[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
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   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. 

    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.

    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \2\ See Attachment 1, Project Status of the Puerto Rico Electric 
Power Authority.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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

    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?

            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

    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. 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.

    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.

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.

     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.

    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.

    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 6th 
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 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:

          --  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.

    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.

     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.

    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]

[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.
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    \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.
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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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    Just as happened after Hurricane Maria, news reports indicate that 
the deaths related to Hurricane Fiona have been under-reported.\3\
---------------------------------------------------------------------------
    \3\ Aumentan a 38 las muertes asociadas al huracan Fiona en Puerto 
Rico--Primera Hora.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
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    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.
---------------------------------------------------------------------------
    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/.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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\
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    \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]


[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.

     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.

    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
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                               APPENDIX 2
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                               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