipalities,
combined with additional historic rainfall during the months of
September and October, our electric system has suffered additional
damages, causing major power outages.
Last month, I formally requested emergency assistance from FEMA to
stabilize our power system by providing additional generation assets
and accelerating work on our transmission and distribution grid.
In response, FEMA created the Puerto Rico Power System
Stabilization Task Force, which includes the U.S. Department of Energy,
the U.S. Army Corps of Engineers and the Environmental Protection
Agency (EPA), led by FEMA, which together with our administration's
energy stakeholders developed a plan to stabilize our electric system
to be able to provide reliable service to the residents of Puerto Rico,
while we continue to carry our reconstruction projects.
FEMA has agreed to provide resources for this stabilization process
that will include actions to assist Puerto Rico in increasing its power
generation capacity and helping improve transmission and distribution
of energy. The plan proposes to:

1. Install temporary generation through power barges and high-
capacity portable generators.

a. FEMA has already identified available units and is making
arrangements to hire and mobilize them to Puerto Rico.

2. Perform key short-term work in existing generation plants that
allow for the reincorporation of units that are not
operating at full capacity or that are out of service.

3. Perform key short-term improvements on the electrical grid, such
as repairing key substations and transformers, and
replacing high-voltage breakers.

The work that FEMA and its federal partners will be doing will be
coordinated with our local stakeholders so that it is done
systematically. With this aid, Puerto Rico will be able to focus all
efforts on advancing the transformation and modernization of its
electric system while our people have a stable service.

CONGRESSIONAL INTERVENTION AND ASSISTANCE

We respectfully ask this Committee and Congress to help us address
some additional challenges that we are facing in our ongoing post-
disaster reconstruction.
First, we ask for 100 percent federal match for energy related FEMA
funded projects. This was done in other states where catastrophic
damages occurred and will enable us to use the funds that we have
earmarked for the local match for additional renewable energy projects
and microgrids.
Second, we ask that FEMA be given Congressional authorization to
adjust fixed costs estimates of approved permanent projects given the
recent increase in the cost of construction materials and supply chain
disruptions. Without this, there is a possibility that some projects
will not have enough funding to be completed, putting Puerto Rico's
resiliency and reconstruction at risk.
Thirdly, we ask that you support an amendment to the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121
et seq.) to authorize FEMA to consolidate disasters into a single award
under DR-4339-PR for the administration of federal assistance. This
request will ensure a sound approach to the recovery process and help
lessen the administrative burden for both the Government of Puerto Rico
and FEMA in managing both disasters.
Lastly, we support the proposal of Chairman Grijalva and other
Members of Congress to allocate $5 billion in directed CDBG-DR funding
for residential solar energy systems on the Island. This will provide
necessary energy independence to residents of Puerto Rico and
democratize access to renewable energy.

STATUS

In conclusion, 125 years of unequal treatment toward the American
citizens living in Puerto Rico have taken a toll on our society. Even
after the successful restructuring of our public debt and the
rebuilding of our infrastructure, Puerto Rico will remain hindered
until our century-long status question is resolved.
The people of Puerto Rico voted and chose permanent union with the
United States through statehood as their path forward. So many Puerto
Ricans have defended American democratic values at home and abroad that
their lack of voting representation in Congress and voting rights is
clearly unacceptable.
Congress should call for a vote on the political future of Puerto
Rico and commit to implementing the will of the majority. After all,
that is what democracy is all about. I thank you for favorably
reporting H.R. 8393 out of this Committee and urge Congress to approve
it.

Thank you.

______

Questions Submitted for the Record to the Hon. Pedro Pierluisi,
Governor of Puerto Rico

Questions Submitted by Representative Leger Fernandez

Question 1. What would you recommend Congress do to improve the
Robert T. Stafford Disaster Relief and Emergency Assistance Act, or
other relevant statutes, to enhance FEMA's and the Federal Government's
response, more broadly, to the disasters Puerto Rico experienced, as
well as future disasters?

Answer. Based on our experience, and the experiences shared with us
of other States, we recommend five improvements to the Stafford Act
that will enhance the Federal Government's response capabilities to not
only Puerto Rico, but other States and Territories faced with
catastrophic damage:
A. Natural Disaster Consolidation:

First, we are asking Congress to support our request that FEMA
consolidate the disaster declarations for Hurricane Maria (DR-4339-PR)
and Hurricane Fiona (DR-4671-PR) into DR-4339-PR with respect to the
administration of federal assistance. FEMA has the authority to make
such adjustments independently pursuant to Stafford Act
Sec. 5172(e)(1)(A)(i). Consolidating disasters reduces administrative
burdens associated with allocating costs and damage to each disaster,
which can be particularly difficult in Puerto Rico where work required
as a result of Hurricanes Irma and Maria was not complete when
Hurricane Fiona hit the Island, in some cases damaging the same
facilities. Consolidation is also beneficial to FEMA, reducing the need
for separate resources devoted to each disaster. It also benefits
Puerto Rico as a Recipient of federal funding, currently managing
disaster grants for not only Hurricanes Irma and Maria, but also other
major disaster such as the 2020 Earthquakes and COVID-19.
Consolidation is not unprecedented. FEMA previously consolidated
close-in-time disasters, such as Hurricanes Irma and Maria in Puerto
Rico, Hurricanes Delta and Zeta in Louisiana, and Hurricanes Laura and
Sally in Alabama and Florida. These storms occurred within weeks of
each other, and FEMA concluded it had the authority to make such
adjustments independently pursuant to Stafford Act
Sec. 5172(e)(1)(A)(i). Due to the lapse of time between Hurricanes
Maria and Fiona, however, FEMA has been hesitant to consolidate them
and has advised that congressional action is needed to allow the
consolidation.
Stafford Act Sec. 5172(e)(1)(A)(i) requires FEMA to estimate the
eligible cost of repairing or replacing a facility ``on the basis of
the design of the facility as the facility existed immediately before
the major disaster.'' This has been the basis for FEMA's consolidation
of close-in-time disasters, because when events occur in rapid
succession, it is often difficult, if not impossible, to identify the
pre-disaster condition of the facility. While Hurricanes Maria and
Fiona were about five years apart (almost to the day), when Hurricane
Fiona hit, many facilities had not been fully repaired or replaced
following Hurricane Maria. Therefore, limiting FEMA assistance based on
the pre-disaster condition of a facility for Hurricane Fiona is likely
to be restrictive. Even where the post-Maria, pre-Fiona condition of
the facility is well documented, having several grant projects spanning
multiple disasters for repairs to or replacement of a single facility
is likely to lead to duplicative costs and efforts. For instance,
documenting repairs to the power grid funded by the Hurricane Maria
disaster versus separately distinguishing and documenting repairs to
the power grid funded by the Hurricane Fiona disaster creates
unnecessary bureaucracy, adds no value, and leads to the same result
with twice the effort.
For an effective consolidation of the disasters, Stafford Act
Sec. 428, Public Assistance Program Alternative Procedures (PAAP) (42
U.S.C. Sec. 5189f) will need to be amended to allow obligated projects,
with agreed fixed cost estimates, to be versioned to include damages
caused by Hurricane Fiona. In addition, we reiterate our request that
Sec. 428 PAAP obligated projects under Hurricane Maria (DR-4339-PR), be
amended to allow versions to accommodate any impacts due to inflation,
construction material cost increases, and labor shortages, among
others.
B. Support 100% Federal Cost Share:
We request that 100% federal cost share be provided for all
Hurricane Maria (DR-4339-PR) and Hurricane Fiona (DR-4671-PR))
permanent work (Categories C-G) projects. Providing 100% federal cost
share for all permanent work projects for both disasters, especially
for work relating to the repair of Puerto Rico's electrical grid, is
crucial for the Island's recovery.
Increasing the cost share for Public Assistance permanent work to
100% federal funding will help expedite the rebuilding of the
electrical grid without imposing an additional financial burden on
Puerto Rico. On May 26, 2021, COR3 made a request to FEMA for a cost
share adjustment of 100% for the Hurricane Maria major disaster
declaration (DR-4339-PR). FEMA denied the request on November 23, 2021,
asserting that the regulation at 44 C.F.R. Sec. 206.47 did not provide
for making a recommendation to the President to increase the cost share
for Public Assistance permanent work to 100% federal funding.
Providing 100% federal cost share is not unprecedented. When
Hurricane Katrina impacted several states in late August 2005, the
state of Louisiana was granted a 100% federal cost share for permanent
work through legislation. Thus, Congress has the authority to enact
specific legislation to remedy the situation and allow increasing the
federal cost share for all Hurricane Maria (DR-4339-PR) and Hurricane
Fiona (DR-4671-PR) permanent work (Categories C-G) projects.
C. Roads, bridges, and highways:

The Bipartisan Budget Act (Pub. L. No. 115-123, Sec. 20601, 132
Stat. 64) (``BBA'') and Stafford Act Sec. 406 should be amended to
extend their applicability to Hurricane Fiona and to include as
critical services Puerto Rico's transportation services, which
comprise, among other things, ports, roads, bridges, and highways, all
of which have been devastated by Hurricanes Maria and Fiona. This will
allow FEMA to provide assistance pursuant to Stafford Act Sec. 428 to
restore disaster-damaged facilities that provide critical services to
an industry standard.
D. Disaster Flexible Match:

We would like to reiterate our previous request to allow the
implementation of FEMA's Disaster Flexible Match (DFM) Program to
alleviate administrative burden and avoid the projected grant deadline-
related challenges of its Public Assistance Program (PA). Like the
global match process for FEMA's Hazard Mitigation Grant Program, the
DFM Program for the PA program will allow the non-federal cost share to
be based on a percentage of a disaster's overall obligation instead of
on a per project basis.
E. Clarify Stafford Act Sec. 705(c)

Stafford Act Sec. 705(c) prohibits FEMA's recoupment of obligated
funds where certain conditions have been met: (1) the payment was
authorized by an approved agreement specifying the costs (i.e., the
obligated Project Worksheet); (2) the costs were reasonable; and (3)
the purpose of the grant was accomplished. FEMA has issued a policy
that greatly undermines the protection afforded by Congress in enacting
Stafford Act Sec. 705(c), which was intended to prevent FEMA's
recoupment of funds, often as a result of FEMA realizing its own
errors, after recipients and subrecipients have received and spent the
money. FEMA's policy significantly limits application of Sec. 705(c)
by, e.g., requiring a subrecipient demonstrate compliance with all
post-award terms and conditions (i.e., procurement requirements,
insurance requirements, etc.) in order for FEMA to consider ``the
purpose of the grant'' accomplished. This policy allows FEMA to claw
back funding where the scope of work is complete, based on a finding of
noncompliance that bears no relation to the ``purpose of the grant''--
e.g., to repair a building. The Policy also specifies that it may make
``project cost adjustments'' prior to determining whether Sec. 705(c)
applies, even though such adjustments are precisely what Sec. 705(c)
prohibits.
The effects of FEMA's policy are being felt all over the United
States, but particularly in Puerto Rico--where recoupments are
debilitating on the Territory's ability to recover financially. For
example, FEMA has recently deobligated millions in power restoration
costs paid by Puerto Rico Electric Power Authority to utilities
providing emergency restoration services under a mutual aid-type
agreement. Such deobligations are prohibited by Sec. 705(c), but FEMA's
own policy gutting the statute's effectiveness leaves the agency
undeterred from clawing back funds.
We request Congress to amend Stafford Act Sec. 705(c) to make its
intent clear to FEMA--the purpose of the grant is accomplished when the
scope of work is complete, and FEMA cannot choose to apply Sec. 705(c)
only after it makes the recoupments that Sec. 705(c) prohibits. We also
ask that Congress extend Sec. 705(c)'s prohibition to recoupments from
private non-profit entities, which are similarly burdened by FEMA's
recoupments.

Questions Submitted by Representative Westerman

Question 1a. What were the challenges associated with working with
FEMA on recovery after Hurricane Maria?

Answer. Aside from complicated bureaucratic processes and repeated
rule changes, the major obstacle to recovery in Puerto Rico has been
access to working capital in particular for large infrastructure and
construction projects. FEMA's disaster recovery programs are based on a
reimbursement model pursuant to the Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal
Awards at 2 C.F.R. Part 200, as adopted by the Department of Homeland
Security at 2 C.F.R. Part 3002. At the time Hurricanes Irma and Maria
made landfall on the island, Puerto Rico was in the middle of a
financial crisis and lacked the necessary liquidity to expend funds.
Moreover, sometimes new ideas intended to move things forward hit
speedbumps, because implementation needed to comply with existing
rules. An example of this is the FEMA Accelerated Award Strategy
(``FAASt''). FAASt uses a Statistical Sampling Methodology to arrive at
fixed cost estimates for groups of critical infrastructure projects,
rather than requiring inspections and cost estimating for each
individual project. While this allowed FEMA to expedite obligation, it
did not expedite performance of work. FAASt effectively amounted to a
master recovery budget for each FAASt subrecipient without authorizing
any related construction. This is because despite the expedited
obligation of funds, all projects still had to go through each step of
the FEMA National Delivery Model. For a project to be authorized for
construction, scopes of work needed to be submitted with enough
engineering and design data to allow FEMA to conduct an Environmental
and Historic Preservation review, as well as potentially approving
additional dollars to finance hazard mitigation measures under Stafford
Act Sec. 406. As implemented, the FAASt program as implemented did not
accelerate recovery, but rather slowed it down.

Question 1b. Were those challenges resolved?

Answer. The most critical strategy developed and implemented by
COR3, in consultation and approval by FEMA, is the Working Capital
Advance Program (WCA). This program was implemented specifically to
provide a mechanism to advance the federal share of funds reimbursed
for permanent work projects under FEMA's Public Assistance program and
HMGP projects for damages incurred as a result of Hurricane Maria. The
WCA Program is currently available for all Puerto Rico subrecipients.
Subrecipients who request a WCA in compliance with the policy
requirements are eligible to receive an initial payment equal to 25% of
the obligated federal share of the associated project.
We appreciate FEMA's recent efforts to simplify its Public
Assistance process and look forward to additional steps it may take to
reduce the burden on applicants going forward. Although 2022 appears to
be a major milestone in Puerto Rico's recovery, there is much ground to
be made up after years of delays.
For example, now more than five years later, FEMA is still making
eligibility determinations and processing administrative appeals for
emergency work costs incurred in 2017 and 2018. The DHS-Office of
Inspector General (``OIG'') released a Report in July 2022 outlining
its assessment of FEMA's Public Assistance Alternative Procedures
Program (PAAP). In comparing obligation times for over fifteen thousand
large projects, the OIG determined that FEMA took, on average, more
than twice as long to obligate funds for the PAAP projects (845 days)
as compared to standard Sec. 406 projects (411 days). The OIG further
found that FEMA's funding obligation times increased significantly for
projects in Puerto Rico and the U.S. Virgin Islands.
Similarly, while significant funds have been obligated for Puerto
Rico's critical infrastructure under FAASt, this obligation has
effectively established project budgets without expedited project
execution. As aforementioned, each project must still work its way
through FEMA's lengthy Public Assistance process before obligated
funding can be disbursed. While Sec. 428 and FAASt were well intended,
their effectiveness is limited by the complicated framework under which
they must be implemented.
Additionally, although authorization and support for the WCA has
been helpful and effective, it came late in the process. There is no
doubt that Puerto Rico would have been better positioned if advances
for permanent projects could be approved like they were in Louisiana
for Hurricane Katrina. Puerto Rico was denied these early benefits,
which would have accelerated the commencement of reconstruction of
bridges, roads, schools, hospitals, the electric grid, and wastewater
treatment plants, among many others.
Even so, we remain exceptionally hopeful for the future, and we
look forward to continuing to build and nurture the collaborative
relationship that we feel we now have with our federal partners. We
believe past FEMA experiences should not hold us back in the future.

Question 1c. What have been the challenges associated with working
with FEMA on recovery after Hurricane Fiona?

Answer. Aside from the challenges stated in our answer to Question
1a from Rep. Westerman in which we are seeking congressional
assistance, because there are multiple other open major disasters, COR3
and Puerto Rico subrecipients find themselves working with different
FEMA teams, who each have their own interpretation of the Public
Assistance program and view of policy implementation. This makes
managing the disasters unnecessarily difficult. We believe
consolidating Hurricanes Maria and Fiona will go a long way to reducing
this administrative burden.

Question 1d. Have those challenges been resolved?

Answer. No. That is why the Congressional assistance we request is
so imperative.

Question 1e. What other policy changes can FEMA make to ensure
obligated funds are spent well and spent quickly on all needed recovery
projects?

Answer. We believe FEMA already has the authority to implement the
following policy changes that would ensure funds are spent effectively
on recovery:

1. Amendment to Stafford Act (Natural Disaster Consolidation): to
authorize FEMA to consolidate Hurricane Maria (DR-4339-PR)
and Hurricane Fiona (DR-4671-PR) disasters into a single
award under DR-4339-PR for the administration of federal
assistance.

2. Support 100% Federal Cost Share: we request that 100% federal
cost share be provided for all Hurricane Maria (DR-4339-PR)
and Hurricane Fiona (DR-4671-PR)) permanent work
(Categories C-G) projects.

3. Amendment to Stafford Act Sec. 705(c): to remove the unnecessary
limitations within its current guidance on 705(c)
protections and provide that the purpose of the grant is
accomplished when the scope of work is complete.

4. Amendment to the 2018 Bipartisan Budget Act and Stafford Act
Sec. 406: to extend their applicability to Hurricane Fiona
and to include as critical services Puerto Rico's
transportation services, which comprise, among other
things, ports, roads, bridges, and highways, all of which
have been devastated by Hurricanes Maria and Fiona.

5. Disaster Flexible Match: we request the allowance for the
implementation of FEMA's Disaster Flexible Match (DFM)
Program to alleviate the administrative burden and avoid
the projected grant deadline-related challenges of its
Public Assistance Program (PA).

6. Additional Time Extension Requests: due to the limitations of
wide-scale construction on an island, time extensions for
permanent work project period of performance were requested
for the remaining permanent recovery work to be completed.
On September 26, 2022, FEMA approved a blanket extension
for 6 months. Puerto Rico appreciates the support from the
Federal Government in granting our request.

Question 2a. After Hurricane Maria, how did the Government of
Puerto Rico and its instrumentalities improve their systems to ensure
recovery efforts get to the people who need it?

Answer. In the 5 years following the devastation of Hurricanes Irma
and Maria, COR3 has implemented numerous changes to its system to
ensure a more transparent and streamlined recovery.
Our partnership with FEMA and other Federal agencies has grown
tremendously as we have made major improvements and worked together to
resolve early obstacles and lift restrictions that previously hindered
progress. For example, the Government of Puerto requested, and FEMA
agreed, to relieve Puerto Rico from a 2019 agreement that imposed
conditions on the Island before requests for reimbursements could be
approved. As discussed earlier, a major obstacle to recovery in Puerto
Rico has been access to working capital to meet the cash-flow needs of
our subrecipients, especially for large infrastructure and construction
projects, since FEMA disaster recovery programs are based on a
reimbursement model. As we transition to the recovery phase where these
projects are an even greater focus, a successful plan to address these
issues is of the utmost importance. Puerto Rico has therefore developed
and is now working to implement several strategies to provide the
necessary support for these projects. One of these strategies is the
WCA mentioned before.
In addition, COR3 has also worked to educate and support our
subrecipients, to build capacity through training events over the last
year and will continue these efforts. The training provided is based on
a customized approach focused on project execution, grants management,
procurement, maximization of eligible scope of work, project
management, and compliance from project formulation to closeout.
Puerto Rico is also encouraged by the continuing close
collaboration with FEMA regarding COR3's administration of the Public
Assistance program and implementation of payment processes for
subrecipients. FEMA has agreed to flexibilities in the management of
the PA program that have been incorporated into the COR3 Cash
Management Policies, transforming the processes around reimbursements
and advances. Under the new reimbursement policy, disbursements for
reconstruction projects under development by municipalities, government
agencies, and non-profit organizations are being expedited,
significantly reducing the average number of days by over 75%.
Similarly, new processes relating to requests for advances for
immediate expenses are executed, on an average, more than 80% quicker
than before. These changes, coupled with the WCA program, enable much
greater support of permanent work projects and help provide the
resources necessary for all projects to progress more efficiently.

Question 2b. How have those systems worked post-Fiona?

Answer. By applying the lessons learned from Hurricane Maria, the
success in COR3's systems has led to a faster start on recovery after
Hurricane Fiona.

Question 2c. How can the Puerto Rican government and
instrumentalities continue to improve their systems to make sure
recovery assistance gets to the populations that need it quickly and
with proper oversight?

Answer. With the majority of emergency work completed for
Hurricanes Maria and Irma, Puerto Rico's disaster response transitioned
to long-term recovery, with its primary focus on the formulation and
execution of permanent work projects. By its nature, long-term
infrastructure recovery is a slower process, as it requires the
development of the design and engineering of projects, environmental
approvals and permits, procurement of construction contracts, and
ultimately construction. All relevant indicators, however, show
significant momentum since 2021.
Under FAASt, FEMA, COR3, and PREPA and LUMA Energy have worked
together to develop Scopes of Work, submit them to FEMA for proper
evaluation and approval, and advance shovel on the ground projects.
Construction projects are being completed in accordance with applicable
codes, standards, and industry best practices, and in the majority of
the cases, with added measures to mitigate hazards and build additional
resilience. Notably, the projects that are and will be executed under
FAASt by PREPA will be compatible for renewable energy integration to
ensure sustainability and resiliency in future disasters.

Question 3. The Puerto Rican Government established a renewable
energy generation goal of 100% by 2050. What is the status toward
achieving that goal and how have ongoing recovery efforts impacted that
goal? Has your administration considered shifting those goals to
accommodate the ongoing multiple natural disaster recoveries?

Answer. The transformation of our electric system is certainly one
of our highest priorities. The Puerto Rico Electric Power Authority is
still in bankruptcy, saddled with over $9 billion in bonded debt, and
burdened with an antiquated infrastructure that was devastated by
Hurricanes Irma and Maria, and for which emergency restoration work
took over a year to repair. The Government of Puerto Rico is hard at
work with the Oversight Board trying to restructure its debt to
affordable levels. We are also committed to achieving our comprehensive
and ambitious public policy to transform our existing power generation
assets, moving away from fossil fuels toward renewable energy, and
converting our fragile and integrated electric grid into a modern,
resilient, and interdependent one that can serve Puerto Rican residents
and businesses without blackouts.
By way of background, on June 20, 2018, the Government of Puerto
Rico enacted the ``Puerto Rico Electric Power System Transformation
Act, Act No. 120-2018 (``Act 120''), with the stated goal of
transforming Puerto Rico's energy system into a modern, sustainable,
efficient, resilient, and cost-effective system.
On April 11, 2019, the Government of Puerto Rico then enacted Act
17-2019 (``Act 17''), further advancing our public policy, which
mandates the delegation or transfer of the operation of the Puerto Rico
Power Authority (``PREPA'') electric power generation, transmission and
distribution, commercialization, and operation systems to the private
sector through the execution of public-private partnership contracts
(``P3 Contracts''), all to be done within certain specific milestones.
The first P3 Contract in connection with Puerto Rico's energy
transformation was executed between PREPA, the P3 Authority, and LUMA
Energy. LUMA is now in charge of the operation and management of the
transmission and distribution assets of PREPA. LUMA also must lead the
redesign and reconstruction of our electric grid to make it more
modern, reliable, able to function interdependently with generation
units to avoid island-wide outages, and able to provide for the
interconnection of microgrids and renewable energy systems.
It is also important to recognize that the $9.5 billion awarded by
FEMA for the energy system reconstruction were approved in the later
months of 2020. Since then, significant advances have been achieved.
While we recognize there have been delays, the path toward
modernization has been set and we are committed to providing modern and
reliable electric service to all on the island. The grid reconstruction
by LUMA is underway, with hundreds of substations repaired, thousands
of poles and streetlights replaced, and over 33,000 new solar customers
connected.
Also, more than 389 FEMA funded projects have been approved by the
Puerto Rico Energy Bureau, 90 projects are in the design phase, 43
projects are awaiting FEMA approval, 51 projects have already been
approved by FEMA, and 40 projects are under construction.
Furthermore, work continues to safely integrate 1,000 MW of
utility-scale renewable energy generation and 250 MW of energy storage
into our system. Likewise, a second tranche of additional utility-scale
renewable energy projects totaling 1000 MV with 500 MV of storage just
finished the request for proposal process and proponents will be chosen
soon by the Puerto Rico Energy Bureau.
In addition, the Puerto Rico Department of Housing is installing
solar and battery systems on all homes rebuilt under its R3 program. It
also has begun the process for the administration of $1.3 billion in
CDBG-DR funds for microgrids and energy storage systems for remote
communities and first response agencies. The first of these projects
will be built in our primary medical center, Centro Medico, for which
proposals for its design and construction should be ready by the
beginning of next year.
Further, the Department of Housing and the Green Energy Trust will
use $500 million in CDBG-MIT funds to assist low- and moderate-income
households in acquiring renewable energy systems. With this allocation,
we expect to have 25,000 additional solar systems and solar communities
across our Island.
The Green Energy Trust will also pursue other funding venues,
including but not limited to the Investment and Infrastructure Jobs Act
and the Inflation Reduction Act, which can finance programs that
promote the development of green energy projects.
However, given Hurricane Fiona's recent impact on Puerto Rico,
which brought over thirty inches of rain to some municipalities,
combined with additional historic rainfall during the months of
September and October, our electric system has suffered additional
damages, causing major power outages. Last month, I formally requested
emergency assistance from FEMA to stabilize our power system by
providing additional generation assets and accelerating work on our
transmission and distribution grid.
In response, FEMA created the Puerto Rico Power System
Stabilization Task Force, which includes the U.S. Department of Energy,
the U.S. Army Corps of Engineers, and the Environmental Protection
Agency (EPA), led by FEMA, which together with our administration's
energy stakeholders developed a plan to stabilize our electric system
to be able to provide reliable service to the residents of Puerto Rico,
while we continue to carry our reconstruction projects.

FEMA has agreed to provide resources for this stabilization process
that will include actions to assist Puerto Rico in increasing its power
generation capacity and helping improve transmission and distribution
of energy. The plan proposes to:

1. Install temporary generation through power barges and high-
capacity portable generators.

a. FEMA has already identified available units and is
arranging to hire and mobilize them to Puerto Rico.

2. Perform key short-term work in existing generation plants that
allow for the reincorporation of units that are not
operating at full capacity or are out of service.

3. Perform key short-term improvements on the electrical grid, such
as repairing key substations and transformers, and
replacing high-voltage breakers.

Question 4. Specifically on electricity restoration after
Hurricanes Maria and Fiona, what did you see that was an improvement
from how LUMA has recovered the grid in the past when PREPA had full
control? Can you provide specifics about where LUMA's performance
differed from PREPA's recovery actions after hurricane outages?

Answer. After a disaster such as Hurricane Maria, there are always
lessons learned that are applied to avoid committing the same mistakes
that occurred during previous disasters. Such was the case here. Before
Hurricane Maria, Puerto Rico was fortunate enough to not have suffered
from a major hurricane for many years. Since Maria, the Government of
Puerto Rico has turned their attention to the preparedness of our
system.
As to our energy grid, considering the vulnerable position that the
power transmission and distribution system had before the storm events,
and the devastating blow it took during the hurricanes, Puerto Rico
embarked on a process to transform PREPA. The goal of the
transformation continues to be to increase the resiliency and
reliability of Puerto Rico's power system and maximize the use of
modern and new technology to deliver a lower cost electric service to
all customers in Puerto Rico. Since LUMA took over the T&D projects,
PREPA has continued developing scopes of work and undertaken the
required actions to conduct repairs, rehabilitation, mitigation, and
permanent works in its generation system and water assets. These
actions combined with the experience after Hurricane Maria, placed our
grid in a stronger position than before the storm. Also, LUMA was able
to count on quicker outside support since they had pre-positioned
contracts for emergency work, which gave them the necessary resources
to begin to deal with to the emergency before Hurricane Fiona left the
island.

Question 5. Please provide data and specifics that details how
rooftop solar systems and other decentralized renewable energy
resources will improve resiliency for your constituents, specifically
1) reports or data shows how the current decentralized energy systems
that are currently in place are effective or not effective, 2) reports
or data showing damage caused or not cause to rooftop solar systems
after hurricanes or other storms and rain events, 3) other data or
stories that provide evidence of effectiveness or ineffectiveness in
increasing resiliency for Puerto Ricans.

Answer. On December 17, 2020, the U.S. Department of Energy's
National Renewable Energy Laboratory (NREL) issued a report titled
``Puerto Rico Low-to-Moderate Income Rooftop PV and Solar Savings
Potential''. The report analyzed the rooftop solar potential of low- to
moderate-income (LMI) households across the island and estimated
510,100 low- to moderate-income structures suitable for solar rooftop
installation across the island. Of these, the report estimated that
approximately 75% are single-family (more suitable for solar
installation) and 60% are owner-occupied (easier process for
eligibility purposes--not an economic development activity). Therefore,
an estimated 229,600 single-family structures occupied and owned by a
low-to-moderate-income household are suitable for solar rooftop
installation across the island.
Based on estimates from the Puerto Rico Department of Housing
(PRDOH) there are 86,700 single-family structures occupied and owned by
low- to moderate-income households suitable and eligible for
photovoltaic system installation. Just looking at the municipalities
most damaged by Hurricane Fiona and assuming everyone will be
interested in a small $30,000 solar rooftop photovoltaic installation,
$2.6 billion would be needed to meet this need.

Questions Submitted by Representative Gonzalez-Colon

Question 1a. Governor Pierluisi, you are requesting that we in
Congress amend the Stafford Act to authorize FEMA to consolidate the
Hurricane Maria and Hurricane Fiona disasters into a single award for
the administration of federal assistance. Can you elaborate on this
proposal and why you believe such an amendment is necessary?

Answer. As mentioned before, we are asking to consolidate the Maria
(DR-4339-PR) and Fiona (DR-4671-PR) Hurricane disasters into a single
award under DR-4339-PR for the administration of federal assistance. To
do this, we believe there has to be an amendment to the Robert T.
Stafford Disaster Relief and Emergency Assistance Act that would
expressly authorize FEMA to combine the disasters by, among other
things, provide assistance to replace, reconstruct, or restore an
eligible damaged facility without regard to the pre-disaster condition
of the facility if the facility or system was also damaged by Hurricane
Maria under DR-4339-PR. It will also provide FEMA the ability to: (a)
include costs to repair or reconstruct damages caused by Hurricane
Fiona (DR-4671-PR) without reducing approved fixed cost estimates or
approved projects for DR-4339-PR; (b) identify new damages caused by
Hurricane Fiona for facilities and systems with an agreed-upon fixed
cost estimate under section 428 or an approved project under section
406 for DR-4339-PR and document them separately and add the costs to
the DR-4339-PR fixed cost estimate; (c) apply a one-time increase of
the total approved DR-4339-PR approved fixed cost estimates to adjust
for inflation and supply chain cost increases since the date of the
disaster; (d) revisit DR-4339-PR projects approved for repair under
Stafford Act Sec. 406, and calculate the combined cost to repair the
facility or system after Hurricane Fiona, and if the adjustment exceeds
50% of the fair market value of the facility or system, declaring the
facility or system eligible for replacement; (e) declare as eligible
all reconstructions and demolition costs for facilities and systems
where work had begun on or before September 18, 2022 that were DR-4339-
PR projects and suffered additional damages from Hurricane Fiona; and
(f) identify new damage and approve a single subgrant for the cost to
repair or replace the facility from damages from DR-4339-PR and
Hurricane Fiona where the facility had no approved project or fixed
cost estimate as of November 1, 2022, and if the combined cost to
repair the facility exceeds 50% of the fair market value of the
facility on September 1, 2017, the facility is eligible for
replacement.
This consolidation will, without a doubt, alleviate the
administrative burden and funding necessary to manage the disasters
separately, for the Government of Puerto Rico, the subrecipients and
FEMA.

Question 1b. Specifically, does this extend to amending any
appropriation that has been made in the past covering a specific
disaster by name or by year and with a set deadline, to now encompass
the others, or would this amendment rather have the goal of having a
single administrative coordination structure to handle the different
funds and applications? That is, would there still be Maria/Earthquake/
Covid/Fiona-specific funds but all under one same coordinating office,
or are they become all a single all-Puerto Rico all-disaster fund?

Answer. What we are seeking is for the funding assigned and to be
assigned for both Maria (DR-4339-PR) and Fiona (DR-4671-PR) be managed
under a single disaster, Maria (DR-4339-PR). This will let Puerto Rico,
through COR3, to manage both disasters under the same administrative
and financial coordination structure that exists today for the
Hurricane Maria disaster. The earthquake and COVID-19 disasters would
not be consolidated and continue to be managed separately.

Question 2. What are the most recent damage estimates for Hurricane
Fiona and have these been shared with Congress and federal agencies
with jurisdiction over disaster recovery? Some of the most significant
damages have been sustained by our public infrastructure, mainly roads
and bridges. Can you please share an estimate of funds that will be
needed to cover these specific damages?

Answer. As you are aware, on September 18, 2022, Hurricane Fiona
made landfall in southwest Puerto Rico bringing heavy rains and 90 mile
per hour sustained winds impacting power and infrastructure across the
island. The 30+ inches of rain that fell caused devastating flooding
that damaged homes and washed out newly constructed roads and bridges.
The winds also caused severe damaged to the power grid, causing an
island-wide blackout and left much of the island without power and
water for weeks. Hurricane Fiona not only exacerbated the prior
disaster damage to the power grid, but also caused new damage. Even
though Hurricane Fiona was a much smaller storm, it caused a cascading
effect that is compounding the difficulty of the recovery from the
multiple disasters that Puerto Rico has endured within the last five
years. As of today, COR3 expects the damages to public infrastructure,
including roads, bridges, highways and power grid, as well as other
eligible infrastructure to amount to $5B.
The Puerto Rico Department of Housing estimates an impact of 50%
increase in housing needs when compared to Hurricane Maria.
Extrapolating the R3 data generated with Hurricane Maria, PRDOH
estimates it will receive approximately 5,300 applications for
rehabilitation, reconstruction, and relocation assistance. Following R3
trends, rehabilitations, reconstructions, and relocations represent
38.3%, 29.5%, and 32.2%, respectively, of the awards issued. Projecting
average cost data for each award, PRDOH estimates a rehabilitation,
reconstruction, or relocation need due to Hurricane Fiona of $872
million.
Regarding other housing assistance, similar to CDBG-DR funding for
Hurricanes Irma and Maria, housing assistance due to Hurricane Fiona
should be broader than just rehabilitation, reconstruction, or
relocation. In the CDBG-DR Action Plan for Hurricanes Irma and Maria,
PRDOH set 68% of the housing budget for rehabilitation, reconstruction,
and relocation assistance, and 32% for other housing activities, such
as homebuyer assistance, multi-family construction, and housing
counseling services, among other CDBG-eligible housing activities.
Following the same percent distribution as in the current CDBG-DR
Action Plan, PRDOH requests an additional $414 million for other
housing assistance needs arising from Hurricane Fiona.

Question 3. PREPA's current depleted fiscal situation prevents them
from entering long-term contracts without approval from the Financial
Oversight Board. In your view, does this affect implementation of a
permanent rebuilding plan?

Answer. Currently, the FOMB contract approval process for PREPA
contracts is taking an average of 10-12 days. This does not seem to
delay the overall timeline of project commencement and completion.

______

The Chairman. The gentleman yields. I am going to pass on
myself at this point and ask the Ranking Member if he has any
questions for the Governor.
Mr. Westerman. Thank you, Mr. Chairman, and thank you
again, Governor, for being here with your testimony.
We know that both electricity generation and transmission
distribution were affected by Hurricane Fiona. The winds and
rain knocked down power lines, substations were flooded, and
supply lines were interrupted, as we noted in the visit that
you led us on with the Resident Commissioner when we were in
Puerto Rico.
So, based on the information that you have, was the power
loss primarily the result of downed power lines, or lack of
electricity generation, or some combination of the two? Where
would you say the most emphasis needs to be placed?
Governor Pierluisi. It is a combination of the two.
Actually, LUMA has estimated that the damage to the
transmission and distribution grid could amount to up to $4
billion. But at a minimum, it will be $2 to $3 billion worth of
repairs that need to be done. You are talking about mostly
lines falling, poles falling that need to be replaced, switches
of breakers, transformers damaged, among other damage.
In the case of generation, some of the generating units
suffered damage because of all the excess humidity that they
were exposed to. And even there, I understand the extent of the
damage doesn't involve or reach the number that LUMA estimated
for the repair of the transmission and distribution grid. But
it is substantial.
FEMA, at my request, came to Puerto Rico after Fiona and
made an assessment, along with DOE, Corps of Engineers, and
EPA. They visited 35 generation facilities, substations,
critical substations, and they confirmed--and I saw this, about
2 weeks ago they gave me an informal report with pictures on
everything--the damage that had taken place. And FEMA has
agreed to come in and assist us in increasing our power
generation for a period of time which could range between 1
year and 1\1/2\ years.
Why? This is important. Right now, because of units
failing, generation units damaged, we are barely supplying the
demand that our people, our constituents, have. And we cannot
repair the units or give them even regular maintenance, as they
should.
Mr. Westerman. Are you talking about the oil-fired units?
Governor Pierluisi. I am talking about all of them. FEMA
has already agreed to make repairs in the Aguirre Plant we flew
over, which is a bunker diesel oil plant; Costa Sur Plant,
which is mostly--or should be--an LNG plant; the San Juan
Plant; and the Palo Seco Plant, which, again, in the case of
Palo Seco, a bunker C oil-burning plant.
San Juan is a combination----
Mr. Westerman. I am going to have to move on, Governor.
Governor Pierluisi. Yes.
Mr. Westerman. But you brought out a lot of points I would
like to discuss more.
I know we talked about LNG exports, and I think you said
you have two places where you can import or bring ships in with
LNG. But because of the Jones Act, and because we don't have
LNG-flagged U.S. vessels, you are having to buy that gas from,
I think, Sierra Leone, or maybe--you told me another country.
Governor Pierluisi. It is mostly Trinidad and Tobago.
Mr. Westerman. Trinidad and Tobago.
Governor Pierluisi. But it can come from as far--like what
you just mentioned, Sierra Leone.
Mr. Westerman. Yes, where we could be using domestic-
produced gas coming out of the Gulf, but also when we look at
having an electric system that is more affordable, more
reliable, and that is cleaner than the bunker oil. I know there
has been a lot of emphasis on offshore wind or solar, but to
give that real baseload power, it seems like there would be
more of an emphasis on building gas plants and figuring out how
to get domestic gas there from the Gulf of Mexico. We know it
provides very clean, very reliable, and very affordable power
when we are rebuilding this system.
We need to have a lot more discussion about that. But there
is----
Governor Pierluisi. Let me quickly respond, because it is
something that you should know, with all respect.
The Energy Bureau of Puerto Rico just authorized a request
for proposals process to have in Puerto Rico a 300 mega-LNG
plant privately financed. It has entrusted the P3 authority to
handle that RFP process, request for proposals, and I envision
that that process will start at some point early next year. So,
we will be seeking a private LNG plant at that level, 300 mega,
which is significant----
The Chairman. OK, thank you very much.
Governor Pierluisi. So, for your knowledge.
The Chairman. Thank you, sir. I hate to interrupt you, but
this hard and fast rule is already being broken, as we speak.
[Laughter.]
The Chairman. I recognize my colleague from Arizona, Mr.
Gallego.
Sir, you are recognized.
Mr. Gallego. Thank you, Mr. Chairman.
Good morning, Governor Pierluisi. Thank you for being here
today. We are all eager to continue the conversation about
Puerto Rico's resilience and disaster reconstruction. And I am
proud to have worked closely with you on this issue during my
recent visit to the island in the immediate aftermath of
Hurricane Fiona. Being present on the ground and seeing the
situation firsthand is an important step in understanding how
it can be most helpful, moving forward.
It is also important to note that the continued question of
Puerto Rico's status has hindered Federal assistance programs
for years, and will continue to do so until it is resolved. So,
passing the Puerto Rican Status Act out of this Committee was a
big step in the right direction, and we should all work
together to keep that momentum going and bring it to the Floor.
I have a couple of questions.
No. 1, Hurricane Fiona was only the latest in a series of
hurricanes and natural disasters impacting Puerto Rico in
recent years. What changes did the Government of Puerto Rico
make to improve disaster response after Hurricane Maria, and do
you believe those changes improved the response to Hurricane
Fiona?
Governor Pierluisi. Well, the FEMA administrator is the one
that has praised us, actually, because of our response to
Fiona. Deanne Criswell has said that the coordination she saw
in Puerto Rico between our first responders and FEMA can be
used as a model for the rest of the nation.
She also said that, for example, they have warehouses with
supplies in Puerto Rico, four of them now. In Maria, they only
had--I am talking about FEMA--one warehouse. They were much
better stocked to help our people. The way FEMA works is they
step in if our local agencies, municipalities, are not able to
supply the needs of our people and coordinate NGOs, who are
always assisting. They didn't have to use much, if at all, of
those supplies, because we were taking care of our people.
The area where I have to admit that there is still a lot of
room for improvement is power, power in Puerto Rico. Because,
actually, when a hurricane happens, there is a blackout. That
is to be expected anywhere. There was a huge blackout in
Florida just recently. But the question is, how soon can you
restore power, which is an essential service? In Puerto Rico,
basically, it took LUMA and PREPA about 2 weeks to restore 50
percent of the power. One week, roughly, a little bit more than
1 week to restore 50 percent of our power generation. Two
weeks, 75 percent. Three weeks, about 95 percent. A hundred
percent by about a month.
To me, that is too long. And the reason is we have an
integrated system which causes that--when there is any major
disruption, the system shuts down to protect itself. We don't
have what is called in the energy field Black Start Units,
which means that our plants cannot restart unless they have a
battery system allowing them to do so without being connected
to the grid. It sounds nonsensical. The plants that are the
ones generating power need power, and a lot of our old plants
don't have those systems. That is part of the work that we will
be doing in the near future.
So, we need to improve our energy system so we don't have
this power disruption for so long after a major disaster, and
we will always be exposed to major disasters.
Mr. Gallego. Yes, and on that subject--we have a minute and
15 seconds, I don't want to get gaveled down--what is the plan
in regards to microgrids and distributed energy that you are
putting together to meet your renewable energy goal of 100
percent by 2025? How is that looking?
Governor Pierluisi. OK. Lots of things are ongoing. I
mentioned quickly that we are devoting $1.3 billion of CDBG-DR
funding for microgrids, distributed energy initiatives in
remote communities, these communities in Puerto Rico, and in
critical public facilities.
The first one that we will be installing takes care of
Centro Medico, our major medical center. There will be a grid
for that, because it is a critical facility. But an RFP process
will be outstanding in early--in January, actually, of 2023.
So, it is about to happen.
We are also devoting $500 million of CDBG-MIT funding for
incentivizing low-income households to have solar panels and
batteries at home. We expect to reach roughly 25,000 households
doing that, basically assuming the cost of those solar systems
for them, among other initiatives that we are doing.
Mr. Gallego. Thank you, Governor.
The Chairman. The gentleman yields, thank you.
Mr. Lamborn, you are recognized for 5 minutes, sir.
Mr. Lamborn. Thank you, Mr. Chairman. In a moment I am
going to yield the remainder of my time to the excellent
Resident Commissioner to Congress from Puerto Rico, Miss
Jenniffer Gonzalez-Colon. Her dedication to the island is
legendary.
First, I have a few brief comments. Governor Pierluisi, I
enjoyed serving with you when you were a Resident Commissioner
to Congress, and I also enjoyed meeting with you in your office
recently on a visit I made to the island. So, it is good to see
you again.
Governor Pierluisi. Thank you for visiting.
Mr. Lamborn. The Federal Government has made fixing the
energy grids of Puerto Rico and the U.S. Virgin Islands a top
priority since Hurricanes Maria and Irma, yet the government-
run utilities, PREPA and Virgin Islands WAPA, remain mired in
debt and mismanagement. WAPA owes more than $150 million for
building an LPG terminal and PREPA owes $300 million for work
performed to restore power immediately after the hurricanes.
And despite actions by this Committee, PREPA is still in
bankruptcy.
It is time for the islands to pay their debts. And with
that, I would yield the balance of my time to the gentlelady
from Puerto Rico.
Miss Gonzalez-Colon. Thank you, my dear friend, for
yielding the time, for visiting the island, and being always
available for the issues regarding Puerto Rico.
Good morning, Governor.
Governor Pierluisi. Good morning.
Miss Gonzalez-Colon. I understand that the biggest
challenge Puerto Rico is facing is the unstable condition of
the grid and the generation plants, and we all know that back
home. Congress has provided Puerto Rico and FEMA has allocated
funds for this purpose.
And in addition, Puerto Rico has also received CDBG-DR
funds for the grid enhancement. And I am concerned that a lot
of this funding is being obligated, but not disbursed. Can you
explain what you are doing just to get that money out of the
Federal agencies?
Governor Pierluisi. I will try to be brief, but----
Miss Gonzalez-Colon. Thank you, because I have another
question.
Governor Pierluisi. OK, then I will be brief. For about 3
years, the spending that happened in Puerto Rico was emergency
spending by FEMA. And for 3 years, even the HUD hadn't
authorized us to use much of the CDBG-DR funding that you
referred to.
In late 2020 was when, basically, FEMA allowed us to access
the $9.5 billion that we have for the electric grid and our
generation system. And it was in May 2021 when FEMA changed its
bureaucratic procedures to expedite the access to this funding.
Since then, FEMA has been working closely with us. It has
streamlined its Environmental Historic Preservation Review, and
now the projects are moving forward. And I mentioned the
number. It is roughly--we now have 40 projects under
construction. In addition, FEMA has given us access, or an
advance has allowed us to get 50 percent of the cost of the
projects in advance, so that recipients that didn't have the
cash-flow to start the projects can have an advance of 25
percent of the cost of the project, and as soon as they spend
that in accordance with requirements, then 25 percent more.
That is a game-changer. So, that is new.
And in the case of CDBG-DR, by the beginning of 2021, only
$100 million had been spent of CDBG-DR funding. Now we are up
to $1.3 billion. And the Secretary of Housing will explain to
you, to the members of this Committee, all the initiatives that
are ongoing and the traction that we are getting. The momentum
is there. I envision a very busy 2023 with thousands of
construction projects on the way.
Miss Gonzalez-Colon. Governor, you said as well that you
are requesting that in Congress we amend the Stafford Act to
authorize FEMA to consolidate Hurricanes Irma, Maria, and
Hurricane Fiona disasters into a single award for the
administration of Federal assistance.
So, that would be the issue of why we need such an
amendment. This amendment is going to lessen the administrative
burdens that you are already talking that FEMA is working----
Governor Pierluisi. Yes, that is another measure to
streamline bureaucratic requirements. Managing two disasters at
the same time, Maria and Irma, along with Fiona, which caused
damage in some of the projects that we were working on for
Maria-related damages, it is nightmarish. It just makes the
life of the FEMA personnel and our COR3 personnel, our
counterpart in Puerto Rico, much harder.
So, that is why we are requesting the consolidation, which
has been done elsewhere in the States.
Miss Gonzalez-Colon. I yield back.
The Chairman. Thank you.
Mr. Lamborn. I yield back.
The Chairman. The gentleman yields. Let me now ask--going
down the dais--Mr. Soto, do you have any questions? You are
recognized, sir.
Mr. Soto. Thank you so much, Chairman.
Governor, welcome back to the Natural Resources Committee
and thanks for always being so accessible.
We know Puerto Rico has faced many challenges: Hurricane
Maria, which we both saw together; Hurricane Fiona, which--
thank you for hosting us down there, and I appreciate your
strong response to Hurricane Fiona. We saw flooding,
particularly in the south. So, we take your comments very
seriously about the need to adjust the FEMA funding to
recognize that Hurricane Fiona has exacerbated some of these
problems.
But thank God for the strong response and that we are
seeing the island quickly recover from that. The disaster
relief funding is there. That is the positive news, right? And
we are finally seeing it start flowing. I was really excited to
hear that 70 percent of the FEMA disaster relief funds have
been obligated, and how critical that is going to be.
The first question has to deal with LUMA and with power. We
know you inherited a LUMA contract, and you are doing your best
to manage Puerto Rico's energy distribution with them and
making sure that we can improve the grid. Why do you think the
contract and the extension by LUMA is vital for keeping Puerto
Rico on the path to a more resilient future? And what would be
the consequences of canceling the LUMA contract, if that were
to happen?
Governor Pierluisi. Well, the first thing that I have to
say is that there is an energy transformation law in Puerto
Rico, which was approved on a bipartisan basis in 2018. It is
Law 120, which is the one that says we cannot continue doing
more of the same, relying on a state-owned monopoly. We need to
do public-private partnerships for both transmission and
distribution and generation, and actually split the two so that
there is no monopoly in Puerto Rico.
LUMA was awarded this contract after a very detailed and
exhaustive P3 process. The Attorney General of Puerto Rico just
issued a comprehensive opinion explaining every step that was
taken before that contract happened. And, actually, I knew that
it was the proper procedure for procurement for the contract,
and also knew that the contract had no invalid or legally
invalid clauses, and so on. I actually knew it. I understood
it. But it is great that the head of the P3 authority requested
this opinion from the Attorney General, and I welcome all of
you to read that opinion, because it explains the process, it
explains the contract in plain vanilla, and it validates it the
same way that a Federal judge, Judge Taylor Swain, in the PREPA
bankruptcy process, has so far validated it, as well. And a lot
is said out there, but I have to say that first.
Second, canceling that contract is, to me, a nightmare. We
have 1.5 billion people being served by our electric system.
Changing LUMA from one day to the next, even transitioning LUMA
out for a year or a year and a half, would disrupt the service
that we are getting and would delay the transformation that you
are following up on and the reconstruction that you are
following up on, because our law would require that I start a
new P3 process to substitute LUMA. So, to me, that is out of
the question.
Mr. Soto. Thank you, Governor.
Governor Pierluisi. LUMA, come December 1, would have two
options, roughly, as I see it: continue rendering its services
under the 15-year contract that was entered into--that is one
option, waiving some conditions that are set in that contract;
or continuing to render its services under a supplemental
agreement that was entered into because of the bankruptcy
process until the bankruptcy process ends. It is as simple as
that.
And that will be announced, either course, at some point
before December 1. But, again, nobody should expect that I will
allow, if I can help it, for a major disruption of our system
just because some people didn't like the P3 process that
happened before I assumed office and don't like the contract
that was entered into and that is the law in Puerto Rico.
Mr. Soto. Thank you, Governor. We know that you will
continue to press to hold them accountable and make sure we can
continue to get Puerto Rico's electrical grid back to
reliability with a boost in renewable energy.
I yield back.
The Chairman. The gentleman yields.
Mr. Hice, sir, you are recognized.
Dr. Hice. Thank you, Mr. Chairman. Look, I am fully aware
that the purpose of this hearing is to deal with the post-
disaster reconstruction and the power grid development. But the
reality is every time we have a hearing here on Puerto Rico, it
is one of two things, and it is happening here again today. It
is coming here with hands out asking for more money and/or
asking for statehood. That is what we ever deal with in here.
And it is no secret I oppose statehood for Puerto Rico, and
I am certainly not alone in that position. It is also no secret
that many people in Puerto Rico want statehood. But there are
many compelling facts and arguments that need to be considered,
and the bill that this Committee forced through, H.R. 1522, had
intrinsic flaws in it.
The bill did not allow, for example, Puerto Rico to remain
a territory. Well, it is critical that pieces of legislation
allow for all possible options, and that is a pretty
significant one that was absolutely left out.
The bill had questionable rules that would have forced the
people of Puerto Rico to put laws into their constitution that
they had not agreed to.
The bill also did absolutely nothing to solve the debt
crisis that they have been facing, and had they voted to be
independent, would have made things even worse for the new
country financially.
And what disturbs me probably more than anything is that
this Committee rammed that piece of legislation through the
process, through a markup hearing, without even having hearings
on the legislation itself. That is unacceptable. When you are
dealing with something like statehood, that should be well
thought out. It is a meticulous process. It is not something to
be rammed through, nor is it something to be dealt with without
any serious thought in just a markup hearing, just say, OK,
well, let's vote on this, let's move with it. It is absolutely
not the way to deal with it.
But that is the common way that this Committee has dealt
with this issue in Puerto Rico. And, quite frankly, the Puerto
Rican Commonwealth has been suffering for quite some times with
issues that have majorly impacted the residents thereof in
negative ways and have halted their future progress.
I was here in 2016 when PROMESA was passed, the Puerto Rico
Oversight Management Economic Stability Act. I was here, some
others were here at that time, as well. And here we are. I
mean, 6 years later, Puerto Rico still does not have a balanced
budget.
Now, listen, there has been progress made, and I am not
going to imply otherwise. I know there has been some progress
made. But we are not even close to having a serious discussion
about statehood. There are so many issues, and here we have
been playing games with the issue, just trying to make it
happen without any even serious hearings.
The government must take responsibility and fix the major
issues that are facing Puerto Rico before we even begin any
serious discussion here about statehood.
And this Committee right here should be holding more
hearings about the status of PROMESA. I don't even remember,
Chairman, the last time we had a hearing to deal with PROMESA.
That should be a priority if we are going to continue.
In order for us to move forward on any issue regarding
Puerto Rico, we need to see more growth from the government;
the terms of PROMESA need to be met; the bonds need to be rated
by major credit rating agencies. I believe this Committee has
done Puerto Rico a great disservice by passing legislation
right here without even holding additional hearings on PROMESA
itself.
And therefore, Chairman, I call on this Committee to be
responsible in that regard, and let's have hearings on the
status of PROMESA. Let's quit playing games with this and move
forward with it. And, with that, sir, I will yield back.
The Chairman. The gentleman yields, and before I recognize
the gentlelady from New York, Ms. Velazquez----
Governor Pierluisi. Mr. Chairman, that was not a question,
obviously, but----
The Chairman. No, and the time is up. Let me do my part.
Governor Pierluisi. OK. At some point I would like to just
make a brief reply, if I may.
The Chairman. Well, when somebody asks you a question, you
can use that time.
Governor Pierluisi. OK. Well, I will be respectful to
whoever asks me a question, but that is fine.
Ms. Velazquez. Not on my time.
Governor Pierluisi. I understand.
Ms. Velazquez. Not on my time.
[Laughter.]
The Chairman. Let me enjoy the prerogative of the Chair for
a little longer, please, sir, Governor. Let me make a short
comment.
The American citizens of Puerto Rico did not come to us
after these disasters with their hands out. They came the same
way that the people that suffered disasters in Florida and in
Texas came to us for relief. And this reconstruction is tied to
that relief. This is not a situation of charity. This is a
situation of mutual support for American citizens across the
board, regardless.
With that, let me recognize the gentlelady from New York,
Ms. Velazquez, for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman and Ranking Member,
for holding this meeting.
Governor, welcome.
Governor Pierluisi. Thank you.
Ms. Velazquez. We are talking about disaster relief and the
hurricanes. Because of Maria, Irma, and Fiona, you have monies
available to pay for capital costs for the reconstruction of
the electrical grid. What are you doing to ensure that the
Federal money will be used to help the people of Puerto Rico as
quickly as possible, and not allow in any way a windfall for
bondholders' recoveries that will ultimately benefit vulture
funds?
Governor Pierluisi. OK. Your question has two components.
In terms of what we are doing to expedite this, the moment I
came into office and the Biden administration came into office,
we started removing bureaucratic obstacles that were in both
FEMA and HUD. Marsha Fudge and Deanne Criswell, I tell you--and
this is a new day, and FEMA is allowing us to get 50 percent
advances for the projects, so that is going to help.
Another thing we are doing is----
Ms. Velazquez. No, let's go to the not using the money, it
will not allow----
Governor Pierluisi. Well, this will allow me to talk about
PROMESA. Actually, we have already restructured the public debt
of the Commonwealth of Puerto Rico. We have already
restructured most of the public debt that was outstanding,
successfully--80 percent debt reduction for the Government of
Puerto Rico.
PREPA is still pending, and the oversight board, along with
the Government of Puerto Rico--we are doing the best to reach a
consensual agreement. The board needs to submit a proposed plan
of adjustment on December 1 to the Federal court.
Ms. Velazquez. OK, so allow me, Governor. I have a question
about PREPA.
Governor Pierluisi. OK. But take my word that I am not
going to support any restructuring that is not sustainable,
that is not affordable. That is the track record I have so far.
So, I wouldn't worry about bondholders getting a windfall.
Ms. Velazquez. So, you are telling me that you are going to
fully litigate all pending matters regarding PREPA before you
agree to a settlement that will burden the people of Puerto
Rico with unaffordable electricity and a detrimental deal that
will further increase costs?
Governor Pierluisi. It depends on----
Ms. Velazquez. And only benefit vulture funds?
Governor Pierluisi. My answer has to be that will depend on
the nature and extent of the settlement, because, actually,
there were outstanding claims before we got the 80 percent
reduction in the Commonwealth's debt that were settled. So, I
cannot rule out that there will be settlement negotiations
along the road.
But take my word that I am not going to allow PREPA to end
up with a debt burden that is going to end up causing
extraordinary increases, unacceptable increases, in the cost of
electricity in Puerto Rico. It has to be affordable. It has to
be----
Ms. Velazquez. So, what you are telling me is that you will
not support a deal that will bind the people of Puerto Rico
with a bad deal for the next 30, 40, 50 years.
Governor Pierluisi. Yes.
Ms. Velazquez. OK. Because Puerto Ricans cannot afford it.
Governor Pierluisi. Agreed.
Ms. Velazquez. So, Governor, are you going to move forward
with a 15-year contract regarding LUMA that does not include
financial penalties for poor performance or strong and
independent oversight?
Governor Pierluisi. Actually, the 15-year contract provides
for either penalties or bonus payments, depending on LUMA's
performance. The Energy Bureau will be publishing the metrics
that will apply to LUMA's performance once the 15-year contract
is in place.
And, actually, when that 15-year contract is in place, the
fee that LUMA gets is considerably less than what we are paying
LUMA right now, the way this works.
On December 1, as I said before, I see two acceptable
options. Either LUMA starts rendering services under the 15-
year contract with the new payment methodology as set forth in
the same, or LUMA agrees to continue rendering services under
the supplemental agreement until the bankruptcy process ends.
Those are the two options that I would accept.
I don't want to even think about the third option which
would be to cancel the LUMA contract and get LUMA on a
transition out of Puerto Rico.
Ms. Velazquez. OK. And what is your government commitment--
--
The Chairman. The time is--if I may, the time is over.
Ms. Velazquez. OK.
The Chairman. And we could circle around again.
Ms. Velazquez. I yield back.
The Chairman. Thank you very much.
Ms. Velazquez. Thank you.
The Chairman. Mrs. Radewagen, you are recognized.
Mrs. Radewagen. Thank you, Mr. Chairman and Ranking Member,
for holding this important hearing. I simply would like to
yield all of my time to Congresswoman Gonzalez-Colon.
Thank you, Mr. Chairman. I yield back.
Mr. Soto [presiding]. The Chair recognizes Representative
Gonzalez-Colon.
Miss Gonzalez-Colon. Thank you, Mr. Chairman. I want to
thank Congresswoman Amata Radewagen for yielding the time.
I am sorry that Mr. Hice just left. I think it is necessary
to make clear some issues here.
First, he is entitled to his opinion regarding the status
of the island, but he does not live in Puerto Rico. He does not
represent the island, as well. Nobody from the island voted for
him to make those such questions. The only ones elected to do
that job is the Governor of Puerto Rico, who is sitting right
there, and me. He is a Democrat. I am a Republican. And both of
us are respecting the will of the people of Puerto Rico that
voted not once, not twice, many times rejecting the current
territorial status.
So, what we are supporting here is what the people of the
island voted for, and that is statehood. And that is democracy,
right? So, again, everybody can have their own opinion. But
coming here to this Committee and saying many things about the
island--and the main issue for our problems, financial
problems, is the status. And that is the root of the problem.
We wouldn't be needing PROMESA or any economic other
situation if we were treated as equal American citizens under
the law. And he is right. The U.S. Congress can do whatever
they want with territories, they can do whatever they want with
the issue of Puerto Rico. And, yet, we are still facing a lot
of the needs like the states of Louisiana, New Jersey, Florida,
and Texas that were hit by hurricanes, as well. So, why treat
Puerto Rico differently than the way you treat other states
when they are in times of need?
I am sorry that I am bringing that issue, but I cannot be
silent when somebody is entitled to their opinion, but not
respecting the will of the people of Puerto Rico.
Having said that, I think it is important that one of the
issues, Governor, that we are discussing here is that there are
many hurdles for the island to manage Federal funding because
we are a territory. And you were saying a few minutes ago--you
were asking regarding the barges and FEMA, you were requesting
power barges and high capacity portable generators. How long
will those generators be on the island?
Governor Pierluisi. Yes. The FEMA regional coordinator for
the Fiona disaster anticipates that the barges could be
contracted for within a month or 2 or 3 months, that time frame
for having them, because, obviously, FEMA would have to lease
those----
Miss Gonzalez-Colon. A question. How long will they be
there, once they are on the island?
Governor Pierluisi. They would remain in Puerto Rico for,
at most, a year. It could be a bit more. Because the purpose of
having this additional generation is to give stability to the
system while we continue with the transformation, while we
continue rebuilding the grid, improving the plants, and
repairing the plants in due course, giving them the required
maintenance, right? That is why we need additional generation.
Now, let me say something, Resident Commissioner.
Miss Gonzalez-Colon. One quick question, just to finish----
Governor Pierluisi. OK.
Miss Gonzalez-Colon. How much will the installment of these
barges reduce blackouts and brownouts?
Governor Pierluisi. It would help incredibly, because we
are talking about 600 to 700 megawatts of additional generation
capacity. That is what is going to happen by getting the
barges, as well as portable generators. The Corps of Engineers
has portable generators, but they can also lease or contract
for additional portable generators.
FEMA estimates that they will need seven of those portable
generators all together, three barges, seven generators. We
should be having, like, 600 to 700 megawatt additional
capacity. That is a game-changer. That is going to allow us to
then repair, continue repairing, continue improving the
existing generation plants, as well as improving the grid,
because we need to keep in mind that what we need is stable
power while we transform our energy system.
Miss Gonzalez-Colon. Thank you. And just to clear the
record, this Committee did not pass H.R. 1522. We passed H.R.
8393. That was a consensus bill that had many hearings through
the years.
With that, I yield back.
Mr. Soto. The gentlelady yields back, and the Chair
associates himself with the Resident Commissioner's remarks.
The gentlelady from New Mexico is recognized.
Ms. Leger Fernandez. Thank you, Chair.
And buenos dias, thank you, Governor, for coming and
joining us here. I am heartbroken about the difficulties that
you are experiencing in Puerto Rico and with what the people
have endured with the disasters and the pain of the aftermath.
And I think a real point that you have made in your
testimony, and that I have suffered and my communities in New
Mexico, is we can appropriate the funds, the President can sign
bills into law, but when the funds don't actually make it to
help reduce and resolve the problems on the ground, then we
have not finished our job. And we need to keep raising these
issues and exploring that.
Would you share a bit more about what have been the
barriers to actually getting the funds that have already been
obligated, dispersed, on the ground?
Governor Pierluisi. Well, both Manuel Laboy and William
Rodriguez will be able to expand, because they are in charge of
actually the CDBG-DR and MIT funds in Puerto Rico and the FEMA
funds. But let me just give you the long story short.
FEMA, it took FEMA up to 2020--and Maria happened in 2017--
to actually give us access to the funds, most of the funds.
And, also, for a couple of years, FEMA was the one handling the
disbursements. It wasn't Puerto Rico. Finally, like in 2019 if
I am correct--if not, I will be corrected later--FEMA allowed
Puerto Rico to handle the disbursement, but then it told Puerto
Rico, ``We need to audit you before you actually can
disburse.'' So, it was like a pre-disbursement audit. It made
no sense.
When Deanne Criswell came into her office, it took her just
a couple of months, until about May 2021, to remove that all
together, allow us to handle the procurement, the disbursements
process, comply with compliance requirements, and that changed
the landscape for us. This is since--about a year, a bit more
than a year ago. That is why you see, from then on, a
significant increase in disbursements.
In the case of CDBG-DR, something similar happened. There
was a grant agreement imposing quite a lot of restrictions on
us. And when Secretary Fudge assumed office, it took her a
couple of months, until April 2021, to remove that grant
agreement, or at least the strict requirements in it.
Since then you see an uptick that is undeniable in our use
of CDBG-DR funds. So, that is----
Ms. Leger Fernandez. So, what you have just described to
me, Governor, is really, basically, part of the issues, I
think, with FEMA. And we need to look at it as a Congress--
there are statutory constraints.
And we are going to be dealing with many more disasters,
and we are going to need to, as a Congress, address the
limitations of FEMA to deal with these disasters and the pain
and the loss. Because the Stafford Act right now cannot do what
the communities need. That is very clear. But,
administratively, big changes can be made in terms of removing
the bureaucracy and having things move quicker. So, I think
that those two are--it is not necessarily the jurisdiction of
this Committee, but we need to look at that.
Another area, and I would love and I would ask that you
supplement your answer with those who are behind you with
expertise, and then also writing as a supplemental answer.
From your experience--because you are dealing with it on
the ground, we are dealing with it on the ground with the
opposite. You are dealing with water. We are dealing with fire.
FEMA does not know how to deal with fire. It is used to dealing
with water. But what we are suffering in the Southwest is going
to be fires, right? And we need FEMA to be able to do that.
But what I would love for you to give us in a submission,
tell us from the ground, ``This is what we think the Stafford
Act should be modified from our experience on the ground.'' So,
I would appreciate if you would do that.
Governor Pierluisi. Count on it.
Ms. Leger Fernandez. I am also out of time, but I also am
very concerned about the inequities that we are going to see if
we don't modify when we deal with the farm bill with regards to
the nutrition programs and those kinds of things. I do sit on
some relevant committees and would also think that that is
going to be important to address, because that is a problem.
Governor Pierluisi. We would like to be included in the
SNAP program, and we are requesting that. It is only fair that
we get the same nutrition assistance as our fellow American
citizens in the States.
Ms. Leger Fernandez. Yes, every citizen should be treated
the same.
Governor Pierluisi. Yes.
Mr. Soto. The gentlelady yields back. The Chair now
recognizes the Resident Commissioner, Jenniffer Gonzalez-Colon.
Miss Gonzalez-Colon. Thank you, Mr. Chair, for recognizing
us.
Governor, we were talking about the situations between
FEMA, PREPA, and many people on the island that are following
this hearing are always complaining that every week we do have
a lot of blackouts. And I experienced those myself.
So, I want to know how the fiscal restructuring draft plan
for PREPA was rejected early this year, and has been reworked,
and the Financial Oversight Management Board has recently
indicated that the increased number of customers who intend to
go off the grid is going to impact the cash-flow of PREPA, the
cash that they have available to pay the settlement, any
settlement.
And the public opinion is strongly against the idea of
seeing their future utility bills include not only paying for
actual service, but a charge to pay the settlement, regardless
of what they consume.
My question will be, in your view, how does this pending
completion of the fiscal restructuring plan affect the recovery
process of the island in the long term, and if that will
prevent PREPA from investing in their infrastructure?
Governor Pierluisi. Having a plan of adjustment confirmed
by the Federal court is absolutely essential, because it would
stabilize PREPA's finances, and it would make it a better
counterparty to any entity that deals with PREPA.
Now, you mentioned the loss of revenue for PREPA if we turn
to renewable energy sources like we are committed to because of
our public energy policy law. I am not concerned about that,
and let me explain why.
On the one hand, people who have solar power will reduce
the cost of energy for themselves, and they will be paying less
to PREPA through the metering system we have, no question about
it. On the other hand, though, people using electric vehicles
will be consuming more power from PREPA because instead of
spending in fuel, they will be spending in just electricity.
And, by the way, the Federal Highway Authority just
approved a plan for stationing electric vehicle chargers on all
the major highways in Puerto Rico.
So, in addition, the way that this is envisioned is that we
will be shutting off traditional generation plants as renewable
energy comes into the system, and we have 18 projects right now
already approved by the Energy Bureau and the Government of
Puerto Rico to add roughly 1,850 megawatts of capacity to our
system from solar power, with 200 megawatt battery storage.
We also will be having another 1,000 megawatts in
additional renewable energy projects. This is going to be an
RFP that is coming out. And what is going to happen once we
keep adding renewable energy production generation in Puerto
Rico, we will be shutting off the plants of PREPA. And that is
going to generate savings for PREPA.
So, this cannot be viewed as losing revenue from customers
and then having a precarious financial condition. You will not.
If you generate the savings related to this transformation that
is ongoing, there shouldn't be any financial issue for PREPA.
Miss Gonzalez-Colon. Governor----
Governor Pierluisi. And the debt needs to be the lower the
better.
Miss Gonzalez-Colon. Thank you.
Governor Pierluisi. And that is what I will be keeping an
eye on in terms of the plan of adjustment.
Miss Gonzalez-Colon. Thank you. A year-and-half ago, LUMA
took control of the transmission and distribution system on the
island. What you are doing to ensure LUMA improve its service
and the performance metric?
Governor Pierluisi. There is oversight on LUMA from so many
quarters. I personally do oversight, my chief of staff does
oversight. I have an assistant chief of staff full-time on
energy affairs doing it, as well. Then we have the P3
authority, which is the administrator of the contract, doing
oversight, as required by the contract. We have the legislature
doing oversight. We have mayors doing oversight. If anything,
there is oversight all over the place.
The Chairman [presiding]. Thank you.
Governor Pierluisi. And what we are doing is ensuring----
The Chairman. Governor----
Governor Pierluisi [continuing]. That LUMA improves its
service and reduces the duration of the disruptions that we are
still facing.
Miss Gonzalez-Colon. I yield back.
The Chairman. Thank you.
Mr. San Nicolas, you are recognized.
Mr. San Nicolas. Thank you so much, Mr. Chairman. Are you
receiving me OK?
The Chairman. Yes, thank you.
Mr. San Nicolas. Thank you, Mr. Chairman. As you know, the
people of Guam have always stood in solidarity with the people
of Puerto Rico.
Governor Pierluisi, you mentioned several segments back a
desire for additional time to remark on some comments made that
were directed particularly toward statehood and Puerto Rico, as
well as the financial condition of Puerto Rico. I would like to
forward you 3 minutes of my time, and if Ms. Velazquez is still
present, I would afford the final minute to her. And if not, I
will yield the full balance of my time to Governor Pierluisi.
Governor Pierluisi. I thank you so much for your courtesy.
I will be brief.
Part of the comments I heard deal with the procedures that
were followed in this Committee while I wasn't a member of the
Committee. So, I am not in a position to comment on that. Our
Resident Commissioner already commented on that, and I know
others could, as well. But I have to reply to a couple of
statements that were made.
The first thing that I will say is that most, if not all,
territories that have become states were under-performing the
states financially and economically. And one of the reasons why
they aspired to become states was to do better, for starters.
Second, all of them didn't have the vote for the President
and the Vice President, didn't have voting representation in
Congress. So, they were aspiring to become states because they
wanted to have full democracy. To think that you can put that
aside just because you are facing a public debt issue or facing
a recession in Puerto Rico misses the point all together.
The second thing that I will say is that there has been a
lot of progress in terms of the public finances of Puerto Rico.
Two budgets, including this one, are clearly balanced, as
certified by the oversight board we have, including the payment
of debt. The debt of the Commonwealth of Puerto Rico has
already been restructured, as well as the principal government
entities in Puerto Rico. And we just had two fiscal years with
economic growth: 2021, 1 percent growth coming after a 3
percent reduction in our GNP; 2022/2023, 4 percent growth. And
this one is on the same track.
Tourism is booming. Manufacturing is increasing
consistently. We have the lowest unemployment rate in our
history. Labor participation has increased by 5 percent. We
have right now more people employed in Puerto Rico than ever
since 2009, when Puerto Rico had half a million more people
living in Puerto Rico. The statistics are there. If anything,
what we are proving is the successful management of the
Government of Puerto Rico and its economy. And this is not only
the credit of my administration. The people of Puerto Rico and
our economic sectors, they deserve the credit, as well.
Having said that, we do not get the same deal in key
Federal programs like Medicaid, Medicare, SSI, and SNAP. No
question that that would help us economically, financially,
which would be something else that Congress could do to assist
the American citizens of Puerto Rico.
And we are not coming here to ask for special treatment. We
are coming here to be treated the same as our fellow American
citizens. We were treated the same in terms of the COVID
response, the pandemic response, and what ended up happening is
that Puerto Rico was on top in terms of vaccination. We proved
that when you treat us equally, we can do as well or better
than anybody in the States.
So, that is why you always see us saying remember that we
are American citizens, proud American citizens, and that we
simply want full democracy and a fair deal.
For the first time, Mr. Chairman, there is still time
running on my clock.
[Laughter.]
Mr. San Nicolas. With that, Mr. Chairman, if there is no
further comment--unless Mr. Soto would like the remaining time.
Mr. Soto. I thank the gentleman from Guam.
Governor, it is great to see you speak so passionately
about something that we all feel very strongly about.
We had two historic 4- or 5-hour hearings on the status of
Puerto Rico, followed by a historic compromise on allowing for
statehood, both of our preferences, along with options for
independence, to de-colonize Puerto Rico. And we are working to
the last minute to ensure we could get a Floor vote on that
very legislation. So, I thank you for your leadership, and for
the leadership of the Resident Commissioner, Jenniffer
Gonzalez-Colon.
And I yield back.
The Chairman. The gentleman yields. Mr. Obernolte, you are
recognized, sir.
Mr. Obernolte. Thank you, Mr. Chairman.
Governor, I have been enjoying your testimony. I would like
to continue a line of questioning that Mr. Gallego started
concerning your request for the allocation of $5 billion in
directed CDBG-DR funding for residential solar. Can you talk a
little bit about how that money would be used to enhance Puerto
Rico's energy resiliency?
Governor Pierluisi. Yes. First of all, this was the
Chairman's request, along with several Members of Congress, and
I support it.
As I told you, when I add up what we are doing in terms of
promoting solar energy systems in Puerto Rico, incentivizing
that, incentivizing distributed energy and microgrid, when you
add it all up I am using--because it is my call--roughly $2.2
billion of CDBG-DR and CDBG-MIT funding for that purpose, which
is--CDBG-DR funding is being used to install solar panels on
all homes rebuilt in Puerto Rico, newly constructed because of
damage caused by Maria.
I am using--actually, I left this out--ARPA funding. I used
ARPA funding to provide incentives, assistance to small and
medium businesses in Puerto Rico so that they can install solar
panels and battery systems in their facilities. We are using
$1.3 billion of CDBG-DR funding for microgrids, distributed
energy systems, in remote areas in Puerto Rico and facilities.
Mr. Obernolte. Well, let's tunnel down on that, because
this is where my concern lies.
The CDBG-DR action plan for Puerto Rico energy systems is
to create 159 microgrids within the island, to increase the
resiliency of the energy infrastructure. But residential solar
to increase resiliency would have to have a much, much finer
array of microgrids because 159--I mean, obviously, those are
still large areas.
So, I am asking about how this is going to increase
resiliency, because I am concerned that just putting solar
panels on a residence, if you are still depending on that
connection to the utility, to PREPA, it is not going to
increase resiliency. So, I am wondering what the plan is.
Governor Pierluisi. Well, OK, let me just say this. LUMA
has provided for the interconnection of 33,000 new solar
systems in Puerto Rico, and they are interconnected. And there
is technology these days that actually, depending on who is the
installer of the system and who owns the system, you can have,
like, virtual power being generated in Puerto Rico and added to
the system in a systematic way.
Mr. Obernolte. That is good, but it does not increase
resiliency.
Governor Pierluisi. I believe it increases resiliency in
the sense that you are making these households more self-
sufficient.
If they have battery systems, they can go through a natural
disaster without losing power, if they handle their systems
adequately.
But let me say more. I am devoting--it is my call--$500
million of CDBG-MIT funding to provide, basically, solar
systems with batteries to roughly 25,000 low-income households.
Why am I supporting the $5 billion proposal of Chairman
Grijalva and others in Congress for more solar systems? Because
do a quick math. If we are reaching 25,000 households with $1
million worth of CDBG funding, if we get earmarked funding at
the tune of $5 billion, you extrapolate it, it is 10 times
more. So, then you are talking about 250,000 households.
Mr. Obernolte. Yes, OK. Let me reclaim my time before we
run out of time here.
Governor Pierluisi. OK. I am sorry.
Mr. Obernolte. Let me just ask you. Please make sure that,
when you create the action plan for that funding, if you get
it, that you create enough microgrids to make it so that it
also increases resiliency. Because that is the purpose of DR
funding, right? It is supposed to increase resiliency. There
are other pools of money for residential solar.
Governor Pierluisi. Your point is well taken. And I know
part of what LUMA is doing is making sure that all the systems
can be interdependent. Instead of relying on the grid, they can
be on their own.
One thing that we are doing with industrial-scale renewable
energy----
Mr. Obernolte. Thank you, sir. I yield back, Mr. Chair.
The Chairman. Thank you. I appreciate it, sir.
To be clear on the proposal for solar and batteries, it is
the issue of batteries where the resiliency comes from
primarily, and that is an essential part of the proposal.
Let me now turn to Mr. Tonko. Sir, you have 5 minutes, and
thank you.
Mr. Tonko. Thank you, Mr. Chair and Mr. Ranking Member, for
holding this hearing.
And, Mr. Governor, thank you for joining us today. It was
an honor to serve with you, and it is great to see you.
It is so important that everyone has access to clean,
affordable, and reliable electricity to power our homes, our
businesses, emergency medical centers, water treatment plants,
and so many other critical facilities. But natural disasters
continue to severely damage Puerto Rico's centralized electric
grid, causing extended outages for the entire island.
So, Mr. Governor, what are some of the economic impacts of
an extended island-wide outage for people and businesses in
Puerto Rico?
Governor Pierluisi. Well, there is no question that when
you have a power outage it has an impact on businesses in
Puerto Rico. As I said before, it took about 2 weeks to restore
75 percent of our power after Fiona. So, for 2 weeks, I am sure
that a lot of businesses were not operating. We saw, in the
month of September, a downward movement in our GNP, our
economic index activity report or activity indexes. And that is
not surprising.
But the way these Federal Emergency management programs
work is that they provide individual assistance. So, by the
month of October, already FEMA had disbursed over $600 million
to individuals. SBA was assisting businesses. So, the economy I
have no question, I have no doubt, that in the month of
October, it is recovering, and then we will continue our
course.
The combination of a quicker response or recovery from the
blackout and the FEMA's assistance will ensure that this is not
going to be like Maria. Maria--it took Puerto Rico back then,
it took the PREPA back then, and it took FEMA back then, 11
months to restore 100 percent of the power of the island. This
is night and day.
And one thing, Mr. Tonko, that I didn't mention, and I
wanted to mention it because it is important. We do have
industrial scale renewable energy projects ongoing as we speak.
But what we are considering doing is, when you have a solar
farm, let's make a grid in that area. Let's have that solar
farm provide the power for the households and businesses in
that area. And right now I mentioned there are 18 of those
projects ongoing, and it will continue increasing. There are
many things we can be doing.
And, by the way, the amount of private investment in those
18 projects that I am talking about is about $1 billion. So, it
is not a small amount.
So, there are lots of things ongoing at the moment. Some of
it is using FEMA funding, using CDBG-DR and MIT funding, but
some of it is actually incentivizing the private sector to come
in and add renewable energy to Puerto Rico, with the goal of
producing 40 percent of our energy from renewable sources by
2025, the immediate goal.
By the way, this is working. I am confident that we could
reach that goal by 2025, because there are a lot of projects in
the pipeline. And if this $5 billion earmark happens, you have
to add it all. You need to add a solar power generation of
households, businesses. And my people will give you the
statistics later on. And you need to add what these industrial-
scale renewable projects will be generating, and add it all
and, hopefully, reach the renewable energy portfolio standard
that we have set in our law.
Mr. Tonko. OK. Thank you, Governor. And I am thrilled that
the Department of Energy recently awarded funding to General
Electric in my district to develop and demonstrate a new
microgrid technology in Puerto Rico. It would automate the
process of leveraging power from one microgrid to restore power
to a nearby microgrid, perhaps one serving a hospital or a
critically under-served community.
This project will be researched and worked on in my
district, in New York's capital region, creating local jobs in
innovation and demonstrated in Puerto Rico. It shows that
modernizing Puerto Rico's grid is essential for ensuring the
health and safety of our fellow Americans on the island. It
also has mutual benefits for communities all over the United
States.
So, I look forward to seeing this and similar projects
advance to help bring about a clean and just future for all of
Puerto Rico.
Governor Pierluisi. Thank you.
Mr. Tonko. Thank you.
With that, I yield back, Mr. Chair.
The Chairman. The gentleman yields. Ms. Conway?
Mr. Bentz. This is Mr. Bentz.
The Chairman. Mr. Bentz, sorry.
Mr. Bentz. Thank you, Mr. Chair.
Governor, I wouldn't want your job.
[Laughter.]
Mr. Bentz. Just saying.
So, under your debt restructuring, the debt was written
down in January from $34 billion to $7.4 billion, a portion of
it. And then the Office of Management and Budget created a plan
that Puerto Rico is supposed to be following. I am familiar
with these plans. I am a lawyer. I have helped structure debt
repayment programs for many, many different clients. And
consistent performance under the plan is essential if the plan
is going to work.
Governor Pierluisi. You are referring to the plan of
adjustment?
Mr. Bentz. I am sorry.
Governor Pierluisi. Are you referring to the plan of
adjustment that was confirmed by the Federal court?
Mr. Bentz. Yes.
Governor Pierluisi. OK.
Mr. Bentz. And is reducing the value of all the bonds by $6
billion and the debt service payments by 32 percent. In
January, a Federal judge confirmed a plan of adjustment for
general obligation bonds, reducing the central government's
debt from $34 billion to $7.4 billion. That is what I am
referring to.
Governor Pierluisi. OK.
Mr. Bentz. And then, as a condition of such reduction,
there was a plan, a certified fiscal plan for the Commonwealth
of Puerto Rico.
What I am concerned about is the report that was issued in
the FOMB's 2022 annual report, where the board noted that the
Puerto Rican Government has ``struggled with implementing
reforms and reporting on this implementation in a timely
manner, causing progress to be inconsistent and incomplete with
many reforms either delayed or not occurring.''
And it goes on to talk about--or we could talk about the
implications this has when it comes to trying to obtain money
from FEMA, the structure you referred to a couple of times,
where the money is actually given out first and then reporting
follows.
And I also have here a report. FEMA did not effectively
manage disaster case management program funds in Hurricane
Maria recovery services. The Office of Inspector General found
fault with how FEMA operated.
I have had occasion to work with FEMA because the state of
Oregon, which I am from, suffered a dramatic fire loss several
years ago. The way that we finally made it work with FEMA--and
I say finally, that is not the right word. They worked rapidly
to help. But we had systems in place in the state of Oregon,
local systems, county systems, all kinds of systems that are
set up to appropriately respond. And as I read this report,
that does not appear to be the case in Puerto Rico. And I say
that without knowing. I am just drawing some conclusions from
these reports.
But what I really would like you to address is the FOMB's
2022 annual report, where it says that the Puerto Rican
Government has struggled with implementing reforms and
reporting on this implementation in a timely manner, causing
progress to be inconsistent and incomplete. Why does that
report say that?
And can you explain why--I don't want an excuse. I want you
to call out the cause of the delay.
Governor Pierluisi. Well, actually, the first thing that I
will say is that some of those reforms that the fiscal plan
provides for require legislation. But the oversight board
doesn't have the power under PROMESA to impose legislation. So,
the fiscal plan, to the extent it requires legislation, it
depends on the will of the legislature for that to happen or
not. So, that is the first question, I will say.
Some of the reforms call for administrative action. There
has been undeniable progress in complying with board
requirements. The transparency that you see in Puerto Rico you
have never seen before. Three financial statements, audited
financial statements, have been published since the beginning
of my tenure, and we will be up to date by May of next year.
All our financial statements, audited financial statements,
will be published. That is an incredible progress for Puerto
Rico.
The board complained about legislation that recently was
approved in Puerto Rico providing specific vacation leave for
private-sector employees, as well as some other rights to our
labor force, which actually we had before. There was a reform
several years ago. The board complaint went to court. That case
is pending. I suspect some of the board's complaints relate to
that particular legislation.
But in terms of my administration's dealings with the
board, we have an effective relationship. We don't agree
always, and there are disagreements, but there has been an
improvement.
Mr. Bentz. Thank you, Governor.
I yield.
The Chairman. Thank you very much. Let me now recognize the
gentleman from Chicago, Mr. Garcia.
You are recognized, sir.
Before the Representative uses his time, votes are going to
be called. There is also an announcement that my side of the
aisle will be at that involves the Speaker. So, at some point
soon, maybe in 20 minutes or half an hour, I am going to call a
recess so that we can attend to those two things, the Speaker's
announcement and the votes that have been called on the Floor.
This hearing isn't going fast, nor should it. So, we will
be back, and we will continue at that point with whatever is
left.
But right now, Mr. Garcia, sir, you are recognized.
Mr. Garcia. Thank you, Mr. Chairman, for holding this
critically important hearing on the political, economic, and
structural neglect that Puerto Rico faces as it tries to
rebuild.
It has been 5 years since Hurricanes Irma and Maria
devastated Puerto Rico, Culebra, and Vieques. And during the
reconstruction that followed, many projects were poorly
managed, funding has been insufficient, and even available
funds have not been disbursed. Then, this past September, of
course, Puerto Rico experienced another devastating storm,
Hurricane Fiona.
So, it is especially important for us to look frankly at
the slow, under-resourced reconstruction of the last 5 years.
We have to apply those lessons now. We have to build a
sustainable, resilient power grid that is responsive to
consumer needs. And of course, we need to prioritize
consultation with community members and civil society. With
that in mind, I would like to ask my first question to Governor
Pierluisi.
Buenos dias, Governor.
Governor Pierluisi. Good morning.
Mr. Garcia. Good morning. In 2011, you created El Concilio
de Reconstruccion by executive order. This reconstruction
council was supposed to help the recommendation, consultation,
and permits for rebuilding move in an efficient manner.
According to its webpage, the council published two
comprehensive reports in 2021.
So, let me first ask, what is the composition of the
council, sir?
Governor Pierluisi. I cannot tell you from the top of my
head, but I understand that what you have there is
representation from the homebuilders, the builders association,
the AGC, Associated General Contractors. You have the College
of Engineers, College of Architects. You have mostly all the
entities that deal with the construction industry in Puerto
Rico. And they advise us regularly through that council.
I also created a reconstruction government committee that
is currently chaired by my chief of staff that meets
regularly--could be weekly, biweekly--to follow up on all
reconstruction projects. It is a massive undertaking. But there
has been a change, a significant change, in the speed of the
disbursements since the Biden administration came into office
and my administration came to office. That is undeniable.
Mr. Garcia. Well, thank you for that.
Now, this council, of course, seems like a significant
opportunity to involve local leaders and civil society groups
in the rebuilding process. The community consultation is
essential for developing solutions that actually help the
communities that they are meant to serve.
What efforts have been made to continue this work and/or to
include municipalities or civil community groups or civil
society participation?
Governor Pierluisi. Well, I know--and our Secretary of
Housing could expand--that we are using a considerable amount
of CDBG-DR funding for planning purposes, and that NGOs are
assisting us for planning purposes. And he could talk about
that.
In terms of municipalities, we are going out of our way to
provide funding to municipalities. Actually, the proposal that
we gave to FEMA to give us a 25 percent advance of the cost of
reconstruction projects initially was intended to assist
municipalities. Seventy-five percent of the reconstruction
projects in Puerto Rico with FEMA funding come from
municipalities. But they were not happening, the permanent
projects, because the municipalities didn't have the cash-flow
to start the projects.
You have to understand that FEMA works based on
reimbursements, so the municipalities didn't have the cash-flow
to hire engineers, architects to handle the design and the
permitting of the projects. And they were not getting off the
ground. We convinced FEMA to give them a 25 percent advance,
and it has been a total success. Now, FEMA has allowed us to
expand that to agencies and NGOs, and that is making a
difference.
And, again, both my Secretary of Housing and the head of
the COR3 agency in Puerto Rico could expand when they take
their turn on the next panel.
Mr. Garcia. OK. Thank you for that. We look forward to
hearing from them.
And, Mr. Chairman, I yield back.
The Chairman. Thank you.
Chair Leger Fernandez, you are recognized if you are
prepared to ask questions.
[Pause.]
The Chairman. Mr. Torres, you are recognized, sir.
Mr. Torres. Thank you, Chair, for allowing me the
opportunity to ask questions.
And thank you, Governor, for your public service.
Governor Pierluisi. Thank you.
Mr. Torres. Puerto Rico's electric grid is so fragile that
every natural disaster seems to cause widespread power outages.
And it seems to me the Achilles heel of Puerto Rico's electric
grid is the lack of redundancy. So, what progress are you
making toward rebuilding the grid with greater resiliency and
with more distributed energy?
Governor Pierluisi. Well, first let me say that we need an
adequate reserve in terms of our generation capacity, which we
don't have at the moment because of plants failing or in need
of repair. That is why what FEMA is doing now, giving us
assistance to increase our power generation for a specific
period of time, it is like giving us breathing room while we
keep rebuilding and improving the system. It makes all the
sense in the world.
In terms of adding renewable energy projects, we are going
at it expeditiously, actually. We already have about 1,000
megawatt additional generation capacity from renewable projects
in the design, and some in the construction stage, with 200
megawatt in battery support.
We also have an RFP process, which is about to be launched,
for an additional 1,000 megawatt generation capacity from solar
sources, along with 500 megawatts in battery storage. This is
industrial scale projects, but we are also submitting or
issuing an RFP process in January to use $1.3 billion that we
destined for microgrids, distributed energy initiatives in
remote communities, in critical facilities. And the first one
that we will have actually, it is a microgrid that will handle
our Centro Medico, our medical center, the only trauma center
we have in Puerto Rico.
So, we will continue doing that. But having FEMA's support,
both on a short-term basis as well as this up to 50 percent
advance of funding, is going to make the difference.
Mr. Torres. Now, I had heard--and maybe I had a
misunderstanding--that there were issues with the advance
payments, that the advance payments were based on fixed cost
estimates, and that Puerto Rico would have to pay the gap
between the fixed cost estimates and advance payments.
Governor Pierluisi. That is a different issue which we are
dealing with. It is one of my asks to this Committee.
Yes, we are using Section 428 of the Stafford Act. The way
that section works is FEMA agrees with the recipient, with
Puerto Rico and subrecipient, as to the estimate of the cost of
the project, and locks it in. So, you need to live with that
estimate----
Mr. Torres. Even if those estimates have been rendered
obsolete by inflation?
Governor Pierluisi. Exactly. That is why we are calling for
Congress to authorize FEMA to adjust those fixed cost estimates
due to the increase in the cost of construction materials and
supply chain disruption.
Mr. Torres. So, it is fair to say that neither FEMA's
existing reimbursement program nor FEMA's advanced payment
programs are sufficiently mindful of the unique fiscal needs in
Puerto Rico.
Governor Pierluisi. We still need to improve them is the
answer that I can give you. And one pending item is this
flexibility that FEMA should have in adjusting fixed cost
estimates that have been agreed to a couple of years ago, a
couple of years ago, or 1, 2 years ago, when the inflation was
not what we are facing right now, when it didn't have the
disruption in supply chains we have been facing since the
pandemic. And that is why I have this ask for this Committee.
Mr. Torres. And I want to quickly ask you. When I took a
tour of Puerto Rico with you, I noticed that most of the
housing I saw was informally constructed. So, I am wondering,
how do we avoid repairing these homes in the same fragile form?
Does FEMA provide you with the flexibility you need to
rebuild these homes with greater resilience?
Governor Pierluisi. Well, one thing FEMA is doing is
actually funding a public affairs campaign, public education
campaign, encouraging people to build up to code, to comply
with our construction code and permitting system.
Mr. Torres. Is there enough funding to that effect?
Governor Pierluisi. We got a decent amount of funding to do
that, but that is a public education issue. At least 50 percent
of our households are not code compliant, which is to your
point. And FEMA is trying to be flexible in providing
assistance to the owners of those households.
The Chairman. Thank you, sir. The gentleman yields.
Let me ask one general question, if I may, Governor, and
thank you for being with us. It is much appreciated.
Governor Pierluisi. Thank you.
The Chairman. The plan to expand, repair, remodel the
schools--one of the things I found striking in visiting Puerto
Rico this year, as I did, there are many schools that have not
been rebuilt or repaired since they were damaged back in Maria
in 2017. Is there a lack of progress, or what do you see for
that? Like, 500 schools----
Governor Pierluisi. Well, there has been a lot of progress
in fixing structural issues in our schools. We had some
earthquakes, as you may recall in early 2020. And one school
totally collapsed because of the design of its structural
columns, defective design. So, we have fixed, using FEMA
funding, it is close to 600 schools already that had those
structural issues.
We have $2.2 billion of FEMA funding to either repair or
rebuild schools, or build new schools. And that is an ongoing
project. The working capital advance is assisting us. The
Department of Education just requested, if my recollection
serves me right, a bit more than $40 million in this--in the
form of a working capital advance, which will help it launch,
hire, again, engineers, architects for the design and
permitting of the schools we need to work on. So, that is an
ongoing project.
The Chairman. OK. Let me ask you one other question,
Governor, and a pathway, a timeline to where--it is not just a
particular interest of mine. It is something that I heard over
and over in Puerto Rico about their schools, their safety, and
their availability. So, I think that would be of interest----
Governor Pierluisi. I can supplement my testimony by giving
you a status report on the Department of Education
infrastructure projects.
The Chairman. I appreciate that. That is what I was getting
at.
LUMA renegotiations, looking at the contract. And one of
the things that is noticeable--perhaps you can correct me if I
am wrong--is that the benchmarks that have to be obtained by
the private contractor for additional money--that is the
target, those are the benchmarks--one of the things that to me
is glaring is that there are no consequences for not meeting
certain benchmarks.
Governor Pierluisi. There are consequences.
The Chairman. In the contracts, as it exists?
Governor Pierluisi. Well, what is happening is this. The
15-year contract provides a payment methodology that includes
either bonuses or penalties, depending on compliance with the
metrics that the Energy Bureau will be setting. The current
supplemental agreement does not. And the reason is because we
have this bankruptcy process ongoing.
Because of the uncertainty involved in having a bankruptcy
process for PREPA, the parties agreed--meaning the P3
authority, PREPA, and LUMA agreed--to enter into this
supplemental agreement that simply provides LUMA a fixed fee
for its services. And the Energy Bureau, along with the P3
authority, monitor LUMA's performance, and periodically report,
the Energy Bureau does, how LUMA is doing in terms of the
metrics. And the metrics that so far----
The Chairman. OK, that is our confusion, Governor, and I
think we need to clarify that because the opportunity to make
some corrections--although many people cry for the end of LUMA
as the provider, and those voices are not only on the island,
they are also here in Congress--it is providing that
information, where our reading of it, or at least the staff and
my reading of it, the downside was that there was no
consequence.
Governor Pierluisi. No, they are wrong.
The Chairman. Well, if we are wrong, if you could provide
it, because we won't keep repeating that.
Governor Pierluisi. LUMA is represented at this hearing, so
you can ask them directly. And I am sure that we can also
supplement my testimony to give you the specifics in terms of
the requirements on LUMA, and the way that we are overseeing
LUMA.
The Chairman. Thank you, Governor, and thank you for your
testimony.
We are going to call a recess so that those of us that are
interested in hearing from the Speaker will do so, then take
the votes, and then come back and begin with the second panel.
I apologize for the delay, but that was inevitable, given
the structure of the day, and all the stuff that is before us.
But, Governor, again, thank you for your time, and----
Governor Pierluisi. And I thank the attendance of so many
members of this Committee. That also has to do with the time
that it has taken. I appreciate that. There has been a lot of
interest in this topic, and I really appreciate it on behalf of
the people of Puerto Rico.
The Chairman. And to your credit and my credit, we kind of
kept on time.
[Laughter.]
The Chairman. I appreciate it.
[Recess.]
The Chairman. Thank you. Let me reconvene the meeting and,
to the witnesses, extend my regrets. But, despite the fact they
missed the last two votes, there were votes and there was an
announcement by the Speaker. And the Members wanted to be part
of that. So, my regrets and apologies for the timing of that,
but we are not in charge of that.
We have Panel 2, and I think two of the Members are here
with us today. Thank you very much. Let me begin by recognizing
and extending the time to Mr. Manuel Laboy, Executive Director,
Central Office for Recovery, Reconstruction, and Resiliency.
Sir, you are recognized for 5 minutes.

STATEMENT OF MANUEL LABOY, EXECUTIVE DIRECTOR, CENTRAL OFFICE
FOR RECOVERY, RECONSTRUCTION, AND RESILIENCY

Mr. Laboy. Thank you, Chairman Grijalva, Resident
Commissioner Gonzalez-Colon, and members of the Committee for
the chance to be here today to talk about the status and
progress of Puerto Rico's disaster recovery.
As you know, between 2017 and 2020, efforts were dedicated
to completing the emergency works related to Hurricane Maria.
For this, FEMA obligated $5.3 billion, including $1.9 billion
for the electrical grid reconstruction under emergency terms.
Simultaneously, FEMA and COR3 worked closely to obligate
permanent work funding in order to begin the long-term recovery
and reconstruction.
To reach this goal, in mid-2019, FEMA implemented for the
first time its FEMA Accelerated Award Strategy, or FAASt. In
September 2020, under the FAASt, FEMA obligated $9.5 billion of
Federal share to PREPA for the long-term permanent work
reconstruction based on a fixed cost estimate. Although COR3
and FEMA have taken proper steps to accelerate the
reconstruction phase of the disasters, including the FAASt
initiative, it also came with limitations and restrictions.
First, FEMA's disaster recovery programs are based on a
reimbursement model. This is fundamental to consider, since
Puerto Rico and PREPA, prior to Hurricane Maria, were in a
fiscal and economic crisis that resulted in declaring
bankruptcy in 2017.
Second, FAASt only created a mechanism to agree on a
universal budget for all permanent work projects, and it didn't
include authorization for construction. Therefore, PREPA and
LUMA are required to submit detailed scopes of work for each
specific project to FEMA through their national delivery model.
Once the scope of work is obligated by FEMA, then PREPA and
LUMA are authorized to proceed to the construction phase and
request COR3 the corresponding reimbursements.
Third, PREPA and LUMA still have to comply with the local
approval process, such as submitting all scopes of work to our
independent energy regulator, the Puerto Rico Energy Bureau, to
ensure all projects are aligned with our state energy public
policy. Notwithstanding, PREPA and LUMA have submitted over
$2.5 billion in projects which are under FEMA's consideration
and approval, of which FEMA has already approved 51, including
11 for generation, 38 for transmission and distribution, and
one for advance purchasing of critical long lead materials and
equipment.
COR3 forecasts that before the end of this year the total
amount of projects approved by FEMA will reach at least 100,
setting the stage for 2023.
Another major change has been COR3's development of a
program aimed to address our service recipients' liquidity
constraints. At the request of the Government of Puerto Rico,
in September 2021, FEMA lifted certain restrictions related to
the disbursement process. In May 2022, FEMA paved the way for
COR3 to release the Working Capital Advance program. The WCA
program allows COR3 to advance 25 percent of the Federal share
obligated by FEMA for large, permanent work projects. In June
2022, this program was launched.
This week, Governor Pierluisi announced that the WCA
program was expanded from 25 percent to 50 percent. To put
things in perspective, in just 5 months COR3 has successfully
disbursed over $550 million, which has impacted around 400
projects, including $180 million for PREPA and LUMA projects
alone.
Despite the aforementioned progress, Hurricane Fiona,
however, gave Puerto Rico another devastating blow. The storm
impacted many parts of the electrical grid and generation
facilities island-wide. A critical aspect of Fiona's recovery
is the grid stabilization plan announced this week by Governor
Pierluisi and FEMA, which will be implemented under FEMA's
direct Federal assistance. This plan will provide short-term
stability to our generation infrastructure, while COR3, PREPA,
and LUMA continue to focus on advancing the long-term
reconstruction projects under FAASt, as well as the energy-
related projects to be funded under FEMA's Hazard Mitigation
Grants program.
Although 2022 appears to be a major milestone in Puerto
Rico's recovery, there is much ground to be made up after years
of delays and the now devastating blow of Fiona. Consequently,
we ask Congress to amend the Stafford Act to authorize FEMA to
consolidate the Hurricane Maria and Hurricane Fiona disasters
not only to ensure a sound approach to the recovery process,
but also help lessen the administrative burden for Puerto Rico
to manage these disasters separately.
Additionally, we request Congress to authorize a 100
percent Federal cost share for all permanent work projects
under Hurricane Maria and Fiona disasters specifically for
projects related to repairing the power grid. We are confident
that the momentum gain advancing the reconstruction will not
diminish. On the contrary, it will accelerate in 2023 and
beyond.
Again, we thank you for the opportunity to be here to share
this with you.

[The prepared statement of Mr. Laboy follows:]
Prepared Statement of the Hon. Manuel Laboy,
Authorized Representative of the Governor
Central Office for Recovery, Reconstruction, and Resilience (COR3)
Government of Puerto Rico

Chairman Grijalva, Ranking Member Westerman, and Members of the
Committee:
Thank you for the opportunity to present on behalf of the American
Citizens of Puerto Rico an update of our island's reconstruction and
power grid development post-disaster. In the 5 years following the
devastation of Hurricanes Irma and Maria, we have made significant
progress toward building back our island despite numerous subsequent
disasters. This progress is, in part, the result of the tremendous and
often bipartisan support we have received from this Committee and
Congress more broadly. Even though Hurricane Fiona caused another
recent devastating blow to the power grid, as well as other critical
infrastructure such as housing, roads and bridges, the Government of
Puerto Rico, in conjunction with the Federal Government, is much better
positioned today to respond and assist in this post-disaster
reconstruction then it was 5 years ago. The current primary focus of
the Government of Puerto Rico continues to be the advancement of a
reliable and efficient power grid as fast as possible. As I will detail
more below, the support of the Federal Government has been critical to
the immediate response and relief, and we look forward to a continued
close relationship with the Federal Emergency Management Agency and the
Department of Energy to advance clean and affordable energy to Puerto
Rico.
Pre-Hurricanes Irma and Maria

As has been well documented, before Hurricanes Irma and Maria made
landfall on the island, Puerto Rico was already in the middle of a
financial crisis. In the prior decade, the Government of Puerto Rico
had amassed unsustainable levels of debt, to a point where credit
rating agencies implemented a series of credit rating downgrades for
Puerto Rico-Related Bonds at various points between 2012 and 2014, with
most of those bonds reaching ``junk'' status between February and June
2014. This caused the Government of Puerto Rico and its entities to
lose access to capital markets which strained Puerto Rico's liquidity
capabilities.
On June 30, 2016, President Barack Obama signed into law the Puerto
Rico Oversight, Management, and Economic Stability Act (``PROMESA''),
which established a financial oversight board, a process for
restructuring debt, and expedited procedures for approving critical
infrastructure projects in order to combat the debt crisis. Through
PROMESA, the US Congress established the Financial Oversight and
Management Board of Puerto Rico (``FOMB'') to help Puerto Rico achieve
fiscal responsibility with pro-growth fiscal reforms and renew access
to capital markets. Essentially, FOMB represented the Puerto Rico
Government entities having debt in the debt restructuring process, but
also presented an additional bureaucratic layer for execution of the
Government's responsibilities.
In addition to the financial crisis, Puerto Rico was also suffering
from an infrastructure crisis, which made the island vulnerable to
natural hazards. Puerto Rico's energy grid, roads, bridges, dams,
ports, hospitals, water treatment plants and more had been decaying for
years mainly due to deferred maintenance. Moreover, the Puerto Rico
Electric Power Authority (``PREPA'') relied too heavily on expensive
oil and was plagued by aging infrastructure dating back to the 1960s.
Additionally, buildings and infrastructure, including residential
septic tanks, were commonly constructed without permits and thus were
not in compliance with building codes. Construction was allowed to
occur in areas that are known to be hazardous, such as areas prone to
flooding and landslides. Similarly, unmetered water connections and
inconsistent electricity metering were common, and laws and regulations
governing these activities were not rigorously enforced.
In the middle of a financial crisis, Puerto Rico was also in
desperate need of transforming its energy grid, modernizing the
telecommunications system, rebuilding its water system, strengthening
maritime, surface and air transportations, as well as repairing and
rebuilding residential housing, without practically any economic and
financial means to achieve it.
Impact of Hurricanes Irma and Maria to Puerto Rico's Fragile Power
Infrastructure

Hurricanes Irma and Maria dealt a devastating blow to Puerto Rico,
resulting in the largest and most complex disaster response and
recovery effort in U.S. history. Hurricane Irma skirted the northern
coast of the Island from September 6-7, 2017 as a Category 5 storm,
causing extreme flooding, regional power and water outages, and other
significant impacts. Before response operations had even concluded,
however, an even more devastating Hurricane Maria slammed into Puerto
Rico on September 20, making a direct strike as a strong Category 4
storm and causing widespread devastation and destruction the likes of
which the island had never seen. Maria represented a ``worst case
scenario'' for Puerto Rico, tracking east-to-west across the island and
leaving no one and no thing untouched. Within a matter of hours, 100%
of Puerto Rico's population, economy, critical infrastructure, social
service network, healthcare system, and even the government became
casualties of the storm. Damage to the electrical grid--including
downed power lines, transmission lines, and poles--was severe. All
power was lost across the island as a direct result of the catastrophic
failure of PREPA's transmission and distribution infrastructure. This
produced a cascading effect that impacted critical infrastructure and
services that relied on power to operate (such as airports, seaports,
hospitals, water systems, communications networks, hotels, traffic and
streetlights, etc.). With much of Puerto Rico's power grid offline,
wastewater treatment plants were out of service. Some sewage plants
were upstream from the drinking water supply, so their failure could
have increased the risk of contamination of drinking water.
Under the National Response Framework, the Department of Homeland
Security (``DHS'') is the federal department with primary
responsibility for coordinating disaster response, and within DHS, the
Federal Emergency Management Agency (``FEMA'') has lead responsibility.
The Administrator of FEMA serves as the principal adviser to the
President and the Secretary of Homeland Security regarding emergency
management. Due to Hurricane Irma's damages, on September 10, 2017,
President Donald Trump issued a major disaster declaration for Puerto
Rico (DR-4336). Later, after Hurricane Maria left island wide
devastation, a second major disaster declaration was issued on
September 20, 2017 (DR-4339), and FEMA extended eligibility for Public
Assistance to all 78 of Puerto Rico's municipalities. The major
disaster declarations triggered a variety of federal response and
recovery programs for Puerto Rico government and nongovernmental
entities, households, and individuals, including assistance through the
Public Assistance program.
Emergency Response for Power Restoration after Hurricane Maria

To attend to the power restoration of the island Puerto Rico
entered into immediate emergency response work. PREPA, the public
entity responsible for Puerto Rico's power grid, brought on third-party
contractors in mid-October 2017 for power restoration services. These
contractors were responsible for mobilizing its own and subcontracted
labor forces and equipment (both heavy and small) from the continental
United States (CONUS) to the Island. In addition, the United States
Army Corps of Engineers (USACE), acting under a mission assignment from
FEMA, engaged contractors to perform power restoration services, with
assignment of line segments coordinated by a Unified Command Group
(UCG) consisting of FEMA, PREPA, USACE, and the Puerto Rico Emergency
Management Agency. In order to fund all this work, FEMA obligated
various projects under Categories A and B of the Public Assistance
program.
In anticipation of the need for a centralized entity to lead the
coordination of the response, long-term recovery and, reconstruction
planning and execution process for the Government of Puerto Rico, the
then Governor of Puerto Rico, Hon. Ricardo Rossello, issued Executive
Order 2017-65 (as amended by Executive Order 2017-69). These executive
orders created the Central Recovery & Reconstruction Office (``COR3''),
to act as the lead agency within the Government of Puerto Rico in the
coordination, development, and execution of long-term recovery and
reconstruction efforts.
Due to the vast devastation, the response effort took over 3 years,
making it impossible to shift into the reconstruction phase. From 2017-
2020, FEMA, COR3 and PREPA worked together to agree on and obligate
emergency projects geared toward electrical pole replacement and debris
removal, among others. During this time span no permanent work projects
were obligated, therefore, the much need reconstruction of our outdated
electrical grid had not even begun.
Transition to Reconstruction Phase

As mentioned, Puerto Rico already was going through its share of
challenges before the storms, the unprecedented devastation presented a
new set of challenges that would muddle an already complicated process
under the Public Assistance program. Federal grant award regulations
allow FEMA to impose additional specific grant award conditions under
certain circumstances, such as to mitigate risk and ensure fiscal
accountability of the recipient or subrecipient. In normal
circumstances under the Public Assistance program, once FEMA obligates
funds, the recipient can expend funds as necessary. However, in
November 2017, FEMA instituted a manual reimbursement process for
subrecipients in Puerto Rico for federal funds, including Public
Assistance funds, to mitigate fiduciary risk and decrease the risk of
misuse of funds. In addition, the Public Assistance program is a
reimbursement program which requires the recipient and subrecipients to
have enough liquidity to expend funds, something Puerto Rico completely
lacked.
To make matter worse, Puerto Rico insurance companies received $8.5
billion in insurance claims. On average, customers received about 60
percent of the amounts they submitted on their claims. Nearly 18 months
after the hurricane, there were still about 11,000 unpaid claims. As
part of its Public Assistance program, FEMA must ensure that the
assistance provided does not duplicate assistance from another source,
including insurance. This exacerbated Puerto Rico's ability to quicken
its recovery efforts.
Moreover, in 2019 FEMA introduced a new Public Assistance delivery
model (the ``National Delivery Model''). While, in the broadest sense,
Puerto Rico supported the implementation of the National Delivery
Model, there were concerns that the model had never before been used on
a disaster where Section 428 alternative procedures \1\ governed nearly
all of the disaster grant funding. Additionally, because it was
different from the delivery model Puerto Rico had been using since
September 2017, it inserted another change in procedures, which raised
concerns over impacts to the already glacial pace of recovery on the
island. However, we adapted and continued the recovery as directed.
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\1\ Under Stafford Act Sec. 428, Public Assistance Alternative
Procedures, FEMA may award fixed cost grants for large permanent work
projects, rather than on an actual cost basis. See Public Assistance
Alternative Procedures (Section 428) Guide for Permanent Work, FEMA-
4339-DR-PR (Feb. 10, 2020).
---------------------------------------------------------------------------
In mid-2019, in an effort to expedite the permanent work process,
especially for Puerto Rico's electrical grid, FEMA implemented for the
first time, its FEMA Accelerated Award Strategy (``FAASt''), under
which it uses a Statistical Sampling Methodology to arrive at fixed
cost estimates for groups of critical infrastructure projects, rather
than requiring inspections and cost estimating for each individual
project. While this allowed FEMA to expedite obligation, it amounted to
a master recovery budget for each FAASt subrecipient, it did not
however, authorize any related construction. Still all projects had to
go through normal and traditional obligation steps through the FEMA
National Delivery Model by submitting Scopes of Work with enough
engineering and design data to allow FEMA to conduct an Environmental
and Historic Preservation review, as well as potentially approving
additional dollars to finance hazard mitigation measures under Section
406 of the Stafford Act. Once the Scope of Work is obligated by FEMA,
the project is authorized for construction.
To make matters worse, Puerto Rico suffered two additional major
disasters--major earthquakes that shocked the Island beginning in late
2019 and lasting over six months and the COVID-19 Pandemic.
Despite these challenges, with the help of the Federal Government,
Puerto Rico worked diligently to pull itself out of the literal and
figurative darkness that the 2017 Hurricanes had cast over the Island.
By the end of 2020, FEMA had obligated over $1.8 billion in emergency
work projects (Category B) for power restoration. However, during this
time, permanent work projects were slow to develop. Through 2020, no
PREPA permanent work projects were obligated by FEMA, however through
FAASt, $9.5 billion had now been approved and today $1.6 billion has
been drawn down and disbursed for the power grid for emergency work,
$184 million for permanent work and $40 million for management
costs.\2\ The FAASt obligations were a major turning point as it moved
the Island out of response and into recovery.
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\2\ See Attachment 1, Project Status of the Puerto Rico Electric
Power Authority.
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COR3's Strategic Plan for Recovery 2021-2022

With the majority of emergency work completed for Hurricanes Maria
and Irma, Puerto Rico's disaster response transitioned to long-term
recovery, with its primary focus on the formulation and execution of
permanent work projects.
By its nature, long-term infrastructure recovery is a slower
process, as it requires the development of the design and engineering
of projects, obtention of environmental approvals and permits,
procurement of construction contracts, and ultimately construction. All
indications, however, show significant momentum since 2021. Under
FAASt, FEMA, COR3 and PREPA and LUMA Energy have worked together to
develop Scopes of Work, get them submitted to FEMA for proper
evaluation and approval, and advance shovel on the ground projects.
Construction projects are being completed in accordance with applicable
codes, standards and industry best practices, and in the majority of
the cases, with added measures to mitigate hazards and built additional
resilience. Notably, the projects that are and will be executed under
FAASt by PREPA will be compatible for renewable energy integration to
ensure sustainability and resiliency in future disasters.
Efforts to Increase Support of Recovery by Providing Access to
Necessary Capital

As discussed earlier, a major obstacle to recovery in Puerto Rico
has been access to working capital to the cash-flow needs of our
subrecipients, especially for large infrastructure and construction
projects, since FEMA disaster recovery programs are based on a
reimbursement model pursuant to the Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal
Awards at 2 CFR Sec. 200, as adopted by the Department of Homeland
Security at 2 CFR Sec. 3002. As we transition to the recovery phase
where these projects are an even greater focus, a successful plan to
address these issues is of the utmost importance. Puerto Rico has
therefore developed and is now working to implement several strategies
to provide the necessary support for these projects.
The most critical strategy developed and implemented by COR3, in
consultation and approval by FEMA, is the Working Capital Advance
Program (WCA). This program was implemented specifically to provide a
mechanism to advance the federal share of funds reimbursed for
permanent work projects under FEMA's Public Assistance program and HMGP
projects for incurred damages as a result of Hurricane Maria. It also
applies to the 2020 Earthquake disaster, and will eventually apply to
large permanent work projects under Hurricane Fiona disaster.
The program was introduced officially through published revision to
COR3's guidance document, the Disaster Recovery Federal Funds
Management Guide (DRFFMG), in the form of a new Chapter 7, Payment and
Cash Management Policy. The WCA was launched in June 2022, after
receiving formal approval from FEMA in May 2022, and is already
demonstrating significant support for the recovery effort. As such, in
just 5 months, COR3 has successfully disbursed over $519M which have
impacted 377 permanent work projects across all permanent work
categories (C thru G) of FEMA's Public Assistance program, including
municipalities, multiple state agencies and public corporations, and
equally important, PREPA and LUMA Energy to support generation,
transmission and distribution reconstruction projects.
The WCA Program is currently available for all Puerto Rico
subrecipients. Subrecipients who request a WCA in compliance with the
policy requirements are eligible to receive an initial payment equal to
25% of the obligated federal share of the associated project. Recently,
COR3 added a second stage to the WCA Program that allows a second
disbursement of 25% after the first 25% is fully validated, which will
correspond to a 50% total advance. To date, COR3 has approved WCAs for
approximately $180 million for PREPA/LUMA alone. This has been critical
in PREPA/LUMA's ability to move forward with the permanent projects
needed for reliable power, since the 25% WCA is leveraging over $700
million in projects, from purchasing equipment and materials, repairs
to existing power generation units, to replacement of poles,
streetlights, switchyards and substations.
Approval Process for PREPA Permanent Work Projects

Although COR3 and FEMA have taken proper steps to accelerate the
reconstruction phase of the disasters, including the FAASt initiative,
as mentioned beforehand, this only created a mechanism to agree on a
universal budget for all permanent work projects. PREPA and LUMA,
entity in charge of operating, maintaining and modernizing Puerto
Rico's transmission and distribution infrastructure, still have to
comply with FEMA's funding obligation as well as local approval
process. Currently it's an 8-step process under FEMA's National
Delivery Model that currently takes an average of 67 days to complete.
The process begins with PREPA/LUMA submitting a scope of work to
the Puerto Rico Energy Board (``PREB''). Once approved by PREB the
project is submitted to COR3 for any possible alternate or improved
project evaluation and subsequent approval by PREPA/LUMA. The agreed
upon project is then submitted to FEMA, where it would go through their
regular approval process by its Consolidated Resource Center (``CRC'')
for CRC for Environmental and Historic Preservation (``EHP''), cost and
Section 406 review. After approval from COR3, the project is resent to
the CRC for additional review. Subsequently, the project is resubmitted
to PREPA/LUMA for approval. After final approval by COR3, the project
is sent for review to the US Office of Legislative Affairs for review
and obligation. It is evident that even implementing FAASt, the
approval process is lengthy and time consuming. However, COR3 is
working closely with all parties involved in the approval process to
make sure it flows as expeditiously as possible.
Notwithstanding, COR3, FEMA and PREPA/LUMA have been able to
obligate more permanent projects in the past 2 years than the prior 3
years combined. Pursuant to the FAASt program, FEMA and PREPA are
formulating projects under the FAASt program approval of $9.5 billion.
Until a project is formulated and submitted to through the PW
obligation process, neither PREPA nor COR3 have access to the funds. To
date, PREPA has submitted over $2 billion dollars in projects which are
under FEMA's consideration and approval. In addition, FEMA has already
approved 51 projects, of which 2 are global Project Worksheets, 11 for
generation and 38 for transmission and distribution projects. To date,
35 projects for both generation and transmission/distribution are under
construction. Additionally, PREPA/LUMA have submitted 41 detailed
Scopes of Work which are currently under review by FEMA. COR3 forecast
that before the end of 2022, the total amount of projects approved by
FEMA would reach at least 100, setting the stage for 2023 as the year
that Puerto Rico would finally experience the much anticipated
construction activities to rebuild the electrical grid system.
Energy Projects under Stafford Act Section 404 Hazard Mitigation Grants
Program (HMGP)

