[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
RECOVERY UPDATE: STATUS OF FEMA RECOVERY
EFFORTS IN PUERTO RICO AND U.S. VIRGIN
ISLANDS FIVE YEARS AFTER HURRICANES IRMA
AND MARIA
=======================================================================
(117-58)
REMOTELY ATTENDED HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND
EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 15, 2022
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
63-335 PDF WASHINGTON : 2026
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri ELEANOR HOLMES NORTON,
ERIC A. ``RICK'' CRAWFORD, Arkansas District of Columbia
BOB GIBBS, Ohio EDDIE BERNICE JOHNSON, Texas
DANIEL WEBSTER, Florida RICK LARSEN, Washington
THOMAS MASSIE, Kentucky GRACE F. NAPOLITANO, California
SCOTT PERRY, Pennsylvania STEVE COHEN, Tennessee
RODNEY DAVIS, Illinois ALBIO SIRES, New Jersey
JOHN KATKO, New York JOHN GARAMENDI, California
BRIAN BABIN, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
GARRET GRAVES, Louisiana Georgia
DAVID ROUZER, North Carolina ANDRE CARSON, Indiana
MIKE BOST, Illinois DINA TITUS, Nevada
RANDY K. WEBER, Sr., Texas SEAN PATRICK MALONEY, New York
DOUG LaMALFA, California JARED HUFFMAN, California
BRUCE WESTERMAN, Arkansas JULIA BROWNLEY, California
BRIAN J. MAST, Florida FREDERICA S. WILSON, Florida
MIKE GALLAGHER, Wisconsin DONALD M. PAYNE, Jr., New Jersey
BRIAN K. FITZPATRICK, Pennsylvania ALAN S. LOWENTHAL, California
JENNIFFER GONZALEZ-COLON, MARK DeSAULNIER, California
Puerto Rico STEPHEN F. LYNCH, Massachusetts
TROY BALDERSON, Ohio SALUD O. CARBAJAL, California
PETE STAUBER, Minnesota ANTHONY G. BROWN, Maryland
TIM BURCHETT, Tennessee TOM MALINOWSKI, New Jersey
DUSTY JOHNSON, South Dakota GREG STANTON, Arizona
JEFFERSON VAN DREW, New Jersey COLIN Z. ALLRED, Texas
MICHAEL GUEST, Mississippi SHARICE DAVIDS, Kansas, Vice Chair
TROY E. NEHLS, Texas JESUS G. ``CHUY'' GARCIA, Illinois
NANCY MACE, South Carolina CHRIS PAPPAS, New Hampshire
NICOLE MALLIOTAKIS, New York CONOR LAMB, Pennsylvania
BETH VAN DUYNE, Texas SETH MOULTON, Massachusetts
CARLOS A. GIMENEZ, Florida JAKE AUCHINCLOSS, Massachusetts
MICHELLE STEEL, California CAROLYN BOURDEAUX, Georgia
Vacancy KAIALI`I KAHELE, Hawaii
MARILYN STRICKLAND, Washington
NIKEMA WILLIAMS, Georgia
MARIE NEWMAN, Illinois
TROY A. CARTER, Louisiana
SHEILA CHERFILUS-McCORMICK,
Florida
------ 7
Subcommittee on Economic Development, Public Buildings, and
Emergency Management
DINA TITUS, Nevada, Chair
DANIEL WEBSTER, Florida ELEANOR HOLMES NORTON,
THOMAS MASSIE, Kentucky District of Columbia
JENNIFFER GONZALEZ-COLON, SHARICE DAVIDS, Kansas
Puerto Rico CHRIS PAPPAS, New Hampshire, Vice
MICHAEL GUEST, Mississippi Chair
BETH VAN DUYNE, Texas GRACE F. NAPOLITANO, California
CARLOS A. GIMENEZ, Florida JOHN GARAMENDI, California
SAM GRAVES, Missouri (Ex Officio) TROY A. CARTER, Louisiana
PETER A. DeFAZIO, Oregon (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ v
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Dina Titus, a Representative in Congress from the State of
Nevada, and Chair, Subcommittee on Economic Development, Public
Buildings, and Emergency Management, opening statement......... 1
Prepared statement........................................... 3
Hon. Daniel Webster, a Representative in Congress from the State
of Florida, and Ranking Member, Subcommittee on Economic
Development, Public Buildings, and Emergency Management,
opening statement.............................................. 4
Prepared statement........................................... 5
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, prepared statement............................. 83
WITNESSES
Panel 1
Anne Bink, Associate Administrator, Office of Response and
Recovery, Federal Emergency Management Agency, oral statement.. 5
Prepared statement........................................... 7
Panel 2
Chris P. Currie, Director, Homeland Security and Justice, U.S.
Government Accountability Office, oral statement............... 20
Prepared statement........................................... 22
Adrienne L. Williams-Octalien, Director, Office of Disaster
Recovery, U.S. Virgin Islands, oral statement.................. 34
Prepared statement........................................... 37
Hon. Manuel Laboy, Executive Director, Central Office for
Recovery, Reconstruction, and Resiliency, Puerto Rico, oral
statement...................................................... 39
Prepared statement........................................... 40
Shay Bahramirad, Ph.D., Senior Vice President of Engineering,
Asset Management, and Capital Programs, LUMA Energy, oral
statement...................................................... 52
Prepared statement........................................... 53
Josue A. Colon-Ortiz, Executive Director, Puerto Rico Electric
Power Authority, oral statement................................ 59
Prepared statement........................................... 61
SUBMISSIONS FOR THE RECORD
Statement of Dawn Bauman, CAE, Senior Vice President, Government
and Public Affairs, Community Associations Institute, Submitted
for the Record by Hon. Dina Titus.............................. 83
APPENDIX
Questions to Anne Bink, Associate Administrator, Office of
Response and Recovery, Federal Emergency Management Agency,
from:
Hon. Dina Titus.............................................. 87
Hon. Sharice Davids.......................................... 93
Hon. Daniel Webster.......................................... 94
Hon. Jenniffer Gonzalez-Colon................................ 95
Questions to Chris P. Currie, Director, Homeland Security and
Justice, U.S. Government Accountability Office, from:
Hon. Dina Titus.............................................. 101
Hon. Sharice Davids.......................................... 102
Hon. Jenniffer Gonzalez-Colon................................ 103
Questions to Adrienne L. Williams-Octalien, Director, Office of
Disaster Recovery, U.S. Virgin Islands, from:
Hon. Dina Titus.............................................. 105
Hon. Sharice Davids.......................................... 106
Hon. Daniel Webster.......................................... 106
Questions to Hon. Manuel Laboy, Executive Director, Central
Office for Recovery, Reconstruction, and Resiliency, Puerto
Rico, from:
Hon. Dina Titus.............................................. 107
Hon. Sharice Davids.......................................... 107
Hon. Jenniffer Gonzalez-Colon................................ 107
Questions to Shay Bahramirad, Ph.D., Senior Vice President of
Engineering, Asset Management, and Capital Programs, LUMA
Energy, from:
Hon. Sharice Davids.......................................... 108
Hon. Jenniffer Gonzalez-Colon................................ 110
Questions to Josue A. Colon-Ortiz, Executive Director, Puerto
Rico Electric Power Authority, from:
Hon. Dina Titus.............................................. 113
Hon. Sharice Davids.......................................... 113
Hon. Jenniffer Gonzalez-Colon................................ 113
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September 12, 2022
SUMMARY OF SUBJECT MATTER
TO: LMembers, Subcommittee on Economic Development,
Public Buildings, and Emergency Management
FROM: LSubcommittee Staff
RE: LSubcommittee Hearing on ``Recovery Update: Status
of FEMA Recovery Efforts in Puerto Rico and U.S. Virgin Islands
5 Years After Hurricanes Irma and Maria''
_______________________________________________________________________
PURPOSE
The Subcommittee on Economic Development, Public Buildings,
and Emergency Management will meet on Thursday, September 15,
2022, at 10:00 a.m. EDT in 2167 Rayburn House Office Building
and via Zoom for a hearing titled, ``Recovery Update: Status of
FEMA Recovery Efforts in Puerto Rico and U.S. Virgin Islands 5
Years After Hurricanes Irma and Maria.'' The subcommittee will
hear testimony from two panels. The first panel will feature
Anne Bink, Associate Administrator of the Federal Emergency
Management Agency (FEMA) Office of Response and Recovery. The
second panel will include Chris Currie, Director of the
Government Accountability Office (GAO) Office of Homeland
Security and Justice; Adrienne Williams, Director of the U.S.
Virgin Islands (USVI) Office of Disaster Recovery (ODR); Manuel
Laboy, Executive Director of the Puerto Rico Central Office for
Recovery, Reconstruction, and Resiliency (COR3); Shay
Bahramirad, Senior Vice President of LUMA Energy; and Josue
Colon, Executive Director of the Puerto Rico Electric Power
Authority (PREPA).
BACKGROUND
The Commonwealth of Puerto Rico and the USVI were
devastated by Hurricanes Irma and Maria on September 6, 2017,
and September 20, 2017, respectively. In Puerto Rico the storms
damaged the entire power grid and triggered the longest
blackout in U.S. history (11 months), left 43 percent of
wastewater treatment plants inoperable, 97 percent of roads
impassable, and 95 percent of Puerto Ricans without drinking
water, damaged 28 percent of health centers, required 90
percent of households to apply for individual assistance, and
tragically caused 3,000 fatalities.\1\ In the USVI the storms
destroyed 70 percent of the buildings on the main island of St.
Croix, damaged the entire power grid and communication
networks, and damaged or destroyed large swaths of critical
infrastructure such as roads.\2\
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\1\ RAND. Hurricanes Irma and Maria: Impact and Aftermath. 2020.
Available at: https://www.rand.org/hsrd/hsoac/projects/puerto-rico-
recovery/hurricanes-irma-and-maria.html
\2\ USDA. USDA Tracks Recovery Following Hurricanes Irma & Maria.
2022. Available at: https://recovery.fema.gov/funding-in-action/
mariaPR7#: :text=Maria%20damaged%20or
%20destroyed%2070,hit%20Puerto%20Rico%20since%201928.
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Given the extraordinary level of infrastructure damage
caused by Hurricane Maria, and the territories' difficult
financial position, the use of alternative procedures,
authorized by Section 428 of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288,
as amended), was added to the presidential disaster
declarations made for the territories.\3\ The alternative
procedures authority was considered the best option for the
territories since it enables recipients more flexibility to
rebuild facilities to meet current needs and build in
mitigation; thus, outdated infrastructure could be updated and
designed for long-term resiliency.\4\ When utilizing
alternative procedures, a fixed cost estimate for each project
must be agreed upon by the recipient and FEMA before work
begins.\5\ If the actual cost of a project exceeds the fixed
cost estimate the recipient is responsible for the overrun.\6\
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\3\ GAO. FEMA Made Progress in Approving Projects, But Should
Identify and Assess Risks to the Recovery, GAO-21-264. May 2021.
Available at: https://www.gao.gov/assets/gao-21-264.pdf. & FEMA. 2017
Hurricane Season FEMA After-Action Report. July 12, 2017, Available at:
https://www.fema.gov/sites/default/files/2020-08/fema_hurricane-season-
after-action-report_2017.pdf
\4\ Id.
\5\ Id.
\6\ Id.
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Additionally, Congress included Section 20601 in the
Bipartisan Budget Act of 2018 (BBA 2018) to provide additional
assistance for the recovery efforts in Puerto Rico and the
USVI. BBA 2018 authorized FEMA to restore disaster damaged
facilities or systems that provide critical services to
industry standard without regard for pre-disaster condition.\7\
Officials in both Puerto Rico and the USVI have reported to the
committee that the implementation of BBA has significantly
aided the recovery process.
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\7\ FEMA. Implementing Section 20601 of the 2018 Bipartisan Budget
Act through the Public Assistance Program. September 2018. Available
at: https://www.fema.gov/sites/default/files/2020-05/
Section_20601_BBA_FP-104-009-5.pdf.
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LIQUIDITY CONSTRAINTS AND FUNDING PROCEDURES IN PUERTO RICO AND THE
USVI
Liquidity constraints have persistently hampered hurricane
recovery efforts in Puerto Rico.\8\ FEMA Public Assistance (PA)
is a reimbursement-based program.\9\ In general, only after
applicants pay eligible costs may they request reimbursement
from PA funds obligated by FEMA.\10\ For this reason,
applicants need to have initial, non-FEMA funds available to
cover the costs of project application and management,
architecture and engineering services, and construction
contracting before they can receive reimbursement.\11\
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\8\ GAO. Puerto Rico Recovery: FEMA Made Progress in Approving
Projects, But Should Identify and Assess Risks to the Recovery, GAO-21-
264. May 19, 2021. Available at: https://www.gao.gov/products/gao-21-
264 & NPR. How Puerto Rico's Debt Created A Perfect Storm Before The
Storm. May 2, 2018. Available at: https://www.npr.org/2018/05/02/
607032585/how-puerto-ricos-debt-created-a-perfect-storm-before-the-
storm.
\9\ CRS. The Status of Puerto Rico's Recovery and Ongoing
Challenges Following Hurricanes Irma and Maria: FEMA, SBA, and HUD
Assistance. November 13, 2020. Available at: https://www.crs.gov/
Reports/R46609.
\10\ Id.
\11\ Id.
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COR3 currently manages reimbursement in Puerto Rico.\12\
However, Commonwealth agencies, municipalities, and private
nonprofits often do not have financial reserves and access to
initial capital to launch projects.\13\ The Commonwealth's
fiscal crisis has exacerbated these liquidity constraints.\14\
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\12\ COR3. COR3 Disaster Recovery Federal Funds Management Guide.
June 2022. Available at: https://recovery.pr.gov/documents/
CH7_Payment_and_Cash_Management_V3_
Final_Version_6_13_2022_signed.pdf.
\13\ Id., and COR3. Seventh Congressional Status Report. January
31, 2022. Available at: Microsoft Word--Seventh Congressional Report
(2-1-2022) Rev PRP-Clean.docx.
\14\ GAO. Puerto Rico Recovery: FEMA Made Progress in Approving
Projects, But Should Identify and Assess Risks to the Recovery, GAO-21-
264. May 19, 2021. Available at: https://www.gao.gov/products/gao-21-
264.
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FEMA and COR3 have implemented several measures to address
this issue, including a Working Capital Advance program for
municipalities and selected FEMA Accelerated Awards Strategy
(FAASt) Applicants,\15\ and making available limited cash
advances for immediate cash needs.\16\ Despite these efforts,
some stakeholders and COR3 acknowledge that liquidity
constraints and reimbursement delays continue to burden
applicants and delay project implementation.\17\
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\15\ Id. and COR3. Seventh Congressional Status Report. January 31,
2022. Available at: Microsoft Word--Seventh Congressional Report (2-1-
2022) Rev PRP-Clean.docx.
\16\ COR3. COR3 Disaster Recovery Federal Funds Management Guide.
June 2022. Available at: https://recovery.pr.gov/documents/
CH7_Payment_and_Cash_Management_V3_
Final_Version_6_13_2022_signed.pdf.
\17\ Center for Investigative Journalism. Municipal Response to
Disasters in Puerto Rico Cost Candidates Their Re-elections. February
22, 2021. Available at: https://periodismoinvestigativo.com/2021/02/
municipal-response-to-disasters-in-puerto-rico-cost-candidates-their-
re-elections/.
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Hurricanes Irma and Maria also hit the USVI amid ongoing
fiscal instability.\18\ The demands of response and decline in
tourism and related industries exacerbated the USVI's fiscal
challenges; some estimates show that public revenues were
halved following the hurricanes.\19\ Pre and post-disaster
fiscal challenges have delayed PA project progress since
applicants have struggled to access initial funding before
receiving reimbursement.\20\ Additionally, applicants report
struggling with reimbursement delays that jeopardize project
advancement after initial launch, ``tremendously impact[ing]
timely payment to vendors.'' \21\ Delays in payments to
contractors may also jeopardize an applicants' credibility.\22\
This, in turn, may lead to price increases as vendors mitigate
the risk of payment delays and inconsistent revenue by
increasing the price of project bids.\23\
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\18\ CRS. Economic and Fiscal Conditions in the U.S. Virgin
Islands. February 13, 2020. Available at: https://www.crs.gov/Reports/
R45235.
\19\ Id.
\20\ ODR. USVI Recovery Leaders: Summit Report. 2021. Available at:
https://www.usviodr.com/wp-content/uploads/2022/05/FINAL-2021-USVI-
Recovery-Leaders-Summit-Report-RS-1.pdf.
\21\ Id.
\22\ Id.
\23\ Id.
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To alleviate these liquidity constraints, FEMA and ODR have
launched several initiatives, including the following:
LIn February 2021, FEMA lifted certain
restrictions placed upon ODR's management of the PA
reimbursement process that sometimes delay disbursement,
including FEMA approval of reimbursement requests.\24\
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\24\ ODR. FEMA Lifts Manual Drawdown Restriction for Reimbursement
of Recovery Project Spending. February 3, 2021. Available at: https://
www.usviodr.com/fema-lifts-manual-drawdown-restriction-for-
reimbursement-of-recovery-project-spending/.
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LOn August 16, 2022, ODR announced the launch of
the Public Assistance Advance Funding program, which is to
provide up to $50,000 to private nonprofit organizations to
ensure the launch and progress of stalled recovery projects
funded through FEMA PA.\25\
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\25\ ODR. ODR Announces New Program Giving Non-Profits Access to
Funding for Stalled Recovery Projects. August 16, 2022. Available at:
https://www.usviodr.com/odr-announces-new-program-giving-non-profits-
access-to-funding-for-stalled-recovery-projects/.
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LIn October 2021, ODR reported that FEMA modified
policies to enable applicants to draw down funds upon receiving
an invoice, as opposed to once they have already paid for the
invoiced costs.\26\
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\26\ ODR. USVI Recovery Leaders: Summit Report. 2021. Available at:
https://www.usviodr.com/wp-content/uploads/2022/05/FINAL-2021-USVI-
Recovery-Leaders-Summit-Report-RS-1.pdf.
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THE BIPARTISAN BUDGET ACT OF 2018, BUILDING CODE COMPLIANCE, AND
MODERNIZATION
BBA 2018 authorized the reconstruction of critical
disaster-damaged facilities to industry standards, regardless
of pre-disaster condition, using PA Alternative Procedures,
which limits applicants to awards determined using fixed cost
estimates.\27\ PA was additionally authorized for components or
facilities unaffected by the hurricanes that required upgrade
or repair so the broader facility or system improvements could
comply with industry standards.\28\ These provisions addressed
Stafford Act limitations on the use of PA to rebuild to a more
resilient standard, given the declining, unmaintained condition
of some facilities in the territories.\29\
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\27\ CRS. The Status of Puerto Rico's Recovery and Ongoing
Challenges Following Hurricanes Irma and Maria: FEMA, SBA, and HUD
Assistance. November 13, 2020. Available At: https://www.crs.gov/
Reports/R46609.
\28\ Section 20601(2) of the BBA of 2018 (P.L. 115-123).
\29\ Disaster Recovery Reform Act of 2018 (DRRA; Division D of P.L.
115-254).
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The Government Accountability Office (GAO) found that both
COR3 and FEMA officials reported challenges and confusion in
implementing Section 20601 of BBA 2018 through early 2019.\30\
Different views between COR3 and FEMA on the application and
scope of this provision has repeatedly raised congressional and
stakeholder concern.\31\ In April 2019, then-COR3 Secretary
Omar Marrero testified before Congress that FEMA's ``efforts to
limit the applicability of BBA'' delayed recovery and reduced
the awards available to critical facilities.\32\ In September
2019, FEMA released guidance clarifying the implementation of
BBA 2018, which addressed some confusion.\33\
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\30\ GAO. Emergency Management: FEMA Has Made Progress, but
Challenges and Future Risks Highlight Imperative for Future
Improvements, GAO-19-594T. June 12, 2019. Available at: https://
www.gao.gov/products/gao-19-617t and GAO. Puerto Rico Disaster
Recovery: FEMA Actions Needed to Strengthen Project Cost Estimation and
Awareness of Program Guidance, GAO-20-221. February 2020. https://
www.gao.gov/assets/710/704282.pdf.
\31\ Testimony by Rep. Lucille Roybal-Allard, U.S. Congress, House
Appropriations Subcommittee on Homeland Security, Hearing on Disaster
Recoveries for 2017 and 2018, hearings, 116th Congress, March 12, 2019.