In addition to the reconstruction projects currently been
implemented under the FAASt program, Puerto Rico's electric power
infrastructure will greatly benefit from unprecedented investments that
will be sought through FEMA's 404 hazard mitigation grants program,
also administered by COR3. The planned investments will cover a wide
range of assets and technologies, from peaking units and dams to ocean
energy, solar and hydro power, to batteries and micro-grids.
To date, FEMA has approved 4 projects: the replacement of existing
peaking units, which are used to manage power reserves and address
power load peaks, a power generation project for the north region of
Puerto Rico, an early warning system for PREPA's dams, and the retrofit
of the Patillas dam. For the first, recently the PREB issued a
resolution approving replacing 11 peaking units island-wide, including
the purchase of 4 new back-start units. The remaining 7 units will be
replaced with new systems with built-in capacity to use green hydrogen
as an alternate fuel. PREPA estimates that will be implementing the
replacement of the 11 units in a period of 24 to 36 months. For north
generation project, PREPA and COR3 are collaborating with FEMA to
develop and submit a new application package for power storage/battery
system. In terms of the dam-related projects, PREPA is making
significant progress advancing the planning, engineering and permitting
phases of each project. Construction is estimated to begin between 2023
and 2024. Between the 4 projects, it is estimated that a total of $1.4
B would be invested via FEMA's 404 HMG program.
On the other hand, COR3 has successfully submitted an additional 5
application packages for FEMA's review and approval that are targeted
to reduce Puerto Rico's reliance on fossil fuel and to diversify the
Island's energy generation portfolio through renewable energy projects,
while mitigating future hazards that causes loss of power after a major
disaster. If approved by FEMA, about $1.1 B would be used to implement
the following projects: a new micro-grid for Vieques and Culebra
municipal-islands, new submarine cables also for Vieques and Culebra,
the retrofit of PREPA's existing hydropower fleet, a new solar power
system for the Guajataca dam, and the very first ocean thermal energy
conversion project in Puerto Rico, the Caribbean and the Americas.
Greater Flexibilities for Cash Management and Reimbursement Processes

COR3 is also encouraged by the continuing close collaboration with
FEMA regarding COR3's administration of the Public Assistance program
and implementation of payment processes for subrecipients. When the
manual drawdown process was lifted Puerto Rico in 2019, FEMA imposed
multiple new conditions and requirements on Puerto Rico's recovery
efforts and specifically regarding payment process implemented by COR3
(the ``2019 Agreement''). In April 2021, Puerto Rico sought termination
of the 2019 Agreement, as COR3 had successfully met all the federal
terms and conditions for two years. Puerto Rico believed it was time to
end these special restrictions and allow Puerto Rico to receive equal
treatment to the other jurisdictions serving as recipients across the
Continental United States. Puerto Rico's request was approved on
September 22, 2021. The elimination of these additional restrictions
allowed Puerto Rico the necessary flexibility to expedite the
processing of reimbursement requests and the disbursements of federal
funds to subrecipients.
The elimination of the 2019 Agreement has also created
flexibilities that have been incorporated into the COR3 Cash Management
Policies, transforming the processes around reimbursements and
advances. Under the new reimbursement policy, disbursements for
reconstruction projects are being expedited, significantly reducing the
average number of days from 240 to 60 days. Similarly, new processes
around requests for advances for immediate expenses are currently being
processed in an average of 21 days rather than 150 days, as was before.
These changes, coupled with the WCA program, enable much greater
support of permanent work projects and help provide the resources
necessary for all projects to progress more efficiently.
Another positive step in our recovery is the significant progress
toward usage of Community Development Block Grant-Disaster Recovery
(``CDBG-DR'') grant funds for the non-federal cost share on approved
FEMA projects. On January 3, 2020, a Memorandum of Understanding
(``MOU'') was signed by FEMA and HUD to work together to facilitate
Puerto Rico's recovery and mitigation activities. This collaboration
includes joint-guidance on the flexible application of CDBG-DR grants
as resources for the cost share for FEMA-funded projects. Since then,
the Puerto Rico Department of Housing (``PRDOH''), the administrators
of CDBG-DR funds allocated to Puerto Rico, and COR3 have continued to
coordinate on the design, development, and implementation of the FEMA
PA Flexible Match Methodology Guidelines (``Guidelines'') as published
on October 14, 2020. COR3 and PRDOH have also submitted a joint
petition to FEMA discussing the implementation procedure of the
Disaster Flexible Match (``DFM'') approach. The DFM proposes a funding
strategy for the FEMA Public Assistance program that eliminates the
need for eligible applicants to comply with CDBG-DR requirements under
each individual project to receive its non-federal share, but rather
applying for match payments based on the total cost share corresponding
to selected FEMA projects for a specific disaster, thereby reducing
additional administrative burdens to the recipient and the
participating subrecipients/applicants. Leveraged together, COR3's FEMA
Public Assistance and PRDOH's CDBG-DR programs ensure that
subrecipients receive the greatest, and most efficient benefit from
federal recovery funding while rebuilding in smarter, more resilient
ways. Recently, FEMA, at COR3's request, is assessing the
implementation of a DFM approach for the FAASt program, a major step in
the right direction to continue streamlining Puerto Rico's
reconstruction processes and eliminating unnecessary administrative
burden that will allow projects and related funding advance in a more
efficient and cost-effective manner.
Hurricane Fiona

On September 18, 2022, Hurricane Fiona made landfall in southwest
Puerto Rico bringing heavy rains and 90 mile per hour sustained winds
impacting power and infrastructure across the island. The 30+ inches of
rain that fell caused devastating flooding that damaged homes and
washed out newly constructed roads and bridges. The winds also caused
severe damaged to the power grid, causing an island-wide blackout and
left much of the island without power and water for weeks.
Hurricane Fiona not only exacerbated the prior disaster damage to
the power grid, but also caused new damage. Despite the fact that
Hurricane Fiona was a much smaller storm, it caused a cascading effect
that is compounding the difficulty of the recovery from the multiple
disasters that Puerto Rico has endured within the last five years.
To meet this unique situation, the Government of Puerto Rico is
working with its federal recovery partners to discuss innovative ideas
that will allow for an efficient and cost effective approach. As we did
after Hurricanes Maria and Irma, we are working closely with FEMA and
other federal partners to ensure close collaboration regarding COR3's
administration of the Public Assistance program and implementation of
payment processes for PREPA and other subrecipients. The leadership of
Puerto Rico and the Federal government are currently in the process of
developing a coordinated plan that includes specialized policies that
benefit a resilient grid reconstruction providing a long-term solution
to Puerto Rico's power needs.
Simultaneously, on October 12th, 2022, Governor Pierluisi requested
direct federal assistance (DFA) to FEMA under Fiona disaster to assess
and implement short-term, feasible solutions that will result in
stabilizing our power grid. The request was accepted by FEMA and for
the past weeks, the Government of Puerto Rico has been supporting FEMA
and its federal partners (DOE, USACE and EPA) in fulfilling the
objectives of the DFA. The overarching goal is to achieve short-term
stabilization while PREPA/LUMA, with the support from COR3 and FEMA,
continues to advance shovel on the ground permanent work and resilient
projects under the FAASt and 404 HMG programs.
Lessons Learned and Opportunities to Support Recovery

It has been a difficult journey, but Puerto Rico is on the road to
recovery and resilience. As we reflect on the last 5 years, there have
been lessons learned. We know that complicated bureaucratic processes
and repeated rule changes slow the process, and that sometimes new
ideas intended to move things forward cannot realize those goals, as
long as they are required to be implemented under existing rules. We
appreciate FEMA's recent efforts to simplify its Public Assistance
process and look forward to additional steps it may take to reduce the
burden on applicants going forward. Although 2022 appears to be a major
milestone in Puerto Rico's recovery, there is much ground to be made up
after years of delays. Even so, we remain exceptionally hopeful for the
future, and we look forward to continuing to build and nurture the
collaborative relationship that we now we feel we have with our federal
partners.
Additional Support of, and Flexibilities for, Capped Grants

One of the lessons learned so far is that attempts to expedite
funding and simplify processes are only as effective as the framework
in which they are implemented. Two examples of this are FEMA's Public
Assistance Alternative Procedures Program under Stafford Act Sec. 428
and FAASt.
The DHS-Office of Inspector General (``OIG'') released a Report in
July 2022 outlining its assessment of FEMA's Public Assistance
Alternative Procedures Program (PAAP).\3\ In comparing obligation times
for over 15 thousand large projects, the OIG determined that FEMA took,
on average, more than twice as long to obligate funds for the PAAP
projects (845 days) as compared to standard Section 406 projects (411
days). The OIG further found that FEMA's funding obligation times
increased significantly for projects in Puerto Rico and the U.S. Virgin
Islands.
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\3\ OIG Audit Report OIG-22-51, Assessment of FEMA's Public
Assistance Alternative Procedures Program (July 13, 2022), available as
of Sept. 12, 2022 at https://www.oig.dhs.gov/sites/default/files/
assets/2022-07/OIG-22-51-July22.pdf.
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Similarly, while significant funds have been obligated for Puerto
Rico's critical infrastructure under FAASt, this obligation has
effectively established project budgets without expedited project
execution. As aforementioned, each project must still work its way
through FEMA's lengthy Public Assistance process before obligated
funding can be disbursed.
While Sec. 428 and FAASt were well intended their effectiveness is
limited by the complicated framework under which they must be
implemented.
Additionally, although authorization and support for the WCA has
been helpful and effective, unfortunately it came late in the process.
There is no doubt that Puerto Rico would have been in a much better
place if advances for permanent projects could be approved like they
were in Louisiana for Hurricane Katrina. Deficiencies under this
disaster affected Puerto Rico as we were denied these benefits which
would have accelerated the commencement of reconstruction of bridges,
roads, schools, hospitals, electric grid, wastewater treatment plants,
among many others. We believe past FEMA experiences should not be in
detriment of current recoveries.
Changes to Robert T. Stafford Disaster Relief and Emergency Assistance
Act

Governor Pedro Pierluisi is in the process of submitting several
requests to Congress geared toward aiding and facilitating
administrative efficiency in the recovery of Hurricanes Maria and
Fiona. Many of these requests could be achieved by amending the Robert
T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5121 et seq.) to authorize FEMA to consolidate both disasters into a
single award under DR-4339-PR for the administration of federal
assistance. We ask Congress to support our request as this will not
only ensure a sound approach to the recovery process but also help
lessen the administrative burden for both Puerto Rico and FEMA and
reduce the amount of funds required to manage these disasters
separately.
Support 100% Federal Cost Share

Governor Pierluisi has also requested that a 100% Federal Cost
Share be extended for all consolidated Maria (DR-4339-PR) and Fiona
(DR-4671-PR) permanent work projects. Since 2017, Puerto Rico has
endured four (4) major disasters which have further exacerbated its
subrecipients disaster management capabilities. This has proven to be
an intense and difficult process considering the island's dire economic
situation. We ask Congress to support our Governor's request to
alleviate the financial strains the disaster recovery process requires.
Nonetheless, if our aforementioned request is not granted, it is
imperative to at least authorize 100% Federal Cost Share for all
permanent work projects related to repairing its power grid. Increasing
the cost share for permanent work to 100% Federal funding will
undoubtedly expedite the rebuilding of the power grid while alleviating
the financial burden on Puerto Rico.
Amendment to the 2018 Bipartisan Budget Act

We further ask Congress to amend the 2018 Bipartisan Budget Act,
specifically section 20601 to include Hurricane Fiona and expand the
definition of ``critical facility'' to include our Island's
transportation services which comprise, among other things, of roads,
bridges, and highways, all of which have been devastated by Hurricanes
Maria and Fiona. Puerto Rico's transportation system is, in many cases,
comprised of a single entry and exit route, which makes its recovery
critical for the United States citizens that reside here.
Appreciation for Additional Time Extension Requests

Due to the limitations of wide-scale construction on an island,
time extensions for permanent work project period of performance were
requested for the remaining permanent recovery work to be completed. On
September 26, 2022, FEMA approved a blanket extension for 6 months.
Puerto Rico appreciates the support from the Federal Government in
granting our request.
Conclusion

Our mission at COR3 as recipient of FEMA Public Assistance 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 the subrecipients of Puerto Rico in
furtherance of the execution of the approved recovery and
reconstruction projects, which will allow for a better, more resilient
Puerto Rico. Effective completion of this work will support a much more
stable electrical infrastructure system 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.
On behalf of the entire COR3 team, we thank Congress and the U.S.
Government for its continued support toward a better life for everyone
in Puerto Rico. Puerto Rico appreciates the attention and focus
Congress is bringing to these important issues we look forward to
working with Congress to evaluate and address the lessons we have
learned, and continue to learn, from these unprecedented events.

______

Questions Submitted for the Record to Mr. Manuel Laboy, Executive
Director, Central Office for Recovery, Reconstruction, and Resiliency

Mr. Laboy did not submit responses to the Committee by the appropriate
deadline for inclusion in the printed record.

Questions Submitted by Representative Leger Fernandez

Questions Submitted by Representative Westerman

Question 1. The Committee has heard concerns about the lack of
coordination between all the governmental entities (federal,
territorial, and local) that are working on the multiple disaster
recovery efforts in Puerto Rico. Please further expand on what the
coordination process is between COR3 and the Federal Government
departments, FEMA, Dept. of Homeland Security, Dept. of Housing and
Urban Development, etc. What has been your coordination process with
Puerto Rico's municipalities, and how has that improved since Hurricane
Maria? What processes and systems are effective and what is not
effective?

Question 2. Which FEMA processes are the most challenging to get
through to actually have money obligated to spend on projects in Puerto
Rico? What has FEMA been good at from your perspective?

Question 3. Can you describe the pace of recovery efforts of COR3,
including power restoration, after Hurricane Fiona and how that
compared to the response after previous disasters or storms? What did
you see that was better than what has happened in the past with both
LUMA's recovery from outages and from PREPA's recovery from outages?

Question 4. Your written testimony to the House Transportation and
Infrastructure Committee from September 2022 detailed the Working
Capital Advance Program that had a goal of helping with liquidity
constraints for projects. Please provide the Committee with an update
on how it has worked for projects begun before Fiona and, also if this
is a program used for Fiona recovery projects?
Questions Submitted by Representative Gonzalez-Colon

Question 1. Mr. Laboy, you indicated you need for FEMA to
streamline the approval and funding processes. Are there any specific
measures that could be taken in Congress that would help spped FEMA
funding obligation approvals? That is, what legislative changes could
we enact to help streamline this process and eliminate bureaucratic
hurdles to advance Puerto Rico's reconstruction process, particularly
to help rebuild Puerto Rico's energy infrastructure?

Question 2. To date, how many subrecipients--municipalities, state
agencies, nonprofit organizations--have applied for or received support
from in the working Capital Advance are currently participating in the
program? Does COR3 expect that all municipalities will eventually
participate?

Question 3. Governor Pierluisi made his request that we in Congress
amend the Stafford Act to authorize FEMA to consolidate the Hurricane
Maria and Hurricane Fiona disasters into a single award for the
administration of federal assistance. Can you discuss how will it
lessen administrative burdens and reduce the amounts of funds required
to manage both disasters?

Question 4. There is concern that with inflation, supply chain and
job market issues that have developed in the past 3 years, the
estimates on which obligations for disaster programs that were already
made may no longer suffice for completion of the work, or truly reflect
the cost of the work for which they were approved. Is there a risk of
not being able to finish recovery projects when recovery funding
obligations are based on estimates that have a fixed cost and, for
example, there are sharp increases in costs of material or labor? In
other words, has inflation and the rising cost of construction and
labor already impacted recovery work? Would the proposal for a one-time
cost adjustment for Section 428 projects be sufficient to address this
need?

Question 5. The Governor has requested an amendment to the Stafford
Act to authorize FEMA to consolidate the Hurricane Maria and Hurricane
Fiona disasters into a single award for the administration of Federal
assistance. Does this extend to amending any appropriation that has
been made in the past covering a specific disaster by name or by year
and with a set deadline, to now encompass the others, or would this
amendment rather have the goal of having a single administrative
coordination structure to handle the different funds and applications?
That is, would there still be Maria/Earthquake/Covid/Fiona-specific
funds but all under one same coordinating office, or are they become
all a single all-Puerto Rico all-disaster fund?

Question 6. Reminder of documents requested for the Committee
during the hearing:

Copy or breakdown of the Action Plan for the rebuilding of
the power system to the Committee, including the timelines
and estimated years in which milestones are to be achieved.

Breakdown how many electric grid projects have been
submitted, obligated, approved, and disbursed. What are
their funding sources, and can you please provide the total
amount under each stage as of today.

Similarly for the other permanent infrastructure segment
recovery projects.

______

The Chairman. Thank you very much. Let me now turn to Mr.
William Rodriguez, Secretary of the Puerto Rico Department of
Housing.
Sir, you are recognized.

STATEMENT OF WILLIAM RODRIGUEZ, SECRETARY, PUERTO RICO
DEPARTMENT OF HOUSING

Mr. Rodriguez. Good afternoon, Chairman Grijalva, Ranking
Member Gonzalez-Colon, and members of the House Committee. On
behalf of the Government of Puerto Rico, I wish to thank the
Committee for inviting me to testify as Secretary of Puerto
Rico Department of Housing on the status of Puerto Rico's post-
disaster reconstruction under the Community Development Block
Grant Disaster Recovery and Mitigation allocations.
As you know, just over 5 years ago, Hurricanes Irma and
Maria struck Puerto Rico and devastated the island's electrical
power system, which led to the longest sustained blackout in
modern U.S. history. However, the impact on the power grid
remains ever present in the daily lives of island residents, as
was recently laid bare after the impact of Hurricane Fiona.
Therefore, a resilient electrical power service remains the
single most comprehensive and critical factor to the future of
Puerto Rico.
In June 2021, the U.S. Department of Housing and Urban
Development, HUD, allocated $1.9 billion for the enhancement
and improvement of Puerto Rico's electrical power system to
provide long-term energy resilience to the most impacted and
distressed areas and to low- and moderate-income communities in
Puerto Rico. This is an unprecedented allocation and, along
with the U.S. Virgin Islands, the only one of its kind.
So, PRDOH worked in close collaboration with HUD and other
Federal agencies throughout the action plan design and approval
process. After conducting a stakeholder engagement strategy,
which included multiple participatory workshops, public
hearings, and consultation with a broad range of Federal
agencies, in January 2022, PRDOH submitted the action plans to
HUD. In March 2022, we received approval of the $1.4 billion
budgeted for the electrical power reliability and resilience,
ER2, program of the $1.9 billion allocation, for which a grant
agreement with HUD was executed in August 2022.
An amendment to the grant agreement for access to the
remaining $500 million will be executed when HUD approves the
energy grid rehabilitation and reconstruction, ER1, non-Federal
cost share program through an action plan substantial
amendment, as requested by HUD.
PRDOH is determined to serve the most vulnerable by
prioritizing strategic projects for critical infrastructure and
areas with demonstrated reliability and resilience challenge
under ER2 program. The strategic projects will promote the
integration of renewable sources of energy and distributed
generation. Experiences with previous disasters have taught us
that critical infrastructure such as hospitals are some of the
places where we are most vulnerable, having had to evacuate
patients due to lack of power.
Therefore, one of these strategic projects will be a
microgrid for Centro Medico, which is the island's main
hospital complex and trauma center. We will focus on the
implementation of targeted, high-impact projects in
collaboration and with the guidance of partners such as the
U.S. Department of Energy while the larger, long-term grid
transformation projects are developed. These enable us to
identify opportunities for alignment and to impact the
populations that suffer the most in times of outages, while the
PR100 study provides the blueprint for the comprehensive grid
approach within the larger context covered by Federal partners
such as FEMA.
Before receiving the allocation for electrical power system
enhancement, PRDOH proactively carved out funds of its DR and
MIT portfolios to allocate funds to individual households and
community-level resilience projects. This includes $300 million
on the CDBG-DR Community Energy and Water Resilience
Installations Program, which launched in 2021, and $500 million
under the CEWRI-MIT programs, which will launch in the upcoming
month.
The energy-related activities to be found across the DR and
MIT portfolios are intended to drive electrical system
enhancement and improvement through our forward thinking and
holistic approach at individual households and community
scales. These programs will complement the regional and grid-
level scales to be addressed by the electrical system
allocations. This will allow for a greater and more meaningful
impact that targets Puerto Rico's most vulnerable.
We are fully committed to the implementation of these
strategic projects as our part of Puerto Rico's recovery
landscape. PRDOH looks forward to ongoing Federal support and
approval to allow assistance to privately-owned utilities as we
move to execute the strategic projects with expediency.
I appreciate the opportunity to appear before this
Committee and look forward to answering any questions you may
have.

[The prepared statement of Mr. Rodriguez follows:]
Prepared Statement of William Rodriguez Rodriguez, Esq., Secretary,
Puerto Rico Department of Housing

Good afternoon, Chairman Grijalva and Members of the House
Committee,

On behalf of the Government of Puerto Rico, I wish to thank the
Committee for inviting me to testify, as Secretary of the Puerto Rico
Department of Housing (PRDOH), on the state of Puerto Rico's Post-
Disaster Reconstruction under the Community Development Block Grant for
Disaster Recovery and Mitigation (CDBG-DR and CDBG-MIT) allocations.
I. Impact of the Disasters

As you know, just over five years ago Hurricanes Irma and Maria
struck Puerto Rico and devastated the electrical power system leaving
the entire Island without power, which led to the longest sustained
blackout in modern United States history. The impact on the power grid
caused harmful effects to communities, water, health, and education
systems, as well as telecommunications, among others. Without power,
residents were unable to gain access to healthcare, communication,
refrigeration, water, cooling, and security. With sustained systemic
insecurity, residents continue to feel many of the same impacts,
economic recovery is hampered, and the cycle of recovery cannot be
completed.
In the months following Hurricanes Irma and Maria, 3.2 million U.S.
citizens lived without power. Around 4% of the population migrated from
the Island, and thousands died as a result of the storms. It also left
mental healthcare providers scrambling to address post-traumatic stress
disorder (PTSD), depression, and other psychological effects. The
conditions in which people were living caused severe anxiety, and these
conditions only worsened as time passed and essential services remained
lacking. This in turn led to an intense fear of future events that
could threaten the Island. This reality was recently laid bare after
the impact of Hurricane Fiona, which resulted in prolonged power
outages posing health and safety threats as critical services remained
unavailable to citizens due to lack of power. Therefore, a resilient
electrical power service remains the single most comprehensive and
critical factor to the future of the Island.
II. Energy Allocation and Action Plan

On June 22, 2021, the U.S. Department of Housing and Urban
Development (HUD) allocated $1.9 billion for the improvement of Puerto
Rico's electrical grid to provide long-term energy resilience to the
most impacted and distressed areas and to low- and moderate-income
(LMI) communities. It is important to understand, however, that the
entire island of Puerto Rico was impacted by the hurricanes, and this
fact was recognized by HUD in the Energy Notice (86 FR 32681) by
declaring the entire jurisdiction as a ``most impacted and distressed''
area, which is unique in the context of disaster recovery.
This is an unprecedented allocation and, along with the U.S. Virgin
Islands', the only one of its kind, so PRDOH has been working in close
collaboration with HUD and other federal agencies throughout the Action
Plan design and approval process. Since August 2021, PRDOH has met with
relevant federal agencies, including the federal members of the
Technical Coordination Team (TCT), as well as with various stakeholders
such as municipalities, residents, non-profit organizations, academic
institutions, and local government agencies to receive their input
during the Action Plan development process. The TCT team, co-led by the
U.S. Department of Energy (DOE) and the Federal Emergency Management
Agency (FEMA), consists of a variety of key federal agencies, such as
the U.S. Army Corps of Engineers (USACE), the Environmental Protection
Agency (EPA), the United States Department of Agriculture (USDA), the
Federal Communications Commission (FCC), the Government Accountability
Office (GAO), and the U.S. Treasury, amongst others. We appreciate the
valuable input these agencies have provided in the development of our
energy recovery strategy.
On November 8, 2021, PRDOH published a draft of its Electrical
Power System Improvements Action Plan on the CDBG-DR website for public
comment to receive recommendations and comments to support the
development of the Plan. Additionally, PRDOH held two public hearings
as part of the efforts to inform the approach to address Puerto Rico's
unmet energy needs. The Action Plan divides the allocation's budget
between two programs: the Energy Grid Rehabilitation and Reconstruction
(ER1) Cost Share Program ($500,000,000) and the Electrical Power
Reliability and Resilience Program (ER2) ($1,316,406,180).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

.epsThe purpose of the ER1 Program is to maximize the benefit from
federal grant programs by positioning CDBG-DR as local match to other
federal funding streams, in this case the FEMA Public Assistance
allocation for electrical grid reconstruction. This approach will
relieve the financial burden related to the recovery efforts of Puerto
Rico's Electrical Grid and Puerto Rico's long-term infrastructure
resilience needs. Through the matching of funding provided by other
federal agencies, critical infrastructure needs will be addressed
making the island more adaptable to changing conditions and able to
withstand and recover rapidly from disruptions caused by future
disasters.
The ER2 Program will provide assistance to create electrical system
reliability and resilience through the implementation of decentralized
renewable energy resources, including, but not limited to both small
and large microgrid projects as allowed under Puerto Rico Energy
policy. PRDOH is determined to serve the most vulnerable by
prioritizing strategic projects for critical infrastructure and areas
with demonstrated reliability and resilience challenges under the ER2
Program. Strategic projects will promote the integration of renewable
sources of energy and distributed generation.
Experiences with previous disasters have taught us that critical
infrastructure such as hospitals are some of the places where we are
most vulnerable, having had to evacuate patients due to lack of power.
Therefore, one of these strategic projects will be a microgrid for
Centro Medico, which is the Island's main hospital complex and trauma
center. We will focus on the implementation of targeted high-impact
projects, in collaboration and with the guidance of partners such as
the DOE and its national laboratories, while the larger long-term grid
transformation projects are developed. It should also be noted that DOE
collaboration is already embedded within program planning, design,
strategic project selection, and implementation. This enables us to
identify opportunities for alignment and to impact the populations that
suffer the most in times of outages, while the PR100 study provides the
blueprint for the comprehensive grid approach within the larger context
covered by federal partners such as FEMA.
On January 24, 2022, PRDOH submitted the CDBG-DR Electrical Power
System Enhancements and Improvements Action Plan to HUD for their
review and approval. A few weeks later HUD provided a summary of the
comments and recommendations made by HUD's internal cross-cutting
requirements partners and members of the Energy TCT to inform revisions
to the Plan. After considering the agencies' comments, on March 15,
2022, PRDOH submitted the revisions to the Plan for HUD's
consideration. Finally, on March 25, 2022, HUD notified that the Action
Plan was partially approved, pending additional project-specific
information for the ER1 Program.
Through the execution of a grant agreement on August 5, 2022, of
the $1.9 billion allocation, PRDOH gained access to the $1.4 billion
budgeted for the ER2 Program. An amendment to the grant agreement for
access to the remaining $500 million will be executed once HUD approves
the ER1 Cost Share Program through an Action Plan Substantial Amendment
as requested by HUD. PRDOH has been coordinating with various
stakeholders such as the Puerto Rico Electrical Power Authority
(PREPA), LUMA, and others, with the purpose of identifying the projects
that may be eligible for funding, as requested by HUD, for ER1 Program
Approval, and to coordinate and assure consistency of all CDBG-DR
funded electrical power system improvements with other disaster
recovery and mitigation planning and development activities.
III. Energy-related Activities under the CDBG-DR and CDBG-MIT
Portfolios

Before receiving the allocation for electrical power system
enhancements and recognizing the need for energy resilience measures in
Puerto Rico, PRDOH proactively carved out funds under its CDBG-DR and
CDBG-MIT program portfolios to allocate funds to address household and
community level energy resilience projects. These include $300 million
under the CDBG-DR Community Energy and Water Resilience Installations
(CEWRI) Program which has already launched, and $500 million under the
CDBG-MIT CEWRI Subprograms.
The energy-related activities to be funded across the CDBG-DR and
CDBG-MIT portfolios are intended to drive electrical system
enhancements and improvements through a forward-thinking and holistic
approach at individual household and community scales. These programs
will complement the regional and grid-level scales to be addressed by
the electrical system allocation. This will allow for a greater and
more meaningful impact that targets Puerto Rico's most vulnerable.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

.epsIV. Streamlining Processes

a. Simplify Bureaucracy

i. LMI Impact

Energy is critical to life and continues to be an urgent need in
Puerto Rico. PRDOH has been consistent in clarifying to HUD that,
because the entire grid is interconnected and ninety-three percent
(93%) of the population is considered to reside in LMI census tracts,
improvements and enhancements to the grid will have a direct benefit to
LMI households across the whole Island. However, HUD is requiring that
PRDOH establish, by budget line item, how each individual project to be
assisted under the energy programs will benefit LMI populations.
Documenting the impact of an electrical project to the smallest area
possible to indicate the specific LMI population that will be benefited
is a redundant administrative process given the Island's overall high-
poverty makeup. Considering the fragility and current state of the
system, which is in desperate need of reconstruction and
rehabilitation, the recommended option for expediting recovery efforts
should be to recognize electrical projects that benefit the Puerto Rico
electrical power system as meeting the LMI requirement.

ii. TCT Consultation

Another area where processes may be streamlined is the TCT
consultation process.\1\ PRDOH has been conducting weekly collaboration
meetings with DOE and its national laboratories, and they have reviewed
and provided feedback on program guidelines, as well as on the program
implementation and project selection strategy. However, according to
the Energy Notice, 86 FR 32681 PRDOH must submit every electrical
project for consultation to both HUD and DOE simultaneously, for these
agencies to then notify PRDOH whether to submit the project for further
consultation with the Energy TCT.
---------------------------------------------------------------------------
\1\ See, Federal Register, 86 FR 32681, Section V.A.2.e.--
Additional consultation requirements.
---------------------------------------------------------------------------
Relieving PRDOH from these consultation requirements, which
includes projects that are assisted by FEMA and already approved by
another federal agency, will accelerate project implementation.

b. Private Utilities Waiver Requests

The Housing and Community and Development Act (HCDA) states that
under the regular CDBG Program, a nonprofit or for-profit private
utility may be assisted with CDBG funds as long as the utility is
publicly regulated.\2\ However, the Energy Notice, 86 FR 32681 contains
a prohibition from providing assistance to privately-owned utilities.
PRDOH made clear through the Action Plan and in meetings with federal
partners our intent to provide assistance to private utilities as part
of the ER2 Program to further renewable energy. On April 13, 2022,
PRDOH submitted a consultation to HUD stating that ``the exclusion of
[...] privately-owned utility[ies] would make the ER2 Program's
decentralized renewable energy approach impracticable and would
severely hinder Puerto Rico's ability to meet its energy resilience and
renewable energy goals.''
---------------------------------------------------------------------------
\2\ 24 C.F.R. Sec. 570.201(l).
---------------------------------------------------------------------------
On July 27, 2022, HUD advised PRDOH to submit the formal waiver
request, which PRDOH did on August 31, 2022. Simultaneously, PRDOH
decided to move forward and submit another waiver request to allow
assistance to for-profit and non-profit privately-owned utilities under
CDBG-MIT and CDBG-DR programs, as designed and already approved by HUD
in both Action Plans. Both waiver requests are pending approval.
Hurricane Fiona put into perspective the need to expedite the
approval of the privately-owned utilities waiver requests, and the need
to swiftly approve the ER1 Program to quickly launch projects that will
bring the much-needed energetic resilience the people of Puerto Rico
deserve. Maintaining HUD's restriction on assistance to privately-owned
utilities will cripple PRDOH's efforts to properly address the
fragility of the Island's electrical power system. Hurricane Fiona also
demonstrated, once again, that Puerto Rico's electrical power system is
interconnected and that improvements and enhancements to the grid will
benefit the Island as a whole, which is mostly LMI.
c. Lead-based Paint Abatement Requirements

The CDBG-MIT CEWRI-HH Program (CEWRI-HERI and CEWRI-IP) has been
developed to provide funds for the installation of photovoltaic systems
(PVSs) and/or battery storage systems (BSSs) for households that own a
single-family structure as their primary residence to provide
participants with a resilient energy alternative during times of
electric grid failure. Based on the CDBG-DR Repair, Reconstruction and
Relocation (R3) Program data, approximately 55% of participating
single-family residential properties were built prior to 1978. Of
these, approximately 37% have tested positive for lead. The CDBG-MIT
CEWRI-HH Program is expected to process around 14,000 applications.
Therefore, it is expected that 7,700 applications will require a lead
hazards assessment and that, of these, approximately 2,800 will require
some abatement works.
Since the program activities will not disturb painted surfaces
totaling more than 20 square feet on exterior surfaces or 2 square feet
in any one interior room or space, PRDOH proposed to HUD a lead
mitigation approach based on di minimis levels, which do not require
PRDOH to conduct safe work practices such as paint testing, abatement,
and clearance, but instead to establish interim controls during
installations of PVSs and BSSs. However, the proposed approach was not
approved, meaning that the CEWRI-HH Program will be required to conduct
testing, abatement, and clearance at each residence. Due to this
determination, PRDOH is in the process of procuring services for risk
assessments and mitigation for an estimated total of $39M. This cost
represents an equivalent loss of 1,560 households for the CEWRI-HH
Program that would otherwise have had access to solar panels and
batteries in their homes.

V. Building on Success

Since being designated as the CDBG-DR Grantee for Puerto Rico in
2018, PRDOH has built strong institutional capacity and has
successfully disbursed over $1.2 billion in CDBG-DR funds. Our more
than 365 professionals have the experience of managing an extremely
large and complex allocation, while earning an ``on pace'' expenditure
classification from HUD.
Through the establishment of twenty (20) programs designed to
provide grant opportunities to citizens, small businesses,
municipalities, agencies, and non-governmental organizations, PRDOH is
creating a significant impact on the local housing, infrastructure,
economic, and planning sectors. To date, the R3 Program has completed
the repair and reconstruction of 4,376 homes and awarded 2,927
relocation vouchers; the Non-Federal Match Program (NFMP) has issued
over $42.5 million in non-federal match disbursements; the Homebuyers
Assistance (HBA) Program has provided assistance to 4,131 participants
for a total of $130.6 million disbursed; and the Small Business
Financing (SBF) Program has issued over 2,610 awards for a total of
$114.5 million disbursed. We can proudly say that we have been able to
directly impact over 11,715 families with access to safe housing.
We understand that time is of the essence in this critical effort
and are fully committed to the expedited implementation of the
abovementioned strategic projects as our part of Puerto Rico's recovery
landscape.
VI. Conclusion

We are working closely with our federal partners to streamline
processes wherever feasible, as well as with key local partners such as
the Puerto Rico Energy Bureau (PREB), Puerto Rico's Central Office for
Recovery, Reconstruction and Resiliency (COR3), PREPA, and LUMA to
ensure alignment as we launch the ER1 and ER2 Programs. The DOE and
National Laboratories (NREL) have been allies to PRDOH by providing
ongoing technical assistance. Through this collaboration, DOE and NREL
have reviewed and provided feedback on program guidelines, as well as
on the program implementation and project selection strategy, and have
assisted with data collection and analysis.
PRDOH looks forward to ongoing federal support as we move to
execute targeted high-impact projects with expediency. I appreciate the
opportunity to appear before this Committee and look forward to
answering any questions you may have.

______

Questions Submitted for the Record to William Rodriguez, Secretary,
Puerto Rico Department of Housing

Questions Submitted by Representative Leger Fernandez

Answer. With natural disasters becoming ever more frequent, it is
imperative to rethink the way the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (Stafford Act) and other relevant statutes
are being implemented. There are certain ways in which the Federal
Government can streamline its disaster recovery response to expedite
recovery measures. From Puerto Rico's experience with recent disasters,
FEMA assistance under permanent works categories require a cost-share
amount that in most cases exceeds the amount Puerto Rico is able to
match without funding available from other sources. Puerto Rico seeks
100% Federal Share for permanent works to effectively launch disaster
recovery projects. Alternatively, a true Global Match approach for non-
federal cost-share would ease the administrative burden resulting from
undertaking individual 10% non-federal match projects. Although
impactful, many of these projects may not be of a scale that justifies
the administrative burden to undertake them individually. It is simply
not cost-effective nor reasonable.

Federal disaster recovery assistance is typically tied to the
response to a specific disaster event, prompted by Presidential and
Congressional actions. Another measure to swiftly deliver assistance
funds to the citizens in immediate post-disaster need is to allow
grantees to provide federal disaster assistance interchangeably among
disaster allocations and not necessarily tied to specific disaster
events. This is particularly important for low- to moderate-income
families who experience damages to their homes or even displacement.
These households cannot afford to wait for the appropriation cycle and
subsequent allocation process to see their homes rebuilt, repaired or
their families relocated out of harm's way. For the same reasons,
states must be able to provide rental assistance to these displaced
families even before the federal funding for the applicable disaster is
made available through the ordinary processes.

Additionally, the application of federal statutes and regulations
require the grantees to perform an evaluation of the availability of
other sources of funding to ensure disaster recovery assistance is not
duplicative. This evaluation entails entering into individual data
sharing agreements with FEMA, HUD, and SBA, among other federal
agencies, to obtain the necessary data to avoid duplication of benefits
(DOB). Although HUD and FEMA are moving toward some data-sharing
agreements, the Federal Government and grantees would greatly benefit
from a unified federal assistance database where data from across all
federal agencies related to disaster recovery assistance and
beneficiaries can be stored and shared, streamlining the required DOB
analysis. This would translate to a reduced risk of providing
duplicative assistance while targeting the population most in need of
disaster recovery assistance at the early stages after a disaster
event.

Questions Submitted by Representative Velazquez

Question 1. Since 2020, your agency has had available $1.29 billion
under the City Revitalization Program meant to enhance resiliency in
urban centers and key corridors, such as the pathways destroyed after
Hurricane Fiona. However, only 2 of the 327 projects under this program
have started. How much out of the allocated funding do these two
projects represent and what is your strategy to ensure that all of them
are started?

Answer. The City Revitalization Program (CRP) has an allocation of
$1.29 billion, from which $1.07 billion have been obligated. The two
projects that have started the construction phase represent $4.7
million (0.6%) of the current project funds for the CRP program, as
described in Table 1--Budget Distribution by Projects Phase.
While as of November 23, 2022, two of the 320 eligible projects had
started construction, another 94 projects are active in the design and
procurement phase. Different strategies have been implemented to ensure
that projects start under the CRP Program. The Puerto Rico Department
of Housing (PRDOH) has contracted three Program Managers (PMs) to
provide dedicated hands-on support to the municipalities for a wide
range of needs. PM support includes:

Provide technical assistance to Municipalities in the
implementation of public policy of the CRP program

Provide support to Municipalities in the identification of
eligible projects

Provide support to Municipalities in the preparation and
development of project scope

Provide support to Municipalities in the preparation of
cost estimates and project implementation itinerary

Provide assistance in the preparation of scope and cost
documents for the contracting of professional services

Provide assistance in processes related to the acquisition
of properties in compliance with the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of
1970 (URA)

Provide assistance in the review or preparation of
environmental evaluation documents (Environmental Review)

Provide assistance in the preparation of Underwriting
documents for affordable housing and economic development
projects

Provide assistance in the preparation of scope and cost
documents for the contracting of construction services

Prepare monthly reports

Provide assistance to PRDOH in the review of payroll
invoices and professional services presented by the
Municipalities

PRDOH is also actively working with municipalities to identify
projects which meet key compliance requirements. We have been in
constant communication with different local and federal agencies to
accelerate the processing of permits and endorsements required for the
projects to begin construction.

Currently, there are 320 eligible projects amongst the
Subrecipients. The status of these projects is distributed as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

.epsAs Table 1 shows, a total of 224 projects are in the approved
phase. Projects in this status are being actively evaluated by
Municipalities for the procurement of design services to move to the
next phase. Projects in the approved phase need to comply with
different requirements, such as URA requirements, underwriting, etc.,
before being ready for the procurement of design services. The 224
approved projects, which have a cost estimate of approximately $455
million, are planned to be under design contracts next year with the
goal to start construction by 2024. The statuses of the projects may
vary depending on their complexity. Currently, Municipalities are
working on identifying and evaluating 42 additional projects with an
estimated cost of $108 million.

CRP expects that the 91 projects that are under the design phase
will soon move to the bid phase. As a result, potentially 94 (the
projects in design and bid) projects will be in process to start
construction or bid during 2023, for approximately $281 million.
The detailed distribution of CDBG-DR funds related to eligible
projects, according to their status of development in the CRP Program
by the 78 Municipalities, are shown in Table 2 below:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

.epsFollow-up Question. Can you mention what percentage of the
funds have been obligated and disbursed to subrecipients?

Answer. As of November 23, 2022, the CRP Program has obligated 83%
($1 billion) of the $1.29 billion budget and 1.3% ($16.7 million) has
been disbursed to subrecipients.

Question 2. The Puerto Rico Department of Housing received a $1.9
billion CDBG-DR allocation to improve the electrical power system. In
the department's Energy Action Plan, you established that 80% of the
Electrical Power Reliability and Resilience Program (known as ``ER2'')
budget will go to distributed energy and microgrids. Can you precise
how many renewable energy projects the agency is intending to fund
under ER2?

Answer. At this moment, we are unable to provide a specific number
of renewable energy projects that may be funded under the ER2 Program
since each project may vary by size and scale. However, the Program's
objective is to promote the maximum integration of renewable energy
across the portfolio. Specifically, microgrids funded under the ER2
Program are required to foster renewable energy integration and
community-level resilience.

Question 3. What metrics will your department use to measure the
impact of these projects on Puerto Rico's goal of achieving 100% of
renewable energy by 2050?

Answer. The U.S. Department of Energy (DOE) and the National Labs
(National Renewable Energy Laboratory (NREL) and Sandia National
Laboratories) are key stakeholders in the ER2 Program. They have been
embedded in the development and selection process of the strategic
projects for the Program, which ensures alignment with the PR100 Study
and its path to Puerto Rico's clean energy future. Additionally, the
PRDOH is part of the Steering Committee for the PR100 Study. We will
continue to work with DOE and the National Labs to establish
appropriate metrics and accompanying data sources to measure project
impact.
Question 4. How has HUD's revision of the Energy Action Plan
progressed since January 2022?

Answer. On January 24, 2022, PRDOH submitted the Action Plan for
HUD review and approval of two programs: 1) The Energy Grid
Rehabilitation and Reconstruction (ER1) Cost Share program, and 2) the
Electrical Power Reliability and Resilience (ER2) program. On March 25,
2022, HUD partially approved the Energy Action Plan, only for the ER2
Program. For ER1 Program approval, HUD required PRDOH to ``assess how
the use of the CDBG-DR funds and its planning decisions will impact
vulnerable populations, protected classes under fair housing and civil
rights laws, and underserved communities that were economically
distressed prior to the disaster.'' PRDOH worked with HUD to determine
how the required analysis could be applied to the context of energy-
grid-level repairs under the ER1 program and began stakeholder meetings
with HUD and participants of the cost-share program to begin the
required analysis.
On October 7, 2022, PRDOH submitted a working draft of Appendix H.1
of the CDBG-DR Electrical Power System Improvements Action Plan for
HUD's courtesy review. The purpose of the Appendix H.1 was to provide
detailed analysis, budgets, maps and methodology regarding how the ER1
program will consider vulnerable populations, as requested by HUD in
its partial approval letter dated March 25, 2022. The approach
considered guidance received from HUD in collaborative work sessions
with HUD and LUMA Energy.
On October 26, 2022, PRDOH received feedback from HUD stating that
the appendix achieved what was required for ER1 Program Approval. PRDOH
included the feedback that was provided by the HUD Office of Fair
Housing and Equal Opportunity (FHEO) and prepared it for web posting as
part of the first substantial amendment to the Electrical System
Enhancements Action Plan (APA1) for a 30-day public comment period as
required by HUD. The APA1 was published on November 15, 2022 and is
currently under the 30-day public comment period that ends on December
16, 2022. PRDOH will submit to HUD the revised APA1 once the public
comment period ends and comments are duly considered. HUD will then
have a 60-day review period for approval.

Question 5. There has been a dramatic surge in housing prices in
Puerto Rico. The sale of homes saw an increase of 30.2% in 2021, the
highest since 2011 according to the Puerto Rico Office of the
Commissioner of Financial Institutions. The increase results in the
highest housing prices in more than a decade. Many experts attribute
this increase in mortgage prices and rents to an increase of wealthy
investors lured in by Puerto Rico's generous local tax exemptions, the
shortage of affordable housing, and the rising of an unrestrained
short-term rental industry. How does your government intend to ensure
the residents of Puerto Rico can stay in the place they've always
called home?

Answer. PRDOH has implemented programs and initiatives to make
housing affordable to the citizens of Puerto Rico. A Program that aids
to expand on affordable rentals is CDBG-DR Gap to Low Income Housing
Tax Credit Program (LIHTC). A total of 851 affordable rental units will
be made available across the island by the end of 2023, and an
additional 2,000 units are expected to be made available through this
Program. Another program that aids homebuyers to acquire a home and
stay in Puerto Rico, especially in these times of high-interest rates,
is the Homebuyer Assistance Program (HBA). Eligible homebuyers can
obtain an award of up to $60,000 for household members that are
Critical Recovery Workforce, toward a down payment and closing costs of
a new home purchase. More than 4,300 households have benefited from the
HBA program thus far.
Seeing the big demand on housing and its related increases in
costs, PRDOH is also in the design and initial implementation steps of
two (2) distinct, yet related, initiatives to ensure the residents of
Puerto Rico can stay in the place they've always called home. The first
initiative is the Alternate Reasonable Sale Price Approach for New
Construction Single-Family Housing Units. This initiative aims to solve
the problem of current construction costs versus appraised value at the
end of construction for independent home builders. PRDOH will establish
reasonable cost for purchase prior to construction and guarantee the
purchase price to the home builder if the unit is selected by a CDBG-DR
or CDBG-MIT Applicant with a relocation voucher. The second, more
aggressive initiative is, the Single-Family Housing Community
Developments Initiative. Through this initiative the PRDOH is planning
to purchase 1,000+ single-family homes distributed across the island.
PRDOH will make these units available for purchase or relocation
assistance at affordable prices to impacted households.

Questions Submitted by Representative Westerman

Question 1. How much of the CDBG funds have you been able to
distribute for Hurricane Maria recovery? What have been your challenges
in distributing funds?

Answer. As of November 30, 2022, PRDOH has disbursed $1.3 billion
not only to rebuild damaged homes, help small business or repave
damaged roads, but to rebuild families and communities and create a
long-term investment in the Island's capital, strengthen the economy
and set the foundations to modernize and improve infrastructure for
decades to come. There are $5.8 billion obligated funds for these
efforts and $3.2 billion in process to be obligated.
Regarding challenges in disbursing these funds, the CDBG-DR Second
Grant Agreement significantly altered the dynamic of PRDOH's progress
by including detailed conditions that needed to be met prior to PRDOH
gaining access to the full allocation of funds. PRDOH had designed the
program budgets, launch schedules, procurements, contract executions,
and program performance and implementation with access to the full $8.2
billion allocation in mind. These roadblocks included in the Second
Grant Agreement, which imposed a tranche funding mechanism that
required several levels of approval (by Financial Oversight and
Management Board (FOMB) and the Federal Fiscal Monitor) and a 12-month
process to request additional funds, slowed the process of disbursing
funds for impactful programs such as the Homebuyer Assistance (HBA)
Program and the CDBG-DR Gap to Low Income Housing Tax Credits Program
(LIHTC), as well as affected program delivery, and increased
administrative burden and expenditures.
After grant restrictions were lifted in May 2021, and PRDOH was
able to receive access to most of the funding budgeted in the CDBG-DR
Action Plan, the disbursement of funds accelerated and allowed PRDOH to
directly serve the people of Puerto Rico through the implementation of
these disaster recovery programs. HUD has even reclassified Puerto
Rico's expenditure rate from ``slow spender'' prior to the restriction
removal to ``on pace'' as of its January 2022 expenditure report.
However, additional external barriers and challenges in the
procurement processes, limited housing market, continued disaster
events, and more, have delayed the timely disbursement of funds. The
LIHTC Program, which focuses on promoting the construction or
rehabilitation of homes for families and elderly people, was behind
schedule due to negotiations with lenders, and the need for additional
resources to perform technical feasibility studies and cost evaluation
of all construction hard costs, and to perform other related duties for
the program. The HBA Program applicants encountered many challenges
when selecting a home, specifically with the high housing prices due to
the current market conditions and the limited stock of properties
available and eligible under the CDBG-DR requirements. The continued
disasters events such as 2019-2020 Earthquakes, and Tropical Storm
Isaias, have produced additional difficulties which PRDOH has been
committed to resolve in benefit the people of Puerto Rico.
On March 21, 2022, in consideration of these challenges, PRDOH
submitted to HUD a Grant Expenditure Deadline Extension Request for
grants B-l7-DM-72-0001 and B-18-DP-72-0001. PRDOH provided HUD with
data on how the constraints of the labor market, including contractors,
developers, services, and materials, among other external issues, have
been detrimental to the CDBG-DR program timelines. PRDOH anticipated
that, without an extension, it was going to be difficult to engage more
contractors and subrecipients in the recovery efforts. On April 19,
2022, HUD denied the extension requested stating that an extension, 4
years prior to the expenditure deadline, was too premature.
On November 30, 2022, PRDOH submitted, on behalf of Municipalities,
Subrecipients, and other stakeholders a 2nd Request for Extension of
CDBG-DR Grant Expenditure Deadline (B-l7-DM-72-0001, B-18-DP-72-0001,
and B-19-DP-72-0001). The letter, among other things, explained that
the current Grant Expenditure deadline of September 20, 2026, is
causing a chilling effect in potential contractors who decide not to
offer in procurements in fear that the delivery of extremely complex
construction projects may extend beyond the expenditure deadline,
causing them to be unable to recover incurred costs and expenses.

Question 2. Thinking about the work of the Puerto Rico Department
of Housing after Hurricane Maria and then more recently after Fiona,
what does your department need to improve, in areas including, but not
limited to: distribution of funds, technical support, navigators that
can help claimants, review of claims to prevent waste, fraud, and
abuse? What plan is in place for COR3 to review their systems and work
toward improvement?

Answer. PRDOH has implemented multiple initiatives to expedite the
disbursement of funds. PRDOH intentionally continues working on
minimizing the time frame for invoice processing for Programs and
Subrecipients to continue executing Disaster Recovery activities
steadily. PRDOH has also provided financial trainings and technical
assistance to Subrecipients which have proven to be efficient to the
overall disbursement process.
Project underwriting and selection processes have been improved to
expedite program implementation, which will in turn increase the
distribution of funds. Program design has been aligned with input from
subrecipients and stakeholders to ensure Programs' success and fulfill
communities and participant's unmet recovery needs. We have implemented
policies and procedures to constantly evaluate program design,
considering all available options and assess effectiveness to
recalibrate the program approach and priorities as needed.
PRDOH recognizes that there are still opportunity areas and is
constantly revising its policies and procedures accordingly. Lessons
learned from the experience gathered through these years of disaster
recovery efforts show that program success is partially dependent on
the proactive collaboration between the federal awarding agency and the
grantee. The extent of the grants PRDOH manages to recover from
unprecedented disasters such as Irma and Maria presents complexities
that require dedicated support from the awarding agency that provides
oversight, yet flexibility to implement recovery initiatives in an
accelerated manner while alleviating the inherent complexity of a
program of this nature. PRDOH continues to foster its relationship with
HUD to reduce administrative barriers and to obtain HUD's responsive,
consequential, and efficient guidance.

Question 3. What was the pace of recovery efforts of the Department
of Housing, after Hurricane Fiona and how that compared to the response
after previous disasters? What did you see that was better than what
has happened in the past?

Answer. PRDOH has yet to receive an allocation to address the
damages caused by Hurricane Fiona. Nevertheless, we are confident that
the experiences and lessons learned in the administration of CDBG-DR
funds in Puerto Rico by PRDOH and HUD will carry forward to current and
future disaster recovery allocations allowing for a more streamlined
process to expedite disaster recovery assistance.

Questions Submitted by Representative Gonzalez-Colon

Question 1. Secretary Rodriguez, in your written statement you
discussed the need to streamline processes and simplify bureaucracy.
You brought the example of the low- and moderate-income (LMI)
requirement. As you explain, HUD is currently requiring the Puerto Rico
Department of Housing to establish--by budget line item and to the
smallest area possible--how each individual project under your agency's
energy programs will benefit specific low- and moderate-income (LMI)
populations. You argue that this is a redundant administrative process
given the Island's overall high-poverty makeup.

Question 2. Has the Puerto Rico Department of Housing requested HUD
a waiver or that electrical projects that benefit the electrical system
be recognized as meeting the low- and moderate-income requirement? If
so, what has been the agency's response?

Answer. PRDOH has proposed HUD to allow an island-wide benefit for
the purpose of the LMI national objective while advancing the recovery,
improvement, and enhancement of the Puerto Rico Energy Grid. HUD has
previously granted this area-wide benefit approach for the State of
Maine, to allow the state to use its entire grant to assist private
utilities with uninsured service restoration.\1\ In the context of a
2006 allocation for the State of Mississippi but referring to the
previously mentioned situation with the State of Maine, at 71 FR 62372
HUD stated that ``Logically, a utility grid or service area cannot be
restored for one income group alone, and this type of disaster affects
everyone in an area, regardless of income. There [is] no practical
methodology in this example for allocating costs among income groups.''
---------------------------------------------------------------------------
\1\ Federal Register Notice, Vol. 71, No. 205 (October 24, 2006),
71 FR 62372, 62373.
---------------------------------------------------------------------------
The Adjusted LMI Data for Puerto Rico results in 77% of the local
population being considered LMI, and 93% of the overall population
residing in LMI census tracts, resulting in a high likelihood that
projects that improve the Puerto Rico Energy Grid, which is mostly
interconnected across the whole island, will meet the LMI Area Benefit
(LMA) national objective. An island-wide benefit for purposes of LMI
National Objective would greatly reduce the time spent documenting
projects to the smallest extent feasible thereby speeding up our
ability to fund energy projects to be carried out by public and private
utilities in Puerto Rico. Requirements that PRDOH demonstrate how each
individual project will benefit LMI communities to the smallest level
would only delay the rehabilitation, improvement, and enhancement of
the already fragile and at-risk electrical grid and serve no statutory
purpose since almost the entirety of Puerto Rico is LMI and the grid
serves the Island as a whole.
PRDOH reiterated its request during a technical assistance (TA)
session held on October 28, 2021. However, HUD directed PRDOH to make
every effort to go the smallest level practicable for area benefit for
LMI. HUD also expressed that PRDOH would have to properly justify on a
case-by-case basis a request for Puerto Rico to be considered as LMI
island-wide. HUD has continued to direct PRDOH to the smallest-unit
geography approach, as demonstrated by their letter of partial approval
of the Energy Action Plan dated March 25, 2022, where they state that
for the Energy Grid Rehabilitation and Reconstruction (ER1) Cost-Share
Program, ``PRDOH must indicate whether its proposed programs and
projects under this activity will provide electrical power system
improvements to communities with concentrations of vulnerable
populations, including low-income rural areas, racially and ethnically
concentrated areas as well as concentrated areas of poverty.''

Question 3. Recent press reports have indicated concern about
deadlines for use of CDBG-DR funds allocated during the aftermath of
Hurricane Maria. It is my understanding that, by law, these funds are
to be available until expended.

Question 4. Could you please clarify if this is a deadline set by
HUD through cooperative agreements for the distinct CDBG-PR programs
currently available for Island Residents? How can we help make sure you
retain the funds until they are fully spent?

Answer. The period of performance for each allocation is
established by HUD first in the applicable Federal Register notices,
and then in each grant agreement. For the CDBG-DR grants, the period of
performance began on September 20, 2018, and ends on September 20,
2026. All funds must be expended before the period of performance end
date as established by HUD in the grant agreements. See below a table
with the current CDBG-DR and CDBG-MIT allocations being managed by
PRDOH and their corresponding periods of performance:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

.epsConsidering the delays experienced during the first stages of
the grants' life cycles, which were detrimental to most of the CDBG-DR
program timelines, on March 21, 2022, PRDOH submitted a grant
expenditure extension request to HUD. PRDOH explained that, without an
extension, funds not expended by the deadline would be subject to
recapture or return to the Federal Government, projects could remain
unfinished, and recovery needs unmet. A more realistic expenditure
projection is necessary to facilitate and help engage more contractors,
subrecipients, and the public for the recovery efforts to be
implemented effectively. This request was denied by HUD on April 19,
2022.
On November 30, 2022, PRDOH renewed its grant expenditure extension
request to HUD. PRDOH relayed the concerns of the Puerto Rico Mayors
Federation and the Puerto Rico Mayors Association, in representation of
the 78 Municipalities of Puerto Rico, about the numerous procurements
for construction services that had no bid process or were without
competition due to lack of offerors, as well as difficulty in hiring
due to lack of professional services and skilled labor. The Puerto Rico
Mayors also expressed concerns regarding the grant expenditure deadline
which, taking into consideration the complexity of projects, raises
their risk profile due to potential disallowed costs if the projects
are not completed within the performance period.
An expenditure deadline extension is not extraordinary, as they
have been granted in the past to other grantees like Texas, New York
State, and New York City, allowing them to exceed their original
expenditure deadlines that have aged as long as 14 years.\2\
Additionally, the billions of dollars for Hurricane Katrina recovery
were unrestrained, as ``. . . the Appropriations Act for these grants
directs that these funds be available until expended . . .''.\3\ An
expenditure deadline extension is necessary to ensure that funds are
adequately and completely spent in order to deliver an impactful and
efficient recovery for Puerto Rico.
---------------------------------------------------------------------------
\2\ These are 14 years ($3.1B, B-08-DI-48-0001), 8 years ($4.4B, B-
13-DS-36-0001), and 8 years ($4.2B, B-13-MS-36-0001), respectively.
\3\ Federal Register Vol. 71, No. 29 (February 13, 2006), 71 FR
7671.

---------------------------------------------------------------------------
______

The Chairman. Thank you, sir. Let me now turn to Dr. Shay
Bahramirad.
Could you say it correctly for me so that I don't butcher
it?
Dr. Bahramirad. Of course. Shay Bahramirad.
The Chairman. Thank you very much. I apologize. Vice
President of Engineering, Asset Management, and Capital
Projects at LUMA Energy. You are recognized for 5 minutes,
Doctor.

STATEMENT OF DR. SHAY BAHRAMIRAD, VICE PRESIDENT OF
ENGINEERING, ASSET MANAGEMENT, AND CAPITAL PROJECTS, LUMA
ENERGY

Dr. Bahramirad. Thank you, sir. Good afternoon. My name is
Dr. Shay Bahramirad, and I am Senior Vice President of
Engineering, Asset Management, and Capital Program at LUMA.
With me today is also Mr. Mario Hurtado, LUMA's Chief
Regulatory Officer, who will be available to answer questions.
We would like to thank Chairman Grijalva, Ranking Member
Westerman, and members of the Committee for the invitation to
appear to discuss the progress we have made to build a better
energy future for Puerto Rico, as well as the ongoing
challenges the 3,958 men and women of LUMA, including 1,696
members of the IBEW union, continue to face due to the years
and decades of operational and maintenance neglect under the
previous operator.
Before I begin, I would like to acknowledge three
additional members of the LUMA team: our Director of Strategic
Initiatives, Ms. Kathy Roure; Regional Manager of Lines, Ms.
Maurice Torres Rivera; and Regional Manager of Lines, Mr. Andy
Andreu. Kathy, Maurice, and Andy are proud members of LUMA who
worked for the former operator of the Puerto Rico Electric
Power Authority. These LUMA workers are examples of the
thousands of amazing utility workers, including many who once
worked for PREPA, who are now helping lead the energy
transformation in Puerto Rico and confronting the challenges we
face head on.
One of the most significant challenges was Hurricane Fiona,
a Category 1 hurricane that included 100-mile-per-hour winds,
30 inches of rain, and widespread flooding which impacted
critical parts of the electric grid and generation facilities
across Puerto Rico. Because of the tireless work of LUMA
workers, we were able to restore power to over 90 percent of
our customers in 12 days, a historic rate of restoration that
has never been seen before in Puerto Rico.
As significant as the response to Hurricane Fiona was, we
continue to confront a brutal reality that cannot be denied.
Specifically, the electric system LUMA inherited 17 months ago
was one of the worst electric systems, when measured in
industry operational standards. This is a fact that cannot be
ignored.
As the samples of the photographic evidence we provided
show, the energy system was plagued by numerous issues from, as
I stated earlier, years and decades of neglect. While LUMA
cannot erase decades of operational and maintenance failure in
17 months, our LUMA teams continue to work hard every day to
confront and overcome these legacy challenges. To date, our
LUMA teams have made undeniable and significant progress,
whether it is replacing thousands of poles, repairing
substations, addressing vegetation issues, or improving
customer service.
We are also proud of our efforts to empower clean energy
revolution in Puerto Rico, having connected more solar
customers in 17 months than were connected in 10 years under
PREPA.
With respect to the more fundamental transformation of the
electric grid, LUMA has advanced federally funded FEMA project
at a historic pace. Specifically, in 17 months we have
initiated 251 projects, with FEMA representing over $6 billion
in federally funded projects, with 23 already under
construction compared to zero FEMA projects under the past
operator.
It is important for the Committee to also know that these
FEMA projects will be guided by clear planning, sound
engineering and science, and strict fiscal oversight.
With the continued support of FEMA and the Department of
Energy, as well as COR3, LUMA will build on the progress we
have made today and will continue moving forward to build a
more reliable and resilient energy system.
While all of us can be proud of the significant progress
that has been made, we cannot discount the real day-to-day
challenges that exist due to the fragility of the electric
system, challenges such as outages and ongoing generation-
related outages. That is something that must be addressed, and
we will continue to work with our Puerto Rican and Federal
agency partners to confront them.
In closing, I hope we all can agree that it is more
important than ever that we build on the progress that has been
made, focusing on the future and not allow ourselves to be
prisoners to a failed energy past.
Let me be very clear. LUMA remains committed to Puerto
Rico, to our 1.5 million customers, and to building an energy
future that will make our customers, our local and Federal
partners, and the members of this community proud. All of us at
LUMA, including the thousands of IBEW union members who are on
the front line of this effort, will not waver from the goal of
building a more reliable, more resilient, and cleaner energy
future for the people of Puerto Rico.
Thank you, and I look forward to your questions.

[The prepared statement of Dr. Bahramirad follows:]
Prepared Statement of Dr. Shay Bahramirad, Senior Vice President
Engineering, Asset Management, Capital Programs at LUMA

I. INTRODUCTION

Chairman Grijalva, Ranking Member Westerman, and members of the
Committee:
Thank you for the invitation to appear this morning to discuss the
most urgent matter facing the people of Puerto Rico: post-disaster
reconstruction and development of Puerto Rico's power grid.
All of us at LUMA, the over 3,000 men and women who work hard every
day, and who have dedicated countless hours to restoring power to our
customers following the most recent hurricane to make landfall in
Puerto Rico: Hurricane Fiona are determined to overcome the profound
challenges we inherited from the prior operator and build a more
reliable, more resilient, and cleaner energy future for the 3.1 million
people we are fortunate to serve.
Throughout this testimony, we will provide the members of this
committee with more information on LUMA's preparation and response to
Hurricane Fiona, the status of FEMA projects and permanent works, and
our ongoing collaboration with the Department of Energy (``DOE'') which
is accelerating project construction, grid modernization and the
transition to sustainable, renewable energy sources.
Furthermore, we will share with you some initiatives we have
undertaken to provide further support to our customers, such as LUMA's
support for and participation in the Power Stabilization Task Force.
In addition, I will discuss key facts and information regarding the
electric grid's historically poor condition prior to our commencement
of operations on the island; LUMA's commitment to rebuilding the
electric system to higher standards for greater resilience;
recommendations for future reconstruction efforts; and our pledge to
develop the Puerto Rican workforce who will rebuild the island's energy
grid.
Moreover, we will focus on the challenges that have emerged
following decades of mismanagement by the Puerto Rico Electric Power
Authority, which filed for bankruptcy relief in July 2017. The dispute
over $9 billion of outstanding debt, which is still ongoing after 5
years, has severely limited the ability to fully transform the electric
system.
Lastly, all of us at LUMA fully embrace the profound responsibility
we have to respond to emergency situations and build a more resilient
electric grid. With the support of FEMA, the Puerto Rican government,
Congress, and other partners, we will build the energy future that the
people of Puerto Rico deserve.

II. EMERGENCY PREPAREDNESS AND THE RESPONSE TO HURRICANE FIONA

LUMA's emergency response to Hurricane Fiona follows a 15-month
effort to overcome years--if not decades--of profound operational
neglect and lack of maintenance by the previous operator. Even before
starting operations, LUMA focused intensely on preparing for an event
like Hurricane Fiona, ensuring that personnel received over 10,000
hours in emergency response training on FEMA's National Incident
Management System and fully outfitting field crews with proper safety
equipment and roadworthy vehicles--conditions that were absent under
the previous operator.
On and around September 14, 2022, LUMA activated its emergency
operations center and began formal preparations for what became a
powerful and devastating Category 1 hurricane, that included 100 mph
winds, over 30 inches of rain, severe flooding, and widespread damage
to local infrastructure and electric infrastructure. LUMA's advance
work and close coordination with Puerto Rico and federal emergency
response agencies, as well as local communities, allowed a restoration
of electric service to 90% of customers within 12 days of Hurricane
Fiona making landfall--a restoration timeline never seen before in
Puerto Rico for a hurricane, and on par with restoration times for
similar events in other jurisdictions in the continental US.

These preparations included the following:

Activating the LUMA Emergency Operations Center and
deploying company representatives to the central
government's Emergency Operations Center, as indicated in
LUMA's Emergency Response Plan (ERP);

Mobilizing 1,300 field workers, including lineworkers and
substation technicians, who are trained and available to
respond to serious emergencies;

Maintaining our 1,800 fleet units fueled and ready to
deploy for emergency response;

Keeping the $130 million inventory of transmission and
distribution material available and on-hand to respond to
emergency events (more than five times the inventory that
was on the island immediately prior to Hurricane Maria);

Deferring all planned reliability work in order to
prioritize and dedicate all available resources to storm
response;

Coordinating with the Puerto Rico Emergency Management
Bureau (PREMB), the Puerto Rico Electric Power Authority
(PREPA), FEMA, the U.S. Department of Energy Support
Function #12 Annex (ESF #12 Annex) and other government
agencies to coordinate a unified response;

Conducting proactive outreach to essential service
providers like hospitals;

Coordinating restoration work to prioritize Community
Lifelines, including health, safety, transportation and
communications facilities; and

Pre-deploying equipment and resources in Puerto Rico to
respond to possible impacts from the storm and maintaining
contact with mutual aid providers so that in the event of
the need for additional response resources, the Caribbean
Electric Utility Services Corporation (CARILEC), the Edison
Electric Institute (EEI) and the American Public Power
Association (APPA) can provide assistance with restoration
efforts.

The grid in Puerto Rico, already fragile, was severely damaged by
Hurricane Fiona, especially in the Ponce, Mayaguez and some of the
central highland regions that suffered severe damage to roads and
critical infrastructure. As you know, the electric system consists of
1) energy generation, which is the responsibility of third parties,
including PREPA, and 2) the transmission and distribution of energy,
which is the responsibility of LUMA.

On the transmission and distribution system:

30% of transmission line segments sustained damage

54% of distribution feeders sustained damage

Seven substations experienced severe flooding (submerged
in water) or were rendered inaccessible

The result was an island-wide blackout leading to more
than 1.4 million customers experiencing outages

LUMA deployed more than 2,500 utility workers and more than 2,500
vehicles, including seven helicopters, to restore the grid. These
helicopters performed over 239 total flight hours, flying over 12,000
miles of coverage area.

These workers included LUMA's normal workforce, seven
local contractor companies, and those LUMA was able to
leverage from Quanta Services, one of its parent companies,
which deployed 221 employees, 56 bucket trucks, and 22
diggers.

These workers were directed from six regional operations
centers, which were overseen by a centralized LUMA
Emergency Operations Center, which coordinated with the
System Operations Control Center in San Juan and a mobile
emergency operations center in Guayanilla on the southern
coast.

As part of a coordinated communications strategy, LUMA kept the
public informed throughout the emergency by providing the following:

435 total updates, including press releases, official
statements, and interviews on television and the radio, on
hurricane response and disaster recovery efforts

1,759 announcements on radio

1,135 social media updates

34 videos posted online showing extent of damages and
ongoing recovery efforts

All of this work led to restoring 90% of customers within
12 days of hurricane landfall

In addition, as part of our commitment to transparency, on October
21, 2022, LUMA publicly provided a document titled Hurricane Fiona
Response and Restoration Event Summary, with responsive statistical
information regarding the response to the emergency related to the
passing of Hurricane Fiona through Puerto Rico. We believe that this
summary represents the most comprehensive collection of restoration
information ever provided to the public so soon following a hurricane
in Puerto Rico.

III. STATUS OF FEMA FUNDED RECONSTRUCTION PROJECTS

When LUMA assumed operations of Puerto Rico's transmission and
distribution system, one of our highest priorities was to work together
with FEMA, the Puerto Rico Energy Bureau, the Puerto Rico Public-
Private Partnerships Authority, the Central Office for Recovery,
Reconstruction and Resiliency (COR3), and the Puerto Rico Electric
Power Authority (PREPA) to develop and advance a series of federally
funded infrastructure improvement projects to transform and modernize
Puerto Rico's energy system.

During the past 17 months, LUMA has been able to advance FEMA
projects in Puerto Rico at a historic pace--a stark comparison to the
previous five years under the prior operator.

A. FEMA Reconstruction Projects

As of November 1, 2022, LUMA has initiated 251 projects with FEMA,
representing more than $6.2 billion worth of federally funded projects.
In contrast, only 37 project submissions had even been made (and not
one project had a preliminary design) before LUMA assumed operations on
June 1, 2021.

Obligated FEMA Projects. LUMA has received, to date, FEMA
approval for 38 critical infrastructure projects
¹ including:

-- Twenty-eight local distribution projects that will
address critical infrastructure, such as streetlights and pole
replacement, targeting the municipalities of San Juan, Arecibo,
Mayaguez, Caguas, Bayamon and Carolina to reduce outages and
increase the reliability of the electric system.

-- Four regional transmission reconstruction projects that
will help improve the high-voltage critical energy
infrastructure that delivers energy across the island.

-- Five substation modernization projects that will address
the pivotal role played by substations in helping deliver
energy to communities across Puerto Rico beginning in the
municipalities of San Juan, Vieques, Culebra, Manati, and
Guayanilla.

-- One critical Emergency Management System (EMS), which is
the first phase of transforming the system operations control
center with state-of-the-art technology and software to
modernize the way Puerto Rico's energy grid is monitored and
managed.

FEMA Projects Under Construction. LUMA has started
construction on 23 FEMA-funded projects across Puerto Rico
including:

-- Six initial streetlight projects as part of LUMA's $1
billion Community Streetlight Initiative in the municipalities
of Guanica, Lajas, Aguada, Maunabo, Luquillo, and Villalba,
where in less than three months, LUMA has installed over 15,000
streetlights.

-- One critical transmission line repair project to improve
the grid's resiliency.

-- Sixteen distribution pole replacement projects to
increase the reliability of the electric grid.

In addition to the projects initiated, approved, and under
construction, LUMA has also taken the following FEMA-related actions:

Received approval for $656 million to procure material
that requires long lead times for manufacturing and
delivery, mainly grid equipment including breakers,
transformers, and reclosers.

Developed four proposals for Hazard Mitigation for non-
damaged infrastructure under Section 404 of the Stafford
Act which would represent $900 million for grid
modernization, including an advanced metering
infrastructure, an advanced microgrid project, and mobile
microgrids to enable renewable energy and make communities
more resilient in the face of system-wide disturbances.

Working with FEMA to get support for the immediate
addressing of Fiona-related damages with permanent work.

B. Working Closely with FEMA on Emergency Preparedness

In addition to moving forward critical federally funded
infrastructure projects, LUMA continues to prioritize emergency
preparedness and taking the necessary steps and actions to be able to
respond to hurricanes and other emergencies.
Given the historic impact of recent hurricanes and the lasting
effects it has had on the people of Puerto Rico, LUMA has made
preparing for emergency events a daily and year-round priority.

As part of our emergency preparedness efforts, we have worked
closely with FEMA, PREMB, DOE ESF 12, and other partners to establish
and adopt industry emergency preparedness standards. Among the actions
we have taken include the following:

Establish Emergency Response Plan. In May, LUMA submitted
its 2022 Emergency Response Plan (ERP) to the Puerto Rico
Energy Bureau as part of its continuous effort to plan,
prepare for and respond to the major emergencies and the
2022 hurricane season.

-- LUMA's 2022 ERP outlines the actions LUMA takes in an
emergency event and helps direct the company's response,
recovery, and restoration efforts.

-- More specifically, the ERP addresses how LUMA responds to
any emergency, including hurricanes, earthquakes or any other
major event that impacts the electric power system.

Adopt Industry Best Practices. The LUMA ERP follows
industry best practices for emergency response and follows
the National Incident Management System as established by
FEMA.

-- The National Incident Management System framework
establishes a standardized Incident Command System (ICS) which
is used across industries and is the basis for LUMA's ERP.

Emergency Preparedness, Training & Readiness. LUMA has
undertaken extensive efforts to improve preparedness,
training, and readiness, including:

-- Emergency Preparedness:

Three emergency preparedness tabletop
exercises completed with FEMA and DOE/ESF 12/PREPA/
PREMB and other local stakeholders.

Procuring and maintaining a fleet of more
than 1,800 vehicles available to support emergency
response efforts.

Installing equipment in the LUMA Emergency
Operations Center and purchasing supplies for emergency
operations.

-- Emergency Training:

Completing more than 10,000 hours of ICS
training.

Completing an Emergency Operations Center
mock drill based on Category 4 Hurricane making
landfall on May 12, 2022, with 75 attendees.

-- Emergency Readiness:

To date, LUMA maintains a total on-hand
inventory of T&D equipment and materials available for
daily operations and emergencies amounting to $130
million including:

-- 19,000 poles

-- 18 million feet of cables

-- 2,545 transformers

-- 53,000 LED luminaries

-- 135,000 insulators

-- 7,800 switches/breakers

-- 30,100 crossarms

As part of our more than 3,000 employees, LUMA has 1,300
transmission and distribution workers across Puerto Rico
who are trained and available to respond to serious
emergencies, in addition to resources from contractors and
mutual aid.

We also have established mutual aid agreements with the
CARILEC, EEI and the APPA for response to critical events
in cases where additional resources for restoration and
response become necessary.

We have also been working with US DOE on development of a
Storm Damage Prediction Tool for estimating material needs.
The Storm Damage Prediction Tool helps forecast storm
damage to transmission and distribution infrastructure.

C. Collaboration with DOE, FEMA, and COR3 in Accelerating
Reconstruction

As part of our commitment to immediately addressing the lack of
sufficient, dependable power generation in Puerto Rico, LUMA is
participating and actively supporting the Power Stabilization Task
Force led by FEMA. Together with federal and Puerto Rico agencies, we
have been working to improve performance on a series of critical areas.

Global/Flexible Match

-- The US DOE is collaborating with FEMA and HUD, to issue a
letter to COR3 that would formally approve the use of funds to
provide projects that would serve as cost share in terms of a
global and flexible match

-- Ongoing collaboration efforts are being discussed to
evaluate how several individual projects can serve a larger
goal

Working Capital Advance

-- We're working with COR3 to be able to leverage additional
FEMA funds in order to purchase equipment ahead of time and
mitigate any potential supply chain problems that may arise

-- LUMA is also working with FEMA and COR3 to increase the
proportion of project cost that could be provided in advance
from the current 25% to 50%

Environmental and Historical Preservation (EHP) Review
Process Efficiencies

-- We are working with FEMA and our partners in the Puerto
Rico government, to align on ways to streamline the EHP
process, including better aligning of the EHP reviews with
existing processes at the federal and territorial level and
supporting reciprocity between different governmental agencies

-- Additionally, we are collaborating with FEMA on
conducting the EHP review on a programmatic level where
applicable, rather than on individual projects

Hazard Mitigation Strategy

-- We are currently undertaking efforts with FEMA and
stakeholders to recognize the importance of ``vegetation
reset'' as a hazard mitigation strategy, which can have a
transformational impact on the reliability and resiliency of
the grid, as well as limit future damages on grid equipment

-- We are also looking more broadly for a holistic, island-
wide perspective on leveraging Section 406 hazard mitigation
funds to maximum effect

Community Development Block Grant-Disaster Recovery (CDBG-
DR) Electric Power Reliability and Resilience Program (ER2)

-- We are working with stakeholders as well as the Puerto
Rico Department of Housing, COR3, DOE, and HUD, to finalize
program guidelines to enable the most impactful deployment of
distributed technologies, including microgrids

-- We are supporting advanced microgrid projects to serve
areas such as the Centro Medico, which represents critical
customers for San Juan and the entire island

IV. HISTORICAL PERSPECTIVE OF PUERTO RICO'S ELECTRIC GRID

To understand the dynamics surrounding our mission to transform
Puerto Rico's transmission and distribution system one must first start
to analyze the electric grid's condition prior to LUMA beginning
operations on the island. As has been documented publicly, Puerto
Rico's electrical grid suffered from years and decades of neglect and
mismanagement under the past utility operator. These profound
operational failures severely impact all areas of the energy system and
represent an ongoing challenge that LUMA remains determined to confront
and overcome.

With respect to the state of infrastructure that LUMA inherited 17
months ago, the following are just some examples of the conditions that
were faced:

Poor Substations: 30% of transmission and distribution
substations, key nodes in the electric grid, were estimated
to require safety and hazard mitigation to reach
remediation.

Poor T&D Assets: An estimated 20% of transmission and
distribution line assets, including poles and wires,
required safety and hazard mitigation to reach remediation.

Public Safety Hazards: Approximately 50,000 streetlights,
more than 10% of all of the streetlights on the island,
were estimated to be physical and public safety hazards.

Lack of Sound Engineering & Planning: Processes for
engineering functions such as distribution planning,
transmission planning, protection and coordination were
lacking and not following industry standards. For example,
a proper simulation model for the Island's transmission
system did not exist to properly design the system.

Antiquated EMS: The Energy Management System (EMS), a
primary technology to facilitate the stable grid
operations, had been purchased in the mid-1990s, poorly
maintained and was no longer supported by the vendor. We
found that PREPA had procured spare parts from eBay.

Lack of Safety Requirements: The entire ground and air
fleet used for utility operations did not meet U.S.
Department of Transportation safety requirements.

Lack of Critical Maintenance: Recommended baseline
maintenance of transmission and substation assets were not
completed, and manufacturers' guidelines were not followed.

Poor Vegetation Management: Vegetation management was
often delayed by PREPA, and vegetation was present and
evident when visiting substations, as well as lines and
feeders.

Lasting Impact of Hurricane Maria: Hurricane Maria
accelerated this deterioration and highlighted the flaws in
legacy design, operation, and maintenance activities. Some
customers didn't have power for more than a year after
Hurricane Maria, which is unacceptable.

These facts, while significant in scope and impact, do not come
close to fully capturing the truly weakened and deteriorated state of
the electric grid. As LUMA has documented through photographic evidence
that has been provided to the Committee, the T&D system inherited by
LUMA was weakened by years, if not decades, of poor design,
maintenance, lack of proper inspections, and other profound failures
that continue to impact the stability and reliability of the energy
system.

As a measure of the fragile and weakened nature of the energy grid,
Puerto Rico has experienced a number of large-scale outage events since
2016--five of which preceded a similar large outage event on April 6 of
2022:

September 21, 2016--Due to fire at Aguirre Power
Generating Plant

April 12, 2018--Due to vegetation

April 18, 2018--Due to transmission repairs

January 7, 2020--Due to earthquake on the island

July 28, 2020--Due to vegetation / equipment failure

Each of these events affected more than 500,000 customers and
restoration efforts lasted for longer than three days. This history of
such events underscores how deeply fragile and severely vulnerable
Puerto Rico's electric grid and critical infrastructure has been
because of the failures of the past operator and reinforces the need
for LUMA to remain focused on the fundamental improvements needed to
modernize and transform the energy system.

V. LUMA'S COMMITMENT TO COMPLETE REPAIRS TO UPGRADED STANDARDS AND IN A
PERMANENT MANNER

Given the need to address these past infrastructure failures and
overall fragility of the energy grid, LUMA takes very seriously the
need to improve the reliability and resiliency of Puerto Rico's
transmission and distribution system. Accordingly, we have implemented
a markedly different approach that is grounded in data, rigorous
engineering, sound planning aligned with modern industry standards, and
transparency about the progress being conducted and the challenges that
are being faced. Given this approach, and in spite of the challenges we
have faced, LUMA has made substantial progress across key areas,
including:

Improving Reliability (Reducing the Number of Outages
Experienced):

-- The System Average Interruption Frequency Index (SAIFI),
or the number of outages that an average customer experiences
in a year, has been reduced by 30% (improvement from a PREPA
baseline of 10.6 to 7.6).

-- What this means is that instead of an average customer
experiencing 10.6 outages in a year, they're experiencing 7.6.

-- 15% fewer substation events than in PREPA's last year.

-- Restored and re-energized two transmission lines that
were out since Hurricane Maria, and two additional lines that
were out since before Hurricane Maria, representing 43 miles of
transmission lines.

-- Restored and re-energized 5 substations that had been out
since Hurricane Maria.

-- Restored and re-energized 496 pieces of equipment,
including in substations and on the transmission and
distribution systems.

Empowering the Growth of Solar/Clean Energy/Renewables:

-- Before LUMA began operations, there was a severe backlog
of customers who had applied for inclusion in PREPA's solar
net-metering program and were waiting to install rooftop solar.

We have successfully reduced this backlog
and have now integrated more than 36,000 customers to
the program, which is more than the previous ten years
under PREPA.

In a little over a year, LUMA added more
customers to the residential solar program than PREPA
ever did over a full decade. Average time for approval
of interconnection has dropped to under 30 days.

-- Completed studies to support the interconnection of more
than 1300 MW of renewable utility-scale generation and
completed solar hosting capacity analyses.

-- Completed cutting-edge optimization analysis to identify
locations in the system with zero network upgrade cost for
affordable and economical renewable energy integration.

-- We have gone from approximately 450 distributed
generation interconnections monthly to approximately 2,200
interconnections per month. Through our accelerated program,
LUMA added more residential solar for customers in 15 months
than the previous operator did over a whole decade.

-- Reenergized transmission line that was out of service
since Hurricane Maria connecting a 27 MW wind farm to the
system.

Improving Customer Service:

-- 1.5 million customers have been provided support by LUMA,
through more than 5 million calls, 400K+ e-mails, 650K+ direct
messages on social media

-- The average wait time of customers on the phone decreased
from more than 10 minutes while under PREPA to approximately 5
minutes under LUMA.

-- The rate of call abandonment declined from more than 50%
with PREPA to 18% under LUMA.

-- 750,000+ downloads of MiLUMA application.
Improving Workplace Safety & Trainings:

-- Developed procedures to support the operation of
interconnected generation resources, the reliable dispatch of
power, black start \2\ and restoration, as well as numerous
other critical operations. These procedures did not exist prior
to our arrival as operator of the T&D system.
---------------------------------------------------------------------------
\2\ Black start refers to restarting the grid after an island-wide
blackout. The other procedures referenced above are related to managing
energy generation to provide reliable power.

-- We have renewed the service fleet with 1,200 new or
repaired vehicles, fully compliant with safety and
---------------------------------------------------------------------------
transportation requirements.

-- Graduated the first class of Puerto Rican electric line
workers from LUMA Technical College, with subsequent graduating
classes during the last year.

-- Total recordable injury rate went from 8.63 under PREPA
to 2.88 under LUMA.

Injury severity rate declined from 62.9 under PREPA to
11.64 under LUMA.

VI. LUMA'S INVESTMENT & COMMITMENT TO WORKFORCE DEVELOPMENT THROUGH
LUMA TECHNICAL COLLEGE

From the very beginning of this process, LUMA has demonstrated a
unique commitment to (i) training and knowledge transfer, as evidenced
by LUMA's pledge to build and manage, at its cost and expense, a
lineworkers college in Puerto Rico (the ``LUMA Technical College'').
Founded by Quanta Services and ATCO, LUMA College for Technical
Training is modeled after Quanta's educational institution Northwest
Lineman College. The Northwest Lineman College (NLC) is an industry-
leading educational institution that provides safety and certification
training in the power delivery, natural gas, and telecommunications
industries. NLC offers complete solutions from entry-level career
programs to advanced industry training and has remained committed to
doing what's best for the student for more than 25 years.
The LUMA Technical College offers a 13-week Utility Lineworker
Program. Through this 13-week pre-apprentice training program, trainees
acquire the knowledge, skill and behaviors that prepare them to be a
highly valuable entry-level lineworker. Using the Three-Phase
Educational Model, LUMA Technical College focuses on education around
three domains of learning: Knowledge, Skill and Behavior. Each academic
course, skill competency, and behavior expectation is shaped by this
model.

VII. LUMA'S COMMITMENT TO ENERGY AFFORDABILITY VS. RISING GENERATION
FUEL COSTS AND DETERIORATING DEPENDABILITY OF GENERATION FLEET
It is important to make clear that LUMA has NEVER proposed an
increase to the base rate that covers the operation of the T&D system.
While there have been increases in electricity rates approved by the
PREB over the past year, it is important to understand that these
increases have been solely due to increases in generation fuel costs.

LUMA's base rate has not changed, and spending has not increased
since June 2021. In general, customers' charges are composed of the
following:

1. Base Rate--These revenues fund the O&M and non-federally funded
capital costs for the T&D System and Generation. Revenues
fund LUMA and PREPA's operating and capital costs.

2. Fuel Charge--These revenues fund PREPA's fuel purchases. This
fuel is purchased for PREPA's generating plants and
EcoElectrica. This is reconciled quarterly. Revenues fund
fuel suppliers for fuel delivered to PREPA.

3. Purchased Power Charge--These revenues fund payments required
under Purchase Power Agreements between PREPA and
Independent Power Producers. This is reconciled quarterly.
Revenues fund Independent Power Producers for electricity
provided to the T&D System.

4. Subsidies, Contribution in Lieu of Taxes--These revenues fund
subsidy programs and power provided to municipalities in
lieu of taxes. This is reconciled annually.

As part of LUMA's responsibilities under the T&D OMA, LUMA submits
calculations for any adjustment to customers rates, regardless of what
expenses the revenues fund. The PREB reviews and approves all rate
changes before they are implemented.
As part of the above requirement, LUMA files calculations related
to Fuel and Purchased Power on a quarterly basis and calculations
related to Subsidies and Contribution in Lieu of Taxes on an annual
basis (in June of every year).
Since June 2021, LUMA has not applied for changes to the Base Rate,
the only source of revenue for LUMA managed expenses. In other words,
LUMA has NEVER proposed a rate increase at any time since taking over
operations.
As previously mentioned, the sole driver of electricity rate
increases since June 2021 has been related to generation related fuel
prices used by PREPA and other generators to produce electricity. While
some have suggested otherwise, the fact is that LUMA, as we have stated
repeatedly in regulatory filings and in public statements, does not
generate energy, is not responsible for rate increases associated with
generation, nor have we ever proposed a change to the T&D base rate.
As is well documented, global fuel prices have materially increased
since June 2021. West Texas Intermediate (WTI) has increased 76% from
$65.17/bbl in May 2021 (before LUMA commenced O&M Services) to $114.84/
bbl in June 2022 and Henry Hub (HH) increased 165% from $2.91/MMBtu in
May 2021 (before LUMA commenced O&M Services) to $7.70/ MMBtu in June
2022.
Please note procurement of fuel and management of fuel costs are
managed by PREPA. All revenues collected from FCA go to pay fuel costs
incurred by PREPA--and are not associated with LUMA.

VIII. OUTAGE REDUCTION EFFORTS

All of us at LUMA share our customers' frustration with outages and
the reliability of Puerto Rico's fragile electric system, which has
suffered from years--if not decades--of mismanagement and neglect.

To address these sincere concerns, LUMA has undertaken a series of
additional actions to build on the progress we have made, reduce the
impact of outage events, and improve our response when such outages
occur. Among the actions include:

Increased utility and vegetation crew numbers by
onboarding 201 additional highly trained utility workers to
help improve overall outage response and target areas for
reliability improvement.

Installed 64 new automation devices all across Puerto
Rico. These are innovative devices used to detect outages
within milliseconds, shorten outage duration and reduce the
number of customers that experience an outage.

Cleared hazardous vegetation from 400 miles of critical
lines identified as impacting frequent outages, in addition
to the 900 miles cleared of vegetation this year across
transmission and distribution powerlines.

Completed critical aerial inspections and thermal imaging
of 262 miles of key lines using special thermography
equipment used to inspect key equipment.

Completed inspections and performed thermal imaging of 341
critical substations.

In response to Hurricane Fiona and ongoing infrastructure
challenges, LUMA will continue to take additional actions and expand on
current programs and efforts in order to improve the reliability of the
energy grid.
The legal framework for the electric sector in Puerto Rico
establishes clear roles for different participants in the electric
sector. Generators, including PREPA and independent producers, are
responsible for operation and maintenance of the power plants, while
LUMA is responsible for the operation of the transmission and
distribution system as well as overall system coordination, planning
and analysis. To be clear, LUMA's customers are critically dependent on
the performance of PREPA's power plants that make up over 70% of the
generation fleet to meet expected customer demand.

The challenges posed by the poor state of the generation assets
have long impacted--and continue to impact--the reliability of the
energy grid. For example:

As a result of PREPA's poor and declining generation plant
reliability, the Puerto Rico electrical system had less
than the minimum required reserve margin during 33 percent
of the time during the past year.

Though the minimum industry benchmark target standard for
planning is that generation should result in load being
shed, or customers losing power, 0.1 days per year, a
resource adequacy analysis found that in Puerto Rico, after
the damage of Hurricane Fiona, the expectation is that
without mitigation, it could occur on 50 days per year,
which is 500 times higher than the planning standard for
North American utilities.

Generation has caused load shed on 37 separate days since
LUMA commenced service.

IX. CONCLUSION

Looking forward, it is more important than ever that all of us work
together to achieve what the Puerto Rican people deserve given the many
hardships they have suffered from poor financial and operational
stewardship under the past operator: a better energy future that moves
Puerto Rico forward. In the face of ongoing challenges, all of us at
LUMA--the more than 3,000 women and men of our workforce--remain more
committed than ever to this goal.
By working together, we believe that the energy future that LUMA is
building in Puerto Rico will, over the coming months and years, close
the chapter on the failures of the past operator and usher in a new era
in which the energy grid is not only more reliable and more resilient,
but serves the energy needs of Puerto Rico for generations to come.

______

Questions Submitted for the Record to Dr. Shay Bahramirad, Senior Vice
President, Engineering, Asset Management, Capital Programs LUMA Energy
Introduction

This letter is in response to your questions for the record dated
December 1, 2022 (the ``Letter'' or ``QFRs'') in relation to our
testimony at the hearing on ``Puerto Rico's Post-Disaster
Reconstruction & Power Grid Development'' held by the Natural Resources
Committee on November 17, 2022.
All of us at LUMA, the over 3,000 men and women, were grateful for
the invitation to testify before the committee on the profound
challenges we inherited as we work hard every day to build a more
reliable, resilient, and cleaner energy future for the 1.5 million
customers we are fortunate to serve.
Throughout this response letter, we will provide the members of
this committee with key facts and information regarding the status of
reconstruction projects that have been submitted to FEMA; hurricane
preparedness and emergency response planning; as well as key
information on the power outages that stem from the fragile state of
the system LUMA inherited and is working hard to improve.

Questions Submitted by Representative Grijalva

Question 1. There are ongoing concerns that LUMA may not have
enough line workers in the field to efficiently repair and update the
grid. In March 2021--Less than 3 months before taking over operation of
Puerto Rico's electricity transmission and distribution grid, LUMA CEO
Wayne Stensby testified to the Puerto Rico House of Representatives
that LUMA would need about 800 line workers to effectively manage the
grid. According to workforce documents provided to the committee by
LUMA, LUMA employed 541 line workers in September of this year, just
before Hurricane Fiona.

Please provide evidence that a shortage of line workers is not the
reason for significant improvements in the frequency of outages and
declines in the duration of outages.

Answer. After reviewing previous testimonies by Mr. Stensby to the
Puerto Rico Legislature, our team was unable to locate the instance in
which he testified to needing 800 line workers to effectively manage
the grid. According to data provided to the Committee recently, as of
September 1, 2022, there were more than 1,300 field workers as part of
LUMA's total workforce. LUMA's ``field team'' includes not only line
workers, but also system operators, protection engineers, mechanics,
substation technicians, and repair crew dispatch operators. In
addition, LUMA has more than 500 workers contracted that focus on
vegetation management, an important aspect of improving reliability in
Puerto Rico. LUMA is constantly evaluating these and other resources to
best fit the needs of the system.
In spite of the significant challenges inherited due to the
operational and maintenance failures of the previous operator, our
utility team have made progress across the system, including in the
area of outages. For example, the System Average Interruption Frequency
Index (SAIFI), or the number of outages that an average customer
experiences in a year, has been reduced by 30% (improvement from a
PREPA baseline of 10.6 to 7.6). In other words, instead of an average
customer experiencing 10.6 outages in a year, they're experiencing 7.6.
Additionally, we recorded 15% fewer substation events when compared to
those occurred during PREPA's last year operating the T&D system.
We have also restored and re-energized two transmission lines that
were out since Hurricane Maria, and two additional lines that were out
since before Hurricane Maria, representing 43 miles of transmission
lines. Furthermore, we restored and re-energized 5 substations that had
been out since Hurricane Maria as well as restoring and re-energizing
496 pieces of equipment, including in substations and on the
transmission and distribution systems.
All of this progress is possible thanks to our field team members,
who are well prepared, trained, and have the resources needed to
complete the job at hand. LUMA has adequately staffed and prepared its
field team workforce, which has resulted in a decrease in the frequency
of outages and completion of critical repair work.
As part of LUMA's commitment to build the next generation of highly
trained utility crews, LUMA and its owners have also invested over $10
million in workforce development in Puerto Rico, opened the LUMA
Technical College, that is training and preparing LUMA workers and
others so that Puerto Rico has the workforce to rebuild and modernize
the grid. LUMA Technical College has the first journeyman line worker
program in Puerto Rico certified by the U.S. Labor Department, where
this week [15] new journeyman line workers received accreditation.

Question 2. The written testimony of Dr. Bahramirad cited that the
frequency of outages was down 30% compared to PREPA's operation--from
10.6 outages per year to 7.6 under LUMA. However, performance data LUMA
provided to the committee shows that PREPA's rolling 12-month SAIFI for
its last year of operation (June 2020 through May 2021) was 8.07. Using
this calculation, LUMA's improvement is much smaller--less than 6%.

How did LUMA calculate PREPA's 10.6 SAIFI? Why did LUMA choose to
compare its annual SAIFI to this 10.6 calculation instead of the 8.07
SAIFI representing final year of PREPA's operation? Is it not more
appropriate to compare LUMA's annual performance to PREPA's final year
of operation?

Answer. We would like to clarify that PREPA's 10.6 SAIFI is a
figure established in accordance with the Puerto Rico Energy Bureau's
(``PREB'') Resolution and Order of May 21, 2021.\1\ Through its
Resolution and Order, the PREB established baselines and benchmarks for
the SAIFI and SAIDI metrics. Accordingly, we believe it is appropriate
to use the data provided by the PREB for purposes of the SAIFI
comparative analysis.
---------------------------------------------------------------------------
\1\ See, Resolution and Order, Puerto Rico Energy Bureau, May 21,
2021 (Available at: https://energia.pr.gov/wp-content/
uploads/sites/7/2021/05/Resolution-and-Order-NEPR-MI-2019-0007.pdf).
---------------------------------------------------------------------------
While we can't speak to the accuracy and validity of PREPA,
independent reviews scored PREPA overall as one of the worst performing
utilities across multiple operational measures.

Question 3. According to LUMA's performance data reported in its
June 20 Motion Submitting Quarterly Performance Metrics submitted to
PREB, it failed to meet its baseline performance metrics outlined in
Annex IX the Operations and Management Agreement for the duration of
outages. Notably, LUMA's annual SAIDI and CAIDI fell short of
established baseline performance metrics. Furthermore, the duration of
outages has been significantly longer than during PREPA's final year of
operation. According to performance data that LUMA provided to the
committee, the monthly SAIDI during PREPA's last year averaged to 102
minutes, compared to LUMA's first year average of 138 minutes--an
increase of 35%. Similarly, PREPA's monthly CAIDI during its last year
averaged 153 minutes, compared to LUMA's first year average of 236--an
increase of 55%. Furthermore, the data shows that durations remain high
in the months leading up to Hurricane Fiona.

What accounts for the severity and persistence of these outages,
and what is LUMA doing to improve its performance? What is LUMA's
projected timeline for meeting its baseline performance metrics for the
duration of outages?

Answer. To understand the dynamics surrounding our mission to
transform Puerto Rico's transmission and distribution system (``T&D'')
one must first start to analyze the electric grid's condition prior to
LUMA beginning operations on the island. As has been documented
publicly, Puerto Rico's electrical grid suffered from years and decades
of neglect and mismanagement under the past utility operator. These
profound operational failures severely impact all areas of the energy
system and represent an ongoing challenge that LUMA remains determined
to confront and overcome.

With respect to the state of infrastructure that LUMA inherited 18
months ago, the following are just some examples of the poor
operational and infrastructure conditions that were faced, and which
continue to pose significant and ongoing challenges:

Poor Condition of Substations: 30% of transmission and
distribution substations, key nodes in the electric grid,
were estimated to require safety and hazard mitigation to
reach remediation.

Poor Condition of T&D Assets: An estimated 20% of
transmission and distribution line assets, including poles
and wires, required safety and hazard mitigation to reach
remediation.

Public Safety Hazards: Approximately 50,000 streetlights,
more than 10% of all of the streetlights on the island,
were estimated to be physical and public safety hazards.

Lack of Sound Engineering & Planning: Processes for
engineering functions such as distribution planning,
transmission planning, protection and coordination were
lacking and not following industry standards. For example,
a proper simulation model for the Puerto Rico's
transmission system did not exist to properly plan and
design the system.

Antiquated EMS: The Energy Management System (EMS), a
primary technology to facilitate stable grid operations,
had been purchased in the mid-1990s, poorly maintained and
was no longer supported by the equipment manufacturer. We
found that PREPA had procured spare parts from eBay.

Lack of Safety Requirements: The entire ground fleet used
for utility operations did not meet U.S. Department of
Transportation safety requirements.

Lack of Critical Maintenance: Recommended baseline
maintenance of transmission and substation assets were not
completed, and manufacturers' guidelines were not followed.

Poor Vegetation Management: Vegetation management was
often delayed by PREPA, and overgrown vegetation that
interfered with safe operation of the system was present
and evident when visiting substations.

The above-referenced facts, while significant in scope and impact,
do not come close to fully capturing the truly deteriorated state of
the electric grid. As LUMA has documented through photographic evidence
that has been provided to multiple Congressional Committees, the T&D
system inherited by LUMA was weakened by years, if not decades, of poor
design, maintenance, lack of proper inspections, and other profound
failures that continue to impact the stability and reliability of the
energy system.

September 21, 2016--Due to fire at Aguirre Power
Generating Plant

April 12, 2018--Due to vegetation

April 18, 2018--Due to transmission repairs

January 7, 2020--Due to earthquake on the island

July 28th, 2020--Due to vegetation/equipment failure

Each of these events noted above occurred prior to LUMA taking over
operations, affected more than 500,000 customers and restoration
efforts lasted for longer than three days. This legacy of system-wide
events underscores how deeply fragile and severely vulnerable Puerto
Rico's electric grid and critical infrastructure have been because of
the failures of the past operator and reinforces the need for LUMA to
remain focused on the fundamental improvements needed to modernize and
transform the energy system.

Given the need to address these past infrastructure failures and
overall fragility of the energy grid, LUMA takes very seriously the
need to improve the reliability and resiliency of Puerto Rico's
transmission and distribution system. Accordingly, we have implemented
a markedly different approach that is grounded in data, rigorous
engineering, sound planning aligned with industry standards, and
transparency about the progress being conducted and the challenges that
are being faced. With this approach, LUMA has made substantial progress
across key areas in spite of the challenges we have faced, including:

Improving Reliability (Reducing the Number of Outages
Experienced):

-- The System Average Interruption Frequency Index
(``SAIFI''), or the number of outages that an average customer
experiences in a year, has been reduced by 30% (improvement
from a PREPA baseline of 10.6 to 7.6).

Empowering the Growth of Renewables:

-- Before LUMA began operations, there was a severe backlog
of customers applying for inclusion in PREPA's solar net-
metering program.

We have successfully reduced this backlog
and have now integrated more than 36500 customers to
the program, which represents more than double the
number of customers than before.

In a little over a year, LUMA added more
customers to the residential solar program than PREPA
ever did over a full decade. Average time for approval
of interconnection has dropped to under 30 days

-- Completed studies to support the interconnection of more
than 1300 MW of renewable utility-scale generation and
completed solar hosting capacity analyses.

-- Completed cutting-edge optimization analysis to identify
locations in the system with zero network upgrade cost for
affordable and economical renewable energy integration.

-- We have gone from approximately 450 distributed
generation interconnections monthly to approximately 2,20
interconnections.

-- Reenergized transmission line that connected a 27 MW wind
farm to the system that was out of service since Hurricane
Maria.

Improving Customer Service:

-- 1.5 million customers have been provided support by LUMA,
through more than 5 million calls, 400K+ e-mails, 650K+ DMs on
social media

-- The average wait time of customers on the phone decreased
from more than 10 minutes while under PREPA to approximately 5
minutes under LUMA.

-- The rate of call abandonment declined from more than 50%
with PREPA to 18% under LUMA.

-- 750,000+ downloads of the MiLUMA customer application for
smartphones.

Improving Workplace Safety & Trainings:

-- Graduated the first class of Puerto Rican electric line
workers from LUMA Technical College, with subsequent graduating
classes during the last year.

-- Total recordable injury rate went from 8.63 under PREPA
to 2.88 under LUMA.

-- Injury severity rate declined from 62.9 under PREPA to
11.64 under LUMA.

In addition to improved operational performance as crews execute
using enhanced procedures, LUMA is executing infrastructure improvement
programs to address the underlying challenges. LUMA's corrective
actions are addressed in part within the System Remediation Plan (SRP),
where specific improvement programs were developed to improve LUMA's
delivery of safe, reliable, and resilient electric service, including:

Transmission and Distribution Pole & Conductor Repair: The
effect of high-risk findings during the high-level
assessment of the distribution poles, hardware, and
conductors, continues to be mitigated. After the completion
of required repairs and replacements of distribution poles,
structures, and conductors, LUMA will have established a
system that is more resilient to severe weather with higher
service reliability and has assets with an extended life
span.

Transmission and Distribution Line Rebuild: This program
replaces damaged or ineffective overhead and underground
lines. Line rebuilds increase service continuity and
reliability to customers by replacing and upgrading
facilities that have poor reliability performance and
adding and completing facilities that allow for alternate
feeds. LUMA is developing loop schemes to increase backups
where possible.

Transmission and Distribution Substation Reliability
Improvements: This program reinforces and upgrades the
existing and aging system infrastructure to improve system
reliability. This program continues to facilitate safety
improvement by replacing equipment prone to failure and
enhancing protection systems to properly de-energize failed
equipment. This reduces safety risks for both employees and
the public and reduces the impacts of major forced outages
due to aged equipment.

Distribution Automation: This program addresses equipment
for distribution automation, including the deployment of
intelligent switches, such as single-phase and three-phase
reclosers. Distribution automation deployment is being
prioritized based on reliability performance. These efforts
include the installation of technologies to serve as line
segmentation and/or protection devices, midline, cutout
mounted protective devices, and fault indicators, aimed at
enabling the rapid isolation of system faults and isolation
of customers not directly on the faulted section of the
line.

LUMA Vegetation Strategic Approach: LUMA is shifting to a
more systematic reclamation of the right-of-way, thus
reducing the frequency of tree-caused outages. This
transition is happening as the frequency of unplanned
outage events continues to decrease, allowing vegetation
management to adopt a more proactive stance.

Question 4. Please provide a copy of the agreement extending LUMA's
supplementary contract period that was set to expire on November 30,
2022.

Answer. See copy of the agreement attached.

Questions Submitted by Representative Gonzalez-Colon

Question 1. The Contractors Association and others have claimed
that when contracting for LUMA work, they are forced to commit that the
Project Labor Agreement terms for LUMA contracts (especially worker
pay) must be then offered to all work in all projects of all their
customers not just LUMA's.

Is this true? Does LUMA in any way bind its contractors to offering
the same condition to all their workers in all their projects outside
LUMA, or not?

Answer. Since our first day of operations, LUMA has made clear that
it fully supports our employees' labor rights. To be clear, LUMA does
not select the union that represents our employees. LUMA employees
choose which union they will be represented by. Furthermore, LUMA does
not, in any way, bind its contractors to offering the same condition to
all their workers on all their projects outside LUMA.
Currently, the majority of our employees are represented by the
International Brotherhood of Electrical Workers (IBEW)--the largest
union in the world representing electrical and utility workers. Prior
to LUMA, there were approximately five different labor unions that
represented PREPA's workers. One of the largest unions under PREPA,
UTICE, chose to amalgamate with the IBEW and engaged in negotiations
with LUMA. Others, like UTIER, chose not to engage in negotiations and
actively urged their members to not apply for open positions at LUMA.
We are incredibly proud of our relationship with the IBEW and have
negotiated a labor agreement that prioritizes worker safety and
training. This agreement also helps enhance the economic development of
the local region, cultivate and further develop a highly skilled local
construction workforce and helps create exciting opportunities that
build the next generation of Puerto Rican line workers that are
training up to industry standards. The highly trained workforce will
enable a faster and more efficient installation process, resulting in
higher quality standards. We share IBEW's strong values for training
and safety, and along with IBEW, LUMA is building the best-trained
utility workforce in the history of Puerto Rico.
The modern labor agreement with IBEW ensures all major transmission
and distribution capital programs use the best-trained workforce, and
that this critical work is done safely and efficiently. To be clear,
the use of well-trained and qualified workers for capital improvement
work will not result in an increase to customer rates.
We have no doubt that the committee shares in our belief in strong
labor rights, that the IBEW is the best and most respected utility
union in the workforce, and that contractors who perform work for LUMA
should and must provide a safe and highly trained workforce.

Question 2. Puerto Rico law directly empowers mayors to perform
rebuilding of infrastructure after a disaster, with the right to be
reimbursed if the work is complying to code. Municipalities in Puerto
Rico have repair teams that can do limited work on local distribution
lines, like raising poles and reconnecting lines to customers. Many of
these are made of former PREPA employees and other trained personnel.

Is LUMA making agreements to allow this work to proceed and
committing to pay? If not, why not? (We have heard repeated reports
that LUMA meets with the mayor, says ``we'll work together'' then sends
a letter saying all they can do is pick up debris.

Answer. As the operator of Puerto Rico's transmission and
distribution system, LUMA and its qualified and trained utility crews
are responsible for the repair and restoration of the electric grid
following any natural disaster. During hurricane Fiona's response, we
deployed over 2,500 utility workers representing more than 660 crews
working in the field across Puerto Rico to restore and reenergize the
electric system.
While we share the desire to restore power as quickly as possible,
power restoration must be done safely and right, according to
electrical standards.
Nowhere in the United States, Canada, or any modern nation, are
untrained or uncertified utility workers permitted to work on utility
lines because of the threat it poses to public safety and the system.
Untrained workers expose themselves, the public and our LUMA crews to
significant safety risks. We raised concerns regarding the images that
were shared of individuals working on power lines without proper safety
gear and without proper safety training.
One fact that stood out as part of Hurricane Fiona's response is
that repair work must be done right, safely and be highly coordinated
with our generation partners, otherwise it complicates, delays and
endangers power restoration efforts across all of Puerto Rico.
We are committed to working together with municipalities to
expedite restoration efforts. What we can't stress enough is that work
on the transmission and distribution system must be performed by LUMA's
trained and qualified field crews. Many of the workers hired directly
by the municipalities have not worked at PREPA nor have they received
training and completed proper certifications in over a year. As such,
we urge those municipal leaders to immediately work with us and not
endanger the lives of others or the people they serve.

Question 3. Reminder of information requested to be submitted at
the hearing:

1. Status of projects to be performed with recovery funds

2. Breakdown of how many projects have been submitted and how much
funding they require

3. Planned rebuilding timeline: outline of projected milestone dates
for submissions, starts of work and expected completions
per the presented Action Plans and expected times (year at
least) to reach them. For example: When will all the
transmission lines be up and operational? At what point do
we expect half the substations that need replacing to be
replaced? Three quarters? All?

4. Costs of subcontracting and consulting for LUMA

5. The comparison of the cost differences between the cost of the
contract work in Fiona vs. what would have been the cost of
using A.P.P.A. support

6. The profit earned by LUMA in its first year as operator

Answer.
1. Status of projects to be performed with recovery funds
2. Breakdown of how many projects have been submitted and how much
funding they require

As of November 1, 2022, LUMA has initiated 251 projects with FEMA,
representing more than $6.2 billion worth of federally funded projects.
In contrast, only 37 project submissions were submitted to FEMA (and
not one project had been designed) before LUMA assumed operations on
June 1, 2021.

Obligated FEMA Projects. LUMA has received, to date, FEMA approval
for 38 critical infrastructure projects including:

Twenty-eight local distribution projects that will address
critical infrastructure, such as streetlights and pole
replacement, targeting the municipalities of San Juan,
Arecibo, Mayaguez, Caguas, Bayamon and Carolina to reduce
outages and increase the reliability of the electric
system.

Four regional transmission reconstruction projects that
will help improve the high-voltage critical energy
infrastructure that delivers energy across the island.

Five substation modernization projects that will address
the pivotal role played by substations in helping deliver
energy to communities across Puerto Rico beginning in the
municipalities of San Juan, Vieques, Culebra, Manati, and
Guayanilla.

One critical Emergency Management System (EMS), which is
the first phase of transforming the system operations
control center with state-of-the-art technology and
software to modernize the way Puerto Rico's energy grid is
monitored and managed.

FEMA Projects Under Construction. LUMA has started construction on
23 FEMA funded projects across Puerto Rico including:

Six initial streetlight projects as part of LUMA's $1
billion Community Streetlight Initiative in the
municipalities of Guanica, Lajas, Aguada, Maunabo,
Luquillo, and Villalba, where in less than three months,
LUMA has installed over 15,000 streetlights.

One critical transmission line repair project to improve
the grid's resiliency.

Sixteen distribution pole replacement projects to increase
the reliability of the electric grid.

Launch of Puerto Rico's federally funded Substation
Modernization Initiative (SMI) with the modernization and
reconstruction of the Manati Substation in the municipality
of Manati.

In addition to the projects initiated, approved, and under
construction, LUMA has also taken the following FEMA-related actions:

Received approval for $656 million to procure material
that requires long lead times for manufacturing and
delivery, mainly grid equipment including breakers,
transformers, and reclosers.

Working with FEMA to get support for the immediate
addressing of Fiona-related damages with permanent work.

Taken in totality, over the coming months and years, FEMA-funded
projects that are being directed by LUMA will be not only the largest
capital energy program in Puerto Rico's history, but also the largest
ever funded by the federal government to repair and rebuild an electric
system across any state and/or territory. As a result, LUMA is excited
by the significant progress that has been made to date that will, as
more FEMA projects begin construction, provide Puerto Ricans with a
stronger, transformed energy grid.
3. Planned rebuilding timeline: outline of projected milestone dates
for submissions, starts of work and expected completions per
the presented Action Plans and expected times (year at least)
to reach them. For example: When will all the transmission
lines be up and operational? At what point do we expect half
the substations that need replacing to be replaced? Three
quarters? All?

In May 2022 LUMA submitted a 5-Year Plan to COR3 and FEMA to
provide LUMA's anticipated timing for sending detailed scopes of work
to COR3 and FEMA for evaluation and review. This 5-Year Plan is a
living document based on the best information available to LUMA at the
time of submission. LUMA expects this plan to evolve over time as new
information becomes available and conditions impacting the electric
grid change.
Additionally, the 5-Year Plan provides an overview of the current
list of projects LUMA plans to initiate over the next five years (2022-
2026) and their schedules for submitting detailed SOWs to COR3 and FEMA
for review. The majority of these projects are near-term projects
identified by LUMA. The list will continue to grow as mid- and long-
term projects are identified.
The table below provides information on the number of projects
currently planned to initiate Engineering Design in each of the years
2022-2026. As the table shows, LUMA has initiated 85 projects as of the
date of the 5-Year Plan (May 4, 2022) and plans to initiate another 185
through to 2026. It is important to note that LUMA continues to
identify new projects across all categories and will add them to the
portfolio over time.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

For a complete list of individual projects included in the 5-
Year Plan, see Attachment B.

4. Costs of subcontracting and consulting for LUMA

With respect to legal and consulting expenses, LUMA works through a
strict expense review process that is independently audited and
approved by third-party actors who reviewed all expenses and invoices
related to the transition between LUMA Energy and PREPA.

5. The comparison of the cost differences between the cost of the
contract work in Fiona vs. what would have been the cost of
using A.P.P.A. support

Although the American Public Power Association (``APPA'') manages a
mutual aid program to facilitate restoration work following storms and
other disasters, it would be speculative to come up with an estimate of
any specific rates that would have applied on the days following the
aftermath of Hurricane Fiona.
However, cost differences are not the only consideration present.
Timing of response and availability to assist is of much greater
importance. In that regard, had LUMA relied exclusively on external
partners and their mutual aid programs, the response rate would have
been much slower.
LUMA's emergency response to Hurricane Fiona followed a 15-month
effort to overcome years--if not decades--of profound operational
neglect and lack of maintenance by the previous operator. Even before
starting operations, LUMA focused intensely on preparing for an event
like Hurricane Fiona, ensuring that personnel received over 10,000
hours in emergency response training on FEMA's National Incident
Management System and fully outfitting field crews with proper safety
equipment and roadworthy vehicles--conditions that were absent under
the previous operator.
On and around September 14, 2022, LUMA activated its emergency
operations center and began formal preparations for what became a
powerful and devastating Category 1 hurricane, that included 100 mph
winds, over 30 inches of rain, severe flooding, and widespread damage
to local infrastructure and electric infrastructure.
LUMA's advance work and close coordination with Puerto Rico and
federal emergency response agencies, as well as local communities,
allowed a restoration of electric service to 90% of customers within 12
days of Hurricane Fiona making landfall--a restoration timeline never
seen before in Puerto Rico for a hurricane, and on par with restoration
times for similar events in other jurisdictions in the continental US.
It is important to note and include as part of the analysis that on
September 28, 2022, just 14 days after Hurricane Fiona impacted Puerto
Rico, Hurricane Ian made landfall in southwestern Florida as a
dangerous and powerful Category 4 storm. In the past, coetaneous or
closely dated disaster events have dislocated and altered the response
and availability of disaster recovery resources for the island of
Puerto Rico. That was not the case under LUMA's recovery efforts from
Hurricane Fiona.
Moreover, for more information regarding the response to the
emergency related to the passing of Hurricane Fiona through Puerto
Rico, see Hurricane Fiona Response and Restoration Event Summary,
October 21, 2022, (Attachment C). We believe that this summary
represents the most comprehensive collection of restoration information
ever provided to the public so soon following a hurricane in Puerto
Rico.

6. The profit earned by LUMA in its first year as operator

LUMA's service fee is authorized under Section 7.1 of the
Transmission and Distribution System Operation and Maintenance
Agreement (T&D OMA) and provides compensation for the performance of
the O&M Services. The service fee for Fiscal Year 2022 was $117
million, in accordance with the terms of the T&D OMA. It is important
to note that LUMA's service fee was determined as part of a competitive
process overseen by the Puerto Rico Agency for Public Private
Partnerships for the award of the T&D OMA. The Partnership Committee in
charge of that process noted in their report that LUMA's fee was lower
than that proposed by other proposals.
It is important to note that LUMA has NEVER raised or proposed
raising customer rates.
LUMA has no control over how rising generation fuel prices may
directly impact customer rates or bills--which are exclusively set by
the Puerto Rico Energy Bureau (PREB). LUMA does not generate energy,
nor does it financially benefit from any change or increase in
generation fuel costs. Since the beginning of 2021, there have been
SEVEN increases to the rate customers pay for electricity due to the
rising cost of generation fuel used by PREPA and other generators and
there have been ZERO increases proposed to pay for any of LUMA's
operations. Because some are unaware of the facts have suggested
otherwise, we want to be very clear--LUMA has NEVER raised customer
rates.
As we have done over the last 18 months, the over 3,000 men and
women are absolutely committed to building a better energy future for
Puerto Rico and overcoming the years and decades of operational and
maintenance neglect by the past operator.

Attachments

[The Attachments for these responses can be viewed on the Committee
Repository at:https://docs.house.gov/meetings/II/II00/20221117/115197/
HHRG-117-II00-Wstate-BahramiradS-20221117-SD006.pdf]

______

The Chairman. Thank you, Doctor, I appreciate it. Let me
now welcome Ms. Charlotte Gossett Navarro, Puerto Rico Chief
Director of the Hispanic Federation.
Ms. Navarro, you are recognized.

STATEMENT OF CHARLOTTE GOSSETT NAVARRO, PUERTO RICO CHIEF
DIRECTOR, HISPANIC FEDERATION

Ms. Navarro. Thank you, Chairman Grijalva, for inviting
Hispanic Federation to speak today about what we have learned
from our 5 years on the ground in Puerto Rico.
We congratulate this Committee for using its oversight
authority to pursue a just disaster recovery for the
archipelago.
Since Maria, Puerto Rico has experienced an ongoing state
of crisis that has left residents traumatized and exhausted and
forced hundreds of thousands to leave Puerto Rico. The recovery
from Maria and subsequent disasters has been tragically slow. I
say tragic because, at its best, it is a daily inconvenience,
but at its worst it has resulted in additional preventable
deaths for our most vulnerable residents, particularly due to
the lack of electricity.
The widely accepted solution to our energy problems is
distributed rooftop solar energy with storage. However, we have
yet to see significant political will to adopt this solution.
More than $12 billion in FEMA funding has been allocated for
the energy grid, but only 3 percent of the funds are proposed
for renewable energy. Congress must use its oversight authority
to ensure that all of the Federal funds allocated for the
optimization of the energy grid prioritize and deploy rooftop
solar energy with storage, and meet Puerto Rico's local
renewable energy policy goals without compromising agriculture
and ecological lands.
According to the limited data published on the Puerto Rico
Housing Department's CDBG-DR Transparency Portal, both the
principal housing recovery program, known as R3, and the
Principal Agriculture Recovery Program, known as Re-Grow, are
failing to reach their goals. The R3 program received 27,000
applications, and of those only 4,398 houses have been repaired
or reconstructed.
Applicants of the R3 program are particularly vulnerable
households who have survived other disasters in the past 5
years while still waiting for the repairs to their homes.
Geographically vulnerable populations such as Punta Santiago in
Humacao, Loiza, and Culebra have had few to no homes repaired
or rebuilt.
Hurricane Maria also devastated local agriculture
production, and $92.5 million was allocated to the Re-Grow
program to provide awards of $25 to $150,000 to local farmers
and fishers. However, since its launch in 2021, out of Puerto
Rico's more than 8,000 farmers and fishers, only 377 have
received Re-Grow funds.
Puerto Rico has more than $3.7 billion available for school
infrastructure. However, in their proposed plan the physical
infrastructure changes that are needed to ensure continuity of
education and structural safety and resiliency during and after
a disaster are minimized. Congress and the President must
ensure all Federal funds are effectively used by requiring
radical transparency and civil society participation in all
phases of decision-making processes. Democratization of the
recovery is the best way to minimize inefficiency, corruption,
fraud, and waste.
Since 2018, we have advocated for the creation of a Citizen
Advisory Committee. And although the Housing Department
committed to the creation of the committee in 2021, as of today
it is still not operational. We welcome the creation of a CDBG-
DR data transparency portal. However, significant improvements
need to be made in the type and format of data collected and
provided to ensure real transparency.
We have also been denied access to FEMA's individual damage
assessment data that would allow us to make proper data-driven
decisions.
Eliminating the barriers of reimbursement and matching fund
requirements to access Federal funds will also promote
equitable access and facilitate participation of community
organizations and municipalities doing critical work, but who
do not have the financial capacity to participate. It would
also promote local business integration.
We support the call for the Biden administration to
establish a recovery task force for Puerto Rico with
transparent processes for inter-agency collaboration and civil
society oversight.
We also support Chairman Grijalva's proposal to allocate an
additional $5 billion for residential rooftop solar.
We also need legislation that brings Puerto Rico
permanently and equitably into all Federal safety net programs,
including Medicaid, SSI, SNAP, and a permanent exemption from
the Jones Act. This will end these injustices and alleviate
poverty and promote economic recovery.
Congress should return Puerto Rico to democratic self-
governance by eliminating the Financial Oversight and
Management Board and ensuring that debt restructuring does not
compromise our basic needs and essential services.
An independent audit is also still needed.
A sustainable and just recovery is only possible if it is
community driven by and for the people of Puerto Rico. Puerto
Rico is on the front lines of climate change, and more than 100
years of systemic Federal discrimination have left us uniquely
vulnerable. But despite that, the people of Puerto Rico are
still standing in the trenches doing the work. Congress and the
Federal Government must fulfill their responsibilities to the
people of Puerto Rico.
Thank you for your time.

[The prepared statement of Charlotte Gossett Navarro
follows:]
Prepared Statement of Charlotte M. Gossett Navarro, Puerto Rico Chief
Director, Hispanic Federation

Introduction

Thank you, Chairman Grijalva, for inviting Hispanic Federation to
speak today about what we have learned from our five years on the
ground in Puerto Rico. Over the last five years we have invested over
fifty-one million dollars and funded and collaborated with more than
140 local non-profit organizations all working toward a more
sustainable, resilient, and just Puerto Rico. To that end, we
congratulate this Committee for using its oversight authority to ensure
a just disaster recovery for the archipelago.
It has been more than five years since Hurricane Maria created
unprecedented destruction and resulted in more than 3,000 deaths. Over
that time, Puerto Rico has experienced an ongoing state of crisis.
According to recent Census data, 43.4% of the 3.2 million people in
Puerto Rico live in poverty, including 6 in 10 children. Since 2017,
Puerto Rico has experienced continued energy insecurity, major
earthquakes, severe austerity measures enforced by a congressionally
imposed and unelected Financial Oversight Management Board (FOMB),
increasing income inequality, hundreds of school closures, the global
pandemic, a collapsing healthcare system, food insecurity, continued
exclusion from federal safety-net programs, and devastating tropical
storms and hurricanes, like Hurricane Fiona. All together these
conditions have left residents traumatized and exhausted and forced
hundreds of thousands to leave.
The recovery from Hurricane Maria and subsequent disasters has been
tragically slow, and I say tragic because at its best it has created
daily inconvenience, but at its worst it has resulted in more
preventable deaths for our most vulnerable residents. This is true
particularly in the context of the electric grid recovery, which has
increasingly experienced rolling blackouts leaving residents without
power more often and for longer time than any US state. Just weeks
before Hurricane Fiona our largest hospital lost power for 24 hours
followed days later by the pediatric wing of another major hospital.
The system's total collapse from a mere category 1 hurricane
illustrates its precarity. The challenges accessing and distributing
diesel to operate generators after Hurricane Fiona makes the
shortcomings of the energy resiliency strategy clear.
Energy Recovery:

The widely accepted solution to this energy problem is distributed
rooftop solar energy with battery systems, however, despite all the
evidence and studies \1\ in support, we have yet to see significant
local political will to adopt this solution. For example, the federal
government has allocated more than $12 billion in FEMA funding for the
optimization of the energy grid, and the government of Puerto Rico is
proposing to use only 3% of the funds for renewable energy with
storage.\2\ In addition, the Biden administration is investing
significant resources into the two-year, interagency, intergovernmental
PR100 study to model viable pathways for Puerto Rico to achieve its
100% renewable energy goals, however the Puerto Rico government has
still not publicly committed to implementing the results of the study.
---------------------------------------------------------------------------
\1\ See, NREL 2020 study ``Puerto Rico Low-to-Moderate Income
Rooftop PV and Solar Savings Potential'', December 17, 2020,
demonstrating that rooftop solar can meet all of Puerto Rico's
residential energy needs, https://www.nrel.gov/docs/fy21osti/78756.pdf.
\2\ PR Electric Power Authority, proposing the use of only $35
million for rooftop solar, https://energia.pr.gov/wp-content/uploads/
sites/7/2022/08/Motion-to-Inform-Reallocation-of-FEMA-404-HMPG-Funds-
and-Request-for-Approval-of-Generation-Projects-NEPR-MI-2021-0002-
1.pdf. LUMA proposing the use of $20.6 million for renewable energy
microgrids, and $362.5 million for renewable energy utility scale
storage, https://energia.pr.gov/wp-content/uploads/sites/7/2022/11/
Motion-Submitting-Hazard-Mitigation-Grant-Program-Projects-and-Reques-
for-Confidentiality-and-Support-Memorandum-of-Law-NEPR-MI-2021-
0002.pdf.
---------------------------------------------------------------------------
In 2019, Puerto Rico passed Act 17, known as the Puerto Rico Energy
Public Policy Act, which, among other things, commits Puerto Rico to
powering itself exclusively from renewable-energy sources by the year
2050. Congress must continue to use its oversight authority to ensure
that all the federal funds allocated for the optimization of the energy
grid are used to prioritize and deploy rooftop solar with storage and
to meet Puerto Rico's local renewable energy policy goals. The federal
and local government should not approve any proposals in which
renewables and rooftop solar are merely incidental to the overall
program. Creating a resilient, decentralized energy system in Puerto
Rico is not just about reaching climate goals--it is literally a matter
of life and death.
We know firsthand that rooftop solar energy with batteries can
create the resiliency Puerto Rico needs because we saw the success of
our community solar energy projects after Hurricane Fiona.
For example, through Solar Saves Lives, a collaboration between
Hispanic Federation, The Clinton Foundation, Direct Relief, and the
Interstate Renewable Energy Council, we installed industrial scale
rooftop solar energy and battery systems in multiple Federally
Qualified Health Centers (FQHCs). After Hurricane Fiona, we contacted
the four centers directly funded by Hispanic Federation and confirmed
that they experienced uninterrupted power despite the blackout. At
sites that relied only on generators with diesel, many FQHC's struggled
to obtain the fuel needed to continue operating. This rooftop solar
energy initiative protects the lives of thousands of families who
depend on the healthcare services provided daily in these health
centers.
Another successful example of how rooftop solar with storage
provides resiliency are Hispanic Federation's solar energy projects at
fisheries in Naguabo, Guayama, Guanica, and Penuelas. Without energy,
the artisanal fisherman based at these community fisheries are unable
to refrigerate and sell their daily catch. At just one fishery in
Naguabo, two months after Maria the fisherman and fish market reported
they had lost more than $200,000 in combined profits. After Fiona, all
the rooftop systems were operating with uninterrupted power. The small
rooftop solar and battery systems save each these community fisheries
up to $5,000 annually in energy costs, prevent loss of food and income,
and serve as energy oasis to the surrounding communities during
disasters, such as Fiona, when residents charged their cellphones and
could refrigerate their critical food and medications. After Fiona, the
15 fishermen of Lajas explained to a reporter that their biggest
challenge \3\ getting back to work was the lack of electricity at their
fishery and so two weeks later Hispanic Federation installed a rooftop
solar energy with battery system \4\ for them as well.
---------------------------------------------------------------------------
\3\ Pescadores de La Parguera denuncian que ``nos tienen
abandonados''--Primera Hora.
\4\ Buenas noticias para los pescadores de Lajas: la villa prendera
con placas solares--Primera Hora.
---------------------------------------------------------------------------
Housing Recovery:

After Hurricane Fiona, Hispanic Federation visited impacted
communities and again witnessed the devastating results of the slow
recovery. For example, in Santa Isabel in southern Puerto Rico, we met
families whose homes had still not been repaired since Hurricane Maria
and had to face Fiona's hurricane winds and 30 inches of rain without a
secure roof. Another family who had been temporarily relocated by the
Puerto Rico Housing Department while they awaited the repair of their
damaged home through the government's CDBG-DR R3 housing program faced
major flooding from Hurricane Fiona in their temporary housing and
shared that their permanent home, which was still mid repair, had
experienced significant damage as well.
According to the limited data published on the CDBG-Disaster
Recovery funds Transparency Portal,\5\ a digital dashboard created by
the PR Housing Department in response to advocacy by Hispanic
Federation and many other organizations, the Housing Repair,
Reconstruction and Relocation Program \6\ (R3) received 27,003
applications and has 17,528 currently active. Of those, only 4,398
houses have been repaired or reconstructed.
---------------------------------------------------------------------------
\5\ PR Housing Department, CDBG-DR Funds Transparency Portal,
https://cdbg-dr.pr.gov/en/transparency-portal/.
\6\ CDBG-DR R3 Program Transparency Portal, as November 15, 2022,
https://cdbg-dr.pr.gov/en/transparency-portal/transparency-reports/
housing-reports/r3-dashboard/.
---------------------------------------------------------------------------
In comparison, Hispanic Federation, with less than $3 million in
private philanthropic funding, was able to impact more than 400 homes
in two and half years, from small repairs to complete ground up
reconstruction. Our strategy was to partner with, and fund local
community based non-profit organizations and utilize local contractors.
It is worth noting the applicants of the R3 program are
particularly vulnerable households. More than 50% are of low to
moderate income, 65 years or older, disabled, and/or with significant
damage in their properties, including blue tarps.\7\ Also, as reported
in the ``Community Study of Housing in Loiza'' published by Taller
Salud in 2022,\8\ seven out of ten applicants under this program are
women. Based on the data, most of these vulnerable households have been
waiting for urgent aid for more than five years and had to survive
other disasters, such as earthquakes, tropical storms, and Fiona,
without a safe home. This is unacceptable.
---------------------------------------------------------------------------
\7\ Id.
\8\ Taller Salud, Estudio Comunitario de Vivienda en Loiza (2022),
https://issuu.com/tallersalud/docs/web_estudio_vivienda_02_final.
---------------------------------------------------------------------------
In addition, geographically vulnerable populations, such as Punta
Santiago in the municipality of Humacao, have been left behind. As of
today, zero (0) homes, none, have been completed there through R3.\9\
In the municipality of Loiza, of 190 active applications only 24 houses
have been repaired or reconstructed.\10\ In Culebra, only one house has
been completed.\11\ As you see, the recovery is too slow, and new
emergencies and disasters, such as Fiona, too fast.
---------------------------------------------------------------------------
\9\ CDBG-DR R3 Program Transparency Portal, as November 15, 2022,
https://cdbg-dr.pr.gov/en/transparency-portal/transparency-reports/
housing-reports/r3-dashboard/.
\10\ Id.
\11\ Id.
---------------------------------------------------------------------------
Even though we acknowledge the important creation of the data
transparency portal, we are currently working with both HUD and the PR
Housing Department to advocate for significant improvements in the type
of data and the way and format that information is published to ensure
real and effective transparency.
For example, the portal still does not provide the updated number
of families living under blue tarps by municipality. In May 2021,
during a PR legislative investigation (R. del S. 76), the PR Housing
Department reported that 18,000 homes were still under blue tarps, and
that only 34 had been repaired or reconstructed at that time. On page
347 of the CDBG-MIT Action Plan First Substantial Amendment, the PR
Housing Department expressed that ``as of May 2022, approximately 3,646
homes impacted by Hurricanes Irma and Maria still have a blue tarp as
partial or whole roof''.\12\ The real time data on how many blue tarps
remain by municipality is critical for the emergency preparation and
recovery efforts of many stakeholders, such as mayors and local
nonprofit organizations, and must be published.
---------------------------------------------------------------------------
\12\ CDBG-MIT Action Plan, First Substantial Amendment, October 17,
2022, https://cdbg-dr.pr.gov/en/download/cdbg-mit-action-plan-
amendment-1-substantial-effective-on-october-17-2022/
?ind=1666809692813&filename=1666809692wpdm_ADM_POLI_CDBG-MIT%20APA1%20
(Substantial)_EN.pdf&wpdmdl=30002&refresh=6373c842f05651668532290.
---------------------------------------------------------------------------
Agriculture Recovery:

Puerto Rico's shrinking agriculture sector has resulted in a
dangerously high dependence on imported food. In good times, Puerto
Rico imports more than 85 percent of our food. After Hurricane Maria,
some estimated this reached 95 percent. From 1998 to 2018, the amount
of land used for agriculture has reduced by 43 percent and the number
of independent farms decreased by more than 58 percent. Our farming
sector is made up primarily of small-scale farms with most farmers over
the age of 60 and generating less than $10,000 a year in sales. The
average small-scale farm is just 57 acres (not all acres in
production). By contrast, the average small-scale farm in the states is
more than 450 acres.
Our agriculture sector has been particularly vulnerable to the
effects of climate change. Hurricane Maria devastated local agriculture
production and both tropical storms and Hurricane Fiona have had
similar impacts. For example, the coffee sector, which is a main driver
of the economy of the central mountain municipalities, lost 80 percent
of the coffee trees after Hurricane Maria. After Hurricane Fiona, we
lost almost the entire plantain production, another important crop for
local production.
In response, the PR Department of Housing CDBG-DR Action Plan
allocated $92.5 million to the Re-Grow PR Urban-Rural Agriculture
Program (ReGrow), which launched in August 2020 to provide awards of
$25,000 and up to agrobusiness including farmers.\13\ The program was
plagued with problems from the start due to its extensive and rigid
eligibility requirements and a program design that did not respond to
the realities of local agriculture and disadvantaged small-scale
farmers. In addition, the original program design excluded the fishing
industry. Since its launch, the program guidelines have been amended
five times and the program administration has changed hands 3 times.
---------------------------------------------------------------------------
\13\ CDBG-DR Re-Grow PR Urban-Rural Agriculture Program
Transparency Portal, as of November 15, 2022, https://cdbg-dr.pr.gov/
en/transparency-portal/transparency-reports/economy-reports/re-grow-
dashboard/.
---------------------------------------------------------------------------
Although most of Puerto Rico's more than 8,000 farmers and fishers
were affected by Hurricane Maria, more than two years after its launch,
ReGrow only has 2,701 active applications and has only made 377
disbursements to applicants.\14\ This means that less than 14% of the
applicants have received any aid five years after Hurricane Maria.
---------------------------------------------------------------------------
\14\ Id.
---------------------------------------------------------------------------
In May 2021, a little less than a year after ReGrow's launch,
Hispanic Federation conducted a brief telephone survey of 140 small-
scale coffee farmers participating in our coffee initiative. Of these,
114 (81%) reported not having applied to the program. Of those 114, 83
(73%) specified that they had not applied because they had not heard of
the program. Others reported not having applied for lack of documents
or other reasons. This highlights the need to make the application
process more flexible to achieve fair access to these aids and ensure
that the funds reach small-scale farmers and fishermen.
Strengthening Puerto Rico's agriculture sector is both possible and
urgent to attend to our food and economic security. After Hurricane
Maria, Hispanic Federation led a multisector coffee revitalization
effort that provided direct support to more than 2,200 small-scale
farmers. The collaborative effort successfully produced and distributed
more than two million coffee seedlings and provided training and
technical assistance to bolster agronomic and climate smart practices.
Our program was successful in part due to its multi sector approach,
which included coffee farmers in all phases from design to
implementation. The federal and Puerto Rico government can and should
do the same.
Democratization of the Recovery:

Congress and the President must ensure all federal funds are
effectively used by requiring radical transparency and civil society
participation in all the phases of decision-making processes.
Democratization of the recovery is the best way to minimize
inefficiency, corruption, fraud, and waste.
That is why, since 2018, in collaboration with other local
organizations, Hispanic Federation has advocated to HUD and the PR
Housing Department for the creation of the Citizen Advisory Committee.
Our hope for this committee is that it would be embedded in the PR
Housing Department to work on recovery, provide valuable oversight and
input in all stages of the recovery from planning, to program design
and implementation. In addition, they would advise on appropriate
public participation for each phase. Although the PR Housing Department
committed to the creation of the committee in 2021, as of today, the
committee is still not operational. Just this week, they finally
announced the official members of the committee, which we hope means
the committee will be active soon. In the meantime, and for the last
five years, recovery decisions are being made without effective public
input and oversight. In addition, they have arbitrarily reversed a
decision and decided to only utilize the Committee for CDBG-Mitigation
funding and excluded CDBG-Disaster Recovery funding.
Had there been effective public participation throughout the
recovery process, we believe we could have avoided the serious public
confusion and delays in implementation of programs such as R3, which
had more than 10 guide revisions, and ReGrow, which had 5 revisions of
the guides.
In addition to the CDBG transparency portals previously mentioned,
we continue to struggle to access the necessary FEMA damage assessment
data that would allow us to make proper data-driven decisions. Most
funding allocation notices indicate the need to identify the ``most
affected and distressed communities and populations'' to serve as the
base of all program-design within CDBG-DR and CDBG-MIT Action Plans and
ensure we are addressing unmet needs. However, in the case of Puerto
Rico, all of Puerto Rico was identified as ``most affected and
distressed''. However, not all communities were affected in the same
way and funding should be prioritized to the most vulnerable,
marginalized, and impacted communities.
The FEMA inspections process through the Individual Assistance
Program is single-handedly the best data to promote informed,
efficient, and responsible decisions--since it is the data used to
calculate unmet need. This information is needed by all stakeholders
including nonprofits, communities, municipalities and others not only
for the design of programs, but also for its accountability processes,
as well to direct and assign additional efforts in the recovery. FEMA
has blocked access to this data because they have claimed their data
gathering methodology does not allow them to share the data without
also sharing personally identifiable information. In five years, they
have not solved this data collection and access issue to ensure the
data needed to promote the responsible use of federal funding and
guarantee the link between funding, most affected communities and unmet
needs. With each new disaster, this data problem repeats itself.
Another way to boost recovery is by eliminating bureaucracies that
have created barriers to rebuilding and slowed community participation
and access to funds. For example, the federal government should waive
reimbursement and matching funds requirements to promote equitable
access to funding and facilitate participation of local, community-
based non-profit organizations and municipalities who are doing the
critical work on the ground with the most affected communities but do
not have the financial capacity to comply with such requirements.
Waivers have been provided selectively after disasters in other US
jurisdictions, and most recently a temporary waiver was provided to
Puerto Rico by the Biden administration for FEMA public assistance
funding. All federal disaster recovery funding intended for low-income
and historically marginalized communities should automatically have
waivers. Policies and legislation should demonstrate an understanding
of the realities of the island.
Congress should also help Puerto Rico return to democratic self-
governance by eliminating the Financial Oversight and Management Board
(FOMB) and ensuring the debt restructuring does not compromise basic
needs and essential services.\15\ President Biden must keep his
campaign promises and hold the undemocratic Financial Oversight and
Management Board (FOMB) accountable by reviewing the FOMB's austerity
measures and auditing the debt to ensure no illegal or unconstitutional
debt is paid. Hispanic Federation supports the ``Territorial Relief
Under Sustainable Transitions for Puerto Rico Act'' (TRUST for PR Act:
H.R. 7409) with amendments to ensure accountability for the FOMB. This
would phase out the FOMB and put Puerto Rico in charge of its own
economic future.
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
Additional Recommendations:

These are only some examples on how unfairly delayed the recovery
process is happening. One of our main asks as part of our Take Action
for Puerto Rico advocacy campaign \16\ has been for Congress to
exercise its oversight authority, as you are doing today, to ensure the
money that you allocated is going to achieve its intended goals.
---------------------------------------------------------------------------
\16\ Hispanic Federation, Take Action for Puerto Rico, Policy
Asks--5 Years Later How the Federal Government and Congress Can and
Must Help Puerto Rico, https://static1.squarespace.com/static/
614a7847232e3561abc4ad33/t/63252dfe683d3e6af95ce40a/1663380 990211/
POLICY+ASK-2022-REV-02.pdf.
---------------------------------------------------------------------------
A sustainable and just recovery must focus on long-term solutions.
Puerto Ricans and local nonprofits have shown their ability to come
together and fill the gaps in the failure of the federal and local
government's response. The key to their success is to listen,
integrate, and work with the impacted communities.
The Biden administration took important steps early on to aid
Puerto Rico's recovery. For example, under President Biden, HUD reached
an agreement with the government of Puerto Rico to eliminate unique
federal restrictions imposed on $8.2 billion dollars in CDBG-DR funds,
but more is needed.
In order to ensure a holistic, effective deployment and alignment
of federal programs and resources, Hispanic Federation supports the
call from Chairman Grijalva, Senators Schumer and Gillibrand and
Congressmembers Velazquez, Espaillat, Meng, and many others, for the
Biden Administration to establish a Recovery Task Force for Puerto
Rico. The task force must have transparent processes for interagency
collaboration, and mechanisms for civil society oversight.
In a broader and holistic perspective of the recovery, Congress
should pass legislation that brings Puerto Rico permanently and
equitably into all federal safety-net programs, including Medicaid,
Supplemental Nutrition Assistance Program (SNAP), Supplemental Security
Income (SSI), among others not only to end second class treatment of
the 3 million people living in Puerto Rico, but also to alleviate high
rates of poverty.\17\ Congress should also permanently exempt Puerto
Rico from the Jones Act, which among other effects, increases the cost
of food by as much as 151 percent.
---------------------------------------------------------------------------
\17\ Hispanic Federation, Take Action for Puerto Rico, Policy
Asks--5 Years Later How the Federal Government and Congress Can and
Must Help Puerto Rico, https://static1.squarespace.com/static/
614a7847232e3561abc4ad33/t/63252dfe683d3e6af95ce40a/1663380 990211/
POLICY+ASK-2022-REV-02.pdf.
---------------------------------------------------------------------------
Conclusion:

Recovery efforts must meet the needs of the present and future
generations. Puerto Rico is on the front lines of climate change and
the probability of severe weather events and other natural phenomena is
only growing. Whether or not they become disastrous is up to how we as
society prepare and respond. Part of that is ensuring a sustainable and
just recovery today, which is only possible if it is community-driven
by and for the people of Puerto Rico, especially those most vulnerable
and marginalized. Congress and the federal government must have the
political will to fulfill, with no further delay or excuses, its
responsibilities with the people of Puerto Rico. Thank you for your
time and service today. I am honored to take any questions.

______

The Chairman. Thank you very much. Let me now recognize Ms.
Ruth Santiago, Community Environmental Lawyer.
Ms. Santiago, you are recognized.
[Pause.]
The Chairman. Ms. Santiago, I think you are on mute. If you
could, unmute the apparatus there. We can't hear that. Ms.
Santiago, I can go back to you and recognize you again if we
get the technical issue fixed.
Let me now turn to Mr. Emilio Colon-Zavala, Board Member of
the Puerto Rico Builders Association.
Sir, 5 minutes.

STATEMENT OF EMILIO COLON-ZAVALA, BOARD MEMBER, PUERTO RICO
BUILDERS ASSOCIATION

Mr. Colon-Zavala. Chairman Grijalva, Ranking Member
Westerman, Ranking Member Gonzalez-Colon, and members of the
Committee, thank you for giving me the opportunity to testify
on Puerto Rico's post-disaster reconstruction and power grid
development hearings.
The Puerto Rico Builders Association since 1951 has
represented our real estate developers, builders, as well as
related industry professionals. We are the Puerto Rico chapter
for both the National Association of Home Builders and the
Urban Land Institute. I come to you in my capacity as a former
Chairman of the Association for the years 2018 and 2019, and in
representation of current Chairwoman Vanessa de Mari.
On September 20, 2017, our vulnerabilities were exposed in
a manner that we never thought would happen. Approximately
60,000 families lost their homes while our infrastructure was
destroyed. Still today, we are struggling to provide basic
necessities to our people.
The question must be how do we take the necessary steps so
that we don't find ourselves in the same predicament? How do we
finally solve our vulnerabilities? The opportunity is here to
rebuild a resilient Puerto Rico.
The slow and bureaucratic process implemented by FEMA under
Section 428 of the Stafford Act and 2 CFR 200.205 has created
significant delays in Federal aid for permanent construction
programs to start.
Typically, as required by the Stafford Act, FEMA has
accepted recipients' cost estimates from professionally
licensed engineers and validated them. In addition, FEMA has
accepted applicant-prepared and certified fixed cost estimates
in other jurisdictions, only not in Puerto Rico, where FEMA
prepared all cost estimates.
Circumventing Congress requirements and deviating from its
own implementation guidelines, FEMA elected not to consider
certified cost estimates by professional licensed engineers
mutually agreed between the administrator of FEMA and the
Puerto Rico Government until 2020. Due to the magnitude of the
disaster and FEMA's failure to expedite its own process, the
result has been totally contrary to the reasoning provided in
FEMA's guidance to not allow participants to submit cost
estimates certified by their engineers as required by Section
428 of the Stafford Act. This greatly impacted project
formulation process and delayed PREPA's PW.
On September 18, 2022, due to Hurricane Fiona's impact in
Puerto Rico, a total blackout once again occurred. Contrary to
Maria's impact, our generation system suffered such damage that
hindered initial recovery efforts. The need for disasters to be
managed jointly is critical in order to reduce regulatory
confusion.
The storm damage has dramatically increased the risk of
customers experiencing load shedding events. Prior to Hurricane
Fiona, customers were 88 times more likely to have a load shed
event when compared to the average mainline electric consumer.
They are now approximately 500 times more likely to have a load
shed event.
The economic impacts to Puerto Rico have been estimated in
$168 million this year and $700 million in 2023, unless
mitigation measures are implemented. It is estimated that if
current trend continues, power generation in Puerto Rico could
be stabilized by March 2024. With the recent announcement of
additional generation, hopefully this timeline will be
accelerated.
One of the models of governance typically considered in
reform process is that of privatization. Privatization,
however, is not a magical measure with assured resource and a
path free of pitfalls. Past experiences both inside and outside
Puerto Rico also demonstrate that privatization is not a
magical solution.
At the end of the day, substituting an inefficient public
monopoly with an inefficient, privately-owned monopoly will not
solve the power grid problems. Puerto Rico must increase its
use of renewable sources, not as a quasi-religious mantra, but
judiciously and intelligently bearing the cost, its
reliability, integration, and accurate operation with existing
traditional systems as its greatest north.
To achieve this, retrofit and reconstruction of existing
transmission and distribution systems are needed to be
accelerated.
Also, permitting challenges remain for projects to be
executed. Streamlining of processes and elimination of
duplicative tasks must be finally resolved. Title 5 of PROMESA,
which established a streamlined permitting process for critical
projects through the oversight board, especially for the energy
sector, hasn't been fully implemented.
Finally, let's not forget the state of Puerto Rico's
economy and its government's fiscal challenges. The Government
of Puerto Rico did emerge from bankruptcy, but an economy
predicated heavily in the use of appropriated Federal dollars
for our reconstruction is not sustainable in the long run.
The recovery of our electrical power infrastructure has to
be our No. 1 priority in order to restore economic stability
and prosperity to our islands. It is, at the end of the day, a
matter of national security.
I thank you again for the opportunity to share our views,
and I am available for further collaboration in these efforts
and to answer any questions you may have. Thank you.

[The prepared statement of Mr. Colon-Zavala follows:]
Prepared Statement of Emilio Colon-Zavala, Puerto Rico Builders
Association
Thank you for the opportunity to present our views to the Committee
on Natural Resources. The Puerto Rico Builders Association, since 1951,
has represented our real estate developers, builders as well as related
industry professionals. We are the PR Chapter for both the National
Association of Homebuilders (NAHB) and the Urban Land Institute (ULI).
I come to you in my capacity as a former Chairman of the Association
for the years 2018-2019.
On September 20, 2017 our vulnerabilities were exposed in a manner
we never thought would happen. This has been the biggest disaster on US
territory. Approximately 60,000 families lost their homes while our
infrastructure was destroyed. Still today we're struggling to provide
basic necessities to our people. The saddest thing of all, is that we
were warned almost twenty years ago. The same thing has happened
before: from 1989 until this day.
It's a shame that we did not take the necessary steps to prevent
today's predicament. Except for the adoption a new building code, we're
still facing the same challenges in 2019. Nevertheless, Hurricane Maria
represents the best chance we have to rethink and rebuild PR the right
way; the canvas was left essentially blank. We need to start over.
The question must be: how do we take the necessary steps so that we
don't find ourselves in this same predicament? How do we finally solve
our vulnerabilities? These are true for the reconstruction after the
hurricane as well as our eleven year old economic depression. The
opportunity is here to rebuild a resilient Puerto Rico.
The slow and bureaucratic process implemented by FEMA under section
428 of the Robert T Stafford Act, and 2 CFR 200.205 has created
significant delays in federal aid for permanent construction programs
to start. On October 30, 2017, the Commonwealth of Puerto Rico elected
to participate in alternative procedures for all large project funding
for Public Assistance (PA) Categories C-G, pursuant to section 428 of
the Stafford Act, for permanent work following Hurricane Maria. The
Alternative Procedures Program is one in which grants for permanent
construction projects after a disaster are based on fixed cost
estimates during the project formulation process. This section, 42
U.S.C. 5189f, requires when determining eligible costs for repair,
restoration, and replacement of damaged facilities under Section 406,
in paragraphs (F) & (G), that cost estimates certified by qualified
Professional Engineers be taken into consideration.
Typically, and as required by the Stafford Act, FEMA has accepted
recipients' cost estimates from professionally licensed engineers and
validated them. In addition, FEMA is accepting applicant prepared and
certified fixed cost estimates in other jurisdictions. Only not in
Puerto Rico where FEMA prepares all cost estimates.
FEMA issued guidance on implementing Public Assistance Alternative
Procedures Program Guide for Permanent Work (PAAP-PW) last April 2018.
Circumventing Congress' requirements, and deviating from its own
implementation guidance, FEMA elected not to consider certified cost
estimates by professionally licensed engineers mutually agreed between
the Administrator and the Puerto Rico Government.
Due to the magnitude of the disaster, and FEMA's failure to
expedite its own process, the result has been totally contrary to the
reasoning provided in PAAP-PW to not allow applicants to submit cost
estimates certified by their professionally licensed engineers as
required by Section 428 of the Stafford Act. This greatly impacted
project formulation process and delayed PREPA's PW.
On September 18 2022, due to Hurricane Fiona's impact to Puerto
Rico, a total blackout again occurred. Contrary to Hurricane Maria's
impact, our generation system suffered more damages than the
Transmission & Distribution System. This is due to a concentration of
generation plants in the Southern Region of Puerto Rico. Since then,
there has been a shortage of electrical power generation in Puerto
Rico.
The storm damage has dramatically increased the risk of customers
experiencing load shedding events. Prior to Hurricane Fiona, customers
were 88 times more likely to have a load shed event, when compared to
the average mainland electric customer. They are now approximately 500
times more likely to have a load shed event (compared to the average
mainland electric customer).
The economic impacts to Puerto Rico are estimated in $168MM this
year and $700MM unless mitigation measures are implemented. It is
estimated that, if current trend continues, power generation in Puerto
Rico could be stabilized by March 2024. This is not an acceptable
timeline for our private sector.
One of the models of governance typically considered in the reform
process is that of privatization. It creates functionally separate
units of the government in such a way that they cannot be easily
pressed to pursue non-commercial goals through non-transparent actions.
After privatization, the government no longer confronts a conflict of
interest between its role as owner of the public service company and
its role as a public policy maker. The costs and benefits of the
arbitrary use of the power to formulate public policy also change to
the extent that the government now has an interest in the existence of
rules that encourage investment and that should change only after
considering the effects of such changes.
Privatization, however, is not a magical measure with assured
results and a path free of pitfalls. First, it requires the government
to make a credible commitment by favoring tariff schemes that cover
costs (or a combination of tariffs and subsidies that cover costs).
Otherwise, private investors will not acquire the state company.
Second, new political problems are created. Some are corollaries of the
economic benefits of privatization, namely, the claim of the company,
now deprived of public service, to reduce costs through reductions in
high levels of employability, theft prevention, among others. The
unthinking opposition of some sectors of interest to privatization and,
in particular, to the privatization of basic services, sometimes by
foreign entities motivated by profit. Past experiences, both inside and
outside of Puerto Rico, also demonstrate that privatization is not a
magical solution. Substituting an inefficient public monopoly with an
inefficient privately owned monopoly will not solve the power grid
problems.
The Association views favorably the use of the vast resources of
the federal Department of Energy and the Southern States Energy Board
(SSEB) to assist in the development of what should be the new grid
(grid) of Puerto Rico. Likewise, we understand that the expansion of
the entities that are recognized can generate and sell electricity,
such as cooperatives and municipalities.
The SSEB has indicated that its plan of work with the Governor and
with the Legislative Assembly has as its goal: to establish a power
grid system for Puerto Rico that is: reliable (reliable), affordable
(affordable) and sustainable/sustainable (sustainable). Given Puerto
Rico's dependence on fossil fuels, and the loss of fiscal resources
that such expense entails, Puerto Rico's energy public policy must,
first, pursue the greatest possible independence in energy sources. In
this sense, although gas is an environmentally favorable alternative,
its lack of production in Puerto Rico, except for its generation in
landfills such as Fajardo, does not pay for that energy independence
that is due, due to conditions of national security and economy, to
pursue. However, the use in Puerto Rico of gas, as the coastal project
of Aguirre should not entail fiscal commitments that make the wind,
photovoltaic and water alternatives that depend on resources that we do
have: wind, sun and water, go to a second flat.
Puerto Rico must increase its use of renewable sources, not as a
quasi-religious mantra, but judiciously and intelligently, bearing the
cost, its reliability, integration, and accurate operation with the
existing traditional systems, as its greatest north.
It is essential to address the problem of politicization. We are
concerned that the passed Act of Execution of the Reorganization Plan
of the Public Service Regulatory Board of Puerto Rico maintains schemes
that do not promote partisan political independence of the operation of
the former Puerto Rico Energy Commission, now the Energy Bureau. The
established model allows, in the long term, to detract from the
professionalization and institutional development of an administrative
entity with a fundamental mission in the future development of Puerto
Rico.
The regulatory framework for Puerto Rico's energy infrastructure
transformation into renewables was passed and adopted before the 2017
hurricanes impacted our island. Since then, damages from multiple
disasters have left our grid in a state of greater vulnerability.
Rolling blackouts occur frequently and the need to amendments to
accommodate to immediate stabilization actions is urgently needed.
These do not have to alter overall goals to move Puerto Rico into
renewable energy but urgent and immediate needs need to be considered.
Finally, let's not forget the state of Puerto Rico's economy and
its Government fiscal challenges. The Government of Puerto Rico did
emerge from bankruptcy, but an economy predicated heavily in the use of
appropriated federal dollars for our reconstruction is not sustainable
in the long term. Maria, who had the most impact, was the most
destitute. The deaths did not occur mostly among the most fortunate
sectors materially. Decisions on partisan political bases today, affect
the health, welfare, jobs, ability to earn a living, dignity and public
safety of our brothers less fortunate in the future.

I thank you again for the opportunity to share our views and am
available for further collaboration in these efforts.

______

Questions Submitted for the Record to Mr. Emilio Colon-Zavala, Board
Member, Puerto Rico Builders Association
Mr. Emilio Colon-Zavala did not submit responses to the Committee by
the appropriate deadline for inclusion in the printed record.

Questions Submitted by Representative Westerman

Question 1. Please further expand on your written testimony about
how the expansion of entities that can generate and sell electricity,
like cooperatives, could be beneficial to Puerto Rico. Please also
include any reports, data, and first-hand knowledge that can help the
committee understand your further discussion.

Question 2. Please further expand on your written testimony about
how the requirements that FEMA put has and applies in Puerto Rico
impacted projects getting off the ground after Maria. Are those hurdles
still in place, and how is that currently affecting recovery efforts
your members are involved in? Please also expand more on what solutions
the Puerto Rico Builders Association would propose to help further
recovery efforts for Puerto Rico.

Question 3. How have interruptions in the supply chain affected
your members in Puerto Rico during past year? How do you expect any
changes to the supply chain to affect recovery post-Fiona?

Question 4. Can you tell us more about how interruptions in
electrical power affected you and your members both pre- and post-June
2021, when LUMA took over the grid?

Questions Submitted by Representative Gonzalez-Colon

Question 1. What has been the greatest challenge for the
contracting and construction sector in the general recovery process?

Question 2. How efficient have been the Federal, State and Local
recovery agencies in processing claims and payments?

Question 3. What is the impact of the repeated consecutive
disasters and emergencies and utility failures on the productivity of
your workforce?

Question 4. Does the damage to roads and bridges limit access to
construction equipment and supplies in the very same areas where it is
most needed?

Question 5. How have your members been directly affected by the
inconsistent power supply?

______

The Chairman. Thank you, sir. Next, we have Mr. Eduardo
Pardo, President of the Puerto Rico Chapter, Associated General
Contractors.
Sir, you are recognized.

STATEMENT OF EDUARDO PARDO, PRESIDENT, PUERTO RICO CHAPTER,
ASSOCIATED GENERAL CONTRACTORS

Mr. Pardo. Good afternoon, Chairman and members of the
Committee and everybody in the hearing. My name is Eduardo
Pardo, a resident of Puerto Rico. I am President of the current
Puerto Rico AGC, Associated General Contractors of America.
Thank you for the invitation to appear before this Committee.
We can agree that the reconstruction process is taking much
longer than expected, and that in some areas such as power,
little progress has been made. Having said that, AGC Puerto
Rico wants to state for the record that recently we have seen
an increase in projects, offer bids, and in construction, such
as the Puerto Rico Aqueduct and Sewer Authority is currently
executing its plan to reconstruct, improve, and build new
installations financed with a mixture of funds, including FEMA.
Different from other agencies, PRASA is communicating and
working closely with local contractors and is issuing bids
regularly. The Puerto Rico Department of Housing, which manages
CDBG funds, has many projects in construction, in award
process, and constantly provides projections for upcoming work.
Municipalities--Certain municipalities, after so many years
and obstacles, have been able to access funds and issue bids.
We are seeing more activity in the municipalities, especially
due to the 25 percent working capital advance approved to
expedite processes.
However, other areas are stuck, especially the electrical
power grid. Rehabilitation and modernization of Puerto Rico's
power grid should be the No. 1 priority for everyone. However,
5 years after Hurricane Maria, AGC of Puerto Rico doesn't know
of any significant projects currently underway to achieve a
resilient and modern network. In fact, the local contractors
that we represent have been sidelined by LUMA and not been made
part of the process.
Our main objective on today's testimony is bringing before
this Committee our main areas of concern and solutions from the
contractors' perspective: government, red tape, and
bureaucracy.
The AGC welcomes appointment of the Secretary of Energy,
Jennifer Granholm, to hopefully identify situations that are
affecting the process of reconstruction work in all areas and
implement solutions that bring transparency and efficiency,
including the use of design, build, and maximization of our
local contracting.
Priority projects--There are many priority needs in Puerto
Rico, but none more important than being ready for the next
storm. We in the AGC strongly recommend concentrating in 5 to
10 priority projects, with special emphasis on those reference
to the power grid. These projects must be moved in front of the
line and have the backing of all entities to get into
construction as soon as possible.
Budgets--No matter what may be said on the how or why, the
fact is that bids and proposals are coming in higher than
budgets, which means projects cannot begin. To be able to
undertake the projects that Puerto Rico needs based on expert
analysis of agencies, the Federal and local government must
expedite budget adjustments to address inflation.
Local contracting--Maximizing the participation of local
contractors and suppliers to reconstruct the island's
infrastructure is vital to Puerto Rico's economic recovery and
progress. Local contracting will create wealth and well-paying
jobs that will remain in Puerto Rico. Section 307 of the
Stafford Act states that preference shall be given to firms
operating in the area affected by disaster or the emergency--in
this case, Puerto Rico. AGC Puerto Rico understands that the
percent of preference shall be determined and included in the
guidelines to ensure transparency and compliance.
Labor--Access to skilled labor is a major concern. AGC of
Puerto Rico and the construction industry is proposing the
implementation by executive order from the President for
significant public benefit to allow non-citizens living
currently in Puerto Rico with undefined migratory status to
work in construction projects financed with FEMA disaster
recovery funds. This will be a feasible mechanism to
significantly expand the pool of workers in the time frame
needed without having to bring in workers from other
jurisdictions. AGC Puerto Rico and our members have
unsuccessfully tried using other mechanisms such as seasonal H-
2B visas. H-2B visas were not designed and are simply not meant
for the construction industry.
PLA requirements--Removing unnecessary requirements, such
as the Project Labor Agreements established by LUMA and imposed
on local contractors is fundamental. We have repeatedly stated
that LUMA's imposition of PLA negotiated with a labor union
outside of Puerto Rico will increase cost dramatically and
significantly limit the number of projects that will be built.
Thank you for the opportunity.

[The prepared statement of Mr. Pardo follows:]
Prepared Statement of Eng. Eduardo Pardo, President, Puerto Rico
Chapter, The Associated General Contractors of America
Good morning, Chairman Grijalva and distinguished members of the
Natural Resources Committee of the U.S. House of Representatives. My
name is Eduardo Pardo, I am a resident of San Juan and current
president of the Puerto Rico Chapter of the Associated General
Contractors of America. AGC Puerto Rico represents more than 300
companies from general and specialty contractors to subcontractors,
suppliers, and industry related services.
Thank you for the invitation to appear before this Committee and
the opportunity to present our testimony regarding the execution of
Puerto Rico's Post disaster reconstruction and power grid development
by the federal and Commonwealth governments and other key stakeholders,
including LUMA. We deeply appreciate the efforts of the Committee to
identify obstacles and implement solutions that will hopefully set
forth more agile processes and accelerate the reconstruction and
modernization of Puerto Rico's infrastructure.
Most of us can agree that the reconstruction process is taking much
longer than expected and that in some areas, such as power, little
progress has been made. Today, Puerto Rico's infrastructure is much
weaker and more vulnerable than ever. As recent as Monday, 175,000 of
PREPA's clients lost power for more than two hours, meanwhile traffic
between Ponce and San Juan is experiencing major interruptions after
gigantic rocks detached and impacted the lanes due to unusually heavy
rainfall.

Having said that, AGC Puerto Rico wants to state for the record
that recently we have seen much needed increased and ongoing activity
in the use of federal funds and projects out for bid in certain areas,
such as:

The Puerto Rico Aqueduct and Sewer Authority, which is
currently executing its plan to reconstruct, improve and
build new installations financed with a mixed source of
funds, including FEMA and own funds. Different from other
agencies, PRASA communicates and works closely with local
contractors and issues bids regularly.

The P.R. Department of Housing, which manages CDBG funds,
has removed hurdles and implemented more efficient
processes to enable more bids and construction activity.
They currently have various projects underway such as
housing reconstruction and repairs and photovoltaic and
water cistern installations. They are also implementing a
design build mechanism, which in our opinion helps to
accelerate projects.

Certain municipalities, which after so many years and
obstacles, have been able to access funds and are issuing
bids for a diversity of projects of different magnitude and
nature. Municipalities are using the design build approach
to accelerate certain projects.

However, other areas are stuck, especially the electrical power
grid. Rehabilitation and modernization of Puerto Rico's power grid
should be the NUMBER 1 PRIORITY for everyone on the island and the
mainland. However, five years after Hurricane Maria, AGC Puerto Rico
doesn't know of ANY significant projects currently underway to achieve
a resilient and modern network. In fact, AGC Puerto Rico and its
members, including leading energy contractors (both in terms of size
and experience), have been sidelined by LUMA in the efforts to develop
and execute the plans to invest the more than $10 billion in federal
funds assigned by the U.S. government to significantly expand people's
access to reliable and cost-effective energy services.

Our main objective of today's testimony is bringing before this
Committee our main areas of concern and solutions, which are the
following:
Government Red Tape and Bureaucracy

Unnecessary steps and requirements by both the Federal and the
Commonwealth governments are complicating, delaying, and increasing the
costs of reconstruction. AGC-PR welcomes the appointment of Secretary
of Energy, Granholm, to hopefully identify situations that are
affecting the progress of reconstruction works in all areas and
implement solutions that will bring transparency and cost and time
efficiency, including the use of design build and maximization of local
contracting.
Priority Projects

The modernization and reconstruction of Puerto Rico's
infrastructure is a monumental project that has no precedent in the
history of the United States. To effectively address it, AGC Puerto
Rico strongly recommends making a list of at least 5 priority projects
in different areas such as the electrical grid, roads, water, schools,
etc. These projects, which shall be designated for their significant
contribution to resiliency, and quality and stability of services to
the residents, shall have an expedited permit and construction
procedures. Secretary of Energy Granholm shall lead the task of
identifying the projects and developing procedures. AGC Puerto Rico has
plenty of experience in streamlining processes, therefore we are
available to collaborate.
Budgets

Repair and reconstruction costs post hurricane Maria were estimated
in 2018. Since then, construction costs have increased dramatically due
to inflation, supply chain and demand factors. According to AGC of
America, construction prices nationally jumped 19% year to year from
2020. In Puerto Rico, prices have experienced a larger increase, in
some cases more than double, especially in labor. This has created a
gap between estimates and actual costs. Currently, proposals are higher
than budgets, which means that projects cannot begin. To be able to
undertake the projects that Puerto Rico needs based on the expert
analysis of federal and local agencies, the federal and local
governments must expedite budget adjustments to address inflation.
Local Contracting

Maximizing the participation of local contractors and suppliers to
reconstruct the island's infrastructure is vital to Puerto Rico's
economic recovery and progress. Local contracting will create wealthy
and well-paying jobs that will remain in Puerto Rico, whereas outside
contractors and employees will repatriate revenues aimed to have a
local economic impact. Section 307 of the Stafford Act states that
preference shall be given to firms operating in the area affected by
the disaster or the emergency, in this case Puerto Rico. AGC Puerto
Rico understands that the percentage of preference should be determined
and included in the guidelines, to ensure transparency and compliance.
(See Attachment 1--Section 307 of Stafford Act)
Labor

Access to skilled labor is a major concern. At present, Puerto Rico
has roughly 30,000 construction workers in the formal economy, and over
25,000 in the informal economy. AGC Puerto Rico and the construction
industry is proposing the implementation, by Executive Order from
President Biden, of a Parole for Significant Public Benefit to allow
non-Citizens living in Puerto Rico with an undefined migratory status
to work in construction projects financed with FEMA disaster recovery
funds. (See Attachment 2--Proposal) This will be a feasible mechanism
to significantly expand the pool of available workers in the time frame
needed, without having to bring in workers from other jurisdictions.
AGC Puerto Rico and our members have unsuccessfully tried using other
mechanisms, such as seasonal H2B visas. We must note that construction
companies on the island have not received any construction workers
under the H2B visa program in recent years, despite having applied. H2B
visas were not designed and are simply not meant for the construction
industry.
PLA Requirements

Removing unnecessary requirements, such as the Project Labor
Agreements established by LUMA and imposed on local contractors, is
fundamental for undertaking the transformation of the electrical grid.
AGC Puerto Rico has repeatedly stated that LUMA's imposition of a PLA
negotiated with a labor union outside of Puerto Rico will increase
costs dramatically, and significantly limit the number of projects that
will in fact be built. LUMA's chosen union, or any other stateside
union, will not be able to supply the amount of construction workers
that will be needed, instead they could reduce the limited resources
that we have available. The U.S. Government, the Commonwealth and
Puerto Rico's construction industry must work together and push for
implementing innovative solutions to address the skilled labor issue
and expand our pool of human resources significantly without adding
unnecessary burden to the island's infrastructure, such as the
abovementioned Parole for Significant Public Benefit.

AGC Puerto Rico thanks you for your time and urges the members of
this Committee to include our recommendations in your report, so they
can be implemented. We are available to answer your questions and to
collaborate as you may deem necessary to accelerate the reconstruction
and modernization of Puerto Rico.

______

Questions Submitted for the Record to Eduardo Pardo, President, Puerto
Rico Chapter, Associated General Contractors
Questions Submitted by Representative Westerman
Question 1. Can you further expand on your testimony about the
design-build system and how that has improved the timeline of projects
your members have worked on?

Answer. The Design-Build delivery method has multiple benefits vs.
the design-bid-build approach, including, among other:

Faster delivery and lower costs, because the contractor
and the design firm work together as a team and, in the
process, they identify best construction methods, determine
the availability of materials, reduce procurement of long-
lead items, and promptly solve RFIs (Requests for
Information) and site conditions.

Effective project and cost management, because the
designer and the contractor are working together through
every phase of the project--from design to construction--
the project is designed according to budget and design
constructability, communication between the design build
team and the owner tends to more fluid and transparent, and
changes and cost estimates are discussed and revised in
real time.

Question 2. How have interruptions in the supply chain affected
your members in Puerto Rico during the past year? How do you expect any
changes to the supply chain to affect recovery post-Fiona?

Answer. Given that Puerto Rico imports around 80% of the
construction materials, our industry is extremely vulnerable to
external market conditions over which we do not have any control. The
Covid-19 pandemic and the war in Ukraine caused significant disruptions
in the supply chain of construction materials worldwide, and Puerto
Rico was no exception. Said situation have reduced the availability,
increased the costs, and delayed the delivery of materials which has
affected construction calendars. As public and private construction
activity continues to increase during the next few years, demand for
construction materials will remain high. Therefore, it is important to
note that any unresolved issues in the supply chain will be a factor in
our industry and the P.R. government's capacity to accelerate the pace
of reconstruction projects. Furthermore, while the U.S. and foreign
markets stabilize, it is important that the local and the federal
governments identify how the application of current laws and
regulations could be specifically aggravating the situation in Puerto
Rico, such as local inventory taxes.

Question 3. From your experience and the experience of your
members, can you tell us more about how interruptions in electrical
power affected you and your members both pre- and post-June 2021, when
LUMA took over the grid?

Answer. Puerto Rico's electrical power service has been unreliable
and expensive for many years, even before the devastating hurricanes of
2017. Since 2017, Puerto Rico in general has suffered the effects of
deteriorating customer services and continuous power outages.

Under LUMA customer service has worsened. For example, if
you call LUMA to request a new connection or a
disconnection it takes them a long time to fulfill the
request. This affects economic development and new
investment.

Moreover, as contractors we hoped and were looking forward
to participating in the historic transformation of Puerto
Rico's power grid under the strong leadership of a
qualified private company with the ability to act outside
of political affiliations. However, our expectations are
very distant from the reality.

-- First, LUMA has not been able to promptly identify issues
and implement solutions, power outages continue to affect
residential and business consumers island-wide, sometimes for
hours and even days, electrical lines and posts are fragile,
and communication with clients and stakeholders is highly
deficient.

-- Second, LUMA is limiting the participation of local
contractors by imposing unnecessary conditions that have led to
the cancellation of contracts with local contractors, and
preference for mainland-based partners or affiliated companies.
For example, in October 2021 LUMA wrote to major highly
experienced electrical contractors in Puerto Rico announcing it
had signed a PLA with IBEW, a mainland-based labor union, which
would apply to all contractors, and subcontractors working with
LUMA in the transformation of the electrical power grip.

Furthermore, the letter stated that LUMA would be
canceling the contracts of the companies that refused to sign
the agreement. AGC-P.R. reiterates that said arbitrary and
unnecessary condition will increase costs substantially and
reduce the expected impact of the federal investment.

Question 4. Please further expand your experience of working with
FEMA or COR3 on recovery and rebuilding efforts. What has the
experience been like for your association and members?

Answer. AGC-PR's experience working with FEMA and COR3 has been one
of effective communication and collaboration. Both agencies have
diligently provided regular status updates of their plans, progress and
upcoming projects and have paid attention to our concerns and
recommendations. We acknowledge and must point that, in the process
(since 2017), both agencies have faced significant challenges regarding
procedures, funding approval, cost estimates, approvals, and
implementation of guidelines, among other. Given Puerto Rico's fiscal
reality (PROMESA, Oversight Board, Title III, etc.) and lack of
qualified personnel in government agencies and municipalities to
navigate the complexities of federal procurement and funding, we have
significantly less ability to fund and procure projects vs. other
mainland states, where reconstruction processes tend to move faster.
Finally, we must note three things:

the complexity and number of required procedures continues
to affect the agility of the processes

the recently implemented working capital advances are
having a palpable positive impact

the appointment of Jennifer Granholm to lead
reconstruction efforts for the U.S. Government is a
positive step

Questions Submitted by Representative Gonzalez-Colon

Question 1. Can you discuss how increased costs due to inflation
are impacting the rebuilding and reconstruction process in Puerto Rico?

Answer. Increased costs due to inflation in labor and material
prices are severely impacting every construction project, both public
and private. According to AGC of A the producer price index for
nonresidential construction--not including added costs for delays in
delivery schedule, raising wages rates and overtime pay, and financial
costs associated with delays--has soared 11.2 year over year (from
October 2021 to October 2022). For example, nationally the producer
price index for diesel fuel soared 61.5 percent year over year, for
cement rose year-over-year increase to 13.4 percent, and for
architectural coatings, such as paint, surged 27.5 percent over 12
months. The unforeseen and sudden increases in prices pose a major
burden on projects with 428 FEMA funding that have fixed budgets
established before 2020. Therefore, the budgets for projects with 428
FEMA funding need to be revised according to current price rates,
because incoming bids are well above the established budgets halting
the projects awards.

Question 2. In your written testimony you briefly discuss how
unnecessary steps and requirements by both the Federal and State
government are complicating, delaying, and increasing the cost of
reconstruction.

Answer. The federal funds assigned to Puerto Rico are very much
appreciated and needed to address the drastic effects of Hurricane
Maria, earthquakes, and housing and infrastructure needs. The processes
established to use and disburse said funds have taken longer than
expected in part due to FEMA's alternate use of Section 428 of the
Stafford Act (based on fixed costs), lack of personnel with experience
in said process, and the sudden and drastic inflation of prices during
the last two years. AGC-PR understands that the following steps could
be major game changers to expedite the pace of the reconstruction
process:

The appointment of Energy Secretary, Jennifer Granholm, to
expedite decision making and resolve any potential impasse,
such as the 25% Working Capital Advance, which was recently
approved and implemented.

The revision of the budgets previously approved for
projects under Section 428 of the Stafford Act (fixed
costs) to update the amounts to current market conditions,
which is under the effects of a sudden inflationary wave
that started two years ago.

Consolidate funding programs (hurricanes Irma, Maria and
Fiona, as well as earthquakes) to avoid further
complications in the use and disbursement of funds.

Prioritize improvements to the approval and revision
processes for projects in FEMA's Accelerated Awards
Strategy (FAAST), especially those related to environmental
approvals.

Allow using the small project definition approved for
Hurricane Fiona (projects of $1 million or less) vs. the
one required for Hurricane Maria (projects of $123,000 or
less) to accelerate processing.

Question 3. In the discussion about the Project Labor Agreements,
can you clarify what is the specific effect that this has upon the
sector, and how is it that the effect happens? Is there an actual
imposition of a binding requirement that IBEW labor terms be applied to
all the contractors' workforce or projects, or is it more that the
higher payments for LUMA contracts creates an increased market pressure
on businesses?

Answer. First, there is an actual imposition because accepting the
PLA between IBEW and LUMA is currently a binding requirement
established by LUMA for contractors who want to participate in the
transformation of the electrical grid. Said imposition will have
several effects of significant importance that will affect both workers
and companies:

Unionize thousands of employees who are currently working
in open shop projects under free market conditions to
benefit one mainland-based union that will be expanding
membership and monthly quotas at the expense of Puerto
Rican workers and the investment of federal funds.

Take away workers' rights to decide if they want to belong
to a union and choose which union will represent them.

Increase costs and reduce the participation of local
contractors and labor who do not want to work under the
imposed conditions, because they were negotiated by
mainland-based parties and do not take into consideration
Puerto Rico's specific needs and realities and the negative
implications they will have in the transformation of the
electric grid, and people's access to reliable service at
competitive costs.

Disrupt free market conditions in Puerto Rico, because
effective in October 2021, LUMA arbitrarily and
unilaterally canceled the contracts it had with all major
local electrical contractors who did not accept the
conditions established in the PLA without taking into
consideration their expertise and capacity or the impact
this unnecessary action would have on cost, and schedule.

Limit the participation of local contractors and the
expected economic impact of federal reconstruction funds,
because LUMA is replacing local contractors for mainland-
based partners and subsidiaries that will import their own
resources and repatriate the profits instead of investing
them in Puerto Rico to build a solid economic basis for
future progress and sustainability.

Last, Puerto Rico-based contractors are asking to be given the
opportunity to participate in LUMA's bids and show--with facts--our
capacity to perform the required tasks for a lower price, on schedule
and efficiently, outside of the PLA.

______

The Chairman. Thank you, sir. Let me now go back to Ms.
Ruth Santiago, Community Environmental Attorney.
Ms. Santiago, if it is functioning, you have 5 minutes.

STATEMENT OF RUTH SANTIAGO, COMMUNITY ENVIRONMENTAL LAWYER

Ms. Santiago. Thank you, Chairman Grijalva, good morning.
Good afternoon to Chairman Grijalva and members of the House
Committee on Natural Resources.
On behalf of the dozens of groups joining in this
testimony, we appreciate the opportunity to testify on Puerto
Rico's post-disaster reconstruction and power grid development.
We advocate for a decentralized, distributed, solar-based
electric system, and have substantial concerns with LUMA
Energy's deficient operation of the electric system and LUMA's
control over the historic amount of Federal disaster recovery
funds.
The recent impacts of Hurricane Fiona brutally underscore
the lessons that were not learned from Hurricane Maria. People
in Puerto Rico experienced the fifth anniversary of Hurricane
Maria without electricity or running water.
Fiona mostly skirted Puerto Rico as a tropical storm and a
Category 1 hurricane as it entered the southwest corner of the
archipelago. Yet, the hurricane downed the centralized and
poorly operated and maintained electric transmission and
distribution system, causing a complete power outage. Only
households and businesses with rooftop solar or functioning
generators had access to electric power.
Just as happened after Hurricane Maria, news reports
indicate that deaths related to Hurricane Fiona, many of them
due to lack of electricity, have been under-reported.
Since 2017, FEMA has allocated an unprecedented $14 billion
for Puerto Rico's electric system and hazard mitigation. Yet,
FEMA, LUMA, and local authorities have opted to rebuild the
exact same system that repeatedly collapses.
The FOMB touts the LUMA contract as one of its foremost
accomplishments. However, for residents, businesses, and
institutions in Puerto Rico, the LUMA contract has been nothing
less than a disaster. Electric service under LUMA has worsened.
There are more power outages and voltage fluctuations which
damage appliances, medical equipment, and other machinery that
put life and property at risk, with adverse effects on public
health, as hospitals, healthcare centers, and homes are left
without service.
An IEEFA study concluded that voltage fluctuations
increased within LUMA's first 2 months of operation. The
duration of outages has increased from 1,340 to 1,649 minutes
per year. The system average interruption frequency index has
steadily risen from 0.5 in January 2022 to 0.7 in May 2022.
As a result of the April 6, 2022 general power outage
related to LUMA's T&D operation, a group of restaurant chains
filed a class action complaint against LUMA, seeking $310
million in damages. The increase in voltage fluctuations is so
prevalent that it prompted the Puerto Rico legislature to allow
the Independent Consumer Protection Office to file claims for
damages to domestic appliances.
On the other hand, a resilient, reliable, and accessible
electric system in Puerto Rico is possible. FEMA should prepare
an Environmental Impact Statement that includes distributed
renewable energy such as rooftop solar and battery energy
storage systems for the investment of the historic amount of
disaster recovery funds. Puerto Ricans with the means to do so
are rapidly installing rooftop solar. If the FEMA funds are not
used to provide rooftop solar and storage system for low and
moderate-income residents, the majority of the population will
be left behind with an expensive, dirty, and unreliable grid,
and vulnerable to tropical storms and low-grade hurricanes like
Fiona.
The Governor mentioned that he would be funding a small
amount of rooftop solar projects. He mentioned 25,000. That
does not go far enough, because we have 1.5 million ratepayers.
FEMA, LUMA, the Government of Puerto Rico, and the Puerto
Rico Energy Bureau continue to push the reconstruction of a
20th century centralized electric system, new fossil
generation, and utility-scale renewable energy projects, which
took up to 15 months to reconnect to the grid after Hurricane
Maria.
Now, PREPA is, I should say, also proposing to use a very
small part of the disaster recovery funds for rooftop solar in
remote mountainous communities. But that is certainly not
enough, as we mentioned, because there are so many other
ratepayers, low-income and middle-income ratepayers, that would
be left behind.
The We Want Sun, Queremos Sol, civil society proposal urges
the use of the FEMA funds to provide lifesaving, distributed
renewable energy, primarily rooftop solar and battery energy
storage, to enable universal access to resilient power to
residents, businesses, and institutions. Puerto Rico need not
be a place of unmitigated disaster. How many more people need
to die for FEMA and the Government of Puerto Rico to invest in
these alternatives?
We urge the Committee to investigate the LUMA contract and
the role of the FOMB in the electric crisis. We ask this
Committee to require FEMA to prepare an EIS in compliance with
NEPA and consider distributed renewable energy and the use of
FEMA funds for rooftop solar and storage systems that will
provide lifesaving electric service to the residents of Puerto
Rico.
The use of the FEMA funds will determine the viability of
Puerto Rico for generations to come. Using FEMA funds to
rebuild the centralized Puerto Rico grid, as proposed by LUMA
and the Government of Puerto Rico is a terrible waste of
taxpayer money.
Thank you.

[The prepared statement of Ms. Santiago follows:]
Prepared Statement of Ruth Santiago, Community Environmental Lawyer
Dear Chair Grijalva and Members of the House Committee on Natural
Resources,

On behalf of the dozens of groups listed in the attachment to this
letter, we appreciate the opportunity to testify and submit written
comments on Puerto Rico's Post-Disaster Reconstruction & Power Grid
Development. As further explained below, the groups joining in this
testimony advocate for a decentralized distributed solar-based electric
system in Puerto Rico. We also have substantial concerns with LUMA's
deficient operation of the electric system since June 2021, and the
control that LUMA Energy seeks to wield over the historic amount of
federal funds for electric system work in Puerto Rico.
We urge the House Committee on Natural Resources to investigate the
Transmission and Distribution System Operation and Maintenance
Agreement between LUMA Energy, LLC and the Puerto Rico Electric Power
Authority (``PREPA'') and the role of the Fiscal Oversight and
Management Board (``FOMB'') in the imposition of the LUMA Contract and
the Puerto Rico electric crisis. We ask this Committee to require the
Federal Emergency Management Agency (``FEMA'') to prepare an
Environmental Impact Statement in compliance with the National
Environmental Policy Act (``NEPA'') that considers reasonable
alternatives such as distributed renewable energy and the use of the
historic and once-in-a-lifetime amount of funds allocated for the
Puerto Rico electric system for rooftop solar and battery energy
storage systems that will provide life-saving electric service to the
residents of Puerto Rico. Attached is our October 4, 2021, testimony
that we incorporate by reference to the current testimony.
I. Background: Hurricanes Fiona and Maria

The recent impacts of Hurricane Fiona brutally underline the
lessons that were not learned from Hurricane Maria.\1\ On September 20,
2022, many people in Puerto Rico experienced the five-year anniversary
of Hurricane Maria without electricity and running water. While Maria
was a Category 4 hurricane, Fiona was much less intense. Fiona mostly
skirted Puerto Rico as a tropical storm and a Category 1 hurricane as
it touched the southwest coast of the archipelago. Yet LUMA Energy's
operation of Puerto Rico's centralized grid is so deficient that it
caused a complete shutdown, even before Fiona made landfall. When Fiona
passed just south of Puerto Rico on September 18, only households and
businesses with rooftop solar or functioning generators had access to
electric power.\2\
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\1\ Ruth Santiago et al., Another Hurricane Makes Clear the Urgent
Need for Rooftop Solar in Puerto Rico, NACLA (Sept. 21, 2020), https://
nacla.org/hurricane-fiona-rooftop-solar.
\2\ Josh Dzieza, When Will Puerto Rico Have Power?, The Verge (Oct.
26, 2022), https://www.theverge.com/c/features/23404252/puerto-rico-
hurricane-maria-electric-grid-solar-panels-prepa-luma-fema; Maria
Galluci, Solar is lifeline in Puerto Rico after Hurricane Fiona knocks
out power, Canary Media (Sept. 19, 2022), https://www.canarymedia.com/
articles/solar/solar-offers-lifeline-in-puerto-rico-after-fiona-knocks-
out-power.
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Just as happened after Hurricane Maria, news reports indicate that
the deaths related to Hurricane Fiona have been under-reported.\3\
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\3\ Aumentan a 38 las muertes asociadas al huracan Fiona en Puerto
Rico--Primera Hora.
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Since Hurricane Maria in 2017, FEMA has allocated an unprecedented
$14 billion for Puerto Rico's electric system and hazard mitigation.
Yet FEMA, LUMA and local authorities have opted to rebuild the exact
same centralized system that repeatedly collapses. Hurricane Maria
destroyed and damaged hundreds of thousands of homes, tore up roads,
bridges, and other infrastructure and downed 80% of Puerto Rico's
centralized grid resulting in a complete power outage that extended for
nearly a year in some communities.\4\
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\4\ Nicole Goodkind, Puerto Rico's Hurricane Maria Power Outage Is
Now the World's Second Largest Blackout, Newsweek (Apr. 12, 2018, 5:40
AM), https://www.newsweek.com/puerto-rico-power-hurricane-maria-
blackout-882549.
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More intense hurricanes, storms, wildfires and other climatic
events increasingly are disabling delivery of energy through electric
transmission and distribution (T&D) systems, i.e. lines, poles, towers,
transformers, substations etc. From the Caribbean to the Gulf Coast,
the eastern seaboard and along the West Coast of the United States
communities are increasingly contending with power outages provoked by
downed T&D infrastructure. Electric power lines are sometimes igniting
or aggravating wildfires in California.\5\ Last year, Hurricane Ida
tore down the T&D system in New Orleans and Hurricane Nicholas wreaked
havoc on the electric grid in Texas.\6\ Just weeks ago, Hurricane Ian
knocked out power for more than 2.6 million Floridians--while
Floridians with rooftop solar and microgrids were mostly unaffected.\7\
---------------------------------------------------------------------------
\5\ Richard Gonzales, PG&E Power Lines Blamed For Northern
California Wildfires, NPR (June 8, 2018, 9:49 PM), https://www.npr.org/
2018/06/08/618444388/pg-e-power-lines-blamed-for-northern-california-
wildfires.
\6\ More Than 100,000 Texas Electricity Customers Without Power
After Nicholas. Restoring it to Everyone Could Take Days, The Texas
Tribune (Sept. 14, 2021, 9:02 PM), https://www.texastribune.org/2021/
09/13/texas-tropical-storm-nicholas-updates/.
\7\ This 100% solar community endured Hurricane Ian with no loss of
power and minimal damage, CNN, Rachel Ramirez (October 2, 2022,
11:53AM), https://amp-cnn-com.cdn.ampproject.org/c/s/amp.cnn.com/cnn/
2022/10/02/us/solar-babcock-ranch-florida-hurricane-ian-climate/
index.html.
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Civil society groups are increasingly holding rogue utilities, like
Entergy in Louisiana, to account,\8\ becoming ``energy literate'' and
putting forth proposals for energy system transformation.\9\ But,
despite lofty renewable energy goals and zero emissions targets,
government agencies that are in the grips of utility capture frequently
fail to follow through on the energy transformation agenda and much
less take assertive steps to facilitate community and civil society
empowerment for critical, potentially life-saving measures for
essential electric service. Puerto Rico is the poster case of energy
injustice.
---------------------------------------------------------------------------
\8\ Energy & Justice in New Orleans: Power to People!, Deep South
Center For Environmental Justice (Sept. 14, 2021), https://
www.dscej.org/the-latest/energy-justice-in-new-orleans-power-to-people.
\9\ Queremos Sol: Sostenible. Local. Limpio, Queremos Sol (Feb.,
2020), https://www.queremossolpr.com.
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Puerto Rico's existing electric transmission and distribution lines
run primarily from the south, where most of the power plants are
located including the two most polluting fossil-fired power stations
and transmit electricity to the north especially the to the San Juan
metropolitan area. The power plants in the south are sited in low-
income, low-wealth neighborhoods, home to many Afro descendant Puerto
Rican families already dealing with environmental racism. Most people
in southeastern Puerto Rico and in many other marginalized areas cannot
afford the upfront costs to access resilient, clean sources of energy
such as rooftop solar and battery energy storage systems.\10\
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
Electric service was still not fully restored nearly a month after
Hurricane Fiona.\11\ A cursory view of the electric system in Puerto
Rico after the hurricanes casts a disappointing and potentially lethal
tally. After Hurricane Maria, the centralized T&D system was stood up
amid scandals of US-based companies like Whitefish and Cobra profiting
handsomely from dubious work. A New York-based company called New
Fortress Energy built an illegal, unaffordable, and unreliable
liquefied ``natural'' methane gas terminal to import highly volatile
methane gas; the Punta Lima Wind Farm was blown away by the hurricane
as was a utility-scale, land-based solar array near where the storm
made landfall; and the Virginia-based AES coal-fired power plant in
Guayama, PR continues to spew toxins and contaminate the South Coast
Aquifer.\12\ The lessons from Hurricane Maria for the need to
decentralize the grid and move quickly to distributed renewable energy
were not learned. As a result, Puerto Rico experienced a complete power
outage two months ago, after Hurricane Fiona. LUMA Energy, a joint
venture created by Quanta Services and ATCO Canadian Utilities is
performing even worse than Puerto Rico Electric Power Authority
(``PREPA'') while lobbying to rebuild the existing centralized, fossil-
enabling T&D system with a historic amount of federal disaster recovery
funds.
---------------------------------------------------------------------------
\11\ Thousands still without power weeks after Hurricane Fiona hit
Puerto Rico, The Guardian (Oct. 12, 2022), https://www.theguardian.com/
world/2022/oct/12/power-outages-puerto-rico-hurricane-fiona.
\12\ EPA Administrator Regan Announces Initial Actions to Protect
Communities Following Puerto Rico Journey to Justice Tour, November 4,
2022: ``In response to community concerns about groundwater
contamination stemming from coal combustion residuals (CCRs) from AES-
PR, EPA will sample groundwater used as drinking water in areas in
southern Puerto Rico where CCRs were historically placed. . . . EPA is
also reviewing the company's plan to address elevated levels of metals
found in groundwater. . . . In addition, EPA has issued notices of
violation to AES-PR identifying potential violations under air and CCR
laws or regulations, including the notice the Administrator announced
during his July visit. . . . Enforcement actions will be taken, as
appropriate, based on EPA's assessment to ensure the safety of the
community and compliance with the law.'' https://www.epa.gov/
newsreleases/epa-administrator-regan-announces-initial-actions-protect-
communities-following-puerto.
---------------------------------------------------------------------------
II. The Disastrous Performance of LUMA Energy

The Fiscal Oversight Management Board touts the LUMA Contract as
one of its foremost accomplishments. (PREPA Fiscal Plan 2021). However,
for residents, businesses, and institutions in Puerto Rico, the LUMA
Contract has been nothing less than a disaster.
Electric service under LUMA has worsened--since LUMA took over
operation of most aspects of the electric system in June 2021, there
are more power outages and voltage fluctuations, which damage
appliances, medical equipment and other machinery and put life and
property at risk.\13\ LUMA's deficient operation of the grid has had
adverse effects on public health, as hospitals, health care centers,
and homes were left without service. The damage has spread to small and
large businesses and essential institutions such as schools and food
inventories, causing economic losses and dislocation in services to the
population.\14\
---------------------------------------------------------------------------
\13\ Reuters, Explainer: What Has Happened to Puerto Rico's Power
Grid Since Hurricane Maria?, VOA News (Sept. 20, 2022, 1:22 AM),
https://www.voanews.com/a/explainer-what-has-happened-to-puerto-rico-s-
power-grid-since-hurricane-maria-/6754784.html.
\14\ Patricia Mazzei, `Why Don't We Have Electricity?' Outages
Plague Puerto Rico, NY Times (Nov. 10, 2021), https://www.nytimes.com/
2021/10/19/us/puerto-rico-electricity-protest.html.
---------------------------------------------------------------------------
A study by the Institute for Energy Economics and Financial
Analysis carried out in August 2021, concluded that voltage
fluctuations had increased within LUMA's first two months.\15\ Measured
by a rolling annual System Average Interruption Duration Index, the
minutes per year of outages has increased since LUMA's June 2021
takeover, from 1,340 minutes to 1,649 minutes.\16\ The System Average
Interruption Frequency Index has steadily risen from 0.5 in January
2022 to 0.7 in May 2022.
---------------------------------------------------------------------------
\15\ Cathy Kunkel & Tom Sanzillo, Puerto Rico Grid Privatization
Flaws Highlighted in First Two Months of Operation: LUMA Contract Has
Led to Delays, Damages, and Poor Services for Puerto Rico Customers,
IEEFA 1, 3 (Aug., 2021), https://ieefa.org/wp-content/uploads/2021/08/
Puerto-Rico-Grid-Privatization-Flaws-Highlighted-in-First-Two-Months-
of-Operation_August-2021.pdf.
\16\ In Re: The Performance of The Puerto Rico Electric Power
Authority, Resolution and Order, at 12-Month Metrics Summary 1, App. 5,
NEPR-MI-2019-0007, (Mar. 14, 2022), https://energia.pr.gov/
wp-content/uploads/sites/7/2022/08/20220818-MI20190007-Resolution-and-
Order.pdf.
---------------------------------------------------------------------------
As a result of the April 6, 2022, general power outage related to
LUMA's T&D operation, a group of restaurant chains filed a class action
complaint against LUMA. In the lawsuit, plaintiffs request that the
court order LUMA and other co-defendants, ``to pay for the economic
damages caused to the businesses as Class A members, and to the
residential clients as Class B members, which is estimated jointly in
an amount of not less than $310,000,000.00.\17\
---------------------------------------------------------------------------
\17\ Wendico et al. v. LUMA Energy, LLC et al., Civil Nnm.
SJ2022CV02868 (TPI, San Juan, May 13, 2022). This case has since been
consolidated with a similar claim against LUMA, Herrero Domenech et al.
v. Luma Energy, LLC et al., Civil Num. SJ2022CV02868 (TPI, San Juan,
April 13, 2022), https://document.epiq11.com/document/
getdocumentsbydocket/?docketId=
961746&projectCode=PR1&docketNumber=2913&source=DM. The consolidated
case is now before the United States District Court for the District of
Puerto Rico, Herrero Domenech et al v. Luma Energy LLC et al, 22-00050-
LTS, (U.S.D.P.R. 2022), https://www.pacermonitor.com/public/case/
45457686/Herrero_Domenech_et_al_v_LUMA_Energy_LLC_et_al.
---------------------------------------------------------------------------
The increase in voltage fluctuations is so palpable that it
prompted the Puerto Rico legislature to seek amendments to Act 57-2014
in order to allow the Independent Consumer Protection Office (ICPO), to
file claims against LUMA on behalf of its clients, for damages to
domestic appliances caused by voltage fluctuations.\18\ The Puerto Rico
House of Representatives also filed a measure requesting that LUMA
follow up on complaints filed by citizens who have lost electrical
appliances due to the blackout on April 6th, 2022.\19\

\18\ P. del S. 0845 of April 18, 2022, 3rd Ord. Sess., 19th Leg.
Assem.
\19\ Presentan Resolucion para Seguir Reclamos por Enseres Danados
por el Apagon, Primera Hora (Apr. 9, 2022, 3:47 PM), https://
www.primerahora.com/noticias/gobierno-politica/notas/presentan-
resolucion-para-seguir-reclamos-por-enseres-danados-por-el-apagon/;
Legisladora Invita a Reclamar a LUMA por los Enseres Danados por el
Apagon y se Compromete a Dar Seguimiento, Univision Puerto Rico (Apr.
10, 2022, 10:34 AM), https://www.univision.com/local/puerto-rico-wlii/
como-reclamar-a-luma-por-enseres-danados-apagon.
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Prior to Hurricane Fiona, two major hospitals lost power for
several hours, forcing doctors to cancel surgeries, routine medical
treatment, and reschedule appointments. Carlos Diaz Velez, president of
the Puerto Rico College of Physicians, highlighted the dangers lurking
behind the outages, saying, ``all of these cases (outages) put the
health, and in some cases, the lives of patients at risk. If the power
goes out, the patient will either die or deteriorate.'' \20\ Fernando
Cabanillas, a leading hematologist in Puerto Rico, wrote a column about
an outage that lasted over 20 hours at a major Puerto Rico hospital,
specifically he mentioned that ``the institution did not have access to
electronic files or telephones for 20 hours. [...] Deaths that are
indisputably due to a blackout are those that occur immediately and are
therefore indisputable, such as when a respirator fails due to lack of
electricity, but in other cases the death may take days or weeks to
manifest and may not be so obvious.'' \21\
---------------------------------------------------------------------------
\20\ Colegio de Medicos Dice Que Luma Fallo y Recuerda Qu Sin Luz
la Vida de Pacientes Peligra, NotiCel (Aug. 25, 2022, 1:29 PM), https:/
/www.noticel.com/ahora/20220825/colegio-de-medicos-dice-que-luma-fallo-
y-recuerda-que-sin-luz-la-vida-de-pacientes-peligra/.
\21\ Fernando Cabanillas, LUMA: Una Amenaza a la Salud Publica, El
Nuevo Dia (Aug. 28, 2022), https://www.elnuevodia.com/opinion/consejos-
de-cabecera/luma-una-amenaza-a-la-salud-publica/.
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LUMA will seek to place blame elsewhere and point to the age and
condition of the transmission system--but the facts above demonstrate
that LUMA's skeleton workforce is doing a worse job operating this
system than PREPA's veteran, union workforce had been doing prior to
June 2021.\22\ LUMA has not provided basic maintenance to the electric
system, such as pruning vegetation to avoid affecting the power lines
(transmission and distribution system).\23\ Vegetation impacts are a
major cause of power outages and contributed to the Hurricane Fiona
outage.\24\
---------------------------------------------------------------------------
\22\ In October 2022, UTIER filed a lawsuit against LUMA and others
for defamation and cyber harassment, alleging that LUMA orchestrated a
slanderous media campaign to discredit and blame the unions for PREPA's
management failures. https://www.sanjuandailystar.com/post/utier-sues-
luma-quanta-services-others-for-defamation-cyber-harassment.
\23\ Felipe Gomez Martinez, LUMA No Usa Fondos para Poda de Arboles
y Vegetacion en las Lineas Electricas, Wapa TV, NotiCentro (Sept. 12,
2022), https://www.wapa.tv/noticias/locales/luma-no-usa-fondos-para-
poda-de-arboles-y-vegetacion-en-las-lineas-electricas_20131122537926.
html.
\24\ Joshua Paltrow and Arelis R. Hernandez, Even Before Fiona,
Puerto Rico's Power Grid Was Poised for Failure, The Washington Post,
(Sept. 19, 2022), https://www.washingtonpost.com/nation/2022/09/19/
puerto-rico-blackout-hurricane-fiona/. See also August 1, 2022 letter
from PREPA Executive Director Josue Colon Ortiz to LUMA President Wayne
Stensby, stating PREPA's concern with ``the condition of several of the
transmission lines of our electrical system, particularly the condition
of the vegetation in the easements and their proximity to the lines, a
situation that can be detected at first sight.'' https://twitter.com/
jaramilloutier/status/1559953502310465536/photo/1.
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LUMA has failed to provide information on the work to restore power
to the millions of residents of Puerto Rico.\25\ LUMA's Contract
provides a cloak of secrecy and lack of transparency to LUMA who, in
effect, has not responded to claims for access to information. This
lack of transparency has been facilitated by the Public Private
Partnership Authority (``P3A'') and the Puerto Rico Energy Bureau
(``PREB''). The lack of access to information and contractual
provisions allows LUMA to create, as it has done in practice, an
environment for corporate profiteering, subcontracting to its own
affiliated companies, as well as their executives, who also receive
excessive salaries. As a for-profit business, LUMA has shown that it
only seeks to enrich itself and impose conditions to increase its
profits, such as not hiring the workforce necessary to operate and
maintain the system. LUMA's Contract has harmed the rights of the
workforce and pensioners while hiring substitutes at well above the
AEEPR's compensation rates, thus creating a system of labor inequality
and injustice for Puerto Rican workers.
---------------------------------------------------------------------------
\25\ Cynthia Lopez Caban, LUMA no sabe cuantos clientes tienen luz
porque hace el calculo de forma manual, Jay Fonseca (Sept. 22, 2022),
https://jayfonseca.com/luma-no-sabe-cuantos-clientes-tienen-luz-porque-
hace-el-calculo-de-forma-manual/. LUMA also lied about flying
helicopters to inspect the damage caused by Fiona. El Nuevo Dia, on the
other hand, obtained information that directly contradicted this.
LUMA's chief pilot had resigned prior to the hurricane, so despite
having four PREPA helicopters, LUMA was unable to fly them at the time
of their statement. Manuel Guillermo Capella, Lento el avance en la
restauracion del servicio electrico y de agua potable, ENDI, (Sept. 22,
2022), https://www.elnuevodia.com/noticias/locales/notas/lento-el-
avance-en-la-restauracion-del-servicio-electrico-y-de-agua-potable/.
---------------------------------------------------------------------------
LUMA has exceeded the budget for the operation and maintenance of
the electrical system functions under its charge. LUMA has not invested
a single penny of its money in the electrical system. As laid out in
our October 2021 testimony, the LUMA Contract grants inordinate control
over disaster recovery funds to LUMA Energy.
The LUMA Contract provisions and operation negatively affect the
legally mandated renewable energy goals.\26\
---------------------------------------------------------------------------
\26\ LUMA filed a motion with the PREB challenging the use of funds
for interconnection of renewable energy projects. Urgent Motion
Requesting Reconsideration of Energy Bureau's Resolution and Order of
June 13, 2022, and Stay of All Directives Therein, Implementation of
the Puerto Rico Electric Power Authority Integrated Resource Plan and
Modified Action Plan, NEPR-MI-2020-00012, June 22, 2022, https://
energia.pr.gov/wp-content/uploads/sites/7/2022/06/Urgent-Motion-
Requesting-Reconsideration-of-Energy-Bureaus-Resolution-and-Order-of-
June-13-2022-and-Stay-of-all-Directives-Therein-NEPR-MI-2020-0012.pdf.
---------------------------------------------------------------------------
III. A Resilient, Reliable and Accessible Electric System in Puerto
Rico is Possible

FEMA should prepare an Environmental Impact Statement (EIS) that
includes consideration of distributed renewable energy such as rooftop
solar and battery energy storage systems for the investment of the
historic amount of disaster recovery funds. The Federal government
should require that the historic amount of disaster recovery funds be
used to equip each residence, business, and institution with
distributed solar energy systems, mainly on rooftops, parking lots or
other suitable places together with energy storage systems (batteries).
These funds should not be used to rebuild the same vulnerable,
centralized power grid. Scarce land should not be impacted or
sacrificed, especially agricultural and ecological land, to build
industrial scale renewable energy projects that depend on vulnerable
transmission lines. Utility scale renewable energy projects took 15
months to reconnect to the grid after Hurricane Maria.\27\
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\27\ Ruth Santiago et al., The Devastating Costs of Puerto Rico's
``Solar Farms'', NACLA (Feb. 17, 2022), https://nacla.org/puerto-rico-
solar-farms.
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The transformation of the electric system toward a system based on
distributed renewable energy mainly through rooftop solar energy
systems will provide environmental justice to the communities most
impacted by fossil fuel plants that pollute the air, land and water,
and damage to public health.
Puerto Ricans with the means to do so are rapidly installing
rooftop solar and storage systems for their own homes--Puerto Rico is
projected to have 500 MW of rooftop solar and more than 1,100 MWh of
rooftop storage by the end of next year.\28\ If the historic amount of
federal funds are not made available to provide rooftop solar and
storage systems for low- and moderate-income Puerto Ricans, these folks
will be left behind with an expensive, dirty, and unreliable grid and
vulnerable to tropical storms and low grade hurricanes like Fiona.
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\28\ Frances Rosario, Nuevo ``Boom'' en Venta de Placas Solares,
Primera Hora (June 13, 2021, 11:45 PM), https://www.primerahora.com/
noticias/puerto-rico/notas/nuevo-boom-en-venta-de-placas-solares/.
Projection based on numbers found in the 2021-2022 metrics released by
PREB. Puerto Rico Energy Bureau, supra note 16, at app. 5.
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FEMA, LUMA Energy, the government of Puerto Rico and PREB, continue
to push the reconstruction of the 20th century centralized electric
system that has failed after each hurricane and sometimes during lesser
storms too and power purchase agreements for utility scale renewable
energy projects that depend on centralized T&D.
Governor Pedro Pierluisi who took power with barely 32% of the vote
is asking FEMA, with the blessing of political cronies at the PREB to
hand over about $14 billion dollars to rebuild the centralized T&D
system and add new methane gas-fired plants. One notable exception to
this scheme is a recent request by PREPA to PREB to use a relatively
small amount ($34M out of $14B) for rooftop solar in remote mountainous
communities.\29\
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\29\ Motion to Inform Reallocation of FEMA 404 HMGP Funds and
Requests for Approval of Generation Projects, In RE: Review of the
Puerto Rico Electric Power Authority's 10-Year Infrastructure Plan--
December 2020, NEPR-MI-2021-0002, Aug. 2, 2022, https://energia.pr.gov/
wp-content/uploads/sites/7/2022/08/Motion-to-Inform-Reallocation-of-
FEMA-404-HMPG-Funds-and-Request-for-Approval-of-Generation-Projects-
NEPR-MI-2021-0002-1.pdf.
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In contrast, and as set out in the We Want Sun/Queremos Sol
proposal,\30\ civil society groups are calling on PREPA to not renew
the LUMA contract and instead invest the historic amount of FEMA funds
allocated for the electric system to provide life-saving distributed
renewable energy, primarily rooftop solar and battery energy storage
systems to enable universal access to resilient power to Puerto Rico
residents, businesses and institutions. Queremos Sol also proposes a
new governance model, that is public, depoliticized, inclusive and
transparent.\31\
---------------------------------------------------------------------------
\30\ We want sun / Queremossol (queremossolpr.com).
\31\ Section V of the Queremos Sol Proposal, https://
www.queremossolpr.com/project-4.
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While various community groups and philanthropic organizations have
built a few rooftop solar and battery energy storage projects
throughout Puerto Rico, the pace and scale of these alternatives is
dwarfed by the proposed rebuild of the centralized grid and the rollout
of new methane gas plants. Higher income individuals are installing
rooftop solar and storage systems but with close to a 44% poverty rate,
most people in Puerto Rico cannot access the life-saving resiliency
that these systems can provide. In Puerto Rico and we might add, the
Gulf Coast and beyond, the investment of FEMA funds is a matter of
equity and environmental, climate and energy justice. These funds
should not be used to rebuild the same vulnerable, centralized electric
system, powered by imported fossil fuels. Refusing this hazardous
dependency and opting for a distributed alternative would also spare
scarce land that should not be sacrificed to build industrial-scale
renewable energy projects. Agricultural and ecological land must be
reserved for other purposes, including for cultivating food sovereignty
and reclamation efforts.
Puerto Rico need not be a place of unmitigated disaster. The people
of the archipelago already have mapped out--and in some places built--
solutions to these challenges, that refuse the centralized, fossil-
fired system. Fourteen-billion dollars are already earmarked to save
residents' lives. How many more people need to die for FEMA and the
Government of Puerto Rico to invest in rooftop solar alternatives?
The Biden-Harris administration must make good on its commitment to
tackle the climate crisis and center environmental, climate, and energy
justice by positioning Puerto Rico as an example of what recovery funds
can do to transform the electric system. It is past time for the
reimaginings provided by our communities to be taken seriously to
create new systems that transform power and advance justice. Puerto
Rico needs energy justice now!
IV. Conclusion

For the reasons summarized in this written testimony, we urge the
House Committee on Natural Resources to investigate the LUMA
Transmission and Distribution System Operation and Maintenance
Agreement 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 require FEMA to prepare an
Environmental Impact Statement in compliance with NEPA and consider
reasonable alternatives such as rooftop solar and battery energy
storage systems. That analysis will show that the best use of the
historic amount of FEMA funds allocated for the electric system would
be rooftop solar and storage systems, which are already providing life-
saving electric service to the residents of Puerto Rico. We also ask
for 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. Using FEMA funds to rebuild the centralized Puerto
Rico grid is a terrible waste of taxpayer money.

Attachment

List of Puerto Rico and Stateside organizations joining in testimony
presented by Ruth Santiago, Esq.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

The Chairman. Let me ask the Members, beginning with Mr.
Stauber, if you have any questions.
Mr. Stauber. Yes.
The Chairman. You are recognized for 5 minutes, sir.
Mr. Stauber. Thank you very much, Mr. Chair. Just a few
questions for Dr. Bahramirad.
Thank you for joining us today. Is LUMA in charge of energy
generation, or is PREPA?
Dr. Bahramirad. Thank you, Congressman, for the question.
LUMA is in charge of transmission and distribution, and PREPA
is responsible for generation.
Mr. Stauber. OK. Does LUMA have any control over
skyrocketing energy prices?
Dr. Bahramirad. No, in fact, Congressman, I appreciate the
opportunity to clarify, as this is an area of immense
confusion. LUMA has never asked or received a rate increase. We
have no control over that. And to be honest, this is an area
that PREPA needs to address. It is hurting the people of Puerto
Rico, and we have efforts that are implementing to mitigate
that damage.
Since the beginning of 2021, there have been seven
increases in the rate customers pay for electricity due to the
rising cost of generation fuel used by PREPA and other
generators, and there have been zero increases proposed to pay
any of LUMA's operation. Less than 16 percent of the bill is
related to LUMA's operation, and LUMA does not generate energy,
nor does not financially benefit from any change or increase in
generation fuel costs.
I should also mention that since August, twice there have
been reductions in generation cost and rate, as well.
Mr. Stauber. Thank you. How long did it take LUMA to return
electrical service to Puerto Rico following Hurricane Fiona?
Dr. Bahramirad. As you heard in my testimony, Congressman,
with the Category 1 Hurricane Fiona, we experienced 100-mile-
per-hour wind and over 30 inches of rain in some areas. It took
us 5 days to restore 52 percent of customers, and 12 days to
restore 90 percent of customers.
That is a historic restoration for Puerto Rico that hasn't
been seen in the past, and that is due to the fact that we have
spent over 10,000 hours of training with FEMA. We have done a
number of drills with the Federal Government, FEMA, Army Corp,
COR3, Department of Energy, and many others to be prepared for
such natural disasters.
In addition to that, our parent company has invested in
assets and trucks, bucket trucks, and diggers in the island to
be prepared for such events. And as a result of that, we have
been able to restore 90 percent of customers in 12 days.
Mr. Stauber. We also know that LUMA inherited a massive
maintenance backlog. With my remaining time can you describe
that backlog left by PREPA, and how many projects you have
completed since you have had the contract?
Dr. Bahramirad. This is an excellent question. When we took
over, we had to digitize rooms and rooms of paper, and to
analyze them related to maintenance of equipment, substation
transmission and distribution lines, and analyze them and
prioritize the maintenance of them. We have made significant
progress.
In addition to that, when we took over, there were over
270,000 work orders in the backlog that have been there since
Maria. And right now, we have only 10,000 work orders in the
backlog.
Mr. Stauber. So, you went from 270,000 backlog orders to--
--
Dr. Bahramirad. To less than 10,000 in 17 months.
Mr. Stauber. OK. I appreciate the opportunity and, Mr.
Chair, I yield back.
The Chairman. The gentleman yields. Let me now turn to the
gentleman from Chicago, Mr. Garcia.
You are recognized for 5 minutes, sir, if you are
available.
[Pause.]
The Chairman. I guess not. And Mr. Bentz, sir, you are
recognized. Thank you.
Mr. Bentz. Thank you, Mr. Chair. I have some questions for
Mr. Pardo, if he can answer, if he can hear me.
My first question has to do with your report. You call out
that--you suggest, actually, making a list of five priority
projects in different areas. Your report would suggest that
there hasn't been a prioritization done. Is that true? Are you
saying there was no prioritization?
If so, who decides what happens, which projects get done
first?
Mr. Pardo. Well, I know that there are critical projects
that the government has in mind, but think the most important
factor here is the power grid and the big projects that really
provide the resiliency needed before the next hurricane. Those
projects have not started. So, those projects may be in FEMA's
hands or in LUMA's hand. That is why the assignment of Jennifer
Granholm is key to resolve those issues and put those projects
out for construction.
Mr. Bentz. So, I am going to pop around here a bit, because
I don't have much time.
In the next part of your report you talk about skilled
labor and that it is a major concern. I looked quickly at the
population of Puerto Rico, which is 3.264 million. I looked at
the demographics and in the unemployment rate. It appears that
your unemployment rate is 8.27 percent. So, I am just
wondering, do you have people in Puerto Rico that don't want to
work, or what is going on? How come you are short labor when
you have an 8.5 percent unemployment rate?
Mr. Pardo. Well, speaking for the construction sector, the
current formal market is around 30,000 workers. It used to be,
before the 15 years of it being a declining economy, that
number used to be 60,000. We could manage around $6 million
worth of work a year, but after 15 years of declining economy,
we have lost that ability, and we need workers. We need workers
to perform this reconstruction work as soon as possible. That
is why we are proposing this initiative for Parole for
Significant Public Benefit.
Mr. Bentz. It appeared to me--and we have the same issue,
by the way, although the unemployment rate appears to be around
3 percent here, so we have an incredible demand for the same
visas you talk about, the H-2B and, actually, also H-2A visas.
So, this seems to be a Western Hemisphere problem.
Let me go to your last paragraph, where you talk about the
restrictions that labor unions have imposed upon--or the
requirements that certain labor unions be used. And you say
this increases cost dramatically and will significantly limit
the number of projects that will, in fact, be built. LUMA's
chosen union will not be able to supply the amount of
construction workers that will be needed. Have you brought this
to the Governor's attention?
Mr. Pardo. Yes, we have. Yes, we have.
Mr. Bentz. And what is the response?
Mr. Pardo. The response has been that they are giving LUMA
the priority to decide. Our point of view is that these are
Federal funds for the benefit of Puerto Rico. We are very sure
that when those projects go out to bid, pricing using those
PLAs are going to be much higher than they need to be. And if
there is any doubt, they can open it to the market, and we can
compare pricing so we can make the best use of the funds
available.
Mr. Bentz. Right. Well, I could comment on this, but I
won't. I have a last question.
You say that the U.S. Government, the Commonwealth, and the
construction industry should work together to implement
``innovative solutions.'' Do you have one or two, some
innovative solutions you would suggest?
Mr. Pardo. Yes, yes, thank you for your question. The
Parole for Significant Public Benefit, that is a parole with a
prerogative the executive branch can provide due to the
hurricane in Puerto Rico. They can provide us with a parole
using non-citizens currently living in Puerto Rico. It is not
for people to come in. It is people that are currently living
in Puerto Rico with an immigrant status, to provide them a
formal way to work for these construction projects, much
needed, and they can be provided a legal way to legalize their
status.
Mr. Bentz. Thank you, Mr. Pardo, very much.
I yield back.
The Chairman. Are any of our----
Voice. Mr. Torres is here, Mr. Torres.
The Chairman. Mr. Torres, as you walk up, take a deep
breath. You are recognized, sir, when you are ready.
Mr. Torres. I have concerns about the manner in which LUMA
reports outages to the public. So, instead of reporting the
number of outages by municipality, LUMA reports outages by
regions.
And here is the problem as I see it. Unlike municipalities,
which are based in law and tradition, and which are familiar to
the people of Puerto Rico, the six regions into which LUMA
divides the island, those regions are arbitrary and artificial.
LUMA's practice of reporting outages based on arbitrarily drawn
regions, in my view, has led to more confusion than clarity.
So, for example, if LUMA reports that power has been
restored in the region of Ponce, it gives the impression that
power has been restored in the municipality of Ponce, even if
that impression is false.
So, is LUMA willing to commit to reporting outages by
municipality, rather than by these imaginary regions you have
devised?
Dr. Bahramirad. Thank you for the question, Congressman. If
it is OK, I would like to invite my colleague, Mr. Hurtado, to
join me to provide details.
The Chairman. Please.
Mr. Torres. Thank you, Mr. Chairman.
The Chairman. Please introduce yourself, sir, for the
record, and your title.
Mr. Hurtado. My name is Mario Hurtado. I am the Chief
Regulatory Officer for LUMA Energy.
The Chairman. Thank you.
Mr. Hurtado. Thank you, sir.
Congressman Torres, the regions that you mentioned,
respectfully, are not arbitrary or artificial. They are based
on the configuration of the electrical system. So, the systems
that LUMA has that track outages by feeder or by distribution
lines coming from the transmission system, that is how the
system is organized. It is also organized so that we can
organize the work efficiently with the different crews. And
that is the way the regions are set up.
That said, your concern is very well taken, in terms of
reporting and providing information to the public. The systems
that LUMA inherited from PREPA are quite limited, specifically
the outage management system, which is the main tool that is
used to track outages and to be able to report out. We have an
improvement program that we have instituted to make
improvements in that, but there is quite a bit of missing data.
We have been rebuilding it, but it is a process that will take
several years----
Mr. Torres. I will rephrase the question. Is it--and I know
it is--it may not be arbitrary to you, but to the people on the
island it comes off as arbitrary. Like, reporting by
municipality would seem more natural, more logical to residents
on the island.
So, my question is, is it even possible for you to break
down the reporting at the municipality level?
Mr. Hurtado. Congressman, where I was getting to in my
answer is that is a goal that we have, and we are moving toward
that. We are not there yet. As I mentioned, as I was trying to
say, it is a multi-year process set for us to get there in
terms of cleaning the data, making sure that it is reflecting
the reality, and also being able to extend the data beyond just
the feeders, but to the laterals that are many of the lines
that come off of a main feeder to actual people's homes.
At this time, we don't have the granularity of data
acquisition from the system to be able to report that way. So,
we are really making calculations and estimates based on how
many customers we believe are connected to certain feeders. So,
that data, while it is the best data we have at the time, is
not that accurate, and it is not organized around
municipalities. That is part of the process that we are
undergoing, and it is something that we are driving toward.
Dr. Bahramirad. Congressman, one thing I would add to it is
the good news is that one of the most transformative projects
that was recently approved by FEMA is modernization of our
energy management system. And as we go through the process and
install that, that is going to help us to get what you are
asking, having more visibility to municipalities, and provide
that information to our customers.
Mr. Torres. I have a question for, I think, the housing
representative. I spoke to the Governor earlier about the
informal nature of much of the housing in Puerto Rico, and how
do we ensure that we are not simply rebuilding in the same
form, but that we are building back better. So, do you have the
funding that you need from FEMA or HUD to rebuild the housing
stock with greater resilience?
Mr. Rodriguez. Yes. Thank you for the question,
Congressman. Yes, we have the money from the DR. We got----
Mr. Torres. How large is that pot?
Mr. Rodriguez. Three billion.
Mr. Torres. Three billion?
Mr. Rodriguez. Yes. Currently, we have access to that
money. Last year, we increased from 400 houses that we already
either repair up to code or reconstruct, and now we have more
than 4,000 houses----
Mr. Torres. I just want to interject, because I see my
time--$3 billion will lead to the rebuilding of how many homes?
And that will be my final question.
Mr. Rodriguez. Sorry?
Mr. Torres. You said you have a pot of $3 billion to
rebuild homes with greater resilience.
Mr. Rodriguez. Yes.
Mr. Torres. How many homes?
Mr. Rodriguez. It will be 17,000 homes.
Mr. Torres. Seventeen thousand?
Mr. Rodriguez. Yes.
Mr. Torres. Out of how many homes in Puerto Rico's housing
stock?
Mr. Rodriguez. One million.
Mr. Torres. So, I think we have a distance to travel
before----
Mr. Rodriguez. Yes.
Mr. Torres. Thank you, Chair.
The Chairman. Thank you, I appreciate it, and thank you for
joining the Committee momentarily, I assume.
Let me now turn to the Commissioner of Puerto Rico, Miss
Gonzalez-Colon.
You are recognized.
Miss Gonzalez-Colon. Thank you, Mr. Chairman.
First of all, I want to just recognize that this morning
two officers were shot doing their job in the morning by CBP
Patrol in the water in the southwest of the island. One of
those CBP officers just passed away as a result of their
injuries. So, I just want to acknowledge that and send our
condolences to their families and all the people involved.
And regarding the hearing, I would like to request PREPA to
submit a written statement regarding the reconstruction of the
island, the power grid, and the generation because it is
pertaining to this discussion today, if you allow that to
happen, sir.
The Chairman. Without objection, and I think it is a good
request.
Miss Gonzalez-Colon. Thank you.
The Chairman. That could be disseminated to all the
Members.
Miss Gonzalez-Colon. Thank you, sir.
The next request will be requiring the action plan for the
rebuilding of the power grid system to the Committee, including
timelines and estimated years in which milestones are to be
achieved by COR3 or the Government of Puerto Rico.
The Chairman. Again, without objection.
Miss Gonzalez-Colon. Thank you. My questions now are going
to be heading to LUMA and Dr. Bahramirad. Did I say that well?
Dr. Bahramirad. Yes, ma'am.
Miss Gonzalez-Colon. OK, thank you. First of all, who will
own title of the goods and equipment, such as tools, vehicles
acquired by LUMA using Puerto Rico or U.S. Federal funding for
the reconstruction of the electrical grid? Is it going to be
under LUMA Energy, PREPA, the Federal Government, or the local
government of Puerto Rico?
Dr. Bahramirad. People of Puerto Rico.
Miss Gonzalez-Colon. Sorry?
Dr. Bahramirad. People of Puerto Rico, ma'am.
Miss Gonzalez-Colon. So, they are going to be property of
the Government of Puerto Rico?
Dr. Bahramirad. Correct.
Miss Gonzalez-Colon. OK. The second question will be--and
you can submit this for the record--I know that LUMA was hired
to fix, of course, the situation of the electrical grid on the
island, the defective system of the electrical grid on the
island, and the Governor of Puerto Rico paid for this. How much
has LUMA been paid over the last year?
Dr. Bahramirad. I would defer that to my colleague, Mr.
Hurtado.
Mr. Hurtado. Congresswoman, good afternoon. LUMA's fee is
approximately $100 million.
Miss Gonzalez-Colon. During the last year?
Mr. Hurtado. Per year, ma'am.
Miss Gonzalez-Colon. For 1 year. It has incurred in the
profit or a loss during the last year.
Mr. Hurtado. Excuse me?
Miss Gonzalez-Colon. It was profit or loss for LUMA during
the last year?
Mr. Hurtado. For LUMA there was profit, based on the fee
minus other expenses.
Miss Gonzalez-Colon. How much subcontracting or consulting
does LUMA do to its own parent companies and other affiliates
of its parent companies?
Mr. Hurtado. LUMA has one contract. Actually, currently,
LUMA does not subcontract to its subsidiary, to its parent
companies at all. There is one contract that has been asked for
on an emergency basis because of Fiona in order to be a
subcontract there.
Miss Gonzalez-Colon. OK. Let's do this. Can you provide the
Committee a breakdown, including the justifications and the
amount charged and paid for those affiliates of your parent
companies, even including Hurricane Fiona?
My next question will be in the sense that during the Fiona
recovery it was reported that LUMA did not call upon the other
public utilities in the American Public Power Association for
cooperation agreements to provide support, personnel, and
equipment, but did everything using LUMA's own contractors. Is
that true, yes or no?
Dr. Bahramirad. Yes, ma'am.
Miss Gonzalez-Colon. OK, OK.
Dr. Bahramirad. We have been in constant communication
with----
Miss Gonzalez-Colon. OK, the answer is yes. So, how many
local versus USA/Canada contractors used?
Dr. Bahramirad. During Fiona we had over 2,800 utility
workers and over 2,500 vehicles deployed.
Miss Gonzalez-Colon. OK. And how much did that cost versus
what the public utility support will have cost?
[No response.]
Miss Gonzalez-Colon. And if you don't have the answer, you
can submit it later to the Committee.
Dr. Bahramirad. Sure. Yes, I don't have the comparison of
the cost.
Mr. Hurtado. Respectfully, the aid from public utilities
was not an option. There wasn't enough time for them to be able
to do it.
Miss Gonzalez-Colon. I don't have a question for you, sir.
The question now will be for the COR3 Director, and I know
you have been asking for the Committee to expedite and approve
more things to make it easier to get the money. Can you clarify
how many electrical grid projects have been submitted,
obligated, approved, and disbursed for, and what are the
funding sources that you can give to the Committee? You can
submit it in writing.
And I know you have been dealing with this for many, many
months, and asking for some amendments that we are working on
in another Committee, which is Transportation and
Infrastructure. What will be your main request, aside for doing
the Stafford Act amendment?
Mr. Laboy. Thank you, Congresswoman. I will say that, as of
today, we have requested FEMA to streamline its process for
this FAASt that we expressed before. All these energy projects
for the reconstruction of the electrical grid, including
generation, transmission, and distribution under the public
assistance program, the $9.5 billion, they have to go through
that national delivery model by FEMA. It means that they have
to conduct Environmental and Historic Preservation Reviews,
very thorough reviews, and also additional evaluations
associated with extra dollars for hazard mitigation measures.
It takes time.
And I have to emphasize the fact that the $9.5 billion was
just a budget when it was announced, and it is based on
reimbursement. So, every project has to go back to FEMA. Today,
they are committed to streamlining that process, but it takes a
lot of time to get authorization for construction.
And let me clarify it again, as I did in my oral statement:
the $9.5 billion never authorized construction. The
construction is authorized once the scope of work is obligated.
As of today, and when the Governor also said it this morning,
there are 51 projects obligated by FEMA. There are 43 right now
pending approval by FEMA. Hopefully, we get to the 100 projects
approval before the end of the year.
So, we ask FEMA, and they are actually doing that review to
streamline that process. And, of course, then we have the rest
of the asks that are included in our testimony.
Miss Gonzalez-Colon. Thank you. My time already expired. I
will submit the rest of the questions for the record.
Thank you, Mr. Chair, and I yield back.
The Chairman. Thank you very much, Commissioner.
The gentleman from Chicago, Mr. Garcia, do you have any
questions? You are recognized, sir.
[No response.]
The Chairman. Mr. Garcia? You are recognized, sir.
Mr. Garcia. Thank you, Mr. Chairman. Sorry for that little
glitch. As you know, Chair Grijalva, you are working to pass $5
billion in supplemental funding for rooftop solar and battery
storage systems, which would go to low-income households and
households with people with disabilities in Puerto Rico.
How could you recommend that programs be operationalized in
order to best meet the needs of the people it is intended to
serve? That is a question for Ruth Santiago, our community
environmental attorney.
Ms. Santiago. Thank you, Congressman. We fully support the
Queremos Sol Coalition. We Want Sun Coalition fully supports
the disaster supplemental bill for $5 billion for rooftop solar
and storage.
As we mentioned in our written testimony, only high-income
people have been able to access that type of lifesaving,
resilient energy supply.
And we clearly saw after Hurricane Fiona that people who
had rooftop solar were able to have power both during and after
the hurricane. And our hope is that the bill will be passed and
that Puerto Rico will become more viable as a place. I hope
that that answers your question.
Mr. Garcia. Yes. Thank you very much.
A question for Ms. Bahramirad. Under the existing contract
with the Government of Puerto Rico, your company is charged
with the use of funds for the reconstruction of the grid. But
FEMA establishes the relationship with PREPA and the Government
of Puerto Rico as recipients of the funds. And, as we know,
FEMA undertakes a recoupment process to get funds back when
they are not used according to the guidelines or policies.
Is LUMA obligated under the existing program to pay back
the recoupment of FEMA if the guidelines are violated?
Dr. Bahramirad. Go ahead.
Mr. Hurtado. Hi, Congressman. Mario Hurtado for LUMA. Under
the operation and maintenance contract between the Government
of Puerto Rico and LUMA, there are several provisions about the
management of Federal funds.
You definitely stated correctly that the recipient is the
Government of Puerto Rico, and in the case for electrical
sector PREPA is the sub-recipient. LUMA, as a contractor for
PREPA, has some specific duties there, including following all
of the Federal laws and regulations in order to fully utilize
all of the funds that Puerto Rico is entitled to rebuild the
grid.
And we have to follow a specific procurement plan for that
and other rules, and that is overseen also by the Public-
Private Partnerships Authority, and they have the ability to
check all of our work, as, obviously, FEMA does, as well. So,
we do have the responsibility to spend those funds within the
guidelines and within the rules.
Mr. Garcia. OK. And will LUMA respond to the Government of
Puerto Rico if money is recouped as a result of your
reconstruction work?
Mr. Hurtado. If money is recouped, sir?
Mr. Garcia. Yes, as a result of your reconstruction work.
Mr. Hurtado. If I understand your question, is LUMA
responsible to the Governor of Puerto Rico for how it spends
those funds and the reimbursement of those funds? The answer is
yes, we are.
Mr. Garcia. OK. Thank you very much.
Mr. Chairman, I yield back.
Mr. Laboy. Mr. Chairman, if I may add one quick comment, if
I may, about that last question, I need to clarify also for the
record that COR3 is the recipient and administrator of all FEMA
obligated funding. So, therefore, COR3 serves as the entity in
front of FEMA and the Federal Government to ensure that all
funding is used and disbursed properly. And we have all the
controls, the policies, and procedures to ensure that every
penny that is disbursed is done in full compliance and
transparency with Federal requirements. So, we are that
watchdog.
The Chairman. OK.
Mr. Laboy. Thank you.
The Chairman. Thank you, sir.
Doctor, and--I am sorry to the other person that was called
up to the table for LUMA--one general question.
There is a contract called the Operations and Maintenance
Agreement. There is currently also a supplemental agreement
that delays the full implementation of the Operations and
Maintenance Agreement. The full Operations and Maintenance
Agreement and all of its contract provisions are supposed to
begin on December 1, or after the debt is figured out. Is that
an accurate way to summarize it? Yes?
Mr. Hurtado. Approximately, Chairman.
The Chairman. Approximately yes?
Mr. Hurtado. Approximately yes, yes.
The Chairman. And the contract sets incentives for good
performance. But currently, neither the contract nor the
supplemental agreement has any financial penalties for poor
performance, is that correct, as well, or approximately
correct?
Mr. Hurtado. No. The contract has significant consequences
for not meeting certain performance metrics. Specifically,
there are key performance metrics that are designated----
The Chairman. Does it involve financial penalties?
Mr. Hurtado. Well, it would put in jeopardy the contract,
and it would give the ability of the Government of Puerto Rico
to cancel the contract. If key performance metrics are not met
for 3 years in a row, the Government of Puerto Rico may cancel
the contract.
The Chairman. But there could be poor performance 2 out of
3 years, but you would meet 1 out of 3, correct? Or is that
just----
Mr. Hurtado. Well, that is the terms of the contract as
they were negotiated and presented with the Government of
Puerto Rico.
The Chairman. OK, I appreciate it. That was approximately
maybe. I don't think it was entirely a yes.
But I mention that because I think financial penalties are
essential, and we will dig into how that is in the contract. It
is the question I asked the Governor, and there is some
confusion as to the interpretation. We will follow up on it,
because I really believe that is the main mechanism for
accountability. And if it is not strong enough, then there are
no consequences, and the people of Puerto Rico could,
potentially, and have suffered.
But, anyway, as I mentioned in the statement, my colleagues
and I, including the Resident Commissioner, are proposing an
energy resilience measure focused on those that need it most
after a disaster. After this disaster, we are requesting $5
billion in emergency supplemental that would provide rooftop
solar and battery storage to low-income households and
households with people with disabilities.
In answer to Mr. Garcia's--part of an answer is that that
is the targeted population, and that would be the control
mechanism in terms of the disbursement they would have to
qualify under that.
And the market for rooftop solar and batteries in Puerto
Rico is one of the most active in the country right now, in
part because people need to keep their lights on and their
refrigerators humming during and after a disaster. Hurricane
Fiona hit Puerto Rico in September. We saw that those with
solar and batteries got to keep their lights on and that
function. But the only people getting these resilience tools
are the ones that can afford it, quite frankly. And those that
can't are denied that very basic need. And for some, it is a
matter of life and death.
So, I want to ask a couple of you, and I was going to ask
Ms. Santiago, but I think you responded to that question
already with Congressman Garcia. Do you support the proposal
that the Department of Energy provide $5 billion for rooftop
solar and storage solutions for Puerto Rico in this new
emergency appropriations bill?
Ms. Gossett, do you support that proposal?
Ms. Navarro. Yes, absolutely. We are 100 percent in support
of that proposal and think it is absolutely necessary.
After Hurricane Fiona we had to rapidly deploy both solar
energy systems to different communities, and also,
unfortunately, generators. But the generators that we were
deploying to the homes of people with disabilities who require
them for respirators, for dialysis, there was no diesel then to
support them. So, solar really is the answer, and I think your
proposal is fantastic.
The Chairman. And Mr. Emilio Colon-Zavala, your reaction.
Do you support that proposal?
Mr. Colon-Zavala. Yes, we do support that program.
The Chairman. I appreciate that. And now, Doctor, if the
proposal covered the technology necessary to be compatible with
the existing grid, would that be helpful to LUMA's operations?
Dr. Bahramirad. Thank you, Chairman, for the question. It
is an opportunity for us to reiterate that we are supporting
the public policy in Puerto Rico, and the people of Puerto Rico
have chosen 100 percent renewable. And in the past 17 months,
the record shows that we have connected 36,500 more than the
past decade, and we do support it.
In terms of a specific question that you asked, the impact
of renewable into the grid, as well as the cost in buildings,
in order to retrofit the roof and making upgrades in buildings
that they do not meet the safety codes, as long as it is
incorporated into the bill we definitely support that.
The Chairman. It is in there. And the Governor--and thank
you--has already expressed his support, and I am very grateful.
My colleagues, Senator Menendez, Senator Gillibrand got 13
signatures in a letter of support urging that that be included.
There is a letter from various groups from the island,
including the Puerto Rico Chamber of Commerce, which supports
it, and the Secretary of Energy, who has spoken favorably of
it. So, this is an idea with good appeal.
I think it can do a lot for families. And while it is not
the substantive, total structural answer to the questions that
we have been dealing with here today, it became a prevalent
question and concern to us, given the reactions we were getting
after Fiona. So, we are going to urge people to support that,
and I want to thank all of you for your support.
Before I thank the witnesses and close up the meeting--I
know nobody wants to leave, but I am going to have to break
this up--I wanted to say something. I think this whole
discussion, and much of the discussion that has occurred has
been around trying to address the issue of disparity and these
emergencies, the reconstruction and energy delivery on the
island, I think, there has to be a balance and an equity going
forward. And we need to address that.
And the accountability and transparency that is necessary,
particularly in making as a commitment, as the good doctor
said, the commitment that Puerto Rico has in policy to 100
percent renewable, I think that is important.
And one of the areas that I brought up with the Governor,
and it has also been a discussion point among the Members here
on both sides of the aisle, are the two critical areas of
reconstruction that continue to be a priority--and we will
continue to ask, regardless of who is in that chair, of the
progress on that--is school reconstruction and the medical
facilities reconstruction.
And I think the point was made by various witnesses, and
that is the community collaboration and the substantive
inclusion of that community in planning for the goal of 100
percent renewable and alternative energy, particularly at the
local community level, which I think will go a long way.
One of my trips, one of the early trips to Puerto Rico to
look at the energy, we went into a small community alli en las
montanus, and they had, through a non-profit, situated
themselves with battery storage and energy, and were able to,
during the worst points in Maria, sustain themselves in those
homes. There weren't many, but they were able to sustain
themselves. And that left an impression with many of us, an
impression that, with this $5 billion, we are trying to provide
a good example of what can be done and how community
collaboration can help us do that.
I want to thank you. We will continue to monitor, to
follow, to provide oversight and, as we are doing with this
supplemental, continue to urge that we reach that balance and
begin to close the disparity gap with our fellow citizens in
Puerto Rico.
With that, thank you very much. The meeting is adjourned.

[Whereupon, at 4:13 p.m., the Committee was adjourned.]

[ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

Statement for the Record
Ingrid M. Vila Biaggi MS, PE
President CAMBIO
November 17, 2022

I. PROMESA has failed in bringing about the necessary electrical system
transformation

Six years after its passage, it is clear that PROMESA is not
furthering the necessary transition toward an affordable and
financially stable electricity system. PROMESA gives the Financial
Oversight and Management Board the power to certify fiscal plans and
budgets for the Puerto Rico Electric Power Authority (PREPA). As
established by Section 201(b) of PROMESA, the fiscal plans are supposed
to provide a path for PREPA to ``achieve fiscal responsibility and
access to the capital markets.'' They are required to ``improve fiscal
governance, accountability, and internal controls'' and ``enable the
achievement of fiscal targets.'' \1\ PROMESA further gives the FOMB the
power to ensure that any law passed by the Puerto Rico legislature is
consistent with an approved fiscal plan, including, if necessary,
taking the Legislature to court to prevent the enforcement of the
law.\2\
---------------------------------------------------------------------------
\1\ Puerto Rico Oversight, Management, and Economic Stability Act
(PROMESA), Pub. L. No. 114-187 Sec. 201(b)(1) (2016) PROMESA.
\2\ PROMESA, Sec. 204(a).
---------------------------------------------------------------------------
In practice, these provisions of PROMESA have enabled the FOMB to
impose its own vision of the transformation of Puerto Rico's electrical
system--namely, privatization--with no published analysis of how this
will put the electrical system on a path toward fiscal health. It is
noteworthy, that despite the Board's active opposition to many
Commonwealth laws, the Board approved of the passage of Puerto Rico Law
120-2018. This law, which set forth the framework for the privatization
of the electrical system, was fiscally irresponsible: it eliminated the
requirement for cost-benefit evaluations for any electrical system
privatization contract, it allowed for the sell-off of generation
assets to private parties, which would restrict the use of federal
funds and drive-up costs.\3\ It also allows for the displacement of
workers which have to be absorbed by other government entities, putting
additional pressure on an already overburdened central government
budget.\4\^,\5\
---------------------------------------------------------------------------
\3\ Puerto Rico is now moving forward with a concession model for
the privatization of the generation assets, apparently because no buyer
could be found for the existing plants.
\4\ https://sincomillas.com/la-transferencia-de-empleados-de-la-
aee-a-otras-agencias-le-va-a-costar-al-gobierno-mas-de-200-millones-
anualmente/?print=print.
\5\ https://ieefa.org/resources/ieefa-us-poor-decisions-luma-
contract-put-puerto-ricos-workers-and-communities-risk.
---------------------------------------------------------------------------
CAMBIO noted in 2019, in our testimony at a House Natural Resources
Committee listening session, that privatization was likely to raise
rates and that, at that time, neither the Puerto Rico government nor
the FOMB had published any study to demonstrate that privatization
would lower or maintain electricity prices which were, at that time, 23
cents/kWh.\6\ Since that time, no economic justification of
privatization has been provided.
---------------------------------------------------------------------------
\6\ Testimony of Ingrid M. Vila Biaggi, U.S. House of
Representatives Committee on Natural Resources Listening Session, March
15, 2019.
---------------------------------------------------------------------------
Unfortunately, the predictions in CAMBIO's 2019 testimony have come
to pass. As discussed later, electrical service has deteriorated under
the private operator LUMA, and--largely due to the failure to
transition away from fossil fuels--rates are now nearly 30 cents/kWh.
After seven PREPA fiscal plans, Puerto Rico is further than ever from
having a resilient, reliable, clean and affordable electrical
system.\7\
---------------------------------------------------------------------------
\7\ https://cambiopr.org/wp-content/uploads/2022/08/
CAMBIO_Informe_plan_fiscal_JCF_AEE_ 08_22.pdf.
---------------------------------------------------------------------------
CAMBIO's analysis of the most recent 2022 PREPA Fiscal Plan shows
that, despite these failures, the Board continues to (1) push for
further privatization of the electrical system, and (2) overstate the
amount of money potentially available to bondholders, thereby
jeopardizing the future financial health of the system. The 2022 Fiscal
Plan calls for the privatization of PREPA's power plants, without any
cost-benefit analysis and without any analysis of the cost or savings
from the first phase of electrical system privatization, the LUMA
contract. The continued inclusion of privatization in the fiscal plans
dramatically limits the Puerto Rico legislature from preventing further
privatization of the electrical system (which would be a logical
response to the problems caused by LUMA), given that the FOMB would
almost certainly take the legislature to court to invalidate any such
legislation.
Our analysis of the Fiscal Plan further shows that the Board has
created an unrealistic expectation of the amount of money potentially
available to service PREPA's debt, primarily by underestimating PREPA's
fuel budget. The Board acknowledges that its projections of dramatic
future declines in fuel prices are partially due to changes in its
modeling assumptions that have no basis in the actual operation of the
system.\8\ If the Board puts forward another PREPA debt proposal to
unsustainably raise rates to pay off the debt, it will perpetuate the
continued underinvestment in system maintenance and labor that were a
major cause in driving the system to its current state of near physical
collapse.
---------------------------------------------------------------------------
\8\ https://cambiopr.org/wp-content/uploads/2022/09/letter-to-FOMB-
PREPA-Fiscal-Plan-8-10-22.pdf.
---------------------------------------------------------------------------
While the 2022 Fiscal Plan does call for some initiatives,
including greater investment in energy efficiency and renewable energy,
that are needed to lower and stabilize electrical system costs, the
Board's actions show where its priorities lie. The Board and its
consultants have been deeply involved in the privatization process, to
the point where the Board's contract with financial consultant
CitiGroup includes a bonus of $21.5 million for upon the consummation
of electrical system privatization transactions.\9\ There is no
indication that the Board has undertaken any similar efforts to further
renewable energy or energy efficiency on the island.
---------------------------------------------------------------------------
\9\ https://drive.google.com/file/d/12AFC-M4W7h9B12UQiP-
XiaVxhiDY_TtO/view.
---------------------------------------------------------------------------
The Board has further lost credibility as a result of the
conflicted advice that it has received from McKinsey, one of its lead
consultants. As a direct result of recent federal legislation, it was
revealed that McKinsey's consulting clients also include Quanta
Services (one of LUMA's parent companies) and New Fortress Energy,
which received a major LNG contract in Puerto Rico under questionable
circumstances in 2019 and is poised to be granted the generation
privatization contract.^10,11,12
---------------------------------------------------------------------------
\10\ https://www.wsj.com/articles/mckinsey-clients-won-puerto-rico-
contracts-as-firm-advised-government-11656334801.
\11\ https://ieefa.org/media/90/download?attachment.
\12\ https://www.elnuevodia.com/negocios/economia/notas/luma-
compara-chinas-con-elefantes-dice-el-representante-del-consumidor-
torres-placa/.
---------------------------------------------------------------------------
Furthermore, PROMESA established an inherent conflict of interest
by allowing the Board the ability to be deeply involved in the
negotiation of contracts, as they were in the LUMA contract, and then
approving the final contract.
In short, the Board has failed to achieve its fundamental purpose
of restoring PREPA to financial health. The only things the Board has
to show for its six years of work on the electrical system are a failed
privatization initiative and a failed debt restructuring agreement. In
the following sections, I will provide more detail on the flawed
privatization process that resulted in the LUMA contract, the failure
of this contract to transform the electrical system, and
recommendations for an alternative model that would result in lower
rates and a more resilient system.
II. The LUMA contracting process raised many red flags

The process undertaken by the Puerto Rico Public-Private
Partnerships Authority (P3 Authority) to select LUMA Energy as the
contractor to operate the non-generation services of Puerto Rico's
electrical system (including operation of the transmission and
distribution systems, power dispatch, customer service and billing)
raised numerous questions about how and why LUMA was ultimately
selected for this contract.
The privatization process was governed by Puerto Rico Law 120-2018
and Puerto Rico Law 29-2009, which together create a non-transparent
process with no public participation for the development of concession
contracts for the operation of Puerto Rico's electrical system. Indeed,
the selection of LUMA was not publicly known until after the contract
had been fully negotiated and signed. Unfortunately, this process
facilitates exactly the sort of politically-driven contracting that was
well-known to be a major problem under PREPA's operation of the system.
Subsequent to the signing of the contract, CAMBIO undertook a
public records request to obtain documents related to the bidding and
bid evaluation process undertaken by the P3 Authority.\13\ A review of
those documents showed that the 5-member committee appointed to review
and evaluate the bids acted with a highly inappropriate level of
coordination in their evaluations. Committee members were asked to
evaluate and score the bids according to 38 separate criteria. Four of
the five members of the committee arrived at identical scores in each
of 37 of the 38 categories evaluated. The scores related to financial
metrics, which accounted for 50% of the total score, appeared to have
been copied directly from a report from FTI Consulting, a consultant to
the P3 Authority. It is unclear how the rest of the identical scores
were arrived at, but the high level of coordination between the
committee members raises serious questions about the independence of
the process and how the decision to choose LUMA was actually made.
---------------------------------------------------------------------------
\13\ These documents are available on CAMBIO's website, https://
cambiopr.org/resources/.
---------------------------------------------------------------------------
It is also important to note that one of LUMA Energy's parent
companies, Texas-based Quanta Services, conducted federal lobbying
during the same time period that it was bidding for the transmission
and distribution system contract. Quanta's federal lobbying disclosures
report the topic of its lobbying simply as ``PREPA.'' The P3
Authority's regulations prohibit bidders from undertaking lobbying
related to an ongoing bidding process, unless such lobbying is
expressly approved by the P3 Authority.\14\ This raises the question of
whether (a) the P3 Authority did approve Quanta Services' federal
lobbying related to PREPA and, if so, why; or (b) Quanta Services
violated the P3 Authority's regulations, with no apparent consequences.
---------------------------------------------------------------------------
\14\ Section 4.13(a) of the P3 Authority's Regulation for the
Procurement, Evaluation, Selection, Negotiation and Award of
Partnership Contracts and Sale Contracts for the Transformation of the
Electric System Under Act No. 120-2018.
---------------------------------------------------------------------------
Finally, it is noteworthy that the Chairman of the Puerto Rico
Energy Bureau, the island's energy regulator, played a dual role during
the LUMA Energy contracting process. Chairman Aviles was one of the
members of the 5-member committee established by the P3 Authority that
selected LUMA and negotiated the contract. Then, in his role at PREB,
he voted in favor of the PREB's approval of the contract.
It is important to recall these irregularities in the contracting
approval process because they provided early indications that the LUMA
contract--far from depoliticizing the electrical system, as promised by
the FOMB--was the result of yet another politically-driven bidding
process. As the next sections will show, LUMA's performance in its
first 17 months of operations demonstrate that the company has not been
up to the task of operating Puerto Rico's electrical system and,
indeed, that privatization has not achieved any of the transformative
goals that its backers promoted.
III. After more than a year of operations, LUMA has exceeded its budget
and provided worse service

In CAMBIO's prior testimony to this committee's hearing on ``The
Transformation of the Puerto Rico Electric Power Authority'' on August
6, 2020, we raised concerns about several contract provisions that
favored LUMA and that would leave the government of Puerto Rico with
little recourse if LUMA failed to meet key publicly stated objectives
of the transformation. Specifically, we noted that the contract imposed
no obligation on LUMA to meet any rate affordability targets, nor did
it provide any metrics for achievement of Puerto Rico's renewable
energy targets--despite the fact that LUMA would be receiving billions
of dollars in federal funds for the reconstruction of the grid. We also
noted that the contract imposed no penalties, nor did it threaten
cancellation of the contract, if key performance metrics were not
achieved.\15\
---------------------------------------------------------------------------
\15\ Ingrid M. Vila-Biaggi and Luis E. Rodriguez-Rivera, Written
statement for the U.S. House of Representatives Committee on Natural
Resources, ``The Transformation of the Puerto Rico Electric Power
Authority,'' August 6, 2020.
---------------------------------------------------------------------------
In the first seventeen months of operations, LUMA has indeed not
been penalized for its failure to perform. During this period there
have been widespread complaints from citizens and mayors regarding
longer and more frequent power outages, as well as voltage fluctuations
that damage home appliances and have even provoked fires. On multiple
occasions, substation fires have caused widespread blackouts.\16\
Recent testimony from the executive director of PREPA to the Puerto
Rico House of Representatives included a list of events in which
disturbances in the transmission and distribution system caused power
plants to go offline as a protection measure, which resulted in major
blackouts.\17\
---------------------------------------------------------------------------
\16\ https://www.elnuevodia.com/noticias/locales/notas/una-averia-
en-costa-sur-provoca-un-apagon-general-en-puerto-rico/; https://
www.elnuevodia.com/noticias/locales/notas/explosion-en-la-subestacion-
de-luma-energy-en-jayuya-deja-sin-luz-a-todo-el-municipio/; https://
www. elnuevodia.com/noticias/locales/notas/fuego-en-subestacion-de-
monacillos-miles-de-abonados-continuan-sin-luz/.
\17\ Testimony of Josue Colon before the Puerto Rico House of
Representatives Committee on Economic Development, Planning,
Telecommunications, Public-Private Partnerships and Energy, September
5, 2022. (https://www.youtube.com/watch?v=1Heyn-OLuj8, starting at 2
hour, 37 minutes).
---------------------------------------------------------------------------
LUMA's poor performance was highlighted by Hurricane Fiona. Even
though Fiona affected the southwest portion of Puerto Rico as a
Category 1 Hurricane the entire island was left without power. This
impact of Fiona cannot be compared to the island-wide devastation
caused by Category 4 Hurricane Maria, therefore it is not clear what
was the cause of the electric system failure. Limited information has
been disclosed by LUMA as to their preparation prior to the storm.
However, it was reported that they underspent on vegetation management
and did not use the budget allocated for inspecting powerlines.\18\
---------------------------------------------------------------------------
\18\ https://www.elvocero.com/gobierno/agencias/luma-gast-menos-en-
el-manejo-de-vegetaci-n/article_08f4a690-3241-11ed-9456-
e3ca602cb51b.html.

As of September 26, more than a week after the storm, power had
been restored to only 60% of customers; in the San Juan area, which
suffered little physical damage, more than 10% of customers were still
without power.\19\ By comparison, after the 1996 category 1 hurricane
Hortenese, which had a similar trajectory to Fiona and caused similar
flooding damage, 100% of power was restored within six days. The storm
revealed poor prior coordination with island mayors; one mayor reported
that LUMA did not arrive until 11 days after the storm and with only a
single crew.\20\ Other mayors sought to activate municipal workers to
begin working on system restoration, as they had done after hurricane
Maria, prompting LUMA to threaten the mayor of Isabela with legal
action.\21\ LUMA decided not to procure the assistance of the American
Public Power Association (APPA) claiming it had enough personnel, yet
they were not able to restore power to over half a million clients for
over a week.
---------------------------------------------------------------------------
\19\ Puerto Rico Emergency Portal System, preps.pr.gov, accessed
6pm on September 26, 2022.
\20\ https://radioisla.tv/11luma-energy-llega-a-municipio-de-lajas-
11-dias-despues-del-huracan-fiona-con-una-brigada/.
\21\ https://www.elnuevodia.com/noticias/locales/notas/alcaldes-
del-pnp-y-ppd-reprueban-la-gestion-de-luma-tras-fiona-no-han-sido-
capaces-de-restablecer-el-servicio-electrico/.

LUMA's inability to properly operate the system stems from another
flaw identified early in the contract: its failure to require LUMA to
hire PREPA employees or to offer them the same level of benefits.\22\
LUMA's decision, allowed by the contract, to not respect the PREPA
employee's collective bargaining agreement resulted in LUMA not being
able to hire the vast majority of PREPA's skilled workforce and thereby
losing hundreds of years' worth of accumulated experience with Puerto
Rico's electrical system.
---------------------------------------------------------------------------
\22\ Ingrid M. Vila-Biaggi and Luis E. Rodriguez-Rivera, Written
statement for the U.S. House of Representatives Committee on Natural
Resources, ``The Transformation of the Puerto Rico Electric Power
Authority,'' August 6, 2020.

The Puerto Rico Energy Bureau recently published a report comparing
LUMA's first year of performance to FY 2020, when the system was
operated by PREPA. In two of the three industry standard grid
reliability metrics (SAIDI and CAIDI), LUMA's performance is notably
worse. Specifically, LUMA's CAIDI (Customer Average Interruption
Duration Index) was 50% higher than the baseline PREPA year, and LUMA's
SAIDI (System Average Interruption Duration Index) was 33% higher than
the PREPA baseline. The Bureau further noted that LUMA has consistently
had fewer employees than budgeted, indicating an ongoing difficulty in
recruiting and retaining a qualified workforce.\23\
---------------------------------------------------------------------------
\23\ https://energia.pr.gov/wp-content/uploads/sites/7/2022/08/
20220818-MI20190007-Resolution-and-Order.pdf.

While the Energy Bureau has reported that LUMA has met or achieved
baseline targets for 84% of metrics, this comparison is a mix of apples
and oranges. It includes crucial reliability metrics (for which in many
cases LUMA is not performing), but also other categories that are much
less integral to the functioning of the system, such as the percentage
of customers on AMI (Advanced Metering Infrastructure).\24\ More
importantly, some of these self-reported metrics are contrary to the
experience lived on the island, such as response time to service and
outage complaints for which LUMA self-reports 9 hrs on average. The
Energy Bureau has also not required reporting on any metrics of power
quality (frequency and voltage stability), despite the large number of
customer complaints on this issue.
---------------------------------------------------------------------------
\24\ https://energia.pr.gov/wp-content/uploads/sites/7/2022/08/
20220818-MI20190007-Resolution-and-Order.pdf.

LUMA has been consistently over budget. During its transition year
prior to taking control of the system on June 1, 2021, LUMA exceeded
its budget by 20%. And during its first year of operation, LUMA
exceeded its budget by $20 million. Despite its understaffed and
underskilled workforce, LUMA was 20% over budget in its first year on
labor costs, due to having to spend additional funds on training and on
importing workers from the United States. As a result of the flawed
structure of the contract, and weak oversight by Puerto Rico government
agencies, no penalties have been imposed on LUMA for its failure to
---------------------------------------------------------------------------
meet budgetary or performance objectives.

IV. The LUMA contract did not transform the failed PREPA model

The 2021 PREPA Fiscal Plan anticipated that privatization would
``depoliticize system management, improve the operational performance,
competitive procurement utilization, management and maintenance of the
T&D system, and the generation network, leading to tangible
improvements in reliability, sustainability, compliance, and overall
quality of service.'' \25\
---------------------------------------------------------------------------
\25\ https://drive.google.com/file/d/
1dXFJldZpOIsAObMZDBd7T2P3j2xMPaal/view.

However, the LUMA contract has not produced any of these benefits,
and has instead replicated or, in some cases, worsened the flaws of the
failed PREPA governance model. Governance of the electrical system
continues to be politicized; the management of the system has not been
professionalized; there is less transparency and opportunity for public
participation than under PREPA; and renewable energy goals continue to
fail to be met. And, as described in the previous section, reliability
---------------------------------------------------------------------------
and quality of service have declined.

The operation of the grid continues to be a highly contentious and
politicized process. As described above, the process of the award of
the LUMA contract appeared to be highly political. Given that there are
billions of dollars of federal funds at stake, electric rates are
nearly 30 cents/kWh, and outages are frequent, it is unsurprising that
the operation of the electrical system continues to be a high-profile
political issue.

The operation of the grid also continues to be overly reliant on
outside professional and technical consultants, who are unaccountable
to the people of Puerto Rico and frequently unfamiliar with Puerto
Rico's electrical system, despite the fact that privatization was
supposedly going to bring an operator with in-house expertise.
Specifically, CAMBIO has found that in fiscal year 2022, LUMA spent
$103.5 million in technical and professional consulting and legal
services, an increase of 55% relative to the $67 million that PREPA
spent in fiscal year 2021 and 125% more than the $46 million spent by
PREPA in 2020.\26\ And this number will only increase for fiscal year
2023: LUMA has recently signed over $100 million in contracts related
to engineering and project management, including $30 million in
contracts with a company that was only created in 2019.\27\ The
government of Puerto Rico justified LUMA's privatization contract in
part indicating that LUMA would come to reduce consulting contracts,
and yet LUMA has come to increase costs and consultant contracts.
---------------------------------------------------------------------------
\26\ https://www.periodicolaperla.com/actualidad/a-costa-del-
pueblo-luma-dispara-gastos-en-consultores-y-servicios-legales/.
\27\ Based on CAMBIO analysis of contracts filed with the Puerto
Rican Comptroller office, LUMA's FY 2022 Annual Report, and PREPA
budget-to-actuals reports.

The privatization model has proven to be less transparent than
PREPA. An arrest warrant was issued by a Puerto Rico judge against LUMA
CEO last fall for failing to provide basic information on LUMA's
staffing to a Puerto Rico House committee.\28\ The results of a CAMBIO
public records request to the P3 Authority show that LUMA failed to
provide information, or provided only incomplete responses, to P3
requests for information regarding outage statistics, staffing and
customer service.\29\ And similar to PREPA, LUMA has not opened any
opportunities for public participation regarding the future direction
of the electrical system.
---------------------------------------------------------------------------
\28\ https://www.elvocero.com/anuncios/un-juez-ordena-el-arresto-
del-presidente-de-luma-energy-y-dice-que-se-burla/article_--99d54bd8-
4223-11ec-8475-67aff5c262ef.html.
\29\ Documents available at https://cambiopr.org/resources/?aapp-
luma.

The privatization has not furthered the island's renewable energy
goals. As noted previously, there are no renewable energy-related
metrics in the contract, despite the fact that LUMA will be receiving
billions of dollars in federal funds which it could, in theory, use to
underwrite a massive deployment of renewable energy and storage and
invest in the necessary grid upgrades to enable the integration of
greater amounts of distributed renewable energy. Instead, Puerto Rico
is far from meeting its 40% by 2025 renewable energy target. Indeed, as
of 2021, utility-scale renewable energy was at 2.4%, with distributed
solar bringing the total to 5%.\30\
---------------------------------------------------------------------------
\30\ Utility-scale renewable energy data from PREPA's December 2021
Monthly Report to the Governing Board. Distributed solar data from
filings in Puerto Rico Energy Bureau Case No. NEPR-MI-2019-0006, August
15, 2022.
---------------------------------------------------------------------------
Far from restoring the electrical system's ability to drive
economic growth in Puerto Rico, the high rates and worsened service
under LUMA have turned the electrical system into an even greater
economic liability, driving companies out of business and contributing
to decisions to leave the island.\31\
---------------------------------------------------------------------------
\31\ https://www.elvocero.com/economia/otros/el-aumento-de-la-luz-
amenaza-al-sector-comercial/article_52d426ae-edcd-11ec-b405-
87186b9013b1.html, https://www.elvocero.com/actualidad/otros/aseguran-
que-la-crisis-de-vivienda-en-la-isla-empeora-con-la-inflaci-n/
article_8211ca7a-00ba-11ed-a9ba-9316a335edf4.html.
---------------------------------------------------------------------------
V. Queremos Sol provides an alternative model of electrical system
transformation

CAMBIO has worked closely with community and environmental
organizations, electrical system experts, and labor unions to develop
an alternative pathway toward a resilient and affordable electrical
system, based on public ownership. The Queremos Sol proposal calls for
achieving 75% distributed renewable energy by 2035 and 100% by 2050,
including an energy efficiency target of 25% by 2035. The proposal
envisions the widespread deployment of rooftop solar and storage,
including the deployment of small solar and battery systems for
resiliency on every home on the island. This would be supplemented by
distributed solar on commercial installations, closed landfills and
other contaminated lands to achieve 75% by 2035.

In March 2021, CAMBIO published the results of a detailed grid
modeling study, based on system data obtained from a public records
request of PREPA, to analyze the feasibility of achieving 75%
distributed renewable energy by 2035.\32\ The modeling found that it is
not only viable and cost effective but that assigned federal funds can
accelerate implementation. Key results of the modeling include:
---------------------------------------------------------------------------
\32\ https://cambiopr.org/solmastechos/.

Provide resiliency to 1 million homes via rooftop solar
---------------------------------------------------------------------------
and storage installations (2.7kV PV with 12.6 kWh storage)

The transformation would reduce fuel costs to $430 million
per year.

The use of $9.6 billion in federal funds to implement the
transformation would reduce and stabilize electrical system
costs at approximately 15 cents/kWh.

This transformation can be undertaken without any new
investment in natural gas infrastructure (in contrast to
the Puerto Rico government's current plan to build a new
300 MW natural gas plant).

CO2 emissions would be reduced nearly 70%,
putting Puerto Rico at the forefront of addressing climate
change with urgency.

Existing fossil fuel-based generation could be retired,
starting with the AES coal plant and then the Palo Seco and
Aguirre oil-burning plants. The remaining units would be
used for very few hours of the year, if at all, with 75%
renewable energy.

The proposal would dramatically reduce dependence on the
vulnerable south-to-north transmission system that
catastrophically failed during hurricane Maria.

The proposal would ensure that all communities would
receive the resiliency benefits of distributed renewable
energy.

Puerto Rican communities are rapidly moving in the direction of
rooftop solar and storage, limited primarily by the high level of
poverty on the island. More than 370 MW of distributed rooftop solar
have been installed in Puerto Rico, with 112 MW of that amount
installed just within the last year.\33\ This rapid growth of rooftop
solar is the only advance in renewable energy that has been made since
Hurricane Maria; not a single MW of utility-scale solar has been
deployed in the last five years. Meanwhile, rooftop solar kept the
lights on during and after Hurricane Fiona, for those households
fortunate enough to have access. Directing $1 billion in already
assigned FEMA funds would allow installation of rooftop solar and
storage to 100,000 households (2.7 kV systems with 12.6 kWh storage).
---------------------------------------------------------------------------
\33\ Puerto Rico Energy Bureau Case No. NEPR-MI-2019-0006, Anejo 2
Datos-Energia-Renovable-NEPR-MI-2019-0016, August 15, 2022.
---------------------------------------------------------------------------
The Queremos Sol model proposes not only a technical transformation
of the electrical system, but also a transformation of the governance
model to one that is professional, transparent, democratic and
accountable to the public.\34\ This governance transformation includes
the following components:
---------------------------------------------------------------------------
\34\ Queremos Sol (We Want Sun): New Governance for Environmental
and Energy Sustainability, October 2022. https://www.queremossolpr.com/
_files/ugd/3debae_86a32a2fb 68749e085074b54b9f36244.pdf.

The expiration of the LUMA contract November 30,2022 and
the transition of transmission and distribution system
responsibilities to a new public entity that prioritizes
the recruitment, of former PREPA employees displaced by the
---------------------------------------------------------------------------
contract.

A new public business model for this new entity that
centers conservation, energy efficiency and the integration
of distributed rooftop solar and storage.

A Board of Directors where the majority of members are
democratically elected from different sectors, rather than
serving at the will of the governor.

A requirement for consultations or referendums before the
Board is able to take certain decisions including, for
example, signing contracts longer than 5 years.

Establishing a much broader public participation process
for the development of Puerto Rico's Integrated Resource
Plan.

Establishing a Citizens Advisory Committee that would
incorporate public participation into Energy Bureau
proceedings, analyze and present evidence and testimony on
energy policies, and provide public education on energy-
related topics.

VI. Federal funds are not being deployed to further the transition to a
resilient, renewable-energy based grid

Finally, CAMBIO is deeply concerned over the use of the billions of
dollars of FEMA and HUD funds destined toward Puerto Rico's electrical
system. There has been no public participation in the deployment of the
FEMA funds, which total more than $14 billion,\35\ and no publicly
available plan from PREPA or LUMA that provides a holistic explanation
of how the different projects for which funding is sought will result
in a reliable and resilient electrical system. What is clear is that
almost none of this money is being directed toward renewable energy or
storage. Indeed, the only renewable energy and/or storage projects that
have been proposed for federal funding are (1) a $35 million rooftop
storage initiative by PREPA to install residential rooftop solar and
storage in three of the municipalities that experienced the longest
blackouts after hurricane Maria, and (2) a $20.6 million renewable
energy microgrid initiative by LUMA, and (3) a $362.5 million grid-
scale storage initiative by LUMA--representing 3% of the funding
available.\36\ The remainder of the FEMA funds are destined toward
hardening of the transmission and distribution system in a way that
appears inconsistent with the IRP. The 2020 IRP approved only $911
million for distribution system upgrades over the next five years,
while PREPA and LUMA's June 2021 Updated 10-Year Infrastructure Plan
calls for LUMA to manage over $1.5 billion in federally funded
distribution projects by 2023.\37\
---------------------------------------------------------------------------
\35\ This includes approximately $12 billion in FEMA 428 and 404
funds, according to PREPA and LUMA's June 2021 Updated 10-Year
Infrastructure Plan and more than $2 billion in FEMA 406 funds
estimated in PREPA's March 2021 Updated 10-Year Infrastructure Plan.
\36\ Puerto Rico Energy Bureau Case No. NEPR-MI-2021-0002, PREPA
Motion to Inform Reallocation of FEMA 404 HMGP Funds and Request for
Approval of Generation Projects, August 2, 2022.
\37\ Puerto Rico Energy Bureau, Final Resolution and Order on the
Puerto Rico Electric Power Authority's Integrated Resource Plan, August
24, 2020, paragraph 907.
---------------------------------------------------------------------------
This use of the FEMA funds squanders a unique opportunity for the
federal government to help Puerto Rico become a model of electrical
system decarbonization and climate change adaptation and mitigation.
President Biden's January 2021 Executive Order calls for a ``carbon
pollution-free electricity sector no later than 2035'', an ambitious
goal that could be realized in Puerto Rico if the federal government
were willing to ensure that grid reconstruction funds were used
appropriately.
There are also $2.7 billion in HUD funds that will become available
for electrical system work.\38\ CAMBIO has publicly urged HUD to bulk
purchase standardized, small-scale rooftop solar and storage systems
that could meet household critical needs during a grid emergency. The
use of the $1.9 billion in HUD funds earmarked for ``Electrical Power
System Enhancements and Improvements'' could result in the installation
of approximately 140,000 systems by a combination of PREPA,
municipalities and/or community organizations. This would radically
transform the resiliency situation for more than 10% of households on
the island, and should be done in a manner that prioritizes low-income
communities that experienced the longest delays in service restoration
after Hurricane Maria.\39\
---------------------------------------------------------------------------
\38\ This includes $1.9 billion of CDBG-DR funds for Electrical
System Enhancements, as well as $300 million in CDBGDR funds for
community energy and water resilience installations and another $500
million in CDBG-MIT funds for community energy and water resilience
installations.
\39\ CAMBIO comments on the Puerto Rico Department of Housing's
Draft Action Plan for CDBG funds for Electrical Power System
Enhancements and Improvements, November 2021.
---------------------------------------------------------------------------
In short rather than using the vast majority of the federal funds
to rebuild a centralized system that has already catastrophically
failed, CAMBIO urges that the majority of federal funds be allocated to
facilitate the widespread deployment of rooftop solar and storage. This
is the transformation that the people of Puerto Rico are demanding and,
as noted above, those that can afford it are already ``voting with
their feet'' by purchasing their own rooftop solar and storage systems.
But with more than 44% of the population of Puerto Rico living below
the federal poverty line, this alternative is out of reach for the
majority of households, who are stuck with an increasingly expensive
and unreliable grid. The use of federal funds to facilitate the
widespread deployment of rooftop solar and storage is critical to allow
low-income households, who currently are priced out of the private
market for solar, to participate in the resiliency benefits of rooftop
solar and storage. It would also allow installations to proceed at a
lower cost, making use of economics of scale from bulk purchasing the
components of residential solar and storage systems.\40\
---------------------------------------------------------------------------
\40\ https://cambiopr.org/wp-content/uploads/2022/01/CAMBIO-DER-
Implementation-Roadmap-Report-01_22.pdf.
---------------------------------------------------------------------------
VII. Conclusion and Recommendations

PROMESA has failed to enable the necessary electrical system
transformation in Puerto Rico. The Financial Oversight and Management
Board aggressively facilitated and then approved the LUMA grid
privatization contract, which has been a costly disaster for the people
of Puerto Rico. Service has worsened and we are no closer to PROMESA's
goals of restoring the electrical system to financial stability and
access to capital markets. Nor has substantial progress been made on
the renewable energy transformation, which is essential for addressing
climate change with urgency and for reducing and stabilizing electrical
system costs. The federal government has not played the necessary role
in ensuring that the billions of dollars of funds earmarked for Puerto
Rico's electrical system will actually result in a more resilient and
cleaner grid. Civil society organizations, including CAMBIO, have
proposed the Queremos Sol alternative for a rapid transition to a
decentralized electrical system, based on rooftop solar and a reformed,
public governance model. This is the Plan B that Puerto Rico needs to
put immediately in place.

CAMBIO presents the following recommendations:

Congress needs to dissolve the FOMB and provide the
government or Puerto Rico a dignified and viable debt
restructuring process, and promptly provide the people of
Puerto Rico with a mechanism to exercise its right to self-
determination;

This committee should urge the government of Puerto Rico
to end the LUMA contract when it expires on Nov. 30. It
should further investigate how the LUMA contract was
awarded, and, in particular, the role of Quanta Services'
federal lobbying in the award of the contract, as well as,
the role of FOMB consultants McKinsey and Citi.

This committee should ensure that federal funds are used
to provide every household in Puerto Rico with rooftop
solar and storage, prioritizing installation in low-income,
vulnerable communities, consistent with climate change
policy.

______

GOVERNMENT OF PUERTO RICO
Puerto Rico Federal Affairs Administration

November 21, 2022

Hon. Raul M. Grijalva, Chairman
U.S. House of Representatives
Committee on Natural Resources
Washington, DC 20515

Dear Mr. Chairman:

On behalf of the Governor of Puerto Rico, the Honorable Pedro R.
Pierluisi, I want to thank you for holding the ``Puerto Rico's Post-
Disaster Reconstruction & Power Grid Development'' hearing last week
and giving the Government of Puerto Rico the opportunity to inform the
members of the Committee on Natural Resources on the progress of the
reconstruction and recovery process of our Island.

As requested, I'm enclosing a status summary of the federal funds
for the reconstruction of public schools impacted by the multiple
natural disasters. If you have any questions, please contact me via
email at [email protected] or Zoe Valentin, Policy Coordinator
and Special Assistant, at [email protected].

Regards,

Carmen M. Feliciano,
Executive Director

Enclosures: Puerto Rico Public Schools Federal Funding Summary

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Submissions for the Record by Rep. Grijalva

U.S. HOUSE OF REPRESENTATIVES

December 5, 2022

Mr. Josue Colon
Executive Director, Puerto Rico Electric Power Authority
P.O. Box 364267
1324 Longworth House Office Building
San Juan, PR 00936-4267

Dear Mr. Colon:

On November 17, 2022, the U.S. House Committee on Natural Resources
held a full committee oversight hearing on ``Puerto Rico's Post-
Disaster Reconstruction and Power Grid Development.'' During the
hearing, Committee Members received testimony from key stakeholders
regarding federal and local post-disaster reconstruction efforts in
Puerto Rico following recent natural disasters, such as Hurricanes
Irma, Maria, and Fiona, and the 2020 earthquakes, as well as the
progress of the restoration and modernization of Puerto Rico's power
grid.

During the hearing, Resident Commissioner Jenniffer Gonzalez-Colon
(PR) raised a request for information from the Puerto Rico Electric
Power Authority (PREPA) in the form of a written statement regarding
the status and development of Puerto Rico's electric system. I
concurred with the request and ordered it without objection.

As the entity responsible for generating electrical energy for the
people of Puerto Rico, PREPA's perspective on the status of Puerto
Rico's electrical infrastructure and plans for repairing and upgrading
the generation system are of great interest to the Committee.
Therefore, I respectfully request that you submit to the Committee a
statement detailing the status of PREPA's generation system, including:

The status and outlook of the generation fleet.

A summary of the plan for rebuilding and replacing the
generation system, including timelines and estimated years
in which each milestone is to be achieved.

The parts of the generation fleet that are priorities for
repair, upgrade, or replacement.

The status and estimated costs of all projects that are
planned or underway using federal recovery funds, including
a breakdown of which projects have been submitted,
approved, or started and what amounts have been disbursed.

Please provide the requested information electronically to Ivan
Robles with the Committee's Office of Insular Affairs at
[email protected] by December 12, 2022.

Thank you in advance for your cooperation and I look forward to
engaging with you further to ensure the people of Puerto Rico have
access to a safe and reliable electrical energy system.

Sincerely,

Raul M. Grijalva,
Chair

______

GOVERNMENT OF PUERTO RICO
Puerto Rico Electric Power Authority

December 12, 2022

Hon. Raul M. Grijalva, Chairman
U.S. House of Representatives
Committee on Natural Resources
Washington, DC 20515

Dear Chairman Grijalva:

We are in receipt of your letter of December 5, 2022, related to
the November 17, 2022, oversight hearing on ``Puerto Rico's Post-
Disaster Reconstruction and Power Grid Development''. In your letter,
you indicated that during the hearing there were some requests for
information related to PREPA, in the form of a written statement
regarding the status and development of Puerto Rico's electric system,
including:

The status and outlook of the generation fleet.

A summary of the plan for rebuilding and replacing the
generation system, including timelines and estimated years
in which each milestone is to be achieved.

The parts of the generation fleet that are priorities for
repair, upgrade, or replacement.

Attached you will find PREPA's response to the request for
information and supporting attachments. As you and the full Committee
on Natural Resources will see from the response, PREPA has provided the
details requested on PREPA's generation system. We also took the
opportunity to provide the Committee on Natural Resources with
additional context and information relevant to the November 17 hearing,
erring on the side of submitting additional background and summaries of
PREPA's many efforts (operational and financial) to keep the lights on
during bankruptcy, tightening budgets, transition to renewable energy
projects, limitations by the island's energy regulator, and ongoing
efforts to expedite project approvals and permitting, among others.
We also include a summary of milestones achieved by PREPA
management and its dedicated, though reduced, labor force--
notwithstanding the historic and sequence of challenges posed by the
impacts of hurricanes Irma (2017), Maria (2017), the earthquakes of
2020, the pandemic period (2020-2021) and most recently, hurricane
Fiona (2022).
Thank you for the opportunity to present this information to the
Committee on Natural Resources. We remain available to address any
questions or comments you or the Committee may have now or in the
future.

Sincerely,

Josue A. Colon-Ortiz
Executive Director

______

PREPA's Response and Supplemental Filing to
Committee Questions and Issues
December 9, 2022

I. Response to Requests in Committee Letter, dated as of December 5,
2022

1. The status and outlook of the generation fleet

Electricity is supplied to PREPA customers primarily by old and
inefficient PREPA-owned generation plants and secondarily from
independent power producers (IPPs) under power purchase and operating
agreements (PPOAs). PREPA-owned power plants have 4,961 MW of installed
generation capacity, IPPs consists of 984 MW from two conventional
power plants and 254 MW from various renewable energy providers. PREPA-
owned generation units have well-above industry average forced outage
rates such that between 30% and approximately 40% of this capacity is
typically out of service, including units that are indefinitely out of
service and in need of significant overhaul. As a result, on average,
only around 60 to 70% (3,000 to 3,500 MW) of PREPA-owned generation
capacity is available for dispatch. Given the frequency of outages
(whether caused by Generation or Transmission- Distribution incidents),
it is often necessary to dispatch generation units with higher cost
fuel. For example, the April 2019 maintenance-related transformer
explosion and resulting loss of Aguirre Unit 2 for approximately 12
months (with average fuel cost of $130/MWh) was compensated by
increasing generation from low efficiency diesel peaking units (with
average fuel cost of $200/MWh).
PREPA generation units began experiencing even more frequent forced
outage events during the summer months of 2021, July, August, and
September. These outage events were due to various factors, including a
combination of high peak demand and energy use, with unanticipated
generator forced outages that resulted in very tight reserve margins,
and at times, generation shortfalls that resulted in brown-out
conditions as well as long load shedding events.
The availability of the system's generating units dropped by 17%
from 2015 to 2020 and has consistently performed below peers. Forced
outages of generating units have also seen an increase of 15% over the
same period and underperformed peer units, exemplifying the
unreliability of PREPA's legacy generating fleet. The net heat rate of
generating units has also seen an increase of 377 Btu/kWh from 2016 to
2020. Today, PREPA's aging plants continue to deteriorate with
worsening levels of performance. PREPA expects these trends to continue
with growing inefficiencies and unreliability as these units continue
to age until the completion of new generation system investments and
major maintenance projects.

2. A summary of the plan for rebuilding and replacing the generation
system, including timelines and estimated years in which each
milestone is to be achieved

a. 5-year plan for rebuilding the energy system

PREPA's 5-Year Infrastructure Projection includes approximately
$2.78 billion in investment needed for PREPA to rebuild Puerto Rico's
Generation system, most of which qualify for FEMA funding under its 428
programs. This estimate includes only the cost associated with FEMA 428
funds, FEMA Sec. 404 funds. It, therefore, excludes infrastructure
hardening work that is eligible for funding through FEMA's 406 Public
Assistance Mitigation (406) program. Please refer to the ``PREPA 5-Year
Infrastructure Projection May 2022'' document attached for further
details.

b. 10-year plan for rebuilding the energy system

The June 2021 version of the 10-Year Infrastructure Plan includes
approximately $3.14 billion in investment that is needed to rebuild and
transform Puerto Rico's electric generation portfolio and repair and
restore its dams and hydro-electric generation and irrigation assets,
most of which qualifies for FEMA funding under its 428 and 404
mitigation programs. The $3.14 billion includes funds to be requested
from these programs, plus supplemental funding from PREPA's NME
program. There are approximately 55 projects that are categorized as
``near-term priority.'' These projects either have already begun
preliminary architectural and engineering (A&E) design or are expected
to do so in years 2021, 2022, and 2023. The in-scope estimated cost of
projects expected to begin within this time horizon is $2.43 billion.
The mid-term priority category is composed of 15 projects that are
expected to begin preliminary A&E design in the years 2024, 2025, 2026,
and 2027. The in-scope estimated cost of projects expected to begin
within this time horizon is $707 million. The long-term priority
category comprises 12 projects that are expected to begin preliminary
A&E design in 2028 and beyond. The in-scope estimated cost of projects
expected to begin within this time horizon is $0.90 billion. Please
refer to the ``PREPA 10-Year Infrastructure Plan Update Final''
document attached for further details.

3. The parts of the generation fleet that are priorities for repair,
upgrade, or replacement

a. Black start Units

PREPA would like to clarify the congressional record about the need
for more and better black start units--and to provide context on the
RFP process that is currently being developed with FEMA support. Please
refer to the PREB docket number: NEPR-MI-2022-0005 for further
information on the regulatory proceeding on the RFP Process for New
Black-Stait Systems at Costa Sur and Yabucoa.
A black-start process entails restoring a power station to
operation without relying on the external electric power transmission
network. These processes are done to recover from a total or partial
blackout which may occur due to several unforeseen factors, including
natural disasters, weather events like storms and hurricanes, technical
failures and more. In general, all power stations need an electrical
supply to start up: under regular operation, this supply would come
from the transmission or distribution system; under emergency
conditions, black-start stations receive this electrical supply from a
small auxiliary generating plant located on-site. Once running, a large
generating unit can be utilized to energize part of the local network
and provide an energy supply for other units within its area. With this
capability at several sites, electrical supplies can be efficiently re-
established around the island. The need to restore the system after a
blackout event makes the availability of small auxiliary generating
plants all the more important for system reliability and restoration.
Further, the Small Generating Units are needed to make available to
PREPA a more diverse and readily available portfolio of generation
units available in case a peak load needs to be met and PREPA's fleet
is insufficient to serve it.
An initial SOW has been submitted to FEMA for the preparation of
preliminary design and technical documents, required by PREPA to submit
a funding application for preliminary and detailed engineering for the
Engineering, Procurement and Construction (EPC) of 36 to 60MW of power
per site at the existing Yabucoa Gas Plant and the Costa Sur Gas.

b. Summary of applicable Integrated Resource Plan approved by the
PREB

PREPA filed its first IRP in 2015, which PREB approved in September
2016. As a result of Hurricanes Irma and Maria in 2017, Puerto Rico not
only faced the unprecedented challenge of rebuilding the electric power
system, but also had to rethink how to harden and modernize the grid to
better equip Puerto Rico against future natural catastrophes, while
diversifying fuel sources and increasing the grid's reliance on
renewable energy resources.
On February 13, 2019, PREPA filed its initial proposed IRP for
PREB's approval (Initial IRP). After reviewing the Initial IRP, PREB
issued a motion with findings and requested PREPA to refile the Initial
IRP after addressing certain items. On June 7, 2019, PREPA refiled its
proposed IRP after making revisions required by PREB (Proposed IRP).
PREB issued its Final Resolution and Order on PREPA's Proposed IRP on
August 24, 2020.

PREB's Final Resolution and Order (Final Order) approved in part
and rejected in part the Proposed IRP and ordered the adoption and
implementation of a Modified Action Plan and Modified Preferred
Resource Plan in lieu of PREPA's proposed Action Plan and Preferred
Resource Plan (Approved IRP). The following three notable modifications
to the grid were approved by PREB, which form the core elements of the
Modified Action Plan and Modified Preferred Resource Plan for PREPA:

1. Increasing share of renewable generation and storage while
retiring or converting existing coal and heavy fuel oil
generation;

2. Enhancing grid resilience through hardening capital projects,
including potential mini-grids and microgrids; and

3. Enabling customer choice through DG, EE, and DR programs.

Additional information on IRP core elements is provided in Appendix
1.

c. Renewable Energy and BESS Procurement--Tranche 1

PREPA launched the first tranche (Tranche 1) of several renewable
energy generation and battery energy storage system (BESS) RFPs on
February 22, 2021. This was done in compliance with legislative and
regulatory mandates under Puerto Rico energy public policy to increase
renewable energy generation in Puerto Rico.
In December 2021, PREPA submitted eighteen (18) solar PV projects
(totaling 845 MW) and three (3) battery storage projects (4-hr)
(totaling 220 MW) to PREB for evaluation and approval. On February 2,
2022, the PREB authorized the eighteen (18) PV project power purchase
operating agreements (PPOAs) and instructed PREPA to finalize
negotiations with those proponents. After LUMA completed the technical
studies for the Tranche 1 projects, PREPA submitted executed PPOAs
during June, July, and August 2022.
On September 1, 2022, the PREB published the independently computed
portfolio of weighted average LCOE of $108.1/MWh for the eighteen (18)
Tranche 1 solar PV projects, along with the real levelized cost of
$85.4/MWh, in 2021 dollars.

d. Renewable Energy and BESS Procurement--Tranche 2 through 6

Following the receipt of bids during 2021 for Tranche 1 of the
renewable energy and BESS procurement by PREPA (for 845MW of solar and
220MW of BESS), PREB issued a Resolution indicating that the remaining
Tranches 2 through 6, would be led by PREB and a selected contractor
(Independent Coordinator) to manage the remaining procurement
processes.
The Tranche 2 procurement process, which was originally set to
begin in June 2021, was launched on September 28, 2022 and published by
the PREB's Independent Coordinator. The original deadline for filing
responses was November 14, 2022. PREB recently announced an extension
until December 5, 2022, for proponents to submit proposals. Tranche 2
seeks up to 1,000MW of renewable energy and 500MW of BESS projects.
Tranches 3 and 4 were supposed to be opened to receive proposals in
December 2021 and June 2022, respectively. Both tranches are now
delayed and PREB has not informed of any updates on the target release
dates.

4. The status and estimated costs of all projects that are planned
or underway using federal recovery funds, including a breakdown
of which projects have been submitted, approved, or started and
what amounts have been disbursed

a. Background and Responsibilities

In September 2017, Pue1to Rico's electric system was completely
devasted by the landfall of Hurricanes Irma and Maria, resulting in the
most prolonged electrical blackout in modern U.S. history. This paved
the way for a historic obligation of federal funds from the Public
Assistance program to Puerto Rico under the Federal Emergency
Management Agency's (FEMA) Stafford Act Sec. 428. Of these funds, over
$9.5 billion are destined for the reconstruction of the Puerto Rico
Electric Power Authority's (PREPA) electrical and water infrastructure.
The $9.5 billion amount represents 90% of the total estimated cost of
the permanent work to be executed and is complemented by a local cost
share of 10%, which amounts to approximately $1 billion that will be
funded by the Government of Puerto Rico, with up to $500 million in
Community Development Block Grant Disaster Recovery (CDBG-DR) funds.
Specifically, this funding will be utilized to design and build a more
resilient and modern electrical infrastructure to provide sustainable
and reliable power for the long-term future of Puerto Rico. Most of
these funds are destined for transmission and distribution (T&D)
infrastructure work.
In addition to the FEMA Sec. 428 Funds, FEMA obligated
approximately $1.5 billion under the Hazard Mitigation Grant Program
(HMGP) authorized by the Stafford Act Sec. 404 for PREPA's electrical
generation and water infrastructure. These funds may be used to provide
protection to undamaged parts of a facility and/or to prevent and
reduce damages that future disasters could cause. Approximately $12.2
billion is currently assigned to reconstruct PREPA's electrical system
and water infrastructure. This consists of FEMA Sec. 428 and Sec. 404
funds, insurance proceeds, and local funds. LUMA Energy is responsible
for permanent reconstruction work related to the T&D infrastructure and
PREPA is responsible for permanent reconstruction work related to its
generation plants, including hydroelectric facilities, dams, and
irrigation infrastructure.

b. Generation/Hydropower plants--federally funded projects,
status, timelines, milestones. Federal Stabilization Plan

Please refer to the ``Permanent Projects Tracker'' attached.

c. Other related FEMA/COR3/HUD accomplishments by PREPA

The funding allocation described above underscores the need to
repair Puerto Rico's generation system urgently. Puerto Rico currently
lacks dependable power generation to supply the energy demand and
requires temporary emergency generation, including peaking units and
three new mobile generators at PREPA's Palo Seco power plant to meet
the load. These three power units at Palo Seco were purchased after
Hurricanes Irma and Maria, and FEMA reimbursed the amount related to
diesel to operate the units.
In addition to the FEMA Sec. 428 and Sec. 404 funds assigned to the
PREPA generation system and water infrastructure assets, PREPA
requested approximately $300 million from the Puerto Rico Department of
Housing for CDBG-DR funds for the retrofit of PREPA's hydroelectric
generating units under ``Electrical Power Reliability and Resilience
Program (ER2)'' of the CDBG Electrical System Optimization Action Plan.
Please refer to the ``Electrical Power Reliability and Resilience
Program (ER2)'' document attached for further information.

Under the Public Assistance program, FEMA approved 11 PREPA
generation-related projects and obligated approximately $182 million
through the FAASt process as of this date. The 11 projects submitted by
PREPA and approved by FEMA include projects at the following power
plants:

Aguirre Power Complex

Costa Sur Power Complex

Palo Seco Power Plant

San Juan Power Plant

Mayaguez Power Plant and

Cambalache Power Plant.

Further, the 11 projects, in turn, cover 65 scopes of work (SOWs)
approved by the Puerto Rico Energy Bureau of the Public Service
Regulatory Board (PREB), Puerto Rico's energy sector regulator, for
repairs of PREPA's legacy generation units.

d. Peakers RFPs; overall status; project timelines for 1st RFP (4
units); 2nd RFP (7 units)

FEMA has obligated $853 million of FEMA Sec. 404 funds that will be
allocated to cover the cost of new turbines. PREPA is following its
procedures and state regulatory regulations to acquire new-generation
equipment. In November 2022, PREPA submitted to PREB a draft RFP to
acquire four turbines with black-start capabilities. Following PREB's
evaluation and approval, PREPA expects the RFP to be published in
December 2022. A separate RFP to acquire seven new simple cycle gas
turbines PREPA will be submitted to PREB in December 2022. PREPA
estimates that PREB may complete its evaluation and grant approval by
early-January 2023. PREPA will publish it as soon as PREB grants leave
to do so.

II. Supplemental Information and Responses Arising from the November
17, 2022's Hearing

5. Summary of Permitting Issues for New Renewable Generation
Projects

a. Title V Critical Project under PROMESA

PREPA has urged all approved renewable energy and BESS Project
Sponsors in Tranche 1 to evaluate and seek, as appropriate, designation
as a Title V Critical Project by the Fiscal Oversight and Management
Board for Puerto Rico (FOMB).
Title V of the Puerto Rico Oversight, Management, and Economic
Stability Act (PROMESA) adopts key provisions of Act 76-2000, the
Puerto Rico Procedures for Emergency Situations or Events Act, and
defines what a Critical Project means. The term ``Critical Project''
means a project identified under the provisions of Title V and
intimately related to addressing an emergency whose approval,
consideration, permitting, and implementation shall be expedited and
streamlined according to the statutory process provided by Act 76-2000,
or otherwise adopted pursuant to Title V. Governor Pierluisi has
declared an energy infrastructure emergency under Act 76-2000 for
purposes of expedited permitting, which is a process that applies to
Puerto Rico permitting agencies.
Title V establishes project submission requirements for Project
Sponsors, and in the case of energy-specific projects, has additional
criteria related to fuel mix diversification, privatized generation,
renewable energy, improved reliance, and performance. This language was
specifically added by Congress knowing that the island's grid and
generation assets were and continue to be in dire need of
transformation and modernization.
As a Critical Project, the FOMB's Revitalization Coordinator has
the authority (and mandate) to identify Points of Contact at each
relevant federal permitting agency, to help prioritize the evaluation
and permitting process for such projects.
Support from the FOMB/Title V designation and efforts to expedite
permitting of energy projects can be enhanced with U.S. Department of
Energy (DOE) Secretary Jennifer Granholm's Puerto Rico Grid Recovery
Modernization Team, for support across federal resources, technical
assistance, and additional help to repair and reconstruct the island's
grid and to drive decisive progress on Puerto Rico's clean energy
transformation.

b. Expedited permitting for energy projects under Puerto Rico Law

The governor of Puerto Rico has broad and specific authority, under
Act 76-2000 to declare an emergency via executive order for the
specific purpose and objective of addressing the declared emergency,
expediting critical permitting for projects designed to address the
emergency. Act 76-2000 was legislated precisely for the type of
situation Puerto Rico is experiencing today with its energy grid and
the obvious urgency, risk factors, overall sector transformation
required under Puerto Rico's energy public policy, PREPA's fiscal plan,
and safety and security concerns given the highly fragile T&D and
energy generation infrastructure.
The governor activated the emergency procedures under Act 76-2000
on March 25, 2021 (EO-2021-024) for purposes of all infrastructure
(including energy infrastructure) impacted by hurricanes Irma, Maria,
and the earthquakes. This Executive Order was most recently renewed/
extended via EO-2022-050 on October 5, 2022.
The legal effect of an executive order pursuant to Act 76-2000 for
these strategic emergency projects is immediate and helps jumpstart and
accelerate local permitting, and thus financing and related funding and
pre-construction (design, modeling, procurement) work.

6. PREPA's efforts before the PREB regarding gasification and
strategies to stabilize generation

a. Conversion of the San Juan Steam Units to Operate with Natural
Gas

PREPA has submitted multiple requests (attached document with links
to the ``Conversion Motions'' filed) to PREB to allow a limited update
or amendment to the operative IRP to enable PREPA to convert the San
Juan steam units 7, 8, 9 and 10 (San Juan Steam Units) to operate with
natural gas as a primary fuel and be able to continue using no. 6 fuel
oil as backup fuel. This amendment would help PREPA achieve compliance
with the State Implementation Plan and convert 400 MW to become more
economical and cleaner generation (two of these units are on long-term
outage, and thus, not currently generating any power). However, PREB
has given priority to procedural considerations, denying the request,
and determining that LUMA is the only party that may request an
amendment to the IRP (even for a generation matter, which is owned and
operated by PREPA). The proposed conversions are a short to mid-term
measure to increase environmentally compliant generation in the north,
close to Puerto Rico's largest load centers--while new renewable energy
and BESS projects and financed, developed, and become operational.

b. Efforts to provide adequate maintenance to the generation fleet

To maintain PREPA's generation units in operation and, more
importantly, in reliable operation and service, these must receive
their appropriate repairs and maintenance, as recommended by their
manufacturers. On November 2021, PREPA asked PREB for leave to commence
10 projects to provide maintenance and repair the generation fleet and
proceed with the corresponding applications and submissions to FEMA and
COR3 for the reimbursement of all associated costs. However, after
several procedural events and several motions filed by PREPA (attached
document with links to the ``Maintenance Motions'' filed), PREB has not
approved several projects that target the need to provide adequate
maintenance to the San Juan units 8 and 10 and the Cambalache Unit 1.
To date, four (4) SOWs for the funding necessary to conduct these works
remain denied before PREB.

Additional detail on the foregoing can be found in Appendix 2.

c. Temporary Generation Initiative: summarize how PREPA had
suggested this before the current instability period and
explain why temporary generation is needed, to supplement
maintenance schedules, etc. (General Requisition Form RF 113)

After Hurricanes Irma and Maria, part of the funds assigned to
Puerto Rico was provided under the 404 Hazard Mitigation Grant Program
(HMGP or FEMA 404). PREPA, as the sub-recipient of the federal funds,
identified hazard mitigation projects that would be eligible under the
HMGP requirements and purpose and, accordingly, proposed two (2) new
generation resources that PREPA had included in its proposed 2019
Integrated Resource Plan (Proposed IRP) as infrastructure projects that
could deliver hazard mitigation results. These projects were: a new
combined cycle (CC) in the San Juan area, which would replace old
thermal generation capacity, and the wholesale replacement of the
entire PREPA peaking unit fleet (``Peaking Units''). The principle that
supported PREPA's proposal for these projects as hazard mitigation
projects was very targeted and came from lessons learned from
hurricanes Irma and Maria, which were later confirmed by the most
recent experience with Hurricane Fiona. More specifically, the
formulation of these projects was driven by the understanding of what
the hurricanes affected the most and the resources that, if available
to PREPA when the hurricanes passed, would have mitigated damages and
accelerated the restoration of power to Puerto Rico.
Usually, a major event leaves Puerto Rico without electric service,
which requires having enough available generation capacity to restart
the system. Puerto Rico electric system operates as an isolated system,
which means it is not interconnected to other electric systems, so it
greatly depends on the black start and peaking units to restart the
system. These units are the first resources used to begin the system
restoration. The black start and peaking units, combined with the base
load units in the north and south, form electric islands through Puerto
Rico, such as mini-grids, to provide reliable power in a continuous
manner to utility's customers. When the major 230 kV and 115 kV lines
are restored and operational, these electric islands are synchronized
with each other until the entire system in connected. This restoration
process is followed to preserve life, continue the restoration of the
electrical service, and begin the economic activity after the passage
of a major atmospheric event, like hurricanes and tropical storms.
The new CC project together with the wholesale replacement of the
Peaking Units were proposed as the main sources of generation to supply
the critical and priority loads of the mini-grids formulated in the
Proposed IRP to operate in a resilient way after the passage of a major
atmospheric event. By supplying the critical and priority loads only
days after the passage of the major event, we can save lives and be
effective and agile in the restoration of the electrical system. The
main focus in this process is to preserve the lives of the residents of
Puerto Rico. Regarding the project for the wholesale replacement of the
Peaking Units, having new peaking units would allow PREPA to replicate
what the U.S. Corps of Engineers (USACE) did in the aftermath of the
hurricanes of 2017, placing emergency generators in different parts of
the Island to create mini-grids and serve critical loads.
Furthermore, in the aftermath of Hurricane Fiona, PREPA's baseload
generating units and peaking units suffered damages mainly due to the
heavy and sustained rains during the passage of the hurricane. This
event occurred in the middle of PREPA's repairs works on its generating
units that started in November 2021. Hurricane Fiona had the main
effect of significantly reducing the available dependable generating
capacity, which was already limited before the event. Hence, to
stabilize Puerto Rico's power system, on September 27, 2022, PREPA
submitted a request (Form RF 113) to the Federal Emergency Management
Agency (FEMA) for the installation of temporary generation, which would
allow PREPA to continue repairing its generating units and,
simultaneously, maintain enough dependable generating capacity to
supply the electrical demand in a reliable and safe manner. Attached,
copy of the Form RF 113 submitted by PREPA.
On October 12, 2022, the Governor of Puerto Rico submitted a formal
request to the DR-4671-DR-PR Hurricane Fiona Federal Coordinating
Officer requesting Direct Federal Assistance to stabilize the
electrical grid, in accordance with recommendations that the Department
of Energy and United States Army Corps of Engineers will be providing
and the federal government appointed the Puerto Rico Power System
Stabilization Task Force (Task Force) to plan, coordinate, and
integrate efforts to execute power system stabilization in Puerto Rico
due to impacts caused by Hurricane Fiona. The Task Force includes
representatives from FEMA, the Department of Energy (DOE), the
Environmental Protection Agency (EPA), and the USACE. Since the
establishment of the Task Force, its members have conducted regular
meetings with PREPA, LUMA Energy, LLC (LUMA), COR3, PREB, and other
local stakeholders. In addition, the Task Force members have visited
and assessed all PREPA's power plants to determine their actual
conditions and operational constraints. As a result of this assessment,
the Task Force determined that the recommended course of action is to
provide temporary generation to augment system capacity to complete
priority emergency repairs to stabilize the system without significant
interruption in service.

7. Responsibility for electric rate increases

PREPA would like to clarify for the congressional record,
statements made by LUMA at the hearing indicating that it was not and
is not responsible for electric customer rate changes.
Starting on June 1, 2021, LUMA began the Interim Service Period
under the Supplemental Agreement to the T&D OMA, providing for LUMA to
assume T&D operations while PREPA remains in Title III. These services
and responsibilities include day-to-day operations and maintenance of
the T&D system, long-term systems and resource planning, generation
dispatch, asset management, operation and maintenance, community and
media relations, reporting and record keeping, finance and accounting,
and oversight and implementation of federally funded projects, among
others specified in the T&D OMA Scope of Services.
Notably under LUMA's responsibilities is the filing of all rate
rider update requests to PREB, including fuel and purchased power rate
riders on a quarterly basis. These rate filings combine (a) forecast
inputs from PREPA on fuel costs--which are based on market prices, and
(b) LUMA's projection of the generation system dispatch. LUMA is
responsible for both real-time generation system dispatch and
forecasting of generation system dispatch and costs, both in the near
term for rate adjustment requests and long-term projection for the IRP,
which is also now the responsibility of LUMA before the PREB.
LUMA's response regarding its responsibilities about rate
increases, may have left some room to interpret that it is not
responsible for electric rate impacts or changes. While it is true that
LUMA, like PREPA, has no control over global fuel market prices, LUMA
does play an important and significant role as the party solely
responsible for requesting and implementing rate and adjustment clauses
changes approved by PREB. This is part of a crucial and entirely normal
utility function of cost recovery and is performed by all mainland
utilities. Further, generation dispatch, which is managed entirely by
LUMA, does have an impact on fuel costs. Even though PREPA purchases
fuels, and thus a PREPA expense, PREPA pays for the fuel that is
consumed by the power plants that LUMA determines how to dispatch.
Thus, PREPA doesn't have control over which fuels, the least or the
more expensive, are used first.

8. Status of PREPA Vendor Payables and Debts

a. Summary of PREPA's status of debts with APPA utilities

i. NYPA

The total validated New York Power Authority (NYPA) invoiced amount
for $2,204,995.90 is in accordance with the MOU. This payment
authorization has been processed and sent to accounts payable for the
corresponding disbursement. Additionally, there is an invoiced balance
of $1,025,584.60 that is outside of the agreement. PREPA is unable to
pay the balance if the project was carried outside of a period covered
by a duly formalized agreement. In response to NYPA's arguments, a
legal assessment was performed to see if it is possible to pay while
maintaining compliance with the laws and regulations applicable to
PREPA. The remaining approved balance of $1,638,405.62 must be paid in
December.

ii. APPA MOUs

The total balance for the 32 companies that provided services to
PREPA is $325.8 million per FEMA. The payment disbursed is
approximately $303 million to 20 companies, and there is an outstanding
balance of approximately $23.5 million to 12 companies. PREPA expects
$23.0 million in reimbursement from FEMA, after which PREPA will
reimburse the relevant 12 companies.
These invoices are validated and certified, but the outstanding
balance claimed by the companies remains to be reconciled. LUMA's
Accounts Payable department will perform the reconciliation. The
following payments were made to companies in the last fiscal year:

Duke--$7,661,916 on 7/2/2021

Southern California--$635,291.49 on 10/15/2021

PG&E--$910,960.94 on 8/12/2022

AES--$47,884.90 on 8/18/2022

b. Summary of Work between PREPA, LUMA and APPA for Fiona;
schedule of meetings held; PREPA's outreach to APPA (explaining
that LUMA cannot reach out to APPA)

On September 14, 2022, APPA's Operations Services Manager, Mr.
Giacomo Wray, contacted Maite Soto and Astrid Rodriguez from PREPA via
email informing that they were monitoring the Tropical Depression Seven
that was moving westward toward the Antilles at the time. APPA wanted
to check in with PREPA to see if it had any concerns or any future
needs for assistance or resources. In addition, APPA offered to
schedule a call to discuss this matter.
PREPA and APPA agreed on having daily meetings starting on
September 16, 2022, to discuss the possible activation of APPA's Mutual
Aid, leaving one day for PREPA to reach out to LUMA and agree on a
process for this activation. Discussing this process was needed because
LUMA, as a private entity and contractor, is not a member of the APPA
and, hence, cannot reach out directly to APPA for the activation of the
Mutual Aid. The tropical depression converted to Tropical Storm Fiona
on September 15, 2022, date when PREPA contacted LUMA via email
requesting LUMA to inform if they need some assistance or resources
from APPA, so PREPA can coordinate such assistance. LUMA answered the
same date informing that they were in the process of evaluating
resourcing needs and availability, including the potential need for
Mutual Aid and asked to schedule a call to discuss and coordinate
potential APPA support with their points of contact, Angel Silverio and
Mervet Rodriguez.
PREPA and LUMA met the September 15, 2022's afternoon and discussed
the need to activate Mutual Aid. LUMA informed that they were still
evaluating resourcing needs and availability and, once they finish this
evaluation, they will know if LUMA will need APPA support. On the
morning of September 16, 2022, PREPA met with APPA and informed LUMA's
response. APPA and PREPA agreed to include LUMA in the following daily
meetings. During the afternoon of September 16, 2022, PREPA met with
LUMA, who informed that, at the moment, LUMA foresaw that they could
manage the Tropical Storm Fiona event with internal resources, but that
were going to meet with PREPA and APPA the next day.
On September 17, 2022, the Governor of Puerto Rico declared an
emergency due to the storm warning issued to Puerto Rico. During the
afternoon of this date, PREPA, APPA, and LUMA had their first meeting
together to discuss the possible activation of Mutual Aid. APPA's
representatives explained the process of requesting Mutual Aid and
answered LUMA's questions related to such process. It was explained
that if LUMA needed to activate the Mutual Aid, it had to request such
aid to PREPA, who in turn will request the aid to APPA. However, it was
agreed to conduct daily meetings between APPA, PREPA, and LUMA to
discuss the current needs of LUMA, so APPA and PREPA can respond on a
timely manner to such needs. In addition, during the meeting, LUMA
informed that they still foresaw that they could manage the Tropical
Storm Fiona event with internal resources and local contractors. For
reference, please see attached letters between APPA and PREPA.
Early on September 18, 2022, Tropical Storm Fiona converted to
Category 1 hurricane and a hurricane warning was issued to Puerto Rico.
APPA, PREPA, and LUMA attended their daily meeting and LUMA informed
that they still foresaw that they could manage the Hurricane Fiona
event with internal resources and local contractors. APPA stressed that
the decision to activate their support should be done as soon as
possible, because the coordination of moving resources to Puerto Rico
take significant time. However, LUMA's representatives sent an email
with a list of possible needs of materials, resources, and equipment
(vehicles) that LUMA estimated to effectively address the restoration
of electrical system. In its email, LUMA clearly stated that the
communication sent was not a request, as its purpose was to advance the
availability analysis process to be effective in the case of activating
a request officially. PREPA forwarded this email to APPA the same date.
During the afternoon and evening of September 18, 2022, Hurricane Fiona
made landfall in Puerto Rico.
On September 19, 2022, APPA, PREPA, and LUMA attended their daily
meeting and LUMA informed that they were conducting assessments of the
damages caused by the passage of Hurricane Fiona. LUMA informed that
they will notify if they need the activation of the Mutual Aid once
they completed the assessment of the damages. APPA reiterated that the
decision to activate their support should be done as soon as possible,
because the coordination of moving resources to Puerto Rico take
significant time.
On September 20, 2022, PREPA sent an email to LUMA summarizing
their daily calls, in particular that LUMA has informed that, so far,
they have not had the need to activate Mutual Aid and that PREPA
encouraged LUMA use APPA's resources, as they were less expensive than
private contractors. That same date APPA, PREPA, and LUMA attended
their daily meeting and LUMA informed that they were still conducting
assessments of the damages caused by the passage of Hurricane Fiona,
after which they will notify if they need the activation of the Mutual
Aid. During the daily meeting on September 21, 2022, LUMA informed that
the status was the same as the day before.
During the daily meeting on September 22, 2022, PREPA's
representatives asked LUMA to clarify if they needed the APPA support,
as it was not clear at that moment. During a meeting conducted later
that same date, LUMA clarified that they were still assessing the
damages caused by Hurricane Fiona and that they will notify PREPA if
they need the activation of Mutual Aid.
On September 23, 2022, APPA, PREPA, and LUMA attended their daily
meeting and LUMA informed that they will notify their decision on the
activation of Mutual Aid the next day. In addition, LUMA informed that,
if they requested APPA's support, the technical staff to be sent to
Puerto Rico shall be members of the International Brotherhood of
Electrical Workers (IBEW). APPA's representatives explained that this
LUMA's requirement significantly limited the available resources to be
sent to Puerto Rico for the restoration works. PREPA's representatives
requested LUMA to evaluate an exception to that requirement,
considering that current situation was an emergency and that APPA's
workers have come in the past to help restore Puerto Rico's electrical
system without any adverse result or violations to American codes and
standards.
On September 24, 2022, APPA, PREPA, and LUMA attended their daily
meeting and LUMA informed that they did not need the activation of
Mutual Aid. PREPA confirmed this notification via email to LUMA. APPA
and PREPA agreed to suspend their daily meetings from that day on.

c. Summary of Cobra debt

On October 19, 2017, after Hurricanes Irma and Maria impacted
Puerto Rico, PREPA and Cobra Acquisitions LLC (``Cobra'') entered into
the Emergency Master Service Agreement for PREPA's Electrical Grid
Repairs-Hurricane Maria, dated October 2017 (the''First Contract'') for
Cobra to perform emergency ``storm restoration services'' for $200
million. Through five subsequent amendments, the contract amount for
the First Contract was increased to $945 million.
On May 26, 2018, PREPA and Cobra entered the Master Services
Contract for PREPA's Electrical Grid Repairs-Hurricane Maria, dated May
26, 2018 (the ``Second Contract,'' and with the First Contract, the
``Cobra Contracts''), for Cobra to perform restoration and
reconstruction services in addition to its emergency storm repair
services under the First Contract, in the amount of up to an additional
$900 million.
On September 30, 2019, Cobra filed a motion seeking (i) allowance
of an approximately $216 million post-petition administrative expense
claim, arising from various services provided by Cobra in connection
with the Cobra Contracts, with interest accruing, and (ii) immediate
payment of that asserted administrative expense claim. As of June 21,
2022, Cobra alleges approximately $123 million of interest has accrued
in connection with non-payment of amounts due pursuant to the Cobra
Contracts.

9. Other PREPA accomplishments and advances following Hurricanes
Irma and Maria and during Title III bankruptcy proceedings

a. 2022 PREPA Fiscal Plan Key Accomplishments

Successfully supported the 11-month Front-End Transition
to the selected T&D OMA \1\ Operator--LUMA Energy, LLC--for
the privatization of the operation and maintenance of
PREPA's T&D system.
---------------------------------------------------------------------------
\1\ Transmission and Distribution Operating and Maintenance
Agreement (T&D OMA) executed on June 22, 2020 amongst PREPA, the Puerto
Rico Public-Private Partnerships Authority (P3A) and LUMA Energy, LLC
and LUMA Energy ServCo, LLC (collectively, LUMA).

Completed the return-to-service repairs to Costa Sur power
units 5 & 6 (440MW), and necessary upgrades to the San
---------------------------------------------------------------------------
Juan Power Plant units 5 and 6 for air quality control.

Reduced customer call wait-times through call center
outsourcing and increasing customer accessibility to e-
billing platforms ahead of LUMA's onboarding.

Secured a historic Global Settlement of $10.7 billion in
funding from FEMA Sec. 428, through the Central Office of
Recovery, and Reconstruction and Resiliency (COR3) with
FEMA, along with cost matching and other funds from
insurance, FEMA Sec. 404 and CDBG-DR, also ahead of LUMA's
onboarding.

Developed and worked toward implementation of the 10-year
Infrastructure Plan for federally funded grid capital
investments required by FEMA, and the implementation of the
PREB-approved Modified Action Plan for PREPA's Integrated
Resource Plan (IRP).

Supported P3A, the Puerto Rico Fiscal Agency and Financial
Advisory Authority (AAFAF, for its Spanish acronym) and
FOMB in launching the PREPA Legacy Generation Asset
procurement process for the selection of one or more
private operator(s) to operate and maintain PREPA's legacy
generation power plants.

Fuel Procurement: At the beginning of FY 2022, PREPA
issued RFPs for both diesel and bunker-C and completed the
evaluation and selection process by the end of September
and October, respectively. Both RFPs attracted considerable
market interest and resulted in improved terms to PREPA
when compared to prior agreements:

o On October 29, 2021, PREPA executed a $606 million fuel
contract with Puma Energy Caribe LLC for bunker-C fuel. The
contract price adder in the competitively procured agreement
represented a 33% price reduction compared to the previous
bunker-C fuel supply contract.

o On November 18, 2021, PREPA executed a $265.5 million
diesel fuel supply contract with Novum Energy Trading Inc. The
contract price adder in the competitively procured agreements
represented a 19% savings when compared to the terms provided
by the previous diesel supplier, Puma Energy Caribe LLC, which
was PREPA's sole provider of diesel fuel since 2014.

Additional detail on prior fiscal year accomplishments is provided
in Appendix 3.

b. Budgetary/financial achievements based on approved budgets

PREPA is required under PROMESA to submit compliant budgets and
abide by FOMB's financial and reporting requirements. FY2023 represents
the sixth budget year for which PREPA achieved a certified budget. In
coordination with FOMB, PREPA developed and implemented a budget to
actual reporting process that has continued during and after the LUMA
onboarding. Throughout the Title III process, PREPA has consistently
proposed balanced budgets in which expenses are equal to or less than
expected revenues.
For Fiscal Year 2021, FOMB modified PREPA's proposal and certified
a budget that included a $126 million deficit based on the expected
LUMA Front-End Transition costs of $135 million, which ultimately
exceeded $180 million. This was the first and only year in which PREPA
did not have a balanced budget, and budgets certified by FOMB for
FY2022 and FY2023 were balanced.
c. Status of PREPA audited financial statements

At the outset of the Title III proceeding, PREPA audited financial
statements were delayed due to going concern issues raised by auditors.
During the pendency of Title III (between 2017 and today), PREPA has
completed the following audits and is working to complete the FY2021
and FY2022 statements.

--FY2015 audited financial statements issued on April 20, 2018

--FY2016 audited financial statements issued on December 12, 2018

--FY2017 audited financial statements issued on June 28, 2019

--FY2018 audited financial statements issued on October 6, 2021

--FY2019 audited financial statements issued on February 24, 2022

--FY2020 audited financial statements issued on September 30, 2022

d. Governor Briefs

Attached to this document, please find copy of the latest PREPA's
report to the Governor of Puerto Rico regarding the status of PREPA's
works.

*****

Appendix 1: Additional information on the Approved IRP

Increasing Share of Renewable Generation and Storage

In the Final Order, PREB ordered PREPA to develop a plan to procure
3,750 MW of renewable energy and 1,500 MW of battery storage by 2025.
In addition, PREB approved the installation of up to 81 MW of local
peaking capacity procured through a technology-agnostic, competitive
bid Request for Proposal (RFP) process that is open to all single or
aggregate sources of demand and supply-side options. PREB also approved
the conversion of eight (8) retired steam plants to synchronous
condensers to enable voltage stability following the installation of
inverter-based renewable generation and battery storage. The Final
Order clarified that the conversion plan w be subject to additional
studies and coordinated with retirement schedules.
PREB rejected the development and construction of most proposed new
fossil fuel generation resources, including the retirement and
wholesale replacement of all eighteen (18) existing gas turbine peaking
units, any new liquified natural gas infrastructure, and large-scale
development efforts on a new combined cycle gas turbine unit at Palo
Seco. PREB did authorize up to $5 million for preliminary economic,
siting, permitting, and feasibility analysis at the Palo Seco site for
a new fossil fuel-powered unit and fuel infrastructure, so long as it
does not interfere with or delay the procurement of renewable energy or
battery storage. Regarding fossil fuel-powered power purchase and
operating agreements (PPOAs), PREB approved both the extension of the
EcoElectrica contract through 2032 and the cessation of the agreement
for coal-fired AES units by the end of 2027, pursuant to Act 17-2019.
Finally, PREB approved the retirement of approximately 2.4 GW of
existing fossil fuel units subject to the EPA's Mercury and Air Toxics
Standards (MATS) rule.
Enhancing Grid Resilience

The Final Order found the Proposed IRP adequately established the
need for (1) transmission system upgrades; (2) the expenditure of up to
$2 billion for hardening of transmission infrastructure; and (3) the
investment of $911 million in distribution system upgrades to enhance
resiliency and support distributed generation. However, PREB ordered
PREPA to seek PREB approval for specific T&D expenditures prior to
making any final planning or investments. PREB also announced the
opening of an optimization proceeding that will determine the optimal
transmission investments for ensuring a more resilient electric power
system, including assessing the ability for small-scale distributed
resources--such as mini-grids--to contribute to resiliency.
As PREPA's successor in operating and maintaining the transmission
& distribution grid, LUMA will be responsible for planning and
implementing any grid resiliency measures, including seeking and
acquiring the necessary approvals from PREB for future capital projects
and expenditures.
Enabling Customer Choice

The IRP's Modified Action Plan enables further customer choice
through various programs, including DG, EE, and DR. PREB ordered PREPA
to further enable DG by ensuring all distribution system planning and
expenditures support DG. With regard to DR, the Modified Action Plan
requires PREPA to develop internal systems and external programs and
offerings available to all customer classes to engage aggregators of DR
resources to offer, dispatch, and be compensated for cost-effective DR
resources. For EE, PREB ordered PREPA to take all necessary steps to
support PREB's forthcoming EE Regulation and underlying objective of
30% EE savings by 2040 (compared to FY2019 net utility sales) as
mandated in Act 17-2019, including providing support for program
implementation, analysis, funding, and financing.

*****

Appendix 2: Additional information on PREPA's efforts before the PREB
(w links of motions filed) regarding gasification and strategies to
stabilize the generation grid

i. Conversion of the San Juan Steam Units to Operate with Natural Gas

1. Environmental considerations and the State Implementation Plan

As an electric utility, PREPA must comply with different
environmental laws and regulations, including the Clean Air Act (CAA)
\2\ and the comprehensive federal law regulating air emissions from
stationary and mobile sources. This law authorizes the EPA to establish
National Ambient Air Quality Standards (NAAQS) to protect public health
and welfare and regulate air pollutants, including hazardous ones.
---------------------------------------------------------------------------
\2\ Clean Air Act, Public Law 95-95--August 7, 1977.
---------------------------------------------------------------------------
Under Section 107(a) of the CAA, each state, territory, or local
air district is responsible for submitting a SIP to specify how NAAQS
will be achieved and maintained within each air quality control region.
42 U.S.C. Sec. 7407(a). The CAA also requires that the U.S.
Environmental Protection Agency (EPA) review and approve SIP that meet
the requirements of the Act. In the case of Puerto Rico, compliance
with the CAA requires the Department of Natural and Environmental
Resources (DNER) to submit a SIP for EPA's approval concerning the 2010
1-Hour Sulfur Dioxide (SO2) NAAQS.\3\
---------------------------------------------------------------------------
\3\ On March 10, 2022, DNER opened a proceeding to evaluate the SIP
and the amendments to the RCAP by publishing notices of public hearing
regarding its intent to adopt a SIP and amendments to RCAP. On April 9,
2022, PREPA submitted written comments on this prior version of the
proposed SIP, and on April 11, 2022, PREPA submitted additional
comments during the public hearing. On August 26, 2022, DNER published
notices of public hearing regarding (i) its intent to adopt the SIP and
(ii) amendments to RCAP. On October 7, 2022, PREPA submitted comments
to these documents.
---------------------------------------------------------------------------
The EPA designated the Guayama-Salinas and San Juan air districts
as nonattainment areas for the SO2 NAAQS, effective April 9, 2018.
EPA's nonattainment designation was based on SO2 modeling results from
modeling performed on these air districts. On May 2016, the Government
of Puerto Rico decided to use the EPA's approved air dispersion model
as the strategy to demonstrate compliance with the SO2 NAAQS.
The air district of Guayama-Salinas includes part of the
municipalities of Guayama and Salinas. In the case of the San Juan air
district, it consists of the municipality of Catano and part of the
municipalities of San Juan, Guaynabo, Bayamon, and Toa Baja. These air
districts cover the area where PREPA's Aguirre, San Juan, and Palo Seco
steam plants are located.
Given the nonattainment designation by EPA under the CAA, the DNER
must submit a final SIP for EPA approval, which shall provide for
attainment of the 2010 1-Hour SO2 NAAQS in the Guayama-Salinas and San
Juan nonattainment areas by April 9, 2023. The SIP was due to EPA by
October 9, 2019. Because the DNER missed the October 9, 2019, deadline
EPA issued the Findings of Failure to Submit (FFS) SIP Required for
Attainment of the 2010 1-Hour Primary Sulfur Dioxide (SO2) NAAQS, with
an effective date of December 3, 2020. 85 Fed. Reg. 69,504 (Nov. 3,
2020). The FFS triggers CAA deadlines for EPA to impose mandatory
sanctions if EPA has not determined that Puerto Rico made a complete
SIP submittal and starts a 2-year clock for EPA to issue a Federal
Implementation Plan.
According to the current Puerto Rico SIP process, EPA should have
determined that the DNER's final SIP submission was complete by June 3,
2022, to avoid the imposition of 2-to-1 offset sanctions in the
nonattainment areas. Since DNER did not meet the SIP submission on that
date, each new ton of SO2 emitted from any new or modified source in
the nonattainment areas must be offset by a two-ton reduction. In
addition to PREPA's power plants, the 2-to-1 offset sanction applies to
all facilities considered emissions sources in the nonattainment areas.
To achieve compliance with EPA's regulations, the 2-to-1 offset
sanction would have required all the owners and operators of emissions
sources in the nonattainment areas to implement emissions control
measures for twice the emissions in comparison with their actual
emissions. This sanction would have increased the operational and
maintenance costs of operating industrial and commercial facilities in
the nonattainment areas, affecting the economic development in these
areas. Puerto Rico did not meet the initial October 9, 2019, deadline
for filing its SIP and filed its final SIP on November 22, 2022. EPA
deemed the submission complete on December 3, 2022. Puerto Rico now
awaits EPA's determination on the November SIP submittal.
As part of the development of the SIP, the DNER has modeled the SO2
emissions in the Guayama-Salinas and San Juan air districts and found
that these areas cannot achieve attainment if PREPA continues using
fuel oil no. 6 (Bunker C) and regular diesel fuels in the generating
units of Aguirre, San Juan, and Palo Seco power plants, absent
generating unit retirements. When modeling combustion turbines using
ultra-low sulfur diesel (ULSD), the emissions are reduced but not
enough for achieving attainment because of the emissions that are
produced in the units that continue using fuel oil no. 6. In the
absence of generation retirements, various modeling runs indicated that
achieving attainment in the relevant air districts would require
burning natural gas in existing steam units of Aguirre, San Juan, and
Palo Seco power plants.
Looking for an environmental compliance strategy that allows
PREPA's thermal units to remain operational while the reliable
transition to new renewable energy resources is achieved, PREPA held
several meetings with DNER and EPA staff during the first months of
2022. During these meetings, the DNER and PREPA agreed on the dual
priorities of providing reliable electricity to the residents of Puerto
Rico and meeting the NAAQS requirements for the benefit of the people's
health and welfare.

Considering the priorities of providing reliable electricity and
meeting the SO2 NAAQS, the DNER and PREPA identified the following
action items as feasible strategies for achieving attainment:

Integration of renewable energy as mandated by the
operative IRP and Modified Action Plan.

Substituting fuels used in existing thermal generating
units.

Development of an SO2 monitoring network within the
designated nonattainment areas for demonstrating attainment
with the NAAQS.

Consistent with these actions, in the short-term, PREPA will:

Continue participating in the renewable energy and storage
RFP tranches mandated in the Modified Action Plan.

Substitute regular diesel with ULSD fuel at combined cycle
units, combustion turbines, and the aero-derivative
machines located at the San Juan, Palo Seco, and Aguirre
Power Plants.

Comply with the DNER's requirements for developing an SO2
monitoring network.

Regarding this short-term strategy, PREPA has already completed the
Tranche 1 RFP process, is supporting the Tranche 2 RFP process (to the
extent requested by the PREB), is taking steps for substituting regular
diesel with ULSD fuel and is following the DNER's requirements to
implement the SO2 monitoring network.
Given the renewable resources interconnection conditions, achieving
Act 82-2010's \4\ renewable portfolio standard's (RPS) goals safely and
reliably are a long-term effort, given the renewable projects'
completion date is not contemplated in the following year. Accordingly,
the SO2 NAAQS SIP can't rely solely on implementing the new resources'
integration mandated by the operative IRP and Modified Action Plan to
attain the NAAQS. To adequately maintain a safe and reliable electric
service for the people of Puerto Rico, PREPA will need to execute the
necessary actions to keep its steam units operational and in compliance
with environmental regulations. As explained, modeling results indicate
that attaining the SO2 NAAQS would require burning natural gas at
existing steam units. Thus, in the short- and medium-term, pursuing the
substitution of fuel oil no. 6 with natural gas in the San Juan, Palo
Seco, and Aguirre power plants would be an appropriate course of
action.
---------------------------------------------------------------------------
\4\ Public Policy on Energy Diversification through Sustainable and
Alternative Renewable Energy in Puerto Rico, Act. No. 82 of July 19,
2020, as amended, 22 LPRA Sec. Sec. 8121-8136 (Act 82-2010).
---------------------------------------------------------------------------
This course of action will allow PREPA to keep the northern and
southern base units online to guarantee the continuity and reliability
of the electric service, operate with the reserve margins required by
being an isolated electrical system and simultaneously comply with
environmental regulations. However, on November 22, 2022, the DNER
approved a SIP with a compliance strategy based on the retirement of
base generating units during the next six years. PREPA is currently
evaluating its next steps on this matter, as the proposed base units'
retirement is not feasible nor practical. PREPA stresses that the
short- and medium-term SO2 compliance of fuel oil no. 6 burning units
can only be achieved by switching them to natural gas, because these
units shall remain online until the new resources are fully
operational.
Currently, there is no natural gas infrastructure on the premises
of the Palo Seco and Aguirre power plants. This constraint, together
with the delayed schedule for the integration of renewable resources,
does not allow PREPA to establish an SO2 compliance strategy relying
solely on the integration of renewables or natural gas fuel switching
for the steam units at the Palo Seco and Aguirre Power Plants. PREPA
will continue focusing on finalizing the construction of the Tranche 1
renewables and energy storage projects mandated by the operative IRP
and Modified Action Plan. The SO2 limitations in the SIP cannot be met
solely with the new resources' integration required by the operative
IRP and Modified Action Plan. At the same time, PREPA needs to maintain
a safe and reliable electric service for the people of Puerto Rico. To
meet the limitations imposed, PREPA will execute the necessary actions
to keep Palo Seco and Aguirre steam units operational and comply with
environmental regulations. This would be done in consultation with the
relevant regulatory entities, such as EPA, DNER, and PREB.
In the case of the San Juan power plant, there is natural gas
infrastructure in place which is currently supplying the San Juan
Combined Cycle units 5 and 6. This existing infrastructure can be used
to provide natural gas to the San Juan Steam Units to achieve
attainment with SO2 in the San Juan air district. Converting the San
Juan Steam Units to generate energy with natural gas will allow them to
remain in operation while in compliance with environmental regulations.
At the same time, renewable resources must be safely integrated into
the electrical system. Considering the above, PREPA has determined to
pursue the conversion of San Juan Steam Units to combust natural gas to
achieve attainment with the 2010 1-Hour SO2 NAAQS mandated in the CAA.

Since February 2022, PREPA has formally asked PREB to grant leave
to commence the works directed to convert the San Juan Steam Units on
more than four (4) occasions. This project, which is of paramount
importance, will benefit the people of Puerto Rico in the following
ways:

1. It is an essential step to achieving attainment with the 2010 1-
Hour SO2 NAAQS in the San Juan air district and,
consequently, helping the Government of Puerto Rico to
avoid costly sanctions, especially those that represent
losing federal funds for road and highway improvements.

2. Burning natural gas in the San Juan Steam Units will
significantly reduce emissions of SO2 as well as other
pollutants, which has a direct effect on the environment
and health of the People of Puerto Rico, particularly those
that live and work in the municipalities of San Juan,
Guaynabo, Bayamon, and Toa Baja.

3. Converting the San Juan Steam Units to operate with natural gas
as a primary fuel source will also achieve compliance of
these units with the MATS required by EPA, 40 CFR Part 63
Subpart UUUUU--National Emission Standards for Hazardous
Air Pollutants, which became effective on April 16, 2012.
As such, several PREPA units were subject to the regulation
on the Non-Continental Liquid Oil Fired Electric utility
steam-generating unit. As an environmental and regulatory
compliance strategy, PREPA effectively committed and
completed the dual-fuel conversion of its Costa Sur units 5
and 6, adding natural gas to the operation and reducing the
use of fuel oil no. 6. Similarly, PREPA is adopting this
compliance strategy with the regulation by achieving the
dual-fuel conversion project for the San Juan Steam Units.

4. Because natural gas is a much cleaner fuel than fuel oil no. 6
(Bunker C), the operations and maintenance costs of burning
natural gas in the San Juan Steam Units would be lower than
those of burning No. 6. This reduction in operations and
maintenance costs results in savings that would be passed
over to the customers.

5. Natural gas fuel market prices do not fluctuate much as those of
petroleum derivatives, like diesel and no. 6 fuels. In
addition, natural gas prices tend to be lower than diesel
and no. 6 fuel prices. These economic aspects result in a
more stable and lower fuel cost for the customers.

2. The conversion is feasible

The San Juan Steam Units' conversion to combust natural gas as
primary fuel is feasible. This conversion was assessed in 2011 when
PREPA conducted evaluations to convert Costa Sur steam units 5 and 6 to
operate mainly on natural gas fuel. At that time, PREPA conducted
evaluations, with the support of generating units' original
manufacturers, for the conversion to operate with natural gas fuel in
the steam units at Costa Sur, Aguirre, Palo Seco, and San Juan. This
resulted in a plan to convert these power plants' steam units to dual-
fuel capability and operate mainly with natural gas. One of the primary
purposes of this fuel conversion plan was to comply with MATS
environmental rules.
In addition, the natural gas supply to the San Juan Steam Units is
possible without building significant additional infrastructure. A
natural gas supply station is located adjacent to the North side of the
San Juan power plant, which already supplies natural gas to units 5 and
6. Further, PREPA has confirmed that there is availability to provide
the natural gas volume needed for all the San Juan steam units once
they are converted.
a. Added capacity and reliability

The conversion of the San Juan Steam Units would provide an added
capacity of 400 MW, which will not be modified after the conversion
works are finalized. Nevertheless, due to pending environmental
restrictions and repairs, the available capacity of the San Juan Steam
Units, units 7 and 9, is limited to 163 MW. Therefore, once the San
Juan Steam Units are repaired and converted to burn mainly natural gas,
the electric system will have an additional 237 MW to serve as baseload
generation and will, in turn, be reliable generation compliant with the
1-Hour SO2 NAAQS and MATS. This added dependable generation capacity is
essential for renewable energy's reliable and safe integration into the
power system.
Given that the highest concentration of load in the north and the
metropolitan area, the contribution of 237 MW from San Juan Steam Units
and 440 MW from San Juan CC, will contribute significantly to the
restoration of the electric system and the control of the northern
voltage profile.
Operating with reduced or limited generation in the northern base
units (San Juan and Palo Seco), where the highest concentration of load
is located, may cause the operating margins of safety in a stationary
regime to be reduced, and the electrical system is predisposed to
voltage instability problems. The increase in the levels of real and
reactive power transfer in the 230 kV and 115 kV circuits in the
transmission system (especially in the main south-north links), due to
the reduced or limited generation in the north, reduces the margins of
transfer capacity to handle situations of outages, contingencies, and
clearances.
Following PREB's reasoning when it approved the San Juan 5 and 6
steam units' conversion to operate with natural gas in January 2019,\5\
and as the situation remains today, Puerto Rico needs reliable base
load generation to provide much-needed stability for the system. In the
case of Puerto Rico, given the lack of baseload from hydro or nuclear,
and the projected retirement of coal-fired generation in 2027, the best
option for environmentally compliant base load during the integration
of renewable sources of generation would be natural gas-fired
generating units. As with the San Juan 5 and 6 conversions, the
conversion of the San Juan Steam Units will make available to PREPA
necessary base load generation in a relatively short timeframe.
---------------------------------------------------------------------------
\5\ See Resolution and Order approving the conversion of San Juan 5
and 6 steam units to dual-fuel units, In Re: Request for Proposals for
Conversion of San Juan Units 5 & 6 to Natural Gas, case no. CEPR-AP-
2018-0001.
---------------------------------------------------------------------------
3. Schedule to complete the conversions

PREPA projects that the execution of the engineering, procurement,
and construction (EPC) of the San Juan Steam Units conversion project
and the completion of the environmental permits of all these units
would take from five (5) to ten (10) years. It is estimated that the
completion of each unit's environmental permits could take eighteen
(18) to twenty-four (24) months. For illustration purposes only,
assuming January 2023 as the effective date of the EPC contract, what
follows is a hypothetical project schedule:

Unit Project Start Project Completion

San Juan 8 January 2023 December 2024
San Juan 10 January 2025 December 2026
San Juan 7 January 2027 December 2028
San Juan 9 January 2029 December 2030

This schedule shows a period of eight (8) years for converting all
SJ 7-10. However, a reasonable contingency period of two (2) years
should be added to this schedule, considering that the conversion
project could be affected by unforeseen and extraordinary events such
as atmospheric disturbances or earthquakes, among others. Therefore,
the San Juan Steam Units conversion project could take ten (10) years.
Nevertheless, PREPA has recommended that PREB approve that the
conversions are done in a phased approach. First, PREPA would complete
the conversion of units 8 and 10. These units are not currently in
service; therefore, these would not have to be taken offline to perform
the conversion works and, thus, will not affect the near-term
forecasted available generation. Then, after units 8 and 10 are
converted, and in service, PREPA would take units 7 and 9 offline to
commence the conversion works. This phased approach strives to maintain
the current generation available to the operator while the conversion
works are performed.
4. Cost estimate of the conversion

PREPA can allocate $138.5M of 404 HMGP funds for this project. This
cost-estimated is based on a previous fuel conversion study conducted
for the San Juan Steam Units.
ii. Efforts to provide adequate maintenance to the generation fleet

The following chart shows the description of the project presented
to PREB, and the cost that, should PREB grant leave to continue with
the projects, would be funded by FEMA, not PREPA's customers.
---------------------------------------------------------------------------
\6\ Presented in millions of dollars.

------------------------------------------------------------------------
PRESENTED
FACILITY PROJECT NAME SCOPE OF WORK ESTIMATE6
------------------------------------------------------------------------
San Juan Unit 10 Provide parts and $15.9
Power Plant Rehabilitation service for the open
inspection and close
of the steam turbine
and generator. Also,
in-shop repairs for
due repairs and
maintenance rotor and
oil flush of the
turbine.
------------------------------------------------------------------------
San Juan Unit 8 Inspect and replace the $10
Power Plant Rehabilitation high-pressure,
(Turbine) intermediate pressure
and low-pressure
rotors of the turbine
and perform all the
testing and
commissioning of the
equipment.
------------------------------------------------------------------------
San Juan Unit 8--Major Necessary repairs of $8
Power Plant Outage--Boiler deteriorated boiler
Sections tubes and assemblies
Replacement and and auxiliary
Repairs & equipment.
Auxiliary
Equipment
Repairs
------------------------------------------------------------------------
Cambalache Unit 1 Perform the required $18
Power Plant Rehabilitation inspections, repair
the exhaust gas
housing and GT
enclosure and filter
house, and replacement
of all of the hot gas
path components, turbo
compressor and blades,
and inspect and
replace gas turbine
no. 1. Also,
conversion of the
control system to blue-
line similar to gas
turbines 2 and 3,
upgrade the combustor
pulsation monitoring
system, upgrade the
automatic voltage
regulator, and upgrade
the opacity monitoring
system.
------------------------------------------------------------------------

Unfortunately, the PREB repeatedly denies PREPA's request to move
forward with these critical projects.
PREPA has repeatedly asked PREB for technical conferences to
discuss these projects' benefits and further explain each's technical
considerations. However, this conference has been constantly denied.
Moreover, PREB insists that the operative IRP must be amended to
consider these projects. Nevertheless, when PREPA requested the
amendment on October 11, 2022, it was outright denied in less than
twenty-four hours. PREB stated that LUMA was the only party with
authority to make the request and denied the petition without analyzing
the petition of the merits.
When the current and operative IRP was presented and evaluated, it
was forecasted that the load served by PREPA was expected to
significantly decline due to a combination of expected base load
reduction (driven by population and economic changes), energy
efficiency gains and demand-side resources. These conditions of
declining load forecast have not been met in the last three years, as
the load demand has increased, and the projection is that the demand
could increase near 3,000 MW in the following years, according to
PREPA's certified 2022 Fiscal Plan approved by the Financial Oversight
and Management Board.\7\ Therefore, the generation system must have
enough dependable capacity to supply the demand safely and reliably
and, thus, avoid massive and frequent load-shedding events.
---------------------------------------------------------------------------
\7\ Available for review at https://oversightboard.pr.gov/fiscal-
plans-2/.
---------------------------------------------------------------------------
The reality mentioned above directly affects the feasible
retirement schedule of PREPA's thermal units. PREPA fully supports the
current public policy regarding renewable energy integration and
transition. Notwithstanding, and especially considering that sufficient
capacity of new renewable resources is not expected to be reliably
interconnected with the power system at least during the following
three to five years, it is imperative that PREB act following the
undeniable reality and allow Puerto Rico's energy system to provide
reliable energy to the People of Puerto Rico. For this purpose, PREPA's
priority repeated request to PREB is that repairs are performed to
maintain the gene rating units online with the primary purpose of
providing the necessary resources to serve the growing demand
projections and to provide continuity and reliability in the electrical
service.

*****

Appendix 3: Further Detail on PREPA Accomplishments and Achievements

2021 PREPA Key Accomplishments

T&D Operator Front-End Transition: To advance and support
the Puerto Rico energy system transformation, PREPA
coordinated with and supported Lum during its Front-End
Transition period to achieve milestones and requirements
contemplated by the T&D OMA. This included the formation of
teams and development of plans to prepare the organization
for financial, operational, and legal transition (e.g.,
radio licenses for telecommunications, setup access to
PREPA offices, Governmental Approvals, etc.) Front-End
Transition teams performed a significant number of deep
dive assessments on PREPA's organization and assets to
guide and develop transition plans and take over T&D
operations and maintenance by June 1, 2021.

Procurement Process for Legacy Generation Public-Private
Partnership (P3): PREPA management and its advisory teams
developed materials for and supporting the administration
of the Request for Proposal (RFP) and bidder due diligence
process for the Legacy Generation P3, which the Puerto Rico
Public Private Partnerships Authority formally launched on
November 10, 2020. The RFP was released to eight (8) highly
qualified bidders with a target completion date for the
second half of calendar year 2021. The goal of this project
is to comply with Puerto Rico's energy policy as set forth
by Act 17-2019 and the requirements of PREPA's certified
fiscal plans, to transfer operation of the generation
assets of PREPA to a private operator to significantly
improve the operations of the legacy generation assets and
achieve cost efficiencies.

EcoElectrica Power Purchase and Operating Agreement (PPOA)
Renegotiation: The Title III Court authorized PREPA to
assume the amended contracts for the renegotiated
EcoElectrica PPOA and long-term natural gas supply
agreement for Costa Sur (Naturgy), which combined represent
annual savings of up to $10-20 million over the next five
(5) years. The PREPA Governing Board signed and ratified
the new contract, which went into effect on October 22,
2020.

Renewable PPOA renegotiation: PREPA renegotiated non-
operating, shovel-ready, renewable PPOA contracts after
obtaining approval from PREB and the FOMB for a total of
150MW of new renewable power generation. The proponents
selected by PREPA, Xzerta Tec Solar 1, LLC--approved by
PREB--and Ciro-One Salinas, LLC--would provide 60 MW and 90
MW of solar renewable generation capacity, respectively.

Costa Sur Remediation: Damage from the January 2020
earthquakes necessitated substantial repair work on Units 5
and 6 of the Costa Sur power plant to improve grid
reliability and regain a major capacity resource utilizing
low-cost and emissions compliant LNG fuel. PREPA completed
Unit 5 repairs by August 2020 and Unit 6 repairs by January
2021, under budget. The successful repairs of Costa Sur
Units 5 and 6 put a total capacity of approximately 820MW
back into service. The goal and benefit of this project was
to reestablish the operations of PREPA's lowest cost
generation units, increase system reliability, and reduce
fuel purchase expenses.

2020 PREPA Key Accomplishments

P3A Process for T&D operator: The most critical milestone
for PREPA's energy system transformation is the transition
to a world-class private O&M operator, selected through a
competitive procurement process. During the last two fiscal
years, PREPA's management and advisory teams played
significant roles in developing materials for and
supporting administration of the RFP and bidder due
diligence process. On June 22, the P3A announced its
approval of contract for a private T&D operator, along with
approvals from the Oversight Board, PREPA governing board
and PREB. Progress reporting on implementation of this P3
will be covered by Front-End Transition Initiative during
FY2021.

Expanded and fortified project management office (PMO):
During FY2020, the PREPA PMO undertook a substantial
reorganization that included significant improvements in
contract procurement and management processes and
capabilities. Findings and recommendations from this
reorganization, as well as recommendations from the prior
Contract Management Improvement Study will be incorporated
into the Front-End Transition measure with the new T&D
system operator and will also be expanded to all applicable
PREPA Directorates as part of the new Procurement
Modernization project in FY2021.

Natural gas conversion at San Juan Combined Cycle (SJCC)
Power Plant: In FY2020, PREPA successfully completed the
land-based LNG import terminal and pipeline infrastructure
in San Juan Harbor and conversion of the SJCC power plant
to dual-fuel capability, after several delays. FOMB's
expects that the project has the potential to save PREPA
and its customers between $180 to $280 million during the
5-year term of the contract.

Customer service improvements: In FY2020, PREPA
successfully outsourced call centers under a competitive
process to handle the overflow from PREPA's internal
operations, reducing average call wait times from a 20-30-
minute average to 3-5 minutes. It also achieved over 20% of
customer penetration on the e-billing platform and has
invested a concerted effort to encourage its customers to
convert to e-billing since mid-March. This effort, which
must continue, also helps mitigate the impact on
collections from COVID-19 mobility restrictions.

2019 Key Accomplishments

San Juan 5 & 6: Execution of San Juan 5 & 6 (conversion
from diesel to natural gas) contracts after review and
analysis of potential expense savings; construction
commenced.

Launch of P3 for T&D Privatization: T&D RFQ was issued in
October 2018; qualified proponents were announced in
January 2019; RFP was issued in early February 2019,
together with a proposed term sheet and a due diligence
data room; management meetings, site visits, and due
diligence are underway.

Debt Restructuring: AAFAF and FOMB announced and published
definitive PREPA RSA with Ad Hoc Group of PREPA bondholders
and Assured Guaranty on May 3, 2019, with an exchange rate
of 67.5% for new Tranche A and 10% for new Tranche B bonds.

Operational Initiatives: $54M in additional operational
savings during FY2019 YTD

Regulatory Framework: Successful enactment of Act 17-2019
setting forth a regulatory structure based on mainland
structures and providing for private investment in the
energy system.

Liquidity: PREPA's cash-flow remained stable during FY
2019 as cash receipts met operating cash expenditures. The
$300M Super priority Post-Petition revolving Credit Loan
from the Commonwealth of Puerto Rico was repaid in March
2019.

Budget to Actuals: Reporting on FY2019 Budget to Actual
and variances prepared on a quarterly basis.

FY2019 second quarter Budget to Actual report showed
revenue targets were achieved.

Restoration Work: Established dedicated Disaster Funding
Management Office in March 2019.

Received an estimated $451M emergency work in
reimbursements from Federal Emergency Management Agency in
FY2019.

IRP: Submissions of the Integrated Resource Plan submitted
to PREB in February and June 2019; regulatory approval
underway and IRP still under revision.

Independent Engineer Report: Draft of Independent Engineer
Report providing an updated assessment of PREPA's
infrastructure submitted to PREPA management for review on
April 5, 2019; final version pending publication.

Medical Benefit Reform: Prepared and executed a contract
for employee healthcare plans, effective January 1, 2019.
New plan for active employees and retirees met planned
savings targets for FY2019.

______

Submissions for the Record from Manuel Laboy

APPENDIX 1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

APPENDIX 2
[GRAPHIC] [TIFF OMITTED] T9823.030

APPENDIX 3
[GRAPHIC] [TIFF OMITTED] T9823.029

Submissions for the Record from Eduardo Pardo

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Parole for Significant Public Benefit: Proposal Summary

Proposal: Parole for Significant Public Benefit

Proponent: Puerto Rico's construction industry (represented by trade
associations, led by the Puerto Rico Chapter of AGC of America, and the
Puerto Rico Chapter of the Home Builders Association).

Problem: Puerto Rico, a U.S. territory, needs to significantly expand
construction workforce (by 50K+) during the next ten years to execute
the infrastructure reconstruction and modernization program financed
with federal funds assigned to address ($55 billion+, between FEMA and
non-FEMA construction funds under the Bipartisan Budget Act 2018) the
disaster caused by hurricane Irma and Maria (2017) and earthquakes
(2020). The magnitude of the need requires more than one solution
(existing and new). Given the urgency of the need, any additional
solution must be efficient in terms of timing, and access to skilled
employees.

Current Solutions: Construction labor training programs (with public
and private academic institutions and several nonprofit organizations),
apprenticeships, and H2-B visas. The combined potential of these
initiatives is not sufficient to meet the anticipated labor needs
within the required time frame.

Proposed Solution: Parole for Significant Public Benefit established by
Executive Order of the President of the United States. Could add 20K+
skilled construction workers.

Legal basis: Section 212(d)(5) of the Immigration and Nationality Act
(INA).

Definition of Significant Public Benefit under Section 212(d)(5):
According to www.uscis.gov there is no statutory or regulatory
definition of ``significant public benefit''. Parole based on
significant public benefit includes, but is not limited to, law
enforcement and national security reasons or foreign or domestic policy
considerations.

Definitions of Terms Under the Proposed Parole:

Beneficiary (recipient) of parole: an individual residing
in Puerto Rico with indefinite migratory status who is
skilled and available to work in construction.

Petitioner: construction companies that demonstrate need
for workforce to execute reconstruction projects covered
under this initiative.

Public: The more than 3 million US citizens living in
Puerto Rico.

Significant Public Benefit: Execution of the
reconstruction and modernization of Puerto Rico's
dilapidated infrastructure financed with FEMA and federal
recovery funds.

Sponsor: N/A Because the beneficiaries are currently
living and working in Puerto Rico, they don't need a place
to live and source of income.

Length of Parole: Two years. Eligible for re-parole after
the initial two-year term.

Eligibility: individuals residing in Puerto Rico with
indefinite migratory status on or before November 2020, who
are skilled and available to work in construction.

Possible point of reference: For the creation of the proposed parole, a
good point of reference could be the International Entrepreneur Parole.
According to the USCIS, ``under the International Entrepreneur Rule
(IER), DHS may use its parole authority to grant a period of authorized
stay, on a case-by-case basis, to foreign entrepreneurs who demonstrate
that their stay in the United States would provide a significant public
benefit through their business venture and that they merit a favorable
exercise of discretion. Under this final rule, entrepreneurs granted
parole will be eligible to work only for their start-up business. The
spouses and children of the foreign entrepreneur may also be eligible
for parole. While spouses may apply for work authorization once present
in the United States as parolees, the children are not eligible to
work. IER parole may be granted for up to three entrepreneurs per
start-up entity.''

https://www.uscis.gov/working-in-the-united-states/international-
entrepreneur-parole

FAQ:

Is this the same as a Parole in Place? No. The Parole in
Place is reserved exclusively for family members of the
military. It is rarely used.

Where will workers come from? Workers will be noncitizens
living on the island on or before November 2020. The Parole
will not be available for immigrants that entered the U.S.
illegally after the established date.

Why not use the H2-B visa program to expand workforce? the
scope of H2-B visas is limited, in terms of the number of
workers that can be allocated to Puerto Rico, duration of
the visas granted (12 months maximum for one-time
occurrences), and application schedule. The program is
intended to meet anticipated seasonal employment demand,
whereas labor needs in construction cannot be anticipated
and occur any time during the year. H2-B visas need to be
procured more than six months prior to need, a process that
does not match construction bidding procedures. In FY 2020
and FY 2021, Zero H2-B visas were granted in Puerto Rico.

Concern: This mechanism was tailored made for Puerto Rico.
Any state or territory under an emergency declaration under
FEMA can request a similar parole.

Concern: This is a novel interpretation and use of
Significant Public Benefit. Significant Public Benefit is
not defined by Section 215(d)(5) of the INA Act, and a
Parole based on significant public can be granted for, but
is not limited to, law enforcement and national security
reasons or foreign or domestic policy considerations.
Therefore, a Parole for Significant Public Benefit can be
used to address the potential construction labor crisis in
P.R. that could halt the infrastructure reconstruction and
modernization program.

Concern: High political cost. The most significant cost
would come from not doing anything to address the
anticipated labor shortage that could delay and negatively
impact the reconstruction process, increase construction
costs, and hold back economic recovery and progress on the
island.

Concern: May cause too much administrative demand on
Immigration personnel. Arrangements should be made for
making Immigration Offices in Puerto Rico responsible of
processing the Paroles, avoiding an overload on other
Immigration offices.

______

STAFFORD ACT > TITLE III > Sec. Sec. 305-307

Sec. 305. Nonliability of Federal Government (42 U.S.C. 5148)

The Federal Government shall not be liable for any claim based upon the
exercise or performance of or the failure to exercise or perform a
discretionary function or duty on the part of a Federal agency or an
employee of the Federal Government in carrying out the provisions of
this Act.

Sec. 306. Performance of Services (42 U.S.C. 5149)

(a) UTILIZATION OF SERVICES OR FACILITIES OF STATE AND LOCAL
GOVERNMENTS--In carrying out the purposes of this Act, any Federal
agency is authorized to accept and utilize the services or facilities
of any State or local government, or of any agency, office, or employee
thereof, with the consent of such government.

(b) APPOINTMENT OF TEMPORARY PERSONNEL, EXPERTS, AND CONSULTANTS;
ACQUISITION, RENTAL, OR HIRE OF EQUIPMENT, SERVICES, MATERIALS AND
SUPPLIES--In performing any services under this Act, any Federal agency
is authorized--

(1) to appoint and fix the compensation of such temporary
personnel as may be necessary, without regard to the provisions
of title 5 governing appointments in competitive service;

(2) to employ experts and consultants in accordance with the
provisions of section 3109 of such title, without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of
such title relating to classification and General Schedule pay
rates; and

(3) to incur obligations on behalf of the United States by
contract or otherwise for the acquisition, rental, or hire of
equipment, services, materials, and supplies for shipping,
drayage, travel, and communications, and for the supervision
and administration of such activities. Such obligations,
including obligations arising out of the temporary employment
of additional personnel, may be incurred by an agency in such
amount as may be made available to it by the President.

Sec. 307. Use of Local Firms and Individuals (42 U.S.C. 5150)

(a) CONTRACTS OR AGREEMENTS WITH PRIVATE ENTITIES--

(1) IN GENERAL--In the expenditure of Federal funds for
debris clearance, distribution of supplies, reconstruction, and
other major disaster or emergency assistance activities which
may be carried out by contract or agreement with private
organizations, firms, or individuals, preference shall be
given, to the extent feasible and practicable, to those
organizations, firms, and individuals residing or doing
business primarily in the area affected by such major disaster
or emergency.

(2) CONSTRUCTION--This section shall not be considered to
restrict the use of Department of Defense resources under this
Act in the provision of assistance in a major disaster.

(3) SPECIFIC GEOGRAPHIC AREA--In carrying out this section, a
contract or agreement may be set aside for award based on a
specific geographic area.

(b) IMPLEMENTATION--

(1) CONTRACTS NOT TO ENTITIES IN AREA--Any expenditure of
Federal funds for debris clearance, distribution of supplies,
reconstruction, and other major disaster or emergency
assistance activities which may be carried out by contract or
agreement with private organizations, firms, or individuals,
not awarded to an organization, firm, or individual residing or
doing business primarily in the area affected by such major
disaster shall be justified in writing in the contract file.
(2) TRANSITION--Following the declaration of an emergency or
major disaster, an agency performing response, relief, and
reconstruction activities shall transition work performed under
contracts in effect on the date on which the President declares
the emergency or major disaster to organizations, firms, and
individuals residing or doing business primarily in any area
affected by the major disaster or emergency, unless the head of
such agency determines that it is not feasible or practicable
to do so.

(3) FORMATION OF REQUIREMENTS--The head of a Federal agency,
as feasible and practicable, shall formulate appropriate
requirements to facilitate compliance with this section.

(c) PRIOR CONTRACTS--Nothing in this section shall be construed to
require any Federal agency to breach or renegotiate any contract in
effect before the occurrence of a major disaster or emergency.

[LIST OF DOCUMENTS SUBMITTED FOR THE RECORD RETAINED IN THE COMMITTEE'S
OFFICIAL FILES]

Submissions for the Record by Witnesses

-- Visual presentation--LUMA Energy, Dr. Shay Bahramirad

-- Written Testimony for Hearing on the PREPA Post
Implementation of the LUMA Transmission and
Distribution Contract--Ms. Ruth Santiago

Submissions for the Record by the Public

-- Olga Mayoral Wilson, APR, Fellow PRSA, Letter to the
Committee, September 26, 2022

-- La Ruta de La Verdad Collective, Testimony, November 17,
2022 by Lorraine Liriano, Spokesperson, Ruta de la
Verdad and Mujeres Contra LUMA

-- Puerto Rico Not For Sale Campaign, Testimony, November
17, 2022 by Fermin Morales Ayala, Spokesperson