And testimony by GAO Representative Chris Currie, House Homeland
Security Committee, U.S. Congress, House Committee on Homeland
Security, Subcommittee on Emergency Preparedness, Response, and
Recovery, Road to Recovery: Puerto Rico and the U.S. Virgin Islands
After Hurricanes Irma and Maria, 116th Congress, July 11, 2019.
\32\ Testimony by Omar Marrero, Executive Director of COR3, U.S.
Congress, House Natural Resources Committee, The Status of the
``Rebuilding and Privatization of the Puerto Rico Electric Power
Authority'', hearing, 116th Congress, April 9, 2019.
\33\ GAO. Puerto Rico Disaster Recovery: FEMA Actions Needed to
Strengthen Project Cost Estimation and Awareness of Program Guidance,
GAO-20-221. February 2020. Available at: https://www.gao.gov/products/
gao-20-221.
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IMPLEMENTATION OF THE FAAST PROGRAM IN PUERTO RICO
FEMA and COR3 have demonstrated significant progress in PA
obligations over the past three years.\34\ FEMA recently
announced that it had approved 10,000, or 95 percent, of PA
projects for Puerto Rico's hurricane recovery.\35\ However,
COR3 and FEMA data reflect that much of the reconstruction has
yet to be completed, and in many cases, has not begun.
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\34\ GAO. Puerto Rico Recovery: FEMA Made Progress in Approving
Projects, But Should Identify and Assess Risks to the Recovery, GAO-21-
264. Available at: https://www.gao.gov/products/gao-21-264 and CRS. The
Status of Puerto Rico's Recovery and Ongoing Challenges Following
Hurricanes Irma and Maria: FEMA, SBA, and HUD Assistance. November 13,
2020. Available at: https://www.crs.gov/Reports/R46609.
\35\ FEMA. FEMA Approves its 10,000th Projects Hurricane Maria
Recovery Project. August 3, 2022. Available at: https://www.fema.gov/
press-release/20220803/fema-approves-its-10000th-projects-hurricane-
maria-recovery-project.
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In early 2020, FEMA and COR3 launched a new variation of PA
called the FEMA Accelerated Awards Strategy (FAASt) to expedite
obligations for four Commonwealth agencies in Puerto Rico.\36\
These agencies are the Puerto Rico Electric Power Authority
(PREPA), the Puerto Rico Aqueduct and Sewer Authority (PRASA),
the Puerto Rico Department of Education (PRDE), and Puerto Rico
Public Housing Administration (PRPHA). Under the FAASt
structure FEMA and COR3 obligated aggregated awards for each
agency based on samples of damaged sites and estimated costs.
These obligations serve as a total ``recovery budget'' for each
agency's hurricane recovery costs across the territory, but do
not represent FEMA approval of the individual projects that
need to be completed by those agencies with the obligations.
Since FAASt awards represent most PA obligated funds for
hurricane recovery ($15.6 billion of approximately $21.3
billion in permanent work obligations for hurricane
recovery),\37\ the process of approving individual projects
entails significant work for FEMA, COR3, and FAASt applicants.
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\36\ FEMA. FEMA Accelerated Awards Strategy (FAASt). June 2, 2022.
Available at: https://www.fema.gov/about/reports-and-data/faast.
\37\ Id.
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According to COR3, the FAASt program was designed in part
to mitigate the applicants' ``lack of technical expertise to
make decisions when designing their projects and the need to
balance the assumption of risk'' and to ``allo[w] critical
infrastructure projects to be grouped together in order to
expedite recovery work'' thereby moving the recovery
forward.\38\ The program also enables applicants to access
funds to contract for architecture and engineering services for
individual projects.\39\
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\38\ COR3. Seventh Congressional Status Report. January 31, 2022.
Available at: Microsoft Word--Seventh Congressional Report (2-1-2022)
Rev PRP-Clean.docx and COR3. FEMA Accelerated Awards Strategy (FAASt)
Projects Execution. 2022. Available at: https://recovery.pr.gov/en/
road-to-recovery/pa-faast.
\39\ Id.
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News media reports indicate that many individual PA
projects may exceed cost estimates.\40\ If individual FAASt
projects incur such cost overruns, the overall FAASt
obligations could prove insufficient to support the work of
reconstructing territory-wide critical services (utilities,
water/wastewater, education system, and public housing).
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\40\ Center for Investigative Journalism. Major recovery projects
to be paid for with recovery funds moving at snail's pace. September
16, 2021. https://periodismoinvestigativo.com/2021/09/major-recovery-
projects-to-be-paid-for-with-recovery-funds-moving-at-snails-pace/ and
Center for Investigative Journalism. Retrasado y con alza en los costos
de construccion el centro de salud de Vieques. January 21, 2022.
Available at: https://periodismoinvestigativo.com/2022/01/retrasado-y-
con-alza-en-los-costos-de-construccion-el-centro-de-salud-de-vieques/.
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PA ALTERNATIVE PROCEDURES AND COST ESTIMATES IN THE USVI
The USVI opted not to group their alternative procedure
projects into agency-wide obligations like Puerto Rico has done
with the FAASt program. Therefore, each permanent work project
using alternative procedures authorities receives an individual
obligation.
BBA 2018 authorized applicants in the USVI to receive PA to
cover the costs of reconstructing eligible facilities to
industry standards ``without regard to the pre-disaster
condition of the facility or system.'' However, in its most
recent annual recovery status report, ODR raised repeated
concerns that FEMA's interpretation of BBA 2018 does not
capture congressional intent ``to repair all eligible damages
both pre- and post-disaster, to remedy pre-disaster conditions
and even to replace undamaged building components to achieve
industry standards.'' \41\ ODR reports that FEMA's narrow
interpretation of BBA 2018 has impeded the territory's ability
to receive assistance sufficient to reconstruct eligible
facilities to industry standards.\42\
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\41\ ODR. Annual Progress Report. September 2021. Available at:
https://www.usviodr.com/wp-content/uploads/2021/12/
DisasterRecovery2021.pdf.
\42\ Id.
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Additionally, ODR has raised concerns that FEMA's Building
Cost Index does not accurately estimate the high cost of
construction in the USVI, nor the rising costs of construction
attributed to inflation.\43\ ODR reports that this oversight
``could cost the Territory many hundreds of millions of dollars
if not corrected and will cause longer term major construction
projects to have inadequate funding.'' \44\
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\43\ Id.
\44\ Id.
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CONTRACTING AND SUBCONTRACTING IN PUERTO RICO AND THE USVI
It is anticipated that Puerto Rico will encounter a
shortage of local contractors when completing reconstruction
work.\45\ To complete recovery projects costing $10 billion per
year, Puerto Rico may need up to 32,000 additional workers and
shortfalls among licensed engineers and other building industry
professionals, as well as grant writers and managers are
expected.\46\ It has been reported that the scale of federal
funds delivered to Puerto Rico is ``likely to fundamentally
change the economy in terms of labor, materials, and
equipment,'' \47\ and it is estimated that approximately 75
percent of the workers required for recovery will come from
outside of Puerto Rico.\48\
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\45\ RAND. Building Back Locally: Supporting Puerto Rico's
Municipalities in Post-Hurricane Reconstruction. 2020. Available at:
https://www.rand.org/pubs/research_reports/RR3041.html.
\46\ RAND. Building Back Locally: Supporting Puerto Rico's
Municipalities in Post-Hurricane Reconstruction. 2020. Available at:
https://www.rand.org/pubs/research_reports/RR3041.html.
\47\ RAND. Forecasting Public Recovery Expenditures' Effect on
Construction Prices and the Demand for Construction Labor. 2022.
Available at: https://www.rand.org/pubs/research_reports/RRA1116-
4.html.
\48\ Id.
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In 2019 the GAO found that shortages among local and
territory government personnel in the USVI exacerbated the
difficulties of hurricane recovery.\49\ Both FEMA and USVI
staff have additionally reported shortfalls among several key
industries critical to executing recovery projects, including
architecture and engineering firms.\50\
---------------------------------------------------------------------------
\49\ GAO. U.S. Virgin Islands Recovery: Additional Actions Could
Strengthen FEMA's Key Disaster Recovery Efforts, GAO-20-54. November
2019. Available at: https://www.gao.gov/assets/gao-20-54.pdf.
\50\ ODR. USVI Recovery Leaders: Summit Report. 2021. Available at:
https://www.usviodr.com/wp-content/uploads/2022/05/FINAL-2021-USVI-
Recovery-Leaders-Summit-Report-RS-1.pdf.
---------------------------------------------------------------------------
CONCLUSION
Five years after the devastation Hurricanes Irma and Maria
brought to Puerto Rico and the USVI progress has been made in
the recovery efforts. However, many challenges remain. This
hearing will provide the subcommittee an opportunity to hear
directly from federal and territory officials on the remaining
challenges in Puerto Rico and the USVI and lessons Congress
might learn from the disaster recoveries.
WITNESS LIST
LAnne Bink, Associate Administrator, Office of
Response and Recovery, Federal Emergency Management Agency
(FEMA)
LChris Currie, Director, Office of Homeland
Security and Justice, Government Accountability Office
LAdrienne Williams, Director, Office of Disaster
Recovery, U.S. Virgin Islands
LManuel Laboy, Executive Director, Office for
Recovery, Reconstruction, and Resiliency, Puerto Rico
LShay Bahramirad, Senior Vice President, LUMA
Energy
LJosue Colon, Executive Director, Puerto Rico
Electric Power Authority
RECOVERY UPDATE: STATUS OF FEMA RECOVERY EFFORTS IN PUERTO RICO AND
U.S. VIRGIN ISLANDS FIVE YEARS AFTER HURRICANES IRMA AND MARIA
----------
THURSDAY, SEPTEMBER 15, 2022
House of Representatives,
Subcommittee on Economic Development, Public
Buildings, and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 10:07 a.m., in
room 2167 Rayburn House Office Building and via Zoom, Hon. Dina
Titus (Chair of the subcommittee) presiding.
Members present in person: Ms. Titus, Mr. Carter of
Louisiana, Mr. Webster of Florida, Miss Gonzalez-Colon, and Mr.
Guest.
Members present remotely: Ms. Norton, Ms. Davids of Kansas,
and Mr. Garcia of Illinois.
Ms. Titus. The meeting will please come to order.
I want to, first, ask unanimous consent to declare a recess
at any time during the hearing if it is necessary. Without
objection, so ordered.
I also ask unanimous consent that Members not on the
subcommittee be permitted--why am I hearing this echo?
I am sorry. OK. I also ask unanimous consent that Members
not on the subcommittee be permitted to sit with the
subcommittee at today's hearing and ask questions. Without
objection, so ordered.
As a reminder, please keep your microphone muted--which we
weren't doing apparently--unless speaking. Should I hear any
inadvertent background noise, I will request that the Member
please mute their microphone.
To insert a document into the record, please have your
staff email it to [email protected].
First, let me thank our witnesses for being here today to
discuss the Federal disaster recovery in Puerto Rico and the
U.S. Virgin Islands as the 5-year anniversary of Hurricane Irma
and Maria are upon us.
Before we start, though, I would like to recognize and
welcome a former colleague of mine and friend, Governor
Pierluisi, who is here from Puerto Rico. Thank you so much for
being here. If you feel like interjecting anything, you are
more than welcome to join us at the table.
Governor Pierluisi. Madam Chair and Mr. Ranking Member, I
will just say that I thank the committee for holding this
oversight hearing on the status of the recovery and
reconstruction of Puerto Rico's infrastructure as a result of
both Irma and Maria. And so, I look forward to being here for
part of the hearing, and I thank as well the Biden-Harris
administration, FEMA in particular, for their support, for the
support Puerto Rico is getting in the context of the pending or
ongoing reconstruction.
So, thank you, ma'am.
Ms. Titus. Thank you for being here. You are always
welcome. It is nice to see you.
Governor Pierluisi. Likewise.
Ms. Titus. These hurricanes, Irma and Maria, absolutely
devastated Puerto Rico and the Virgin Islands. They ravaged the
islands' infrastructure, the electric grids were wiped out,
roads were made impassable, critical water infrastructure was
severely damaged, schools were just wiped away, and thousands
of homes were destroyed. The Territorywide destruction was
unprecedented and it posed major challenges for disaster
response and recovery.
When Irma and Maria struck, these two islands did not have
the necessary funds available to support a major disaster
recovery. As we all know, FEMA's recovery model is centered on
reimbursement. It is nearly impossible to kick-start a swift
and efficient recovery without access to capital within the
existing model. So, the scale of destruction, paired with
liquidity constraints, created an unprecedented challenge for
the islands and FEMA.
The people of Puerto Rico and the Virgin Islands are
entitled to the same quality of critical infrastructure
available to the mainland. This includes access to
transportation, education, healthcare, reliable electricity,
and clean drinking water.
So, while this recovery poses many difficulties, it is
essential that we face the challenges head-on and be sure that
these facilities are put back in place.
A second challenge for the recovery effort was Federal
underinvestment in the islands' public infrastructure prior to
the storms. Most public infrastructure already required
significant improvements. Consequently, it was quickly
determined that FEMA should not use its traditional Public
Assistance authorities to build back to status quo ante.
Instead, FEMA, Puerto Rico, and the U.S. Virgin Islands agreed
to utilize a new authority provided by section 428 of the
Stafford Act. This is known as alternative procedures, and it
would allow the Territories to build back better and be more
resilient in the face of any future storms.
It is important to note, however, that to use these
alternate procedures, FEMA and the impacted applicant must
determine the value of the damage and develop a fixed-cost
estimate for each project. If the actual cost of the project
exceeds the fixed-cost estimate, the applicant is responsible
for the cost overruns.
It is critical that the estimates are correct from the
beginning so construction can begin swiftly once project funds
are obligated. Challenges posed by continued liquidity
constraints in the Territories, the global pandemic, and
inflation, however, have caused many concerns that it may not
be possible to complete these projects at their estimated cost.
I hope we can talk about the potential overruns with
witnesses today and how we are going to address that challenge.
I am encouraged to hear from the disaster recovery leaders
in Puerto Rico and the U.S. Virgin Islands that their
relationship with FEMA has improved in recent years, and the
pace of recovery is increasing. There has been some success in
obligating funds for projects, but unfortunately little
reconstruction work has actually begun. We would like to hear
about that as well.
Reconstruction marks a new phase of recovery on the
islands. I look forward to discussing the challenges and the
solutions with the outstanding witnesses we have here today so
that we can ensure that the future of these recoveries faces
fewer roadblocks than they had in the past.
I am committed to remaining an active partner in this
recovery until the very last repair project is completed, and I
expect FEMA to commit to us to doing the same.
The people of Puerto Rico and the U.S. Virgin Islands have
displayed incredible resilience for the past 5 years, and
patience, I might add. So, I thank our witnesses for being here
today, and I look forward to discussing lessons learned and how
we can improve the process, not just for these two areas, but
any place in the future where something similar might occur.
[Ms. Titus' prepared statement follows:]
Prepared Statement of Hon. Dina Titus, a Representative in Congress
from the State of Nevada, and Chair, Subcommittee on Economic
Development, Public Buildings, and Emergency Management
I'd like to thank our witnesses for being here today to discuss the
federal disaster recovery in Puerto Rico and the U.S. Virgin Islands at
the five-year anniversary of Hurricanes Irma and Maria.
These hurricanes absolutely devastated Puerto Rico and the Virgin
Islands. They ravaged the islands' infrastructure--the electric grids
were wiped out, roads were made impassable, critical water
infrastructure severely damaged, and thousands of homes were destroyed.
The territory-wide destruction was unprecedented and posed major
challenges for disaster response and recovery.
When Irma and Maria struck, Puerto Rico and the Virgin Islands did
not have the necessary funds available to support a major disaster
recovery. The Federal Emergency Management Agency's (FEMA) recovery
model is centered upon reimbursement. It is near impossible to
kickstart a swift and efficient recovery without access to capital
within the existing model. The scale of the destruction paired with
liquidity constraints created an unprecedented challenge for the
islands and FEMA.
The people of Puerto Rico and the Virgin Islands are entitled to
the same quality of critical infrastructure available on the mainland.
This includes access to transportation, education, health care,
reliable electricity, and clean drinking water. So, while this recovery
poses many difficulties--it is essential that we face challenges head
on.
A second challenge this recovery encountered was federal
underinvestment in the island's public infrastructure prior to the
storms. Most public infrastructure already required significant
improvements. Consequently, it was quickly determined that FEMA should
not use its traditional public assistance authorities to build back
what previously existed. Instead, FEMA, Puerto Rico, and the USVI
agreed to utilize new authorities provided by Section 428 of the
Stafford Act, known as alternative procedures, which would allow the
territories to build back better and more resilient.
However, it is important to note that to use alternative
procedures, FEMA and the impacted applicant must determine the value of
disaster damage and develop a fixed cost estimate for each project. If
the actual cost of any project exceeds the fixed cost estimate the
applicant is responsible for cost over runs. It is critical that the
estimates are correct, and construction can begin swiftly once project
funds are obligated. However, challenges posed by continued liquidity
constraints in the territories, the global pandemic, and inflation have
created many concerns that it may not be possible to complete projects
at their estimated cost. I hope to frankly discuss these potential
overruns with the witnesses today.
I am encouraged to hear from disaster recovery leaders in Puerto
Rico and the Virgin Islands that their relationship with FEMA has
improved in recent years and the pace of recovery has increased. There
has been particular success obligating projects. However, very little
reconstruction work has actually begun.
Reconstruction marks a new phase of recovery on the islands. I look
forward to discussing potential challenges and solutions with the
witnesses regarding reconstruction, so we ensure the future of these
recoveries faces fewer roadblocks than the past.
I am committed to remaining an active partner in this recovery
until the last repair project is complete. I expect FEMA to commit to
do the same.
The people of Puerto Rico and the Virgin Islands have displayed
incredible resilience these past five years. I thank our witnesses for
being here today and look forward to discussing lessons learned and how
we can make the remainder of this recovery a success.
Ms. Titus. With that, I would like to ask our ranking
member for his opening statement, Mr. Webster.
Mr. Webster of Florida. Thank you, Chair. Thank you to the
witnesses for being here today.
It has been 5 years since Hurricanes Maria and Irma hit
Puerto Rico and the U.S. Virgin Islands. I look forward to
hearing from our witnesses today on what the recovery process
has looked like, what successes and challenges they have faced,
and lessons learned that we would be able to apply across
disaster recovery efforts.
This is a unique opportunity to examine how our efforts to
cut redtape and streamline processes have been implemented by
FEMA. Time is money. The longer it takes for communities to
rebuild, the higher the costs to both those communities and to
the taxpayer.
At times it seems like after Congress removes redtape, more
redtape kind of appears. And FEMA is kind of the perpetrator of
that. We simply can't afford to continue doing things the way
we have done them before and expect some kind of different
results.
For example, in the Sandy Recovery Improvement Act, we
created section 428, a choice for a streamlined, faster process
or to use the old paperwork-intensive process for rebuilding
the infrastructure. The 428 authority was intended to speed up
the process by basing assistance on certified cost estimates.
The idea was to reduce costs by shortening the rebuilding time,
cutting administrative costs, and arriving faster at a more
definitive dollar amount for a project. Yet by many accounts,
the 428 process is looking more like the old cumbersome
process, removing any incentives to use it.
The 428 authority and similar reforms have been key tools
in the recovery efforts in Puerto Rico and the U.S. Virgin
Islands. Understanding how these reforms are working--or not
working--will help us know what action to take.
A complicated recovery process not only hurts communities
hit by disaster, it also increases costs to the taxpayer,
especially given the impact high inflation rates are now having
on the costs of materials and labor.
I look forward to hearing the testimony from our witnesses
today. And thank you, Chair, for allowing this hearing. And I
yield back.
[Mr. Webster of Florida's prepared statement follows:]
Prepared Statement of Hon. Daniel Webster, a Representative in Congress
from the State of Florida, and Ranking Member, Subcommittee on Economic
Development, Public Buildings, and Emergency Management
Thank you, Chair Titus, and thank you to our witnesses for being
here today.
It has been 5 years since hurricanes Maria and Irma hit Puerto Rico
and the U.S. Virgin Islands.
I look forward to hearing from our witnesses today on what the
recovery process has looked like, what successes and challenges they
have faced, and lessons learned that we could apply across disaster
recovery efforts. This is a unique opportunity to examine how our
efforts to cut red tape and streamline processes have been implemented
by FEMA.
Time is money--the longer it takes communities to rebuild, the
higher the costs to both those communities and to the federal taxpayer.
At times it seems after Congress removes red tape, more red tape is
created by FEMA, and we simply cannot afford to continue doing things
the same way and expect different results. For example, in the Sandy
Recovery Improvement Act, we created section 428 of the Stafford Act
intended to give States a choice for a streamlined, faster process or
to use the old, paperwork-intensive process for rebuilding
infrastructure. 428 authority was intended to speed up the process by
basing assistance on certified cost estimates.
The idea was to reduce costs by shortening the rebuilding time,
cutting administrative costs, and arriving faster at a more definitive
dollar amount for a project. Yet, by many accounts the 428 process is
looking more like the old, cumbersome process, removing any incentives
to use it. 428 authority and similar reforms have been key tools in the
recovery efforts in Puerto Rico and the U.S. Virgin Islands.
Understanding how these reforms are working--or not working--will
help us know what action to take. A complicated recovery process not
only hurts communities hit by disaster, it also increases costs to the
taxpayer, especially given the impact high inflation rates are having
on the costs of materials and labor.
I look forward to hearing the testimony of our witnesses today.
Thank you, Chair Titus. I yield back.
Ms. Titus. Thank you, Mr. Webster.
We will now turn to our witnesses. We will be hearing
testimony from two panels today. Each panel will be followed by
questions from the Members.
I would now like to welcome the witness on our first panel.
This is Anne Bink, who is the Associate Administrator for the
Office of Response and Recovery at FEMA. We thank you for
joining us today. We all look forward to hearing your
testimony.
Without objection, our witness' full statement will be
included in the record. Since your written testimony has been
made part of the record, the subcommittee requests that you
limit your oral testimony to 5 minutes.
Ms. Bink, welcome, and please proceed.
TESTIMONY OF ANNE BINK, ASSOCIATE ADMINISTRATOR, OFFICE OF
RESPONSE AND RECOVERY, FEDERAL EMERGENCY MANAGEMENT AGENCY
Ms. Bink. Thank you.
Chair Titus, Ranking Member Webster, and members of the
subcommittee, thank you for the opportunity to testify about
FEMA's support of the recovery of Puerto Rico and the U.S.
Virgin Islands from Hurricanes Irma and Maria.
As you have stated, in less than 2 weeks, in September
2017, the islands were devastated. Lives were lost, homes were
destroyed, the power grid and water systems collapsed,
healthcare facilities shut down, and communities were uprooted.
Hurricane Maria was the strongest storm to hit St. Croix
and Puerto Rico in nearly a century. There were critical
immediate needs, and beyond those needs lay a difficult road to
recovery.
For FEMA and the Biden-Harris administration, continued
recovery efforts from these storms is a top priority, and the
Agency's investment of resources, with the generous support of
Congress, has been reflective of this commitment.
A few weeks ago, Puerto Rico reached the milestone of
10,000 obligated Public Assistance projects, a total investment
of nearly $28 billion. This includes the largest ever public
infrastructure project obligated by FEMA at nearly $9.5 billion
for the Puerto Rico Electric Power Authority, or PREPA, which
will rebuild the power grid and build it back better. We have
also provided $1.5 billion in assistance to nearly half a
million residents.
In the U.S. Virgin Islands, FEMA is making similarly
historic investments in public infrastructure. FEMA has
obligated over $4 billion across 1,400 projects. And this
includes $1.4 billion to restore the energy grid, nearly $1
billion for housing, and $134 million for transportation.
FEMA continues to work with the USVI to reach an agreement
on project scopes and expects infrastructure assistance to
total $12 billion. This investment will result in significantly
modernized public health and education sectors and completely
rebuild--in a more resilient fashion--large portions of the
power, water, and wastewater systems.
Five years after the hurricanes, over 1,000 FEMA employees
remain on the ground and dedicated to these recovery missions,
over 90 percent of whom are local hires.
Notwithstanding this historic commitment, much work remains
to be done. This work will lead to a more resilient and better
community infrastructure. For example, the Roberto Clemente
Stadium in the municipality of Carolina in Puerto Rico. More
than a landmark, the baseball stadium plays an important role
in the municipality's economy. It impacts local business owners
and other sectors like transportation, tourism, and
hospitality. This project is nearly complete with the help of
over $18.4 million in FEMA funds.
In the USVI, FEMA is focused on supporting the vision to
transform its infrastructure to better withstand future storms.
Recently, FEMA approved over $200 million to replace the now
demolished Arthur A. Richards School. This new school will help
ensure students can attend a state-of-the-art facility that is
more resilient to future storms.
More than $463 million has been obligated to support
healthcare facilities, including the Charles Harwood Medical
Clinic and the Roy Lester Schneider Hospital. We are also
providing historic levels of mitigation assistance which will
greatly enhance resiliency further in the future.
Puerto Rico has access to roughly $3 billion in hazard
mitigation grant program funding, which is the maximum
authorized by the Stafford Act, and the U.S. Virgin Islands has
access to roughly $960 million.
FEMA is ensuring we are prepared to support residents in
communities of the Caribbean. At this very moment, we have
responders on the ground and commodities pre-positioned in
anticipation of Tropical Storm Fiona.
Compared to 2017, we now have 9 times the water, 10 times
the meals, and 3 times the number of generators on the island.
Consistent with the goals of FEMA's strategic plan, we are
ensuring equity, resilience, and readiness are at the heart of
what we do. We are committed to supporting preparedness and
resilient recovery, and we are doing so through on-the-ground
technical assistance with our local hires who bring invaluable
knowledge of the communities they serve.
We also continue to implement policies to advance our
strategic plan. One such example is around equitable policy
changes. Many homeowners and renters in the past lacked the
paperwork required to qualify for some FEMA benefits in the
past. Under Administrator Criswell's leadership, FEMA has
expanded the types of ownership and occupancy documentation
that we can accept, to include self-certification as a last
resort. Since implementing this policy, more than 100,000
individuals received assistance that would have otherwise been
denied.
All our efforts have to be balanced against dual
imperatives: ensuring that our assistance is provided as
quickly as possible and ensuring that these resources benefit
the people and the communities that need them most. The
governments of Puerto Rico and the U.S. Virgin Islands have
made great progress in their ability to manage historic levels
of Federal funding and advance recovery for the residents.
In closing, when I began leading the Office of Response and
Recovery, one of my very first field visits was to Puerto Rico
and the U.S. Virgin Islands, where I observed firsthand the
achievements of our team on the ground as well as the
challenges that lie ahead.
Last fall, FEMA participated in a recovery summit with USVI
officials, which provided valuable outcomes. And we are going
to continue to build on that as we will host our second annual
USVI recovery summit in the fall.
Similarly, just last month, I also spent a week at a summit
with Puerto Rico's top recovery officials and our senior
leadership team, where we continued to work toward solutions to
advance our collective recovery efforts. We are firmly
committed to an expedited recovery to enhance resilience
against all future hazards.
Thank you, and I look forward to your questions.
[Ms. Bink's prepared statement follows:]
Prepared Statement of Anne Bink, Associate Administrator, Office of
Response and Recovery, Federal Emergency Management Agency
Chair Titus, Ranking Member Webster, and Members of the
Subcommittee, thank you for the opportunity to testify today about the
Federal Emergency Management Agency's (FEMA) efforts in support of the
recovery of Puerto Rico and the U.S. Virgin Islands from Hurricanes
Irma and Maria.
In less than two weeks in September 2017, Puerto Rico and the U.S.
Virgin Islands were severely impacted by two major hurricanes--Irma and
Maria--that devastated the Caribbean. On September 7, 2017, Hurricane
Irma first struck St. Thomas and St. John, then tracked near
northeastern Puerto Rico, causing widespread power outages and
straining infrastructure across the islands. Less than two weeks later,
Hurricane Maria struck St. Croix, and then made landfall in Puerto
Rico. The devastation was of historic proportions. As a result of these
hurricanes, many lives were lost, homes were destroyed, the power grid
and water systems collapsed, health care facilities were shut down, and
communities were uprooted. Hurricane Maria was the strongest storm to
hit St. Croix and Puerto Rico in nearly a century. There were critical
immediate needs--and beyond those needs lay a difficult road to
recovery. A road that we continue to travel today.
For FEMA and the Biden-Harris Administration, continued recovery
efforts from these storms for Puerto Rico and the U.S. Virgin Islands
remains a top priority, and the Agency's investment of resources, with
the generous support of Congress, has been reflective of this
commitment.
Historic Levels of Assistance
For Puerto Rico, a few weeks ago, FEMA reached the milestone of
10,000 obligated Public Assistance projects, a total investment of
nearly $28 billion. Of this investment, the largest ever public
infrastructure project was obligated at nearly $9.5 billion to the
Puerto Rico Electric Power Authority (PREPA), which will not just
rebuild Puerto Rico's power grid, but will build it back better. FEMA
funds are helping to rebuild roads, hospitals, schools, and water
facilities to enable recovery and enhance resilience in communities
across Puerto Rico. We have also provided $1.5 billion in assistance to
nearly half a million residents and continue to coordinate interagency
recovery efforts, such as with the Department of Housing and Urban
Development, which has awarded over $20 billion in Community
Development Block Grant Disaster Recovery Funds, thanks to the
tremendous bipartisan support of Congress.
In the U.S. Virgin Islands, FEMA is making similarly historic
investments in public infrastructure. FEMA has obligated over $4
billion across 1,400 projects. This includes $1.4 billion to restore
the energy grid, $993 million for housing, and $134 million for
transportation. FEMA continues to work with the Territory to reach an
agreement on capped-fixed subgrants and expects infrastructure
assistance to total over $12 billion. This investment will result in
significantly modernized public health and education sectors and
completely rebuild--in a more resilient fashion--large portions of the
power, water, and wastewater systems.
Five years after the hurricanes, 850 FEMA employees remain on the
ground and dedicated to Puerto Rico and the U.S. Virgin Islands
recovery missions, ninety percent of which are local hires. We actively
partner with the Puerto Rico Central Office of Recovery,
Reconstruction, and Resiliency (COR3), the Puerto Rico Emergency
Management Bureau (PREMB), and key critical infrastructure partners
such as PREPA, and the Puerto Rico Aqueduct and Sewer Authority
(PRASA), and regularly troubleshoot complex challenges to generate
innovative solutions. FEMA also has an active partnership with the U.S.
Virgin Islands Office of Disaster Recovery, Virgin Islands Territorial
Emergency Management Agency (VITEMA), Water and Power Authority (WAPA),
Housing Finance Authority (VIHFA), and Waste Management Authority
(WMA).
At every step of the way, FEMA is working with these partners to
ensure recovery is progressing and we are innovating to address
emerging challenges. Most recently, we have worked with Puerto Rico to
address supply chain constraints through an approval of almost $600
million to purchase long-lead items that are needed to rebuild the
power grid. This allows for the advance purchase of materials that take
time to arrive on the island, so they are available once reconstruction
work begins. Working closely with the Government of the U.S. Virgin
Islands and staff from this Committee, we have re-evaluated our
approach to implementing the Bipartisan Budget Act of 2018 to ensure we
are resiliently rebuilding the islands' infrastructure to the latest
industry standards. This has resulted in our decision to build 56 brand
new medical facilities and schools. Finally, to address liquidity
challenges associated with local jurisdictions undertaking large scale
construction projects, we worked with Puerto Rico to implement a
Working Capital Advance program for municipalities. Recently, PRASA
projects were added to the program, which allows for an advance in
funds to begin project execution across the island. These, and many
other innovative practices, continue to define Puerto Rico's and U.S.
Virgin Islands' historic mission.
As if the recovery mission were not challenging enough on its own,
our FEMA staff and the residents of Puerto Rico and the U.S. Virgin
Islands persevered through the January 2020 Puerto Rican earthquakes--
which registered as much as 6.4 in magnitude--and the COVID-19 pandemic
that surged just a couple months later. To date, FEMA has obligated
over $740 million to support earthquake recovery and almost $300
million to support the islands' response to COVID-19. Despite these
additional challenges, our dedicated FEMA recovery workforce
collaborated with its partners to approve a record number of projects.
Building Back Better
Notwithstanding this historic obligation of funds, much work
remains to be done to rebuild the infrastructure of these islands. In
Puerto Rico, the Government of Puerto Rico reports 2,260 recovery
projects are currently under construction and another 945 have been
completed. In the Virgin Islands, the Territory reports that 89
recovery projects are currently under construction. These projects are
more than just statistics, they are the foundation of what we expect
will be more resilient and better community infrastructure. One such
project is the Roberto Clemente Stadium in the Puerto Rican
municipality of Carolina. More than a landmark, the baseball stadium
plays an important role in the municipality's economy as it impacts
local merchants, business owners, and other sectors like
transportation, tourism, and hospitality. The stadium also serves as a
collection center during disasters and as a mass vaccination and COVID-
19 testing site. Repairs to the field, replacement of seating and the
electric system, among others, are about ninety percent complete with
the help of over $18.4 million in FEMA funds.
Similarly, FEMA funded the replacement of Puerto Rico's main water
testing facility located in Caguas. Operated and maintained by PRASA,
this project was developed under FEMA's Accelerated Awards Strategy
(FAASt), where a sampling methodology was used to streamline
inspections. Of the $3.7 billion obligated to PRASA under FAASt, about
$30 million corresponds to the water testing lab, which processes and
analyzes the purity of drinking water and provides adequate wastewater
treatment in Puerto Rico. The new laboratory is being rebuilt using
current codes and standards and is about thirty-five percent complete.
In the U.S. Virgin Islands, FEMA is focusing on supporting the
Territory's vision to transform its infrastructure to better withstand
future storms. Recently, FEMA approved a $209 million replacement for
the now demolished Arthur A. Richards Jr. High School. The new school
will help ensure K-through-8 students can get back into classrooms at a
state-of-the-art facility that is more resilient to future storms and
breaks the cycle of disaster, damage, and reconstruction. More than
$463 million has been obligated to health care facilities in the
Territory. FEMA has approved the replacement of four medical facilities
in the U.S. Virgin Islands. St. Croix facilities include the Charles
Harwood Medical Clinic and Juan F. Luis Hospital, and St. Thomas sites
include Charlotte Kimelman Cancer Institute and Roy Lester Schneider
Hospital.
We are not just strengthening damaged infrastructure; we are also
providing historic levels of mitigation assistance in areas undamaged
by the storms. We have committed over $2.4 billion for projects and
obligated over $132 million in project costs and $49 million in
management costs in Puerto Rico through the Hazard Mitigation Grant
Program since Hurricane Maria. In responding to this disaster, Puerto
Rico has submitted over $4 billion worth of projects. Building code
enforcement is one of the most significant projects on the island and
will help eliminate informal construction. FEMA has obligated more than
$54 million so far for this project, which will enhance Puerto Rico's
recovery for generations, making the island safer and stronger. In
addition, nearly $5 million has been obligated to review and update
Hazard Mitigation plans in all 78 municipalities. Puerto Rico has
access to roughly $3 billion in Hazard Mitigation Grant Program
funding, the maximum authorized by the Stafford Act, and the Virgin
Islands has access to roughly $960 million in Hazard Mitigation Grant
Program funding. Working closely with the Governments of Puerto Rico
and the Virgin Islands, we are focused on leveraging this funding for
the benefit of all residents and communities.
FEMA is not just providing historic levels of funding and building
back facilities in a more resilient manner--in line with the
Administration's priorities--we are ensuring equity is at the center of
this recovery. We have re-designed and re-issued program guidance and
trainings to make sure they are available in Spanish, ensuring our
communications and programs are more accessible and responsive within
affected communities. In both Puerto Rico and U.S. Virgin Islands, as
indicated, ninety percent of FEMA staff involved in the recovery
missions are local--they know their communities and operate with a high
degree of cultural and social awareness. Consistent with the goals of
FEMA's 2022-2026 Strategic Plan, we are actively working to ensure
recovery projects are completed in compliance with federal laws and
executive orders on civil rights & civil liberties, and environmental
justice to provide services in an equitable and fair manner. For
example, when recently reviewing a proposed mitigation project to
address flooding, our team observed land acquisition activities within
the project that could unintentionally increase flood risks for
surrounding low-income communities. The team worked with the applicant
to ensure necessary steps were put in place so the project would not
adversely affect homes within those nearby communities.
Preparedness for What May Come
Building a stronger infrastructure than what previously existed
before Hurricanes Irma and Maria is just one aspect of resilience. FEMA
is also ensuring we and the Government of Puerto Rico and Territory
governments are prepared to support their residents to withstand future
storms. Climate change is impacting the islands, occasioning higher sea
levels and more intense storms. Recognizing the challenges of moving
emergency supplies to Puerto Rico and the U.S. Virgin Islands after a
storm, we have pre-positioned much greater inventories on the islands.
For example, compared to on-island supplies in Puerto Rico in 2017,
today we have twice the number of generators, nine times the water, ten
times the meals, and eight times the number of tarps. Having these
resources pre-positioned will significantly enhance our ability to
render assistance quickly when future storms impact the islands.
When the next storm hits, we will also be better able to assist
previously underserved populations in Puerto Rico and the U.S. Virgin
Islands. For instance, in 2017, many homeowners had difficulty proving
they owned homes that had been handed down informally through the
years. Under Administrator Criswell's leadership, FEMA expanded the
types of ownership documentation we can accept, including documents
like receipts for major repairs or improvements, court documents,
public officials' letters, mobile home park letters, and even applicant
self-certification for mobile homes and travel trailers as a last
resort. We have also changed the way we calculate the threshold for
property losses to qualify for our Direct Housing program. Our goal is
to ensure equitable damage evaluations regardless of the amount of
damage to the home. Changing the calculation of the threshold from a
fixed dollar floor of $17,000 to a simpler $12 per square foot will
result in families receiving assistance who would not have been
considered for direct housing in the past. This change has resulted in
more than 5,000 additional survivors receiving Direct Housing
assistance so far.
All our efforts have to be balanced against dual imperatives:
ensuring that our assistance is provided as quickly and effectively as
possible, while simultaneously ensuring that we are watchful stewards
of taxpayer dollars so that these resources benefit the people and
communities that need them. The governments of Puerto Rico and the U.S.
Virgin Islands have made great progress in their ability to manage
historic levels of federal funding. For instance, Puerto Rico and the
U.S. Virgin Islands have made significant improvements in lowering
their improper payment rates, which currently stand at 0.079 percent
and 1.13 percent respectively. This stewardship is essential to a
successful financial recovery and the intended use of taxpayer dollars.
In closing, the continuing recovery of Puerto Rico and the U.S.
Virgin Islands from Hurricanes Irma and Maria, paired with preparations
for future disasters, are of paramount importance to FEMA, and to me
personally. When I became the head of the Office of Response and
Recovery, one of my very first trips was to Puerto Rico and the U.S.
Virgin Islands where I observed firsthand the achievements of our team
on the ground, as well as the challenges that lie ahead. Just last
month, I spent a week at a very productive summit of our senior
leadership staff working on Puerto Rico recovery initiatives, along
with top recovery officials from the island. We are firmly committed to
delivering the quickest and most efficient recovery services to Puerto
Rico and the U.S. Virgin Islands, while enhancing the islands'
resilience against all future hazards.
Thank you, and I look forward to your questions.
Ms. Titus. Thank you very much.
We will now move on to the Members' questions. Each Member
will be recognized for 5 minutes, and I will start by
recognizing myself.
Thank you for that testimony. I would like to go back to
something I mentioned in the opening statement, and that is the
concern about cost increases, whether it is due to inflation or
the pandemic or problems with having the funds in the islands.
Can you address what those problems are, and tell us how
the projects that are under that alternative procedure and
FAASt [FEMA Accelerated Awards Strategy] will be able to
continue if they don't have the money and if the estimates
aren't adequate to reach the current costs?
Ms. Bink. Absolutely. I appreciate the question and share
the concerns you raised. We are in a dynamic environment, and
one of the reasons alternate procedures was a valuable approach
is because we built in not only inflationary cost increases
into estimates, but also future price factor, which was
designed specifically and only for Puerto Rico and the Virgin
Islands under the BBA [Bipartisan Budget Act] authority that
was provided to us. And that really has resulted in estimates
that we believe will meet the needs of the recovery scope going
forward.
There is flexibility within those 428 projects, as we call
them, to balance underruns with overruns should different
estimates and bids come in at different levels, but we are
mindful of that and we continue to address the challenges we
see in the broader landscape.
One example is around supply chain. We have worked with
Puerto Rico's government on a project, which this is the first
time we have done this, where we have developed a project of
$650 million to support equipment and supplies that have longer
lead times. So that when shovels are ready to go into the
ground, that equipment is available to support the grid build
back and resilience efforts.
So, that is a $650 million project we have worked with
Puerto Rico to obligate. That is just one example, but we will
continue to monitor the landscape. And if conditions reveal
needs that we have not yet addressed, we will work to address
those within our authorities.
Ms. Titus. So, you think there is some alternative to just
not appropriating the money or forcing the local governments to
have to make up the difference?
Ms. Bink. That is right. And we will closely monitor the
progress as we move forward. The things like developing
projects for those longer lead time materials and equipment is
a big step forward, because the best defense against
inflationary increases and other supply chain disruptions is to
get those shovels in the ground.
And we have seen tremendous progress in that regard, as I
am sure you will hear more about from Puerto Rico officials,
recovery officials: 2,200 projects in construction now and
about 1,000 complete. That is excellent progress, and we are
looking forward to building upon that with our close
relationship of our teams on the ground.
Ms. Titus. I appreciate that. I wonder if you can tell us
why it has taken so long, what your insights are? And in the
last Congress, your predecessor was asked if FEMA was a long-
term agency or a short-term. And he said, well, I would make
the case that we are a response agency and short term.
Well, I don't know. Is 5 years short term or long term? Is
the glass half empty or half full? I wonder if FEMA is
committed to the long-term recovery.
Ms. Bink. Chair Titus, I sit before you today confirming
our commitment to the long-term recovery of Puerto Rico and the
U.S. Virgin Islands. Since the storm hit, we have not left. We
still have over 1,000 FEMA employees, many of which are
survivors from the storms themselves, that remain on the island
and committed to the recovery and resilience of the islands. It
is our number one priority, and I stand behind it.
Ms. Titus. Would you address why it has taken so long?
Ms. Bink. Absolutely. Yes. There is no doubt that starting
with a new process under the BBA and developing projects that
are of such significance and magnitude, given the scope of the
damage, created challenges. We did, through the authorities
granted through the BBA, were able to obligate, in historic
short timeframes, a large magnitude of funding for Puerto Rico.
And that was not without its challenges given how new it was.
That was also through an earthquake, COVID-19 disruptions,
and the fact that, if you take the power sector in Puerto Rico
as an object lesson, over 80 percent of the transmission and
distribution network was damaged or destroyed from Maria. That
is a large volume and a very concentrated level of damage that
had been unprecedented.
So, yes, there were challenges. I believe we are in a
position now to really hit the gas and keep moving in getting
those shovels in the ground to progress the recovery of the
islands.
Ms. Titus. Thank you very much.
Ms. Bink. Thank you.
Mr. Webster of Florida. Thank you, Chair.
Associate Administrator Bink, a goal of disaster funding is
to help States rebuild the infrastructure following a disaster.
Recognizing the benefits to taxpayer mitigation, Congress
authorized funding to ensure States could build in mitigation
as they rebuild existing infrastructure. However, mitigation is
different than funding completely new and duplicative
infrastructure.
For example, I understand that despite the U.S. Virgin
Islands existing liquid propane gas system, FEMA may be pushing
for USVI to transition to solar in rebuilding.
What is FEMA's role and policies on funding new systems
rather than fixing the ones that exist?
Ms. Bink. Ranking Member, thank you very much for the
question. Our role is as an enabler. When FEMA is doing our
job, we are doing the job of ensuring that the goals of Puerto
Rico and the Virgin Islands and all of our recipients across
the board are meeting their objectives. We are there to support
their projects and their resilience efforts to meet the goals
that they have in the future and ensure that their spending is
in alignment with all of our program requirements so they can
maintain that funding and maintain that progress.
So, we are agnostic to the goals themselves. We support
those goals as the recipients move toward more resiliency and a
speedy recovery.
Mr. Webster of Florida. So, the idea of heading out in the
direction of rebuilding the existing infrastructure, is that
something that can be totally modified?
Ms. Bink. I am happy to look into the specifics of the
projects you are speaking of, and I can work with my team and
yours to give more detail on the specifics there to work on
that.
Mr. Webster of Florida. OK. So, funding from other agencies
like HUD have also been provided for these recovery efforts.
However, there are concerns that FEMA's process is not
streamlined in a way that would maximize the efficient use of
these funds. For example, FEMA requires that HUD funding that
may be used to support the State's cost share must be accounted
for by project rather than a faster approach of combining
calculations across multiple projects.
Is this the case? If so, why is FEMA requiring this?
Ms. Bink. The complexity is certainly an issue that, as a
New York State recovery official, I had experienced related to
multiple funding streams. And in this role, it is a priority of
mine to ensure that we are reducing complexity wherever we can.
One example is related to implementing a flexible match
concept within each of those 428 projects. We have worked with
Puerto Rico to, within those large infrastructure projects,
like the $9.5 billion PREPA project, working to provide a
flexible structure so that part of the work needs to meet not
only FEMA requirements but also HUD requirements, which, as you
pointed out, can differ.
That flexibility will streamline the process and save
valuable time as Puerto Rico continues its recovery. It is
something we have also discussed with the U.S. Virgin Islands
and will continue to work to streamline and simplify the
application of multiple funding streams as they apply to FEMA
projects.
Mr. Webster of Florida. So, the idea of working together is
not anathema; you are pursuing it--OK.
Ms. Bink. Yes. Absolutely. And as part of the summit with
USVI, I just discussed with the Office of Disaster Recovery
potentially bringing in HUD too, so we can have those critical
discussions at the leadership level and make sure we are all
leveraging all flexibilities within our authorities to the
maximum extent.
Mr. Webster of Florida. Thank you very much. I yield back.
Ms. Bink. Thank you.
Ms. Titus. Thank you, Mr. Webster.
Now, Ms. Holmes Norton.
Ms. Norton. Thank you, Chairwoman Titus.
Associate Administrator Bink, the U.S. Virgin Islands
Office of Disaster Recovery reports that FEMA's building cost
index reflects the high cost of construction in the Virgin
Islands and could leave the long-term construction projects
without adequate funding.
How does FEMA account for inflation and supply chain
challenges when calculating construction costs for years' long
projects?
Ms. Bink. Thank you for the question. There are multiple
ways in which we address the inflationary factors and supply
chain concerns as we move forward. And when project estimates
are developed for alternative projects, not only the future
price factor, which is unique to the U.S. Virgin Islands and
Puerto Rico, what we are really looking at the future needs
when it comes to funding to support the work under those
projects as time elapses. There are also inflationary factors
that are built in to those projects.
Beyond that, once the values are set, funding can be
redistributed within each of those larger alternative projects
for underruns and overruns as bids are put out and those
numbers come back.
So, there are many factors and many flexibilities within
the 428 structure that address supply chain and future
inflationary cost concerns.
Ms. Norton. Well, in light of the Office of Disaster
Recovery's concerns, will FEMA undertake a review of the cost
estimate models in the building cost index?
Ms. Bink. So, we are certainly looking at our building cost
index modeling, and we know there are challenges there. I have
just spoken with the Office of Disaster Recovery about it this
morning. We will continue those discussions, and we will
continue to monitor the impacts of inflationary factors and
supply chain considerations in the future as bids do come in
for construction and shovels start to hit the ground.
Ms. Norton. FEMA's Accelerated Awards Strategy expedites
obligations by aggregating awards for individual projects to be
completed by a local governmental agency and to one overall
what it calls recovery budget. However, the individual projects
apparently still need to be approved by FEMA.
What steps will FEMA take to expedite the approval process
for individual projects?
Ms. Bink. So, that is a great question, and it is squarely
within the scope of the review we are doing of the Consolidated
Resource Center 5-year review right now. We have taken a deep
dive into our process. It has been about 5 years since it has
been implemented, and we are looking at things we can improve
and things we can streamline to ensure that, when project
scopes are submitted, that they are quickly reviewed and
adjudicated so that the work can begin.
Again, we know the best defense against inflation, supply
chain concerns is really to get to that construction point. And
that is our laser focus, and that is the support we are
providing on the ground through our joint recovery offices, and
it is what we will do centrally through CRC improvements.
Ms. Norton. Thank you very much, Ms. Bink.
And I yield back.
Ms. Titus. Thank you.
We will now go to someone who is very much involved in this
issue who brings it up at every hearing and who has done a
great job of informing us and staying on top of it, Miss
Gonzalez-Colon.
Miss Gonzalez-Colon. Thank you, Madam Chair. And I want to
say thank you to you and the ranking member for actually having
this hearing and allowing Puerto Rico to have so many witnesses
in the two panels we have today. I think it is important we are
just reaching the 5-year anniversary and there are many
questions still in the air about that recovery process.
Having said that, I also want to say that FEMA has done a
great job during the last years trying to expedite. There are
still a lot of things to do, and that is the reason I think
this hearing is so important, seeing what are those areas where
we need some improvement. Because on one side, I know local
agencies are submitting documents and sometimes they are
waiting for too long to get approved or having another second
sub.
So, in that sense, it has been 5 years, I think, but it
could have been yesterday as well. And the hit that Puerto Rico
and the U.S. Virgin Islands took was historic and life changing
for many of us. Whole lifetimes of work, even the pride of 80
years of progress just shut down in a night.
Over 3 million left without power, communications,
transportation, but the people of Puerto Rico did not fall
apart, and I think that is the great message, that we came
together just to survive.
In that sense, the extended lack of essential services
meant thousands of deaths in Puerto Rico. And my colleagues--
and I need to say this--came with me to the island and
responded with funding for recovery, a lot of Members. I will
say more than 100 Members of Congress came together and
traveled to Puerto Rico, alongside with Cabinet officials, to
make all the funding that was approved. And staff from FEMA and
other agencies have been working hard from the start, but has
been too slow to see some effects.
And in that sense, major obligations for primary
infrastructure rebuilding really began only late in 2020. My
constituents are frustrated with the lack of progress, and the
biggest symbol is the continued instability of the electrical
grid.
They hear about over $4 billion approved for repairs of
damage or almost $10 billion obligated for permanent
rebuilding, but they are still getting frequent interruptions,
lines going offline, substations on fire, lines failing, and
that is the reality we face in Puerto Rico right now.
Today, with a tropical storm approaching, the social
networks are filling with anxiety about, again, being months
without power, and that is the reality Puerto Ricans are
living.
So, the people ask, where is all the aid that has been
approved by Congress? What has been done or is being done? And
when will people see the results, at least in the electric
grid? I hope we can get some of those answers today. And there
is much more to be done, apply lessons learned, and to commit
to doing better going forward, but we are here today to listen.
And I've got some questions for you, and one of them,
Administrator Bink, is, of the $9.5 billion obligated for long-
term power grid recovery in Puerto Rico, how much has been
applied for?
Ms. Bink. So, right now, with the $9.5 billion, we are
seeing significant--we have over 40 projects that have been
approved in scopes of work. That work is continuing at rapid--
--
Miss Gonzalez-Colon [interrupting]. But how much of the
$9.5 billion is being applied for?
Ms. Bink. So, the $9.5 billion will be completely utilized
at the end, meaning that the $9.5 billion is the amount. And
this is what makes the 428 program so valuable for the island.
And this, again, is the largest infrastructure project ever
obligated by FEMA, which makes this a once-in-a-lifetime
opportunity----
Miss Gonzalez-Colon [interrupting]. Yes. But my question,
Administrator, I know the money is going to be used, but my
question, right now, how much of the money has been applied for
even by PREPA, by LUMA, or whoever is going to be managing the
electrical grid?
You just told me that you just approved 40 of those
projects. So, what is the percentage of share of the whole $9.5
billion?
Ms. Bink. So, what I can do is provide you the detail
after. I don't have the specific numbers right upfront----
Miss Gonzalez-Colon [interrupting]. Perfect. I prefer that
you give me the specifics.
Ms. Bink. Absolutely. And COR3 and PREPA and LUMA will have
the specifics on the project. What I can say----
Miss Gonzalez-Colon [interrupting]. That is going to be the
second panel. I want FEMA to give me the numbers of what you
have been approved, what has been submitted, applied, and
approved by FEMA, and how much has been disbursed. What is the
expected number for now? You don't have that number right now?
Ms. Bink. Well, the key that I wanted to raise was that the
$9.5 billion will be the amount spent by Puerto Rico. That
number will be the ultimate spending, because any funds that
are not used to support rebuild will be supporting resilience.
Miss Gonzalez-Colon. I know, but that is not the question I
am asking.
Ms. Bink. Yes.
Miss Gonzalez-Colon. So, if you can provide--I know my time
expired--if you can provide us how much has been applied, how
much has been approved, how many projects, and what is the
percentage of share of the $9.5 billion.
Ms. Bink. Absolutely.
Miss Gonzalez-Colon. I yield back.
Ms. Titus. You can continue.
Miss Gonzalez-Colon. Thank you.
How many of those electrical grid projects have been
applied and approved from all sources? Because we are talking
here about FAASt, but there is also regular disbursement. And I
would love to know how much will be the total of that amount,
between the Federal programs that have been approved for just
the electrical grid. I am not going to the municipalities. Just
for the electrical grid.
Ms. Bink. So, overall for public utilities for Maria, the
number of amount obligated is $13.2 billion, 265 projects,
overall. So, that is where a lot of the scopes, including that
largest project ever, will be specified, scoped out, and then
the shovels will continue to hit the ground. So, that is the
overall scope of all public utility projects.
Miss Gonzalez-Colon. We knew that. I mean, we were the ones
who approved the funding. So, my question, again, is, sometimes
agencies on the island claim that FEMA has been slow approving
the projects that have been submitted. So, I have you here and
that is the reason I am asking the question of how much has
been applied for? That is one thing. How much has been
obligated? How much has been disbursed? And separating the
accounts that money is coming from. FAASt is one thing and the
other one was the regular disaster funds.
So, knowing that, who is responsible for applying and
certifying those projects, and who is responsible for receiving
and accounting for it? Is it FEMA? Is it going to be COR3? Is
it going to be LUMA? Is it going to be PREPA?
Ms. Bink. So, that is part of what we are doing on the
ground. So, we obligate the funding and the recipient, in this
case, would be the Puerto Rico government, determines the
scopes within those larger projects and then submits those
scopes of work for approval from FEMA. That is typically----
Miss Gonzalez-Colon [interrupting]. But we are talking
electrical grid. We are not talking about the rest of the----
Ms. Bink [interrupting]. All projects. All projects. And if
there are subrecipients, they would move through the recipient,
which is COR3, in this case, with Mr. Laboy serving as the
Governor's authorized representative.
So, at that point, we review those scopes, we approve, and
then the bids and the construction proceeds.
Miss Gonzalez-Colon. How much has been disbursed right now
for electrical grid purposes?
Ms. Bink. So, for public utilities, low. Low amount has
been disbursed, about $40 million at this point. But again----
Miss Gonzalez-Colon [interposing]. $40 million.
Ms. Bink [continuing]. That is against the overall public
utility category F spending. But, again, there is a lot of
detail that goes into that and a lot of work happening to
develop those scopes of work. It is the focus of what we are
doing with our technical support on the island, which, again,
goes beyond what we typically do for disaster recovery
development of projects.
Miss Gonzalez-Colon. I am not questioning that. I am just
saying that $40 million that has been disbursed for electrical
grid--it's been 5 years. And I know a lot of the equipment that
is going to be purchased is not over the counter in a store
that you just can grab them and put in the electrical. I know
many of those scopes of work need plans either from LUMA,
either from PREPA.
My concern, and the numbers that I would love for you to
provide to this committee, is how much has been applied
specifically--I know the government of Puerto Rico and the
Governor, who I recognize is here, has been very eager in
working together with the Department of Energy, to what intent
the money is going to be used: is it for renewables, is it
going to the transmission, is it going to be the plants, is it
going to the illumination? But our concern, the people of the
island, is how much of those funds are being applied,
obligated, disbursed?
And in that plan's scope that you were just mentioning, how
many projects are in the pipeline? Because if we are going to
be waiting 5 more years to get that money done, then the
inflation is another big area that we need to tackle, because
many of those projects maybe projected today are going to be
without resources.
And I want to say thank you, Madam Chair, for providing me
with extra time.
Ms. Titus. Well, maybe Ms. Bink can get together with you
afterwards or something and to help you with some of those
numbers.
Ms. Bink. We are happy to provide that.
I do want to say one other thing, though. In our role and
our coordination with the Department of Energy and the Puerto
Rican government, we are in lockstep in working toward the
PR100 goals and the 2050 plan for renewable energy, getting to
that 100 percent by 2050.
That takes time and that can take work, and that is where
you see--while the start could have been faster, we are
starting to see that pivot toward more work, more shovels in
the ground. And really that work to develop the resilience
infrastructure in the island is a once-in-a-lifetime
opportunity. And while it takes time to get there, we think it
is time well spent, because the island will be more resilient,
more independent from an energy perspective going forward.
Ms. Titus. Thank you. I have heard you mention several
times shovel ready, but I have learned over the years from
engineers that you really have to be pencil ready. And so, I am
sure a lot of what you are working on has involved pretty
elaborate pencil-ready projects before you get to the shovels.
Isn't FEMA engaged with that stage of the process?
Ms. Bink. Absolutely. We are really engaged in all steps.
Having joint recovery offices onsite, on island, that is an
extra step in our technical assistance that you don't typically
see. The other thing we are consistently doing is looking for
opportunities to expand our technical assistance within the
authorities granted, or, in some cases, moving beyond that,
requesting additional authorities.
Just last week, we did submit a proposed legislation that
would offer further technical assistance to the U.S. Virgin
Islands. That would address supply chain concerns, potentially
provide additional support to the USVI to achieve their long-
term goals. And we will bring more detail on that to the
committees and the relevant committees as we move forward, but
we are always thinking about what can we do on the ground to
move these projects forward and to completion, and what can we
do to build in resilience in every opportunity we have.
Ms. Titus. Thank you.
Now, Mr. Garcia, I recognize you.
Mr. Garcia of Illinois. Thank you, Madam Chair, for having
this most important hearing.
To Ms. Bink, we have received important concerns from local
groups in Puerto Rico about how the reconstruction of the
electrical grid and other projects funded with Public
Assistance funds are not complying with climate policies
promoted by this administration. Specifically, in the Puerto
Rican government 10-year plan for reconstruction of the grid,
two methane gas and other carbon-emitting projects are proposed
and there is no mention of renewable energy projects such as
rooftop solar microgrids. Nevertheless, FEMA has issued an
environmental ``finding of no significant impact'' decision on
this 10-year plan, stating that the environmental impact of
projects is to be seen in a case-by-case basis.
Thus, my first question: Can you explain to us how FEMA is
ensuring that Federal funds for reconstruction are being used
in ways that do not violate Federal laws or policies to attend
climate change and promote resilient communities?
Ms. Bink. It is a great question. And what you are seeing
right now is the start of the projects and the rebuilding work.
The scopes related to resilience take time to develop and are
and will be in alignment with the PR100 goals that were
undertaken jointly with the government of Puerto Rico, as well
as the Department of Energy. So, those scopes related to
resilience portions of projects take a while.
I experienced this in New York State when I was the
recovery official working on 428s for Sandy projects. And it is
true here. The resilience work will take time, but the goals
will align ultimately with those set forth by Puerto Rico and
the U.S. Virgin Islands to meet their needs. We will make sure
we enable projects that bring them where they want to be.
Mr. Garcia of Illinois. So, you don't see any violation of
laws or policies that have been championed by the
administration?
Ms. Bink. So, I am not familiar with the specifics there. I
can certainly go back to my team and provide further detail,
but not to my knowledge. Thank you.
Mr. Garcia of Illinois. Thank you. My next question: What
are the processes to evaluate the projects proposed by the
government of Puerto Rico as to their climate sustainability?
Ms. Bink. So, we are an enabler in the sense that we want
to ensure that the projects that the government brings forth to
us to implement are aligned with FEMA requirements and
standards, and that their goals for resiliency are met on their
terms--what they are looking to do, how they are looking to do
it--and ensuring that all our rules, policies, and laws are
followed in the process. So, we are there to enable their
recovery on their terms.
Mr. Garcia of Illinois. And my last question: What
affirmative steps have been made or taken to make sure that
funds are not wasted or misused in building back a fossil fuel
infrastructure that is outdated and goes against the logic of
building back better?
Ms. Bink. Well, one of the key capacity builders in the
grid is ensuring that it can take on renewable energy sources
and drive those long-term resilient actions. So, as the
rebuilding occurs within the grid, it will set the baseline and
the ability to then bring in renewable sources of energy and
cleaner sources of energy, which is part of the plan, as I
understand it, from Puerto Rico recovery officials.
Mr. Garcia of Illinois. Thank you for that.
No further questions, Madam Chair. I yield back.
Ms. Titus. Thank you, Mr. Garcia.
That concludes our first panel. We thank you, Ms. Bink, for
providing us with information. And we would ask you to get back
to the Members who had questions that you said you could get
additional information for. So, thank you very much.
We now call up panel 2. There seems to be a lot of
questions about the electric grid. I think some of these
members of this panel may be able to address those.
It was pointed out to me that Ms. Bink has to leave to go
back to get ready for the tropical storm that is coming to
Puerto Rico. Seems kind of poetic.
Thank you all very much for being here. We have Chris
Currie, who is the Director of Homeland Security and Justice
with the Government Accountability Office.
We have Adrienne Williams-Octalien, who is the director of
the Office of Disaster Recovery for the U.S. Virgin Islands.
And I would point out that we have talked to Stacey Plaskett
for her input into some of these questions. She is very
concerned about this. So, thank you for being here.
Manuel Laboy, who is executive director for the Central
Office for Recovery, Reconstruction, and Resiliency in Puerto
Rico.
Shay Bahramirad, who is the senior vice president from LUMA
Energy.
And then Josue Colon-Ortiz, who is the executive director
of the Puerto Rico Electric Power Authority.
So, we thank you and we look forward to hearing your
testimony.
Without objection, our witnesses' full statements will be
included in the record. And so, for that reason, we would ask
that you keep your oral testimony to 5 minutes.
So, we will start with you, Mr. Currie. You may proceed.
TESTIMONY OF CHRIS P. CURRIE, DIRECTOR, HOMELAND SECURITY AND
JUSTICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; ADRIENNE L.
WILLIAMS-OCTALIEN, DIRECTOR, OFFICE OF DISASTER RECOVERY, U.S.
VIRGIN ISLANDS; HON. MANUEL LABOY, EXECUTIVE DIRECTOR, CENTRAL
OFFICE FOR RECOVERY, RECONSTRUCTION, AND RESILIENCY, PUERTO
RICO; SHAY BAHRAMIRAD, Ph.D., SENIOR VICE PRESIDENT OF
ENGINEERING, ASSET MANAGEMENT, AND CAPITAL PROGRAMS, LUMA
ENERGY; AND JOSUE A. COLON-ORTIZ, EXECUTIVE DIRECTOR, PUERTO
RICO ELECTRIC POWER AUTHORITY
Mr. Currie. Thank you, Chair Titus, Ranking Member Webster,
other members of the committee. It is a pleasure to be here to
talk about all of our work that we have done over the last 5
years on the recoveries in Puerto Rico and the USVI. And I just
want to say, I think it is great that you have both places
represented here today because the challenges in the Virgin
Islands are no less severe than are in Puerto Rico too.
So, the recoveries from these disasters are definitely the
most complicated and likely most expensive in the country's
history, and not just because of the scale of the damage, but
also the complexity of the situation in both places
financially.
Most members on this committee have had disasters in your
jurisdictions and you know what it is like to manage these
programs. Federal programs can be very complicated, lengthy,
and very frustrating to navigate, even for the most routine
disasters and especially for large complicated ones.
I want to be clear that, in my view, the recovery in both
places is not where it needs to be and is not moving as fast as
it should be. The best way I can talk about this is through
numbers.
Most of the Federal dollars actually spent so far are for
earlier response and emergency repair work, not permanent
repairs. And rebuilding of key infrastructure like schools,
hospital buildings, and other things still has a long way to
go.
You heard in the first panel about obligated dollars. To be
clear, obligation, according to FEMA itself, is an agreement to
spend money now or in the future. Project obligations are not
construction. They are not shovels in the ground.
In Puerto Rico, FEMA has obligated over $21 billion for
Public Assistance projects, this permanent work I have talked
about. However, only $407 million, that is 2 percent, has
actually been spent. In the VI, they have obligated $2 billion
for permanent projects and they have spent about $617 million.
That is a little bit better at 31 percent. They still have a
long way to go, too.
The FEMA money is the largest pot, but Federal funds in
other agencies are delayed, too. Congress appropriated about
$20 billion for HUD funds to Puerto Rico, and as of last month,
$900 million had been spent. That is 4.5 percent. The sum of
$1.9 billion was appropriated to VI for HUD and $250 million
has been spent, and that is 11 percent.
These billions in unspent dollars, as we talk about them,
are a huge scope and they represent thousands of projects. But
to make this a little bit more real, my written testimony
includes pictures, for example, of a school that we have been
to outside of San Juan several times over the course of several
years. That school now looks worse than it did after Hurricane
Maria.
To me, the photo tells the story of the numerous recovery
challenges that we faced. I think it would be hard to imagine a
school in the suburbs of DC or another large city that was
sitting overgrown and dilapidated for 5 years. And I point this
out, not to blame anyone, but to be clear on the status of the
recovery.
There are thousands of Federal, Commonwealth, and municipal
folks working hard on the recovery, and FEMA has also done a
number of things to try to address problems and address some of
our recommendations. For example, we found in the past that
constantly changing policy and guidance for these projects has
led to problems in both locations in estimating costs and
delays in agreeing to project scope and obligations.
FEMA has worked with both places, both islands, to improve
this area and has implemented several steps to streamline these
processes. And we have heard during our recent visits just a
couple months ago that communication and coordination with FEMA
in Puerto Rico, particularly, has been improved.
However, while there has been progress, I think we are
entering a really difficult phase. This doesn't get easier the
further we get into it. Our ongoing work on Puerto Rico has
identified a number of challenges, I think many of which are
likely to affect the Virgin Islands in the same way or maybe
even worse.
For example, many municipalities still lack the staff, the
experience, and the knowledge of Federal procurement rules and
policies. And this is really important right now because
thousands of contracts, literally thousands are going to be
awarded in the coming years for projects. It is critical
because these processes can determine whether these costs are
reimbursed by FEMA or not. If they are not followed, oftentimes
they won't be reimbursed. There are still also many
disagreements about project scopes that can lead to delays in
starting them.
Inflation, as has been already discussed, is also a huge
concern. While some inflation was factored into these projects,
like Ms. Bink talked about, that was done 2 or 3 years ago.
Nobody could have possibly understood what was going to happen
this year with inflation, and I think this is going to have a
huge impact on estimated projects as we go.
And lastly, I will just point out for the sake of time,
there are also concerns about the supply chain and needed
supplies. This is going to be a key part of this, too.
And let me just end by saying, I think it is important to
understand that these Federal dollars are not just critical for
rebuilding damaged projects; this is critical for the economy
of Puerto Rico for the years to come. It is a huge part of
their expected GDP, and I think it is very important that we
continue to monitor them.
Thank you very much.
[Mr. Currie's prepared statement follows:]
Prepared Statement of Chris P. Currie, Director, Homeland Security and
Justice, U.S. Government Accountability Office
Chair Titus, Ranking Member Webster, and Members of the
Subcommittee:
Thank you for the opportunity to provide an update on our work on
the Federal Emergency Management Agency's (FEMA) disaster recovery
efforts in Puerto Rico and the U.S. Virgin Islands (USVI) as we mark
the 5-year anniversary of hurricanes Irma and Maria.
In a 14-day span in September 2017, these two hurricanes struck
Puerto Rico and the USVI, causing severe damage to critical
infrastructure estimated in the hundreds of billions of dollars in
Puerto Rico and in the tens of billions of dollars for the USVI (see
fig. 1).\1\ According to a July 2022 analysis conducted by National
Oceanic and Atmospheric Administration, Hurricane Maria is the third
costliest hurricane in U.S. history, while Hurricane Irma ranks
sixth.\2\
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\1\ In its recovery plan, the Government of Puerto Rico estimated
that the territory would need $132 billion from 2018 through 2028 to
repair and reconstruct the infrastructure damaged by the hurricanes,
while a 2018 report from the USVI Hurricane Recovery and Resilience
Task Force estimated that the hurricanes caused approximately $10.7
billion in total damages across the USVI.
\2\ National Oceanic and Atmospheric Administration, National
Centers for Environmental Information, ``Costliest U.S. Tropical
Cyclones'', accessed September 6, 2022, (Washington, D.C.: July 11,
2022) https://www.ncei.noaa.gov/access/billions/dcmi.pdf.
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Figure 1: Path of Hurricanes Irma and Maria through Puerto Rico and the
U.S. Virgin Islands
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: GAO analysis of National Oceanic and Atmospheric
Administration; Map Resources (map).
GAO-22-106211
Notably, the hurricanes devastated Puerto Rico's electrical system.
It took roughly 11 months to restore power to all of the customers in
Puerto Rico, the longest blackout in U.S. history. In the USVI, its
Hurricane Recovery and Resilience Task Force concluded that the storms
damaged more than half of the territory's housing units as well as its
hospitals, schools, and water and wastewater facilities.\3\
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\3\ In addition to the 2017 hurricanes, Puerto Rico also
experienced a series of earthquakes in December 2019 and January 2020,
with strong aftershocks felt through July 2020. Additionally, both
Puerto Rico and the USVI experienced the effects of the COVID-19
pandemic.
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FEMA, a component of the Department of Homeland Security, is the
lead federal agency responsible for assisting states, as well as
territories like Puerto Rico and the USVI, with disaster recovery
efforts.\4\ Among other responsibilities, FEMA awards and administers
various disaster recovery and mitigation grant programs, such as the
Public Assistance program and the Hazard Mitigation Grant Program, in
partnership with state or territorial governments.
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\4\ See 6 U.S.C. Sec. 313.
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My testimony today discusses our prior work on disaster recovery
efforts in Puerto Rico and in the USVI since hurricanes Irma and Maria
in 2017, as well as preliminary observations from our ongoing work
related to Puerto Rico, including:
1. actions FEMA has taken to address recommendations we made in
prior reports to improve FEMA's disaster recovery efforts in Puerto
Rico and the USVI;
2. the status of FEMA's Public Assistance and Hazard Mitigation
Grant Program funding in Puerto Rico and the USVI, as of August 2022;
and
3. potential challenges FEMA and Puerto Rico face with ongoing
disaster recovery efforts and any actions to address them.
My statement is based on products we issued in from November 2019
to May 2021 as well as data and preliminary observations from an
ongoing review of FEMA's disaster recovery efforts in Puerto Rico. To
conduct our prior work, we reviewed federal laws related to emergency
management, analyzed FEMA data and documentation, and interviewed
relevant agency officials. More detailed information on the scope and
methodology for our prior work can be found in the issued reports cited
throughout this statement.\5\
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\5\ For a complete list of our previous work in this area and on
other related topics, see the Related GAO Products page at the end of
this statement. [Editor's note: See https://docs.house.gov/meetings/PW/
PW13/20220915/115108/HHRG-117-PW13-Wstate-CurrieC-20220915.PDF pgs. 23-
26.]
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To develop our preliminary observations from ongoing work, we
obtained and analyzed Puerto Rico and USVI obligation and expenditure
data as of August 2022 from FEMA's Emergency Management Mission
Integrated Environment; Integrated Financial Management Information
System; as well as the Puerto Rico Central Office of Recovery,
Reconstruction, and Resiliency Transparency Portal. To assess data
reliability, we reviewed existing information about these systems,
submitted questions to data users and managers responsible for these
data, and conducted basic tests on the data such as checking for
duplicate records or missing values. We determined these data to be
sufficiently reliable for the purposes of this statement. Moreover, we
conducted site visits to Puerto Rico in March 2022 and July 2022 to
meet with federal, territorial, and local government officials as well
as nongovernmental organizations to discuss their observations on
disaster recovery efforts and associated challenges, and to observe
disaster-damaged areas (see fig. 2).
Figure 2: Status of Recovery Project at Berwind Intermediate School in
San Juan, Puerto Rico, March 2019 and March 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
LEFT: School with internal mold and water damages caused by Hurricane
Maria observed in March 2019.
RIGHT: School observed in March 2022 awaiting repairs. According to a
FEMA official, a construction crew removed doors, windows, and some
walls due to asbestos and lead in the building.
Source: GAO. GAO-22-106211
Over the course of these site visits, we interviewed officials from
FEMA, the government of Puerto Rico's Central Office of Recovery,
Reconstruction, and Resiliency (COR3), and four municipalities in
Puerto Rico.\6\ In addition, we interviewed a private operator of a
Puerto Rico government agency and two nongovernmental organizations
that have monitored the progress of Puerto Rico's disaster recovery
efforts from hurricanes Irma and Maria. Outside of our site visits, we
interviewed one Puerto Rico government agency in June 2022 and three
additional Puerto Rico government agencies in August 2022. The
information from our site visits and interviews are not generalizable
but provide important insights into the ongoing disaster recovery
efforts in Puerto Rico.
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\6\ COR3 is an office established after the 2017 hurricanes to
guide recovery investment and policy and to serve as a focal point for
managing Puerto Rico's recovery.
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We conducted the work on which this statement is based in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background
FEMA's Public Assistance Program
FEMA's Public Assistance program provides grant funding to state,
territorial, local, and tribal governments, as well as to certain types
of private nonprofit organizations, to assist with responding to and
recovering from presidentially-declared major disasters or
emergencies.\7\ As shown in figure 3, FEMA categorizes Public
Assistance grant funds broadly as ``emergency work'' or ``permanent
work.'' Within these broad categories are separate subcategories. In
addition to the emergency work and permanent work categories, the
program includes category Z, which represents indirect costs, direct
administrative costs, and any other administrative expenses associated
with a specific project.
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\7\ In accordance with the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (Stafford Act), as amended, the President of
the United States may declare that a major disaster or emergency exists
in response to a governor's or tribal chief executive's request if the
disaster is of such severity and magnitude that effective response is
beyond the capabilities of a state, tribe, or local government and
federal assistance is necessary. See 42 U.S.C. Sec. Sec. 5170-5172.
The Public Assistance program represents the largest share of the
Disaster Relief Fund, which is the primary source of federal disaster
assistance for state and local governments when a disaster is declared.
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Figure 3: Federal Emergency Management Agency's Public Assistance
Program Categories of Work
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
\a\ The Disaster Recovery Reform Act of 2018 amends the definition of
Category Z management costs. See Pub. L. No. 115-254, Sec. 1215, 132
Stat. 3186, 3449 (codified at 42 U.S.C. Sec. 5165b(a)).
FEMA's Public Assistance program also provides grant funding for
cost-effective hazard mitigation measures to reduce or eliminate the
long-term risk to people and property from future natural and man-made
disasters and their effects.\8\ For example, a community that had a
fire station damaged by a disaster could use Public Assistance grant
funding to repair the facility and incorporate additional measures such
as installing hurricane shutters over the windows to mitigate the
potential for future damage.
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\8\ FEMA may fund hazard mitigation measures related to the damaged
facilities receiving Public Assistance grant funding pursuant to
section 406 of the Stafford Act, as amended. 42 U.S.C. Sec. 5172; 44
C.F.R. Sec. 206.226.
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FEMA, the state or territorial government (the recipient), and
local or territorial entities (the subrecipient) work together to
develop projects under the Public Assistance program. After a project
has completed FEMA's review process and is approved, FEMA obligates
funding for the project by placing money into an account where the
recipient has the authority to draw down--or expend--funding to pay the
subrecipient for eligible work upon completion.\9\
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\9\ An obligation is a definite commitment that creates a legal
liability of the government for the payment of goods and services
ordered or received. For the purposes of this statement, obligations
represent the amount of grant funding FEMA provided through the Public
Assistance program and the Hazard Mitigation Grant Program for specific
projects in Puerto Rico and the USVI. An expenditure is an amount paid
by federal agencies, by cash or cash equivalent, during the fiscal year
to liquidate government obligations. For the purposes of this
statement, an expenditure represents the actual spending by the
government of Puerto Rico government or the USVI government of money
obligated by the federal government.
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Figure 4 shows images of a Public Assistance-funded water tank
project we visited in Humacao, Puerto Rico in February 2020 (image on
left) and again in March 2022.
Figure 4: Status of Federal Emergency Management Agency Public
Assistance-Funded Buena Vista Arriba Water Storage Tank in Humacao,
Puerto Rico, February 2020 and March 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
LEFT: Damaged water tank from winds of Hurricane Maria observed in
February 2020.
RIGHT: Largely repaired water tank observed in March 2022. Source: GAO.
GAO-22-106211
The Sandy Recovery Improvement Act of 2013 authorized the use of
alternative procedures in administering the Public Assistance program,
thereby providing new flexibilities to FEMA, states, territories, and
local governments for debris removal, infrastructure repair, and
rebuilding projects using funds from this program.\10\ Unlike the
standard Public Assistance program where FEMA will reimburse the actual
costs of a project, the Public Assistance alternative procedures allow
awards for permanent work projects to be made based on fixed-cost
estimates to provide financial incentives for the timely and cost-
effective completion of work.
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\10\ The Sandy Recovery Improvement Act of 2013 amended the
Stafford Act by adding Section 428, which authorized FEMA to approve
Public Assistance program projects under the alternative procedures
provided by that section for any presidentially-declared major disaster
or emergency. This section further authorized FEMA to carry out the
alternative procedures as a pilot program until FEMA promulgates
regulations to implement this section. Pub. L. No. 113-2, div. B, Sec.
1102(2), 127 Stat. 39, amending Pub. L. No. 93-288, tit. IV, Sec. 428
(codified at 42 U.S.C. Sec. 5189f). The stated goals of the
alternative procedures are to reduce the costs to the federal
government, increase flexibility in the administration of the Public
Assistance program, expedite the provision of assistance under the
program, and provide financial incentives for recipients of the program
for the timely and cost-effective completion of projects.
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Under these procedures, if the actual cost of the project exceeds
the fixed-cost estimate agreed upon by FEMA and the recipient, the
recipient or subrecipient is responsible for the additional costs at
the time of the closeout process.\11\ However, if the actual cost of
completing eligible work for a project is below the estimate, the
recipient may use the remaining funds for additional cost-effective
hazard mitigation measures to increase the resilience of public
infrastructure.\12\ In addition, these funds may be used for activities
that improve the recipient's or subrecipient's future Public Assistance
operations or planning.
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\11\ Closeout is the step is where the grant process ends. In order
to complete a closeout, award recipients submit the final financial and
programmatic reports. According to the OMB Uniform Grants Guidance
Sec. 200.343, the recipient must submit all financial, performance, and
other reports required under the grant within 90 days after the grant
award expires or is terminated. The awarding agency will review these
reports to ensure compliance will all the grant terms and conditions as
well as to make sure recipients spent all the funds appropriately.
\12\ Section 20601 of the Bipartisan Budget Act of 2018 also
authorizes FEMA, when using the alternative procedures, to provide
assistance to fund the replacement or restoration of disaster-damaged
infrastructure that provide critical services without regard to pre-
disaster condition. Bipartisan Budget Act of 2018, Pub. L. No.115-123,
Sec. 20601(1), 132 Stat. 64 (2018). Critical services include public
infrastructure in the following sectors: power, water, sewer,
wastewater treatment, communications, education, and emergency medical
care. See 42 U.S.C. Sec. 5172(a)(3)(B). The Act also authorizes FEMA
to fund the repair or replacement of undamaged components of critical
services infrastructure when necessary to restore the function of the
facility or system to industry standards. Section 20601 applies only to
assistance provided through the Public Assistance alternative
procedures program for the duration of the recovery for the major
disasters declared in Puerto Rico and the USVI following hurricanes
Irma and Maria. Further, the Additional Supplemental Appropriations for
Disaster Relief Act of 2019 provides additional direction to FEMA in
the implementation of section 20601. See Pub. L. No. 116-20, tit. VI,
Sec. 601, 133 Stat. 871, 882 (2019). Specifically, it directs FEMA to
``include the costs associated with addressing pre-disaster condition,
undamaged components, codes and standards, and industry standards in
the cost of repair'' when calculating whether a facility should be
repaired or replaced.
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In October 2017, Puerto Rico requested, and FEMA approved, the use
of the alternative procedures program for all large-project funding for
Public Assistance permanent work projects in categories C through
G.\13\ Although FEMA had approved alternative procedure grants in 30
states as of April 2018, in these cases, it used alternative procedures
on a project-by-project basis. Puerto Rico's recovery from the 2017
hurricanes is the first recovery to use alternative procedures for all
large permanent work projects. On January 23, 2020, FEMA made the use
of Public Assistance alternative procedures optional for the repair of
non-critical service facilities in Puerto Rico damaged by Hurricane
Maria; however, it still requires large projects for critical service
facilities to use Public Assistance alternative procedures.
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\13\ According to a November 2017 amendment to Puerto Rico's major
disaster declaration, due to the extraordinary level of infrastructure
damage caused by Hurricane Maria, as well as the financial status of
Puerto Rico, officials chose to use the alternative procedures for all
large-project funding for Public Assistance categories C through G
pursuant to section 428 of the Stafford Act. Puerto Rico; Amendment No.
5 to Notice of a Major Disaster Declaration, 82 Fed. Reg. 53,514 (Nov.
16, 2017). For fiscal year 2022, the large project threshold was any
amount over $139,800.
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In July 2018, FEMA approved a request from the Governor of the USVI
to transition to using the Public Assistance alternative procedures
program for permanent work in the territory. In addition to the
alternative procedures process, the USVI may pursue the use of the
standard Public Assistance program on a project-by-project basis.
FEMA's Hazard Mitigation Grant Program
FEMA's Hazard Mitigation Grant Program provides grant funding for
long-term mitigation solutions to reduce the risk of loss of life and
property from future disasters. Unlike mitigation measures funded
through the Public Assistance program to further protect disaster-
damaged infrastructure, the Hazard Mitigation Grant Program may fund
measures for systems, facilities, or properties that were not damaged
in the disaster. For example, program funding can be used to construct
floodwater control measures that did not exist prior to the disaster,
or to update existing hazard mitigation plans to accurately reflect
current mitigation goals.
FEMA Has Taken Steps to Address Recommendations to Improve the
Management of Its Grant Programs
In prior reports, we made recommendations to improve FEMA's
management of its recovery grant programs in Puerto Rico and the USVI,
including those related to (1) the development of fixed-cost estimates
under the Public Assistance alternative procedures, (2) the
availability and clarity of guidance for FEMA's Public Assistance
program and the Hazard Mitigation Grant Program, and (3) the
identification, assessment, and management of risks to recovery in
Puerto Rico. In response, FEMA has taken steps to address these
recommendations, as discussed below.
Developing Fixed-Cost Estimates. In November 2019 and February
2020, we reported on the development of fixed-cost estimates for
permanent work projects under the alternative procedures in the USVI
and Puerto Rico, respectively. We reported in November 2019 that FEMA
and USVI officials stated that developing accurate fixed-cost estimates
for permanent work projects under the alternative procedures posed
challenges.\14\ Specifically, USVI officials told us that developing
fixed-cost estimates that accurately forecast the future costs of
completing large, complex permanent work projects in the remote island
territory was difficult given the unique circumstances that influence
construction costs in the USVI, such as the limited availability of
local resources and the need to import construction materials and
labor.
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\14\ GAO, U.S. Virgin Islands Recovery: Additional Actions Could
Strengthen FEMA's Key Disaster Recovery Efforts, GAO-20-54 (Washington,
D.C.: Nov. 19, 2019).
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To address this issue, in May 2019, FEMA approved a USVI-specific
cost factor to incorporate into FEMA's process for developing fixed-
cost estimates on an interim basis. The factor aims to ensure that FEMA
captures actual costs of implementing permanent work projects in the
territory. Given the uncertainty around these fixed-cost estimates,
USVI officials told us the territory would need to balance the
potential flexibilities provided by the alternative procedures program
with the financial risk posed by cost overruns when deciding whether to
use the alternative procedures or the standard Public Assistance
program for any given permanent work project.
For Puerto Rico, in February 2020, we also reported that, given the
importance of reaching mutual agreement on fixed cost estimates for
projects under the alternative procedures, FEMA and Puerto Rico had
taken a deliberative approach to establishing the data and procedures
to use in developing these fixed cost estimates.\15\ This included,
among other things, adapting the way FEMA estimates costs to the
specific post-disaster economic conditions in the territory, including
developing exceptions to FEMA's cost estimating guidance. In July 2019,
FEMA approved two exceptions: (1) a cost factor to account for local
labor, equipment, and material costs in Puerto Rico, and (2) a future
price factor and price curve to account for anticipated rises in
construction costs over time due to the massive influx of disaster
recovery funds, coupled with limited material and labor resources in
Puerto Rico.
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\15\ GAO, Puerto Rico Disaster Recovery: FEMA Actions Needed to
Strengthen Project Cost Estimation and Awareness of Program Guidance,
GAO-20-221 (Washington, D.C.: Feb. 5, 2020).
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At the time, we found that FEMA adapted its Public Assistance cost
estimating guidance to accurately reflect costs in Puerto Rico but that
it could improve the guidance to further enhance its reliability.
Specifically, we found that FEMA's guidance substantially or fully met
best practices for nine of the 12 steps included in the GAO Cost
Estimating and Assessment Guide; however, FEMA could improve the
guidance in three areas, including analyzing risks and future
uncertainties that could affect these estimates.\16\ We recommended
that FEMA revise its cost estimating guidance for Puerto Rico to fully
align with all 12 steps. In response, FEMA addressed this
recommendation by, among other things, developing a job aid to provide
additional guidance on cost estimating procedures to further align its
Public Assistance program guidance with the steps outlined in our
guide.
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\16\ GAO, GAO Cost Estimating and Assessment Guide Best Practices
for Developing and Managing Capital Program Costs, GAO-09-3SP
(Washington, D.C.: Mar. 2, 2009).
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We are continuing to monitor the use of fixed-cost estimates for
permanent recovery projects in our ongoing work.
Availability and Clarity of FEMA's Guidance. In November 2019, we
reported that the USVI and FEMA established structures for overseeing
recovery efforts and had issued numerous useful documents and guidance
for implementing its recovery programs.\17\ For example, FEMA's
consolidated standard operating procedures for the Public Assistance
program provided FEMA officials across all disasters nationwide with a
common understanding of the expectations and requirements for managing
projects. However, we found that FEMA did not have similar consolidated
standard operating procedures for the Hazard Mitigation Grant Program,
which were located across multiple guidance documents. Nor did the
existing Hazard Mitigation Grant Program documents provide a concise
roadmap that outlined roles and responsibilities, key tasks and
milestones, and performance measures for FEMA officials to use when
monitoring and closing out individual program projects for any given
disaster.
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\17\ GAO-20-54.
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To further strengthen its existing program guidance and management,
we recommended that FEMA assess the need for an agency-wide
consolidated standard operating procedures document for the Hazard
Mitigation Grant Program. In response, FEMA published a new webpage in
February 2021 to consolidate the program's guidance in one location for
easy reference and in January 2022, issued additional guidance for FEMA
personnel's use in managing its hazard mitigation programs to address
the recommendation.
In addition, we reported in February 2020 that FEMA had developed
Public Assistance policies and guidance to respond to complex recovery
conditions in Puerto Rico, which FEMA officials said they provided
throughout the Public Assistance project development process.\18\
However, Puerto Rico government officials we spoke with stated that
they were not always certain about how to proceed in accordance with
FEMA policy because they did not consistently understand what guidance
was in effect. We also found that pertinent guidance may not be shared
with key recovery partners and that FEMA did not maintain a repository
of Public Assistance guidance available to all recovery partners that
included current applicable guidance.
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\18\ GAO-20-221.
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Without real time access to current applicable guidance, recovery
partners risked using guidance that has been revised or replaced.
Therefore, we recommended that FEMA develop a repository for all
current applicable Public Assistance policies and guidance for Puerto
Rico and make it available to all recovery partners, including
subrecipients. FEMA addressed this recommendation by making Public
Assistance policies and guidance documents accessible to Puerto Rico
recovery partners, including subrecipients, through its internal Public
Assistance application management system.
Risks to Recovery Projects. In May 2021, we reported that although
the number of Public Assistance projects developed and obligated for
Puerto Rico's recovery had increased, FEMA had not comprehensively
identified or assessed the risks that could affect the success of the
remainder of the recovery, or identified potential actions to manage
them.\19\ These risks included (1) delays related to a lack of
subrecipient staff expertise to develop projects for obligation and (2)
difficulties providing initial construction funding for projects due to
financial austerity measures put in place related to the government of
Puerto Rico's default on debt beginning in August 2015.
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\19\ GAO, Puerto Rico Recovery: FEMA Made Progress in Approving
Projects, But Should Identify and Assess Risks to the Recovery, GAO-21-
264 (Washington, D.C.: May 19, 2021).
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While Puerto Rico-based FEMA officials and Puerto Rico government
officials identified risks that could affect continued progress of
recovery efforts, we found that FEMA headquarters officials had not
comprehensively identified and assessed such risks or identified
potential actions to manage or monitor them. As of February 2021, FEMA
headquarters was in the early stages of implementing an enterprise risk
management framework to identify and assess risks to its mission, as
required by the Office of Management and Budget. However, it was too
soon to tell if FEMA would use this framework to comprehensively
identify, assess, and monitor risks to Puerto Rico's recovery.
Nonetheless, the time that had elapsed since the 2017 hurricanes
and the work remaining highlighted the need for urgent and diligent
action to help ensure the success of Puerto Rico's remaining recovery
efforts. Therefore, we recommended that, in coordination with the
government of Puerto Rico and relevant federal agencies, FEMA identify
and assess the risks to the remainder of Puerto Rico's recovery,
including internal and external factors, such as Puerto Rico's capacity
to carry out projects. Further, we recommended that FEMA identify
potential actions to manage the risks to the remainder of Puerto Rico's
recovery and continuously monitor risks.
In response, FEMA has taken steps toward addressing these
recommendations by setting risk assessment related goals for FEMA
personnel involved in the process, drafting a risk assessment plan for
Puerto Rico's disaster recovery, and developing plans to review the
plan with Puerto Rico government officials before adoption in January
2023.
We will monitor FEMA's further actions to identify, assess, and
manage risks to recovery in Puerto Rico through our ongoing work.
FEMA Has Obligated Over $32 billion for Recovery Efforts and About $1
Billion Has Been Expended on Public Assistance Long-Term Rebuilding
Projects
FEMA has obligated a combined total of about $32.2 billion in grant
funds for Public Assistance projects and approximately $304.8 million
for the Hazard Mitigation Grant Program in Puerto Rico and the USVI in
response to hurricanes Irma and Maria as of August 2022. In turn, the
governments of Puerto Rico and the USVI have expended approximately
$7.7 billion of the Public Assistance obligations and about $39 million
in Hazard Mitigation Grant Program obligations as of August 2022. About
$1 billion of the Public Assistance expenditures were for permanent
work projects that support long-term rebuilding projects, such as
rebuilding schools, the power grid, water systems, and other damaged
infrastructure.
Public Assistance obligations in Puerto Rico. As shown in figure 5,
FEMA obligated approximately $28 billion in Public Assistance funding
to Puerto Rico related to the 2017 hurricanes as of August 2022. This
funding includes approximately $5.4 billion (19 percent) for emergency
work (categories A and B), about $21.2 billion (76 percent) for
permanent work (categories C through G), and about $1.4 billion (5
percent) in management and administrative costs (category Z).\20\
---------------------------------------------------------------------------
\20\ These totals do not include FEMA's Public Assistance
obligations in response to the series of earthquakes Puerto Rico
experienced starting in December 2019 or to COVID-19. As of August
2022, FEMA's Public Assistance obligations in response to the
earthquakes totaled about $739.5 million, while obligations related to
COVID-19 response were approximately $194.6 million.
---------------------------------------------------------------------------
Figure 5: Federal Emergency Management Agency Public Assistance Grant
Funding Obligated to Puerto Rico by Category, as of August 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: Federal Emergency Management Agency's Emergency Management
Mission Integrated Environment. GAO-22-106211
Public Assistance expenditures in Puerto Rico. The government of
Puerto Rico has expended about $5.3 billion--about 19 percent--of the
approximately $28 billion in Public Assistance obligations as of August
2022. However, expenditures for emergency work projects constitute a
large majority of expended Public Assistance funding in Puerto Rico.
Specifically, as of August 2022, emergency work projects account for 81
percent of the expended amount while permanent work projects account
for 8 percent of the total (see figure 6).
Figure 6: Federal Emergency Management Agency (FEMA) Public Assistance
Grant Funding Expended by the Government of Puerto Rico by Category, as
of August 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: FEMA via the Puerto Rico Central Office for Recovery,
Reconstruction, and Resiliency Transparency Portal. GAO-22-106211
We will continue to monitor Public Assistance obligations and
expenditures for Puerto Rico through our ongoing work.
Public Assistance obligations in the USVI. FEMA's obligations
related to the 2017 hurricanes for Public Assistance projects in the
USVI were approximately $4.2 billion as of August 2022. As figure 7
shows, FEMA's Public Assistance obligations as of August 2022 include
approximately $1.8 billion (43 percent) for emergency work (categories
A and B), about $1.9 billion (44 percent) for permanent work in
categories C through G, and $533.5 million (13 percent) in management
and administrative costs (category Z).
Figure 7: Federal Emergency Management Agency Public Assistance Grant
Funding Obligated to the U.S. Virgin Islands by Category, as of August
2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: Federal Emergency Management Agency's Emergency Management
Mission Integrated Environment. GAO-22-106211
Public Assistance expenditures in the USVI. The USVI government has
expended about $2.4 billion--about 57 percent--of the approximately
$4.2 billion in Public Assistance obligations as of August 2022. About
66 percent of total Public Assistance expenditures in the USVI went
toward emergency work projects while 26 percent went toward permanent
work projects (see fig. 8).\21\
---------------------------------------------------------------------------
\21\ The remaining Public Assistance expenditures in the USVI in
response to the 2017 went toward management and administrative costs.
---------------------------------------------------------------------------
Figure 8: Federal Emergency Management Agency Public Assistance Grant
Funding Expended by the U.S. Virgin Islands Government by Category, as
of August 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: Federal Emergency Management Agency's Integrated Financial
Management Information System. GAO-22-106211
Hazard Mitigation Grant Program obligations and expenditures in
Puerto Rico and the USVI. FEMA has obligated a combined total of about
$304.8 million in funding for Hazard Mitigation Grant Program projects
in both Puerto Rico and the USVI in response to hurricanes Irma and
Maria.
Specifically, in Puerto Rico, FEMA has obligated approximately
$162.7 million as of August 2022 to 200 Hazard Mitigation Grant Program
projects specifically in response to Hurricane Maria, and the
government of Puerto Rico has expended about $21.2 million--or 13
percent--of total obligations. For Hurricane Irma, FEMA has obligated
about $3.9 million to six projects related to Hurricane Irma, while the
government of Puerto Rico has expended approximately $252,000, which
represents about 6 percent of total obligations, as of August 2022.
In the USVI, FEMA has obligated approximately $138.2 million in
Hazard Mitigation Grant Program funding to projects in response to the
2017 hurricanes while the USVI government has expended about $17.6
million of these obligations as of August 2022.
With our ongoing work, we will continue to obtain updated Hazard
Mitigation Grant Program obligation and expenditure data for Puerto
Rico to track the progress of disaster recovery efforts.
Puerto Rico Faces Potential Challenges to Ongoing Recovery Efforts and
FEMA Is Communicating Regularly with Stakeholders to Discuss Issues
In our ongoing work, officials from the agencies and organizations
we have interviewed thus far have described potential challenges to the
continuing disaster recovery efforts in Puerto Rico. In addition, our
preliminarily observations indicate that FEMA communicates regularly
with government of Puerto Rico agencies about the implementation of
Public Assistance and Hazard Mitigation Grant Program projects and has
taken actions, such as providing trainings, to help address some of
these issues.
FEMA, Puerto Rico Government Agencies, and Other Puerto Rico
Stakeholders Cited Potential Challenges to Ongoing Recovery
Efforts
In our ongoing work, officials we have interviewed from FEMA and
selected Puerto Rico government agencies, Puerto Rico municipalities, a
private operator of a Puerto Rico government agency, and
nongovernmental organizations have identified potential challenges to
Puerto Rico's disaster recovery efforts. These potential challenges
include: (1) the limited institutional knowledge and capacity in Puerto
Rico to manage disaster recovery programs; (2) difficulties between
FEMA and grant applicants reaching agreement on scopes of work for
projects; (3) increases in project costs due to inflation; and (4)
difficulties procuring resources such as goods and services for the
construction of projects.
Limited institutional knowledge for managing FEMA's grant programs.
Preliminary observations from our ongoing work indicate that Puerto
Rico faces challenges with building up institutional knowledge to
manage FEMA grant awards and projects. In particular, officials from
COR3 stated that COR3 found that some local governments--commonly known
as municipalities--had relatively little knowledge of the federal
procurement process or the use of Public Assistance funding for the
administrative and management costs of projects. Specifically, in
COR3's February 2021 analysis of its survey to identify the capacities
of municipalities, it found that 31 municipalities did not have
extensive knowledge of federal regulations and needed to obtain better
knowledge in the area to meet federal requirements for recovery project
contracting and purchasing.\22\
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\22\ As a condition of receiving reimbursement for contractor costs
relating to FEMA's federal assistance programs, FEMA award recipients
and subrecipients must comply with all applicable federal laws,
regulations, and executive orders, including federal procurement
standards found at 2 C.F.R. Sec. Sec. 200.317-200.327.
---------------------------------------------------------------------------
Difficulties reaching agreement on project scopes of work. Among
the Puerto Rico government agencies and municipalities that we have
interviewed thus far, some officials have described challenges with
reaching agreement with FEMA on the scope of work for Public Assistance
projects they are submitting to FEMA for approval. For example,
officials from a municipality we interviewed stated that getting
approval from FEMA to add improvements to a project above its pre-
disaster design has been difficult and time consuming.\23\ In addition,
officials from a private operator of a Puerto Rico government agency
told us that they have had disagreements with FEMA on making repairs
beyond the damages sustained during Hurricane Maria. Specifically, the
private operator and FEMA disagree on which aspects of the agency's
proposed project the Public Assistance funding will cover. FEMA
officials note that there are nuances involved in developing a complex
project and ensuring it is eligible under federal laws and regulations.
---------------------------------------------------------------------------
\23\ An Improved Project is a project that incorporates
improvements or changes to the pre-disaster design that are not
required by eligible codes or standards. Federal Emergency Management
Agency. Public Assistance Program and Policy Guide, FP 104-009-2
Version 4 (June 1, 2020).
---------------------------------------------------------------------------
Increases in project costs due to inflation. Based on preliminary
observations in our ongoing work, officials in Puerto Rico we have
interviewed are concerned that inflation will lead to an increase in
the cost of executing projects and exceed FEMA's obligations for some
projects. For example, officials from a municipality stated that the
fixed cost estimates developed under Public Assistance alternative
procedures no longer reflects the current costs of basic supplies, such
as concrete, needed for their projects. Furthermore, officials from a
nongovernmental organization stated that they were concerned with the
capability of municipalities--already facing financial hardships--to
afford the increased cost of projects due to inflation. Officials from
this nongovernmental organization added that since FEMA's Public
Assistance is a reimbursement program, grant recipients--such as
municipalities--need to pay for the cost of a project upfront before
FEMA can reimburse them. These officials also emphasized that with
Public Assistance alternative procedures, if the costs of a project
exceeds the fixed cost estimate, the grant recipient would have to pay
the difference.
Additionally, officials from some Puerto Rico government agencies
that received obligations through the FEMA's Accelerated Awards
Strategy (FAASt) approach expressed concerns about inflation increasing
the overall cost of their projects and making the fixed-cost estimate
they agreed to no longer accurate.\24\ For example, officials from a
Puerto Rico government agency stated that some of its projects have
doubled in cost from the original estimate. Furthermore, officials from
another Puerto Rico government agency stated that they were unsure if
the obligation amount estimated using FAASt would adequately cover the
cost of their projects due to cost increases they ascribe to inflation.
According to FEMA officials, Public Assistance fixed cost estimates
accounted for some inflation; however, they told us that they are
monitoring for cases of project cost increases that exceed 50 percent
of the original fixed cost estimate.
---------------------------------------------------------------------------
\24\ FAASt allows selected Puerto Rico state agencies such as
Puerto Rico's Electric Power Authority, Aqueduct and Sewer Authority,
Department of Education, and the Public Housing Administration to use a
sample of the information needed to extrapolate costs and develop a
fixed cost estimate for Public Assistance permanent work projects. See
GAO-21-264 for more details.
---------------------------------------------------------------------------
Difficulties procuring resources to begin construction on projects.
According to officials from FEMA and Puerto Rico government agencies,
we have interviewed for our ongoing work, procuring resources such as
contractors and equipment needed to begin construction of projects can
be challenging.\25\ For example, FEMA officials we spoke with stated
that municipalities have particular difficulty procuring specialized
personnel such as engineers and construction contractors because they
have to compete with government agencies and larger corporations for
the same resources. Furthermore, officials from a Puerto Rico
government agency we interviewed specified that delays in the global
supply chain have affected Puerto Rico. These officials told us that
obtaining parts and materials needed to start construction on a project
can sometimes take up to 24 months.
---------------------------------------------------------------------------
\25\ In May 2021, we reported that Puerto Rico would likely face
risks finding labor to handle the sheer number of projects that need to
be constructed. According to FEMA officials, this is because thousands
of projects will be going on simultaneously and will likely put a
strain on Puerto Rico's capacity to procure labor, equipment, and
materials to start construction. See GAO-21-264.
---------------------------------------------------------------------------
FEMA Communicates Regularly with Puerto Rico Stakeholders about
Disaster Recovery Efforts
According to FEMA, Puerto Rico government agencies, and municipal
officials we interviewed thus far, communication between FEMA and
Puerto Rico stakeholders generally occurs frequently through formal and
informal means. For example, preliminary observations from our ongoing
work indicates that FEMA holds weekly and monthly meetings with COR3
and other government agencies, such as the Puerto Rico Electric Power
Authority. These meetings include discussions with FEMA officials on
the status of projects and related grant funding or construction
issues. Officials from one Puerto Rico government agency told us that
through these meetings, they are able to ask FEMA officials for help on
specific topics related to their Public Assistance projects, such as
FEMA's Environmental and Historic Preservation review process.\26\
These officials stated that they meet with FEMA and COR3 officials up
to three times a week and have informal communications daily with FEMA
and COR3 officials. Further, officials from some of the municipalities
that we have spoken to also stated that they have constructive
relationships with their FEMA Program Delivery Managers and that
communication with them has improved since the beginning of the
disaster recovery.\27\
---------------------------------------------------------------------------
\26\ According to FEMA, an Environmental and Historic Preservation
review includes FEMA reviewing each Public Assistance project to ensure
the work complies with applicable federal laws and implementing
regulations, and applicable executive orders to protect the environment
and preserve the U.S.'s historic and archeological resources. Federal
Emergency Management Agency. Public Assistance Program and Policy
Guide, FP 104-009-2 Version 4 (June 1, 2020).
\27\ According to FEMA, Program Delivery Managers serve as the
primary point of contract for applicants, providing customer service
and programmatic guidance throughout the grant process.
---------------------------------------------------------------------------
In addition, both FEMA and COR3 have provided municipalities with
trainings and technical assistance. For example, in February 2021, FEMA
and COR3 hosted a virtual training for municipal staff on the
processing of acquisitions and contracting which all 78 municipalities
attended. More recently, from December 2021 to June 2022, FEMA
delivered multiple 3-day grants management training for municipalities.
These trainings covered topics such as the lifecycle of grants, project
management, administrative requirements, and the procurement process.
Our ongoing work will continue to explore the challenges to the
disaster recovery efforts in Puerto Rico as well as potential solutions
to these challenges. We will also continue to identify steps FEMA is
taking to help address them. We plan to issue a final report next year.
Chair Titus, Ranking Member Webster, and Members of the
Subcommittee, this completes my prepared statement. I would be pleased
to respond to any questions that you may have at this time.
Ms. Titus. Ms. Williams-Octalien.
Ms. Williams-Octalien. Good morning, Chairwoman Titus and
Ranking Member Webster, members of the committee. I am Adrienne
Williams-Octalien, director of the Office of Disaster Recovery
in the U.S. Virgin Islands. Thank you for holding this hearing
and for the opportunity to provide testimony on the status of
the Virgin Islands recovery 5 years after the devastating
storms.
Hurricanes Irma and Maria brought a tremendous amount of
damage to the Virgin Islands, but also provided opportunity to
rebuild an aged infrastructure. While there has been
significant progress in advancing the efforts, the Territory
remains in a fragile state. The accomplishments to date have
been achieved despite significant challenges related to Federal
bureaucratic processes and a global pandemic, which exacerbated
the already acknowledged complexity of recovering from back-to-
back category 5 storms.
With damages estimated to be over $11 billion, which is
nearly three times the annual gross domestic product, the
Territory anticipates receiving $8 billion to $10 billion from
Federal programs over the next 5 years to aid in the recovery.
To date, $5.6 billion of the anticipated $8 billion has
been obligated to the Territory; $2.7 billion of those funds
have been expended. With a portfolio of only 1,500 projects, at
least 783 hurricane recovery projects have been completed to
date, and 500 are underway.
Progress has not come without its challenges. In requiring
the Territory to submit reimbursement requests to FEMA for
approval before gaining authorization to draw funds, the
Territory was placed in 2019 under manual draw. This created a
significant delay in getting payments out to vendors.
In February 2021, FEMA lifted the manual draw requirements
for reimbursement spending in the Territory. This decision
demonstrated FEMA's confidence in the Territory's ability to
manage its Federal recovery dollars.
The geographical makeup and fiscal constraints of the
Territory creates a set of unique circumstances not experienced
in Anytown, USA. In many instances, these challenges have
pushed FEMA into uncharted waters and forced the development of
innovative approaches to disaster recovery practices.
Congress recognized these distinct challenges and in 2018
passed the Bipartisan Budget Act. The BBA allowed for the
rebuilding of critical facilities to prevailing industry
standards. To date, a total of 92 projects have been requested
for replacement through FEMA, 46 of which have been approved,
to include 17 educational facilities and 8 healthcare
facilities. Additionally, FEMA has approved the replacement of
the wastewater system and potable water systems for the island
of St. Croix, paving the way for similar considerations for St.
Thomas and St. John.
The benefits of the BBA cannot be underscored enough. It
has created the genesis for the transformation of a resilient
Virgin Islands. Although the BBA provided tremendous
opportunities for the Territory, unfortunately, it took FEMA
almost a year to release the associated policy guidance to
enable the implementation of the laws as Congress intended.
These provisions created a complete metamorphosis of how FEMA
administers its Public Assistance program.
In its initial stages, the Territory had concerns that the
FEMA policies were not aligned with Congress' intent. It was
not until the October 2021 FEMA/USVI BBA Summit, held with
Governor Albert Bryan, Jr., Delegate to Congress Stacey
Plaskett, and, of course, members of the Appropriations
Committee and FEMA leadership, that key policy decisions were
made to align more with the intent of Congress. This discussion
yielded the obligation of funding for reconstruction of the
first school and addressed questions that impacted funding for
healthcare facilities.
We are, however, still experiencing challenges with the
agreement of fixed-cost offers. The Territory has requested a
second summit to address lingering issues related to cost
development, to ensure that we are maximizing assistance and
proper application of the BBA provisions.
As you may be aware, the Territory is not in a position to
provide upfront funding projects; therefore, it is critical
that obligations are in line with actual costs. Many of these
projects will be in construction over the next 5 to 7 years.
With the cost of inflation and supply chain issues that are
currently being experienced, the Territory is at great risk for
cost overruns for section 428 projects.
The Territory has found it necessary to leverage multiple
Federal resources for a project to be feasible. The layering of
Federal funding is very challenging as agencies become
Territorial with governing regulations. This inevitably results
in contractors including the cost of time and money in bids and
has the unintended consequence of driving the cost of the
recovery up.
The Territory continues to advocate for waiver of the local
match requirement. Under the current situation, the USVI is
dedicating $500 million of its HUD CDBG-DR funds to cover the
non-Federal share of the FEMA Public Assistance projects. This,
however, requires the laborious task of having each project
reviewed by another Federal agency, again, delaying payment to
contractors.
The request to waive the match is well within the line of
the Insular Areas Act. However, multiple requests have been
denied by FEMA as recently as June 2022. The Territory simply
does not have the resources to cover local match requirements,
and even with the allocation of the CDBG-DR funds, additional
funds may be necessary.
Lastly, capacity issues are not limited to the Territory.
Federal agencies are also experiencing the impact of the lack
of experienced personnel to assist with the reviewing of
recovery funds. Timelines associated with reviewing projects
tend to span months before responses are received. As disasters
become more prevalent, it is prudent that we remove the
complexities so we can get the resources to the people who need
them most.
The Territory is continuing to lead efforts to rebuild a
resilient public infrastructure and positively transform our
Territory for generations to come.
I would like to thank Delegate to Congress Stacey Plaskett,
the Department of the Interior, FEMA, HUD, and all of our local
and Federal partners for their continued support.
On behalf of Governor Albert Bryan, Jr., and the people of
the Virgin Islands, I would again like to thank you and this
body for your support and commitment to the U.S. Virgin
Islands' recovery and its quest to build a resilient Virgin
Islands.
Thank you.
[Ms. Williams-Octalien's prepared statement follows:]
Prepared Statement of Adrienne L. Williams-Octalien, Director, Office
of Disaster Recovery, U.S. Virgin Islands
Good morning, Chairman Peter DeFazio, Ranking Member Sam Graves,
and Members of the Committee on Transportation and Infrastructure
Subcommittee on Economic Development, Public Buildings, and Emergency
Management. I am Adrienne L. Williams-Octalien, Director of the Office
of Disaster Recovery in the U.S. Virgin Islands. Thank you for holding
this hearing and for the opportunity to provide testimony on the status
of the Virgin Islands recovery five years after the devastating 2017
hurricane season.
Hurricanes Irma and Maria brought a tremendous amount of damage to
the Virgin Islands but also provided the opportunity to rebuild an aged
infrastructure and create resiliency. While there has been significant
progress in advancing recovery efforts, the Territory remains in a
fragile state. There is work left to be done on many of our critical
facilities, including hospitals and schools, but the rebuilding efforts
are in full swing. The accomplishments to date have been achieved
despite significant challenges related to federal bureaucratic
processes and a global pandemic, which exacerbated the already
acknowledged complexity of recovering from back-to-back Category 5
storms.
With damages estimated to be over $11B, which is, nearly three
times the annual gross domestic product, the Territory anticipates
receiving $8-$10B through various federal programs over the next five
years to aid in the recovery. To date, $5.6B of the anticipated $8B has
been obligated to the Territory. $2.7B of those funds have been
expended. The Territory anticipates receiving this funding from four
main federal programs, including the FEMA-Public Assistance and Hazard
Mitigation Grant Programs, HUD-Community Development Block Grant-
Disaster Recovery Program and Federal Highway Emergency Relief Program,
along with other disaster-related funds from various federal entities.
With a portfolio of over 1,500 projects, at least 783 hurricane
recovery projects have been completed to date and over 500 are
underway. Progress has not come without its challenges. In October
2019, the Territory was placed on manual draw after the results of a
2018 audit. This required the Territory to submit reimbursement
requests to FEMA for approval before gaining authorization to draw
funds. This created a significant delay in getting payments out to
vendors. In February 2021, FEMA lifted the manual draw requirement for
reimbursement spending in the Territory. The decision demonstrated
FEMA's confidence in the Territory's ability to manage its federal
recovery dollars.
The geographical makeup and fiscal constraints of the Territory
creates a set of unique circumstances not experienced in Any Town, USA.
In many instances, these challenges have pushed FEMA into unchartered
waters and forced the development of innovative approaches to disaster
recovery practices.
Congress recognized these distinct challenges and in 2018, passed
the Bipartisan Budget Act (BBA). The BBA allowed for the rebuilding of
critical facilities to prevailing industry standards. To date, a total
of 92 projects have been requested for replacement through FEMA--46 of
which have been approved to include 17 educational facilities and eight
healthcare facilities. Additionally, FEMA has approved the replacement
of the wastewater system and potable water systems for the island of
St. Croix, paving the way for similar considerations for St. Thomas and
St. John.
The benefits of the BBA cannot be underscored enough. It has
created the genesis for the transformation of a resilient Virgin
Islands. Although the BBA provided tremendous opportunities for the
Territory, unfortunately, it took FEMA almost a year to release the
associated policy guidance to enable the implementation of the laws as
Congress intended. These provisions created a complete metamorphosis of
how FEMA administers its Public Assistance Program. In its initial
stages, the Territory had concerns that the FEMA policies were not
aligned with Congress' intent. It was not until the October 2021 FEMA/
USVI BBA Summit, held with Governor Albert Bryan Jr., Delegate to
Congress Stacey Plaskett, staff of the Appropriations Committee and
FEMA leadership, that key policy decisions were made to align more with
the intent of Congress. This discussion yielded the obligation of
funding for the reconstruction of the first school and addressed
questions that impacted funding for healthcare facilities.
It is highly encouraged that timelines are mandated for federal
agencies to issue guidelines for any programmatic authorities granted
through congressional legislation. The time that it takes to deliver
these policies negatively affects the impact of the intended
legislation on jurisdictions.
We are, however, still experiencing challenges with agreement on
fixed cost offers. The Territory has requested a second summit to
address lingering issues related to cost development to ensure that we
are maximizing assistance and proper application of BBA provisions as
well as gaining clarification on the appeal process for BBA decisions.
As you may be aware, the Territory is not in a position to provide
upfront funding for projects. Therefore, it is critical that
obligations are in-line with actual costs. Many of these projects will
be in construction over the next 5-7 years. With the cost of inflation
and supply chain issues that are currently being experienced, the
Territory is at great risk for cost overruns for 428-fixed cost
projects.
This risk is further heightened by the lack of workforce to support
the rebuilding efforts. According to the findings in the RAND Report
commissioned in 2019 by FEMA, if every able body in the Territory were
working, an additional 5,000 employees would still be required
(Culbertson et al., 2020). The Territory has engaged in a number of
workforce training initiatives and recruitment fairs but undoubtedly,
the workforce demand will heighten as early as 2023.
This phenomenon also impacts the limited pool of contractors that
are able to access required bonding for large projects. The Territory
has already begun to see the manifestation of this challenge as
solicitations for projects are being issued multiple times due to a
lack of interest by contractors. It will be necessary to attract off-
island contractors to support the volume of projects that is
anticipated for the next 3-5 years. However, off-island contractors who
are not familiar with the federal requirements and burdensome
administrative processes often grow impatient with the time it takes to
process payments.
The Territory has found it necessary to leverage multiple federal
resources for a project to be feasible. The layering of federal funding
is very challenging as agencies become territorial with governing
regulations. This inevitably results in contractors including the cost
of time and money in bids and has the unintended consequence of driving
the cost of the recovery up. The Territory continues to advocate for a
waiver of the local match requirement. Under the current situation, the
USVI is dedicating $500M of its HUD CDBG-DR funds to cover the non-
federal share of the FEMA Public Assistance projects. This, however,
requires the laborious task of having each project reviewed by another
federal agency, again delaying payment to contractors. If the 10% cost
share is waived, the USVI can instead redirect these funds to help
rebuild homes damaged by the hurricanes and address other critical
needs.
The request to waive the match is well in line with the Insular
Areas Act. However, multiple requests have been denied by FEMA, as
recently as June 2022. The Territory does not have resources to cover
local match requirements and even with the allocation of the CDBG-DR
funds, additional funds may still be necessary.
Despite the many challenges of the recovery, the Territory is still
focused on ensuring that vendors and contractors are paid in a timely
manner. This is evidenced by the 2019 petition made to FEMA to allow
the Territory to pay on invoice, thereby negating the need to provide
proof of payment before drawing reimbursement funds. This eliminated
the Territory from seeking loans, lines of credit and other financing
mechanisms to commence projects.
Disaster recovery is never fast enough. However, the bureaucratic
processes that govern the spending of funds frustrate as opposed to
facilitate recovery efforts. To address these concerns, Congress may
consider action that identifies one federal agency to review recovery
projects for compliance with shared regulations and prioritize the
rules and requirements of the primary federal funding source.
It is clear that new flexibilities afforded to programs but
executed through the old FEMA model do not meet the level of intended
success. The timelines associated with the obligation and expenditure
of federal funds are frustrating at best and we should collectively
develop an approach to revamp how recoveries are funded. We need to
explore closing the gap between FEMA and HUD funding becoming available
to disaster-stricken areas this allows for comprehensive recovery
planning and execution. In addition, novel solutions for acquiring
skilled workers to support recovery efforts from the continental U.S.
and other regions of the Caribbean is crucial. Legislation that allows
workforce from neighboring Caribbean islands to come to the Territory
to accelerate rebuilding efforts is warranted.
Lastly, capacity issues are not only limited to the Territory.
Federal agencies are also experiencing the impact of the lack of
experienced personnel to assist with the reviewing of recovery
projects. Timelines associated with reviewing projects tend to span
months before responses are received. As disasters become more
prevalent, it is prudent that we remove the complexities so we can get
the resources to the people who need them the most.
The Territory is continuing to lead efforts to rebuild a resilient
public infrastructure and positively transform our Territory for
generations to come. Moving through the complexity of federal
requirements across multiple funding sources and ensuring that projects
are funded, monitored, and compliant is an arduous task, but it can be
done with our combined support. I would like to thank Delegate to
Congress Stacey Plaskett, the Department of Interior, FEMA, HUD and all
of our local and federal partners for their continued support. On
behalf of Governor Albert Bryan Jr. and the people of the Virgin
Islands, I would like to once again thank the members of this body for
your support and commitment to the U.S. Virgin Island's Recovery and
its quest to ``Build a Legacy of Resilience.'' I remain available to
answer any questions you may have.
Ms. Titus. Thank you.
Now, Mr. Laboy.
Mr. Laboy. Thank you, Chairwoman Titus, Ranking Member
Webster, for the chance to be here today to talk about the
status of Puerto Rico's recovery 5 years after Hurricanes Irma
and Maria. My name is Manuel Laboy, and I serve as the
Governor's authorized representative and as the director of the
Central Office for Recovery, Reconstruction, and Resiliency for
Puerto Rico, also known as COR3.
My remarks today will first describe the dire circumstances
under which Puerto Rico was devastated by back-to-back
hurricanes and our efforts in the early years to get our heads
above water. Then, I will discuss the last couple of years when
Puerto Rico's recovery began to take off and make real
progress.
When Hurricanes Irma and Maria hit Puerto Rico in September
2017, we were already in crisis. Puerto Rico had just entered
bankruptcy. It was illiquid and had no access to capital
markets. Much of Puerto Rico's infrastructure was beyond its
useful life and in a state of deterioration.
From 2017 until 2020, our recovery was devoted to emergency
work and temporary measures. During this phase, FEMA programs
and processes went through several major shifts during this
time, including institution of a new delivery model, an
amendment to the disaster declaration that requires the use of
fixed-cost estimates for large projects and implementation of
the FEMA Accelerated Awards Strategy, known as FAASt, designed
to expedite the obligation of funding for the energy, water and
sewer, and public schools infrastructure. During this period,
Puerto Rico also suffered two additional major disasters.
First, the earthquakes, and then COVID-19.
By the end of 2020, $4 billion for emergency work had been
disbursed and $13.5 billion for permanent work obligated to
repair, restore, and replace damaged facilities by Hurricane
Maria. The last 2 years have seen great collaboration with our
Federal partners, primarily FEMA. We have moved the recovery
forward into the permanent work phase, which requires the
development of scopes of work, the design and engineering
projects, procurement of construction contracts and,
ultimately, construction, while FEMA continues to obligate
permanent work funding reaching a total of $21.4 billion of
Federal share to date.
To accelerate the reconstruction, we requested FEMA to take
certain actions to remove obstacles, and FEMA has worked with
us to do so, including lifting a 2019 agreement that imposed
conditions on the island before request for reimbursements
could be granted and the provision of Working Capital Advances,
which have been immensely helpful in allowing us to increase
permanent work disbursements and advance the execution of large
projects led by the municipalities, the Puerto Rico Electric
Power Authority, and the Puerto Rico Aqueduct and Sewer
Authority.
In the last 2 years, FEMA and Puerto Rico have achieved so
much. Over 5,600 projects are under execution, including 1,700
in the design, engineering, and permitting step and about 2,200
projects in the construction phase. Projects include roads and
bridges, schools and hospitals, water and sewer, ports,
recreation and sports facilities, and power generation and
electrical grid. The latter is fundamental for the integration
of renewable energy technology.
From 370 permanent work projects completed by the end of
2021, today that number is over 1,100. Equally critical, Puerto
Rico has submitted all closeout packages for the Hurricane Irma
disaster and over 600 packages for Hurricane Maria, and has
continued to undergo FEMA's Validate as You Go process, passing
with flying colors.
Since 2021, the amount of permanent work disbursed has
increased by $543 million compared to $153 million disbursed
between 2017 and 2020.
In terms of the Hazard Mitigation Grants Program, COR3 has
successfully submitted over $4 billion in application packages
to FEMA, including renewable energy and climate adaptation
related projects.
Just 2 weeks ago, FEMA Administrator Deanne Criswell came
to visit Puerto Rico and expressed how pleased she was with the
collaboration taking place and the work getting done on the
island. It has been a difficult journey, and even though we are
tackling recent challenges, such as cost increases and
availability of skilled labor, Puerto Rico is on the road to
recovery and resiliency.
Since 2017, COR3 has provided critical technical assistance
to all of our subrecipients to obtain funding and to execute
work in compliance with Federal and State requirements. We
deeply appreciate FEMA's full support and recent efforts to
simplify its recovery processes and look forward to additional
steps it may take to continue increasing administrative
efficiencies. We are confident that the momentum gained for
advancing the reconstruction will not diminish; on the
contrary, will accelerate in 2023 and beyond.
Again, we thank you for the opportunity to be here to share
this with you today.
[Mr. Laboy's prepared statement follows:]
Prepared Statement of Hon. Manuel Laboy, Executive Director, Central
Office for Recovery, Reconstruction, and Resiliency, Puerto Rico
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
Thank you for the opportunity to appear before you today on behalf
of the American Citizens of Puerto Rico to discuss our recovery from
Hurricanes Irma and Maria. In the five years following the devastation
of these two hurricanes, we have made significant progress towards
building back our Island. This progress is, in part, the result of the
tremendous and often bipartisan support we have received from this
Committee and Congress more broadly.
Puerto Rico's Challenges Prior to 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 decade prior, the Government of Puerto Rico
had amassed unsustainable levels of debt, to a point where credit
rating agencies implemented a series of 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 of 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 process for restructuring debt and expedited
procedures for approving critical infrastructure projects in order to
combat the debt crisis. Through PROMESA, the U.S. Congress also
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 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 this financial crisis, Puerto Rico also
desperately needed to transform its energy grid; modernize the
telecommunications system; rebuild its water system; and strengthen
maritime, surface, and air transportations; as well as repair and
rebuild residential housing, without any financial means to achieve any
of these critical tasks.
Impact of Hurricanes Irma and Maria 2017-2020
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.
Hurricane 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 catastrophic. All power was lost
across the Island as a direct result of the near-total 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 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. Water damaged structures
were exposed to other potential environmental hazards, such as mold, an
increase in rodents and pests, and chemicals and waste. This obviously
caused a devastating blow to Puerto Rico's already fragile economy.
The powerful winds, storm surge, and localized flooding from
Hurricane Maria caused significant damage or complete destruction of
over 472,000 housing units across Puerto Rico. This forced hundreds of
thousands of Island residents to seek shelter in hotels, with friends
and family, or in congregate shelters. The magnitude of housing losses
produced a housing emergency throughout the Island due to the
insufficient remaining housing stock to shelter all of those who had
lost or had been forced out of their homes. This reality, added to the
power and water outages, forced tens of thousands of Puerto Rico
residents to flee to the continental United States, further impacting
the Island's ability to recovery and rebuild its communities and
economy.
Emergency Response, Stabilization, and Transition to Disaster Recovery
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) and FEMA designated nine of Puerto Rico's 78
municipalities as eligible for FEMA's Individual Assistance, which
provides relief for immediate needs and housing restoration. 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 both Public Assistance and Individual
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.
On November 5, 2017, FEMA published Amendment No. 5 to the initial
declaration notice for Hurricane Maria. Amendment 5 expanded FEMA's
funding authority, including the confirmation of availability of
funding for hazard mitigation measures under Section 404 of the
Stafford Act, but conditioned this funding on three things, including
the establishment of a ``grant oversight authority, supported by third-
party experts, to perform as the grant recipient for Public Assistance
and Hazard Mitigation funding to ensure sound project management and
enhanced, centralized control and oversight over the distribution of
FEMA grant funds.'' In order to establish a centralized entity to lead
the coordination of the long-term recovery, reconstruction planning,
and administration of the federal programs for the Government of Puerto
Rico, the 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.
As mentioned, Puerto Rico was already going through its share of
challenges before the storms and 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 disburse funds according to its own
management processes, as long as doing so is compliant with federal
requirements. 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, commonly known as the ``270
Process.'' This added a significant administrative step to the process
and required Puerto Rico to submit funding drawdown requests on behalf
of municipalities and state agencies to FEMA for approval.
Additionally, the drawdown requests had to include supporting
documentation to certify the amount being requested for drawdown was
eligible, allowable, reasonable, and in compliance with federal
procurement regulations. In 2019, the 270 Process ended, transferring
the disbursement responsibility to COR3 via a FEMA-State Agreement, but
imposing additional restrictions, terms and conditions related to the
disbursements process to be managed by COR3.
In addition, the Public Assistance program is generally a
reimbursement program which requires the recipient and subrecipients to
have enough liquidity to expend funds first, i.e. the ability to
procure and pay for contractors and then submit proof of the incurred
expenses for reimbursement, something Puerto Rico completely lacked. In
past large recovery efforts, including those managed by recipients in
the States of Louisiana, Mississippi, Texas, and Florida following
major hurricanes in 2004, 2005, and 2008, there was greater flexibility
with respect to recipients' authority to provide advance funding to
subrecipients. During these older events, the applicable financial
management regulations contained in 44 C.F.R. Part 13 allowed
``advances to Subrecipients in the amount of 50 percent of the funds
obligated by FEMA under Public Assistance subgrants.''
However, 2 C.F.R. Part 200 superseded 44 C.F.R. Part 13 and applies
to disasters declared after December 26, 2014, so including Puerto
Rico's recovery from Hurricanes Irma and Maria. The newly issued
regulations made it more difficult to provide the fiscal support that
subrecipients in Puerto Rico needed in order to begin the substantial
recovery effort. Specifically, 2 C.F.R. 200.305(b)(1) provides that,
``Advance payments to a non-Federal entity must be limited to the
minimum amounts needed and be timed to be in accordance with the
actual, immediate cash requirements of the non-Federal entity in
carrying out the purpose of the approved program or project.'' The Cash
Management Improvement Act of 1990, 31 U.S.C. Sec. Sec. 6501-6508, and
its implementing regulations at 31 C.F.R. Part 205 also alludes to a
minimum amount to meet immediate cash needs.
To make matters 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 uncertainty as to whether benefits
would be duplicated exacerbated Puerto Rico's ability to quicken its
recovery efforts. Further, FEMA requires that subrecipients pursue all
available resources, which put subrecipients in Puerto Rico in a
position to make difficult decisions regarding whether to accept
insurance settlement offers to cover necessary critical expenses, or
continue fighting with insurance companies who had far greater
resources at their disposal and none of the time constraints.
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 was yet 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 funding
obligation process, FEMA implemented its FEMA Accelerated Award
Strategy (``FAASt''), a novel approach never applied in any prior
disaster recovery managed by FEMA, under which it uses a Statistical
Sampling Methodology to arrive at fixed cost estimates for groups of
critical infrastructure projects (energy, sewer and aqueduct, and
public schools), rather than requiring inspections and cost estimating
for each individual project. While this allowed FEMA to expedite
obligation and amounted to a master recovery budget for each FAASt
subrecipient, it did not authorize any related construction, and
required that all projects needed to be formulated through FEMA's
National Delivery Model by submitting detailed scopes of work for
environmental and historic preservation compliance, and to request
additional funding on a project-base for hazard mitigation measures.
Compounding Puerto Rico's challenges, the Island suffered two
additional major disasters while in the throws of recovery from
Hurricanes Irma and Maria--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, 1,416 emergency work projects (Categories A & B)
had been obligated for $4.95 billion, of which $3.9 billion had been
disbursed. During this time, permanent work projects (FEMA Categories C
through G) were slow to develop. Through 2020, 4,649 projects were
obligated, the majority of which over 80% were small projects, and only
$153.3 million had been disbursed (See Figure 1 in Appendix). The
Puerto Rico Energy Power Authority (``PREPA'') and the Puerto Rico
Department of Education (``PRDE'') funds under FAASt were obligated in
September 2020 (followed by the Puerto Rico Aqueduct and Sewer
Authority (``PRASA'') in January 2021). But, 2020 would be a turning
point, as the Island moved out of response and into recovery.
COR3's Strategic Plan for Recovery 2021-2022
With the majority of emergency work complete, Puerto Rico's
disaster response transitioned to disaster recovery, with its primary
focus on the formulation and execution of permanent work projects
(which are captured under FEMA Categories C through G). By its nature,
long-term infrastructure recovery is a slower process, as it requires
the development of scopes of work, the design and engineering of
projects, procurement of construction contracts, and ultimately
construction. All indications, however, show significant momentum since
2021. For example, from 2017 to 2020, COR3 disbursed $3.9 million in
FEMA Public Assistance for emergency work (Categories A & B) and just
$153.3 million in for permanent work (Categories C through G). But,
from 2021 through the present, COR3 has disbursed an additional $386.8
million for emergency work (Categories A & B) and another $543.4
million for permanent work (Categories C through G). These numbers
demonstrate the marked shift from response to recovery. (See Figures 2
and 3 in Appendix).
Our relationship with FEMA and other Federal partners has
strengthened tremendously as we have worked together to resolve early
obstacles and lift restrictions that previously hindered progress. For
example, the Government of Puerto Rico requested, and FEMA agreed, to
release a 2019 agreement that imposed significant conditions on the
Island before requests for reimbursements could be granted. FEMA also
approved the provision of working capital advances, which have been
immensely helpful in providing subrecipients the liquidity necessary to
begin permanent work projects.
Puerto Rico has now submitted all close out packages for the
Hurricane Irma disaster and 638 closeout packages for Hurricane Maria,
including three for permanent work. Puerto Rico continues to undergo
FEMA's Validate-as-You-Go (``VAYGo'') process and is passing with
flying colors. Just two weeks ago, FEMA Administrator Deanne Criswell
came to visit Puerto Rico and expressed how pleased she was with the
collaboration taking place and the work getting done on the Island,
noting:
Puerto Rico has a unique opportunity to not only rebuild, but
to build back better. The historic assistance provided by FEMA
presents Puerto Ricans with the opportunity to meet their goal
of a strong infrastructure prepared to mitigate future damage.
As an agency, we remain committed to advancing equity and
combating climate change, while increasing preparedness and
resilience in the face of future natural and man-made
disasters.\2\
---------------------------------------------------------------------------
\2\ FEMA Release NR-544, ``FEMA Administrator Reaffirms
Collaboration with Local Government in Reconstruction Efforts,'' (Aug.
31, 2022), available as of Sept. 12, 2022 at https://www.fema.gov/
press-release/20220831/fema-administrator-reaffirms-collaboration-
local-government-reconstruction
---------------------------------------------------------------------------
Summary of Recent Progress and Updates to Administration of Programs
As of June 2022, 1,700 permanent work projects (damaged elements)
related to Hurricane Maria were in the engineering/design and
permitting stage ($2 billion), and 2,144 were in full construction mode
across the island ($1.3 billion), including the reconstruction of the
power grid and generation plants, water and aqueduct installations,
roads and bridges, schools and hospitals, and recreational and sport
facilities, adding resilience to hundreds of communities. Additionally,
1,176 projects have been completed at a cost of $200,563,062 compared
to 370 in 2021 and very few in 2020. (See Figure 5). We still have much
to do, the estimate of repairs needed is over $30 billion to support
the execution of over 8,000 Project Worksheets (PW's) and 14,000
damaged elements for Hurricane Maria alone for permanent work, but as
noted above, funding disbursed in 2022 doubled amounts disbursed in
2021--Puerto Rico is on the right track. Additionally, COR3 has
disbursed approximately $326 million in funding for the earthquake
disaster and approximately $117 million for emergency measures to
combat the COVID-19 pandemic.
In addition, under FAASt, FEMA has obligated a federal share of
$9.5 billion for PREPA, $3.7 billion for PRASA, and $2.1 billion for
the Department of Education. These subrecipients have collectively
submitted 90 scopes of work for validation by FEMA and $222.8 million
has been disbursed. Notably, the projects that will be executed under
FAASt by PREPA will be critical for renewable energy integration to
ensure sustainability and resiliency in future disasters. (See Figure 4
in Appendix).
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.
Efforts to Increase Support of Recovery by Providing Access to
Necessary Capital
As discussed earlier, a major obstacle to recovery in Puerto Rico
is access to working capital, especially for large infrastructure and
construction projects. 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.
To address liquidity constraints, on June 15, 2022, COR3 released a
new funding support program available to its subrecipients, implemented
specifically to provide a mechanism to advance the federal share of
funds for approved permanent work projects under FEMA's Public
Assistance related to Hurricane Maria and the earthquake disaster. The
program was introduced officially through 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. This new and improved advance program is officially
known as the Working Capital Advance (``WCA'') Program and is already
demonstrating significant support for the recovery effort.
The WCA Program is available for all Puerto Rico municipalities,
PRASA, and PREPA for large permanent work projects. Subrecipients who
request a WCA in compliance with the policy requirements are eligible
to receive a one-time payment equal to 25% of the obligated federal
share of the associated project. To date, COR3 has approved WCAs for
238 total projects which includes support for projects being
administered by 38 different municipalities, PREPA, and PRASA. The WCAs
account for $325 million in advanced funding that will be critical in
these subrecipients' ability to move forward with the projects. COR3 is
in the process of expanding the WCA Program to PRDE and to the Puerto
Rico Public Housing Administration, as well as to the Hazard Mitigation
Grants Program (``HMGP'').
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 for Puerto Rico in 2019, FEMA
imposed multiple new conditions and requirements on Puerto Rico's
recovery efforts and specifically regarding the 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 CONUS. 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 under development by municipalities, government
agencies, and non-profit organizations 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.
Significant Progress and Status of Closeout of Disasters
Puerto Rico's commitment to effective and efficient recovery
efforts is demonstrated by the rate at which it has been able to
reconcile and close FEMA Public Assistance projects prepared for
Hurricane Irma. Beginning in 2021, COR3 made a commitment to prioritize
closeout of projects. In 2022, COR3 achieved the submission of all
closeout packages for all Hurricane Irma projects. Puerto Rico is very
proud of this achievement. Although many project closeouts remain for
other disasters, more progress has been made during the past 12 months
than in the previous four years combined, another testament to the
administrative efficiency achieved using the greater flexibilities and
control that FEMA is now allowing for COR3.
Regarding Hurricane Maria, FEMA has approved a time extension to
submit all closeout packages related to Emergency Work Categories (A &
B) project worksheets to December 31, 2022. As of September 9, 2022,
COR3 has submitted to FEMA 184 large projects, and 454 small projects
for closeout, representing a project funding amount of $360.7 million.
COR3 is working diligently to submit the remaining Category A & B
projects by the approved deadline.
COR3 established a work plan to close all permanent work projects
that have been completed. We have submitted to FEMA the first three
projects and have currently assigned an additional 31 projects for a
total amount of $24.7 million. We will keep submitting these projects
to FEMA in the coming months.
Hazard Mitigation Grants Program (``HMGP'')
One of COR3's priorities since 2021 has been to maximize mitigation
efforts, for which FEMA made available $3.999 billion to Puerto Rico
under HMGP, which includes $999 million for the non-federal share
portion, implemented under the Global Match Strategy with Community
Development Block Grant Mitigation (``CDBG-MIT'') funds. The program's
primary purpose is to ensure that critical mitigation measures are
adapted to reduce the risk of loss of life and property from future
disasters are taken during the reconstruction process following a
disaster. To ensure this, Puerto Rico's main focus under this program
is to promote resilience and climate change adaptation via projects
such as localized flood control, coastal erosion, soil stabilization,
coral reef protection, ocean energy and structural/wind retrofits.
Furthermore, since 2021 COR3 has made substantial internal
investments including staffing up significantly from a staff of 5 to
30, as well as engaged the services of two experienced contracting
firms, following a competitive procurement, to support in the process
of reviewing and formulating HMGP proposals.
Currently, COR3 has made huge strides in the project formulation
phase, as it has 74 projects approved for a total investment of $2.3
billion. Among these projects that provide resiliency measures are the
Department of Health's CDT Generators, to ensure critical health
facilities' services remain uninterrupted in the case of a power
outage. Another project, the Planning Board's Code Enforcement Project
($144 million, approved project, 80% completed), is creating stricter
and more uniform enforcement of code construction compliance, which
will result in a more resilient construction industry that in turn
allows for quicker disaster reconstruction activities. (See excel table
for additional details.) COR3 has also submitted an additional 225
projects under evaluation by FEMA, which will have a total cost of $1.7
billion, such as such as the Ocean Thermal Energy Conversion Facility,
which will provide the Southeast of Puerto Rico a source of renewable
energy that is generated 24/7 by converting ocean water into energy, as
well as combat climate change.
In addition, COR3 will soon launch its Road to Resilience dashboard
in its Transparency Portal mapping all HMGP projects and continue its
full transparency campaign. (See Appendix.)
The Government of Puerto Rico would like to appreciate FEMA's
collaboration with COR3 in approving an extension for the 2021 deadline
to October 2022.
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 five years, there
have been many 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 when 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 have with our
federal partners.
Additional Support of, and Flexibilities for, Capped Grants
One of the lessons learned 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 (``PAAP'') 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 PAAP.\3\ 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
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, when compared to projects for
mainland events.
---------------------------------------------------------------------------
\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 master recovery budgets but without expedited
project execution. Each project must still work its way through FEMA's
lengthy Public Assistance process before obligated funding can be
disbursed.
While the PAAP Program and FAASt were well intended, their
effectiveness is limited by the complicated framework under which they
must be implemented. Moreover, because this was the first time FEMA
implemented FAASt, the guidelines to develop individual projects to
capture the recovery scopes of work to be implemented has changed
multiple times.
Limitations of a Reimbursement Program
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 and more flexible means of
supporting distressed subrecipients were allowed similar to the State
of Louisiana's recovery when it experienced two successive extreme
events, Hurricanes Rita and Katrina, in 2005. 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.
As has been the case following prior large events that have
impacted other locations, when a catastrophic event impacts an already
distressed recipient or subrecipient, the solution is to develop
proactive and innovative strategies to provide better support, not
impose even greater restrictions. Puerto Rico has proven that it can
emerge and thrive even when faced with great adversity, and we hope we
can now move forward as a most-trusted partner in recovery.
Support for Additional Time Extension Requests
Due to the limitations of wide-scale construction on an island,
time extensions are required for the remaining permanent recovery work
to be completed. Currently, Puerto Rico has 9,186 time extension
requests pending with FEMA. Historically, FEMA has set relatively short
time extensions that are unrealistic and can lead to heightened
frustrations on the part of our subrecipients. Often, by the time a
response is received from FEMA, the requested extension date has passed
and additional extension is often needed; it's a circle of aggravation
that is unnecessary at this stage in the recovery effort when so many
permanent work projects are facing ``extenuating circumstances'' \4\
and eligible for additional extension. We ask that you support and
encourage FEMA to grant these time extensions, recognizing that
although the road to recovery has been long, it has been a
collaborative process that has moved forward at a remarkable pace
despite major unprecedented storms, earthquakes, and a global pandemic.
---------------------------------------------------------------------------
\4\ Pursuant to 44 CFR Sec. 206.204, the recipient is authorized
to grant initial extension of projects, with additional extension under
the authority of the applicable FEMA Regional Administrator and subject
to justification including ``extenuating circumstances'' beyond the
control of the subrecipient or recipient.
---------------------------------------------------------------------------
Close-Out Concerns
Although Puerto Rico has much recovery ahead, successful closeout
of projects begins now. While the Hurricane Irma closeout process has
been successful, closeout efficiencies could be improved if there were
clearer guidance on the documentation required for each category of
work. We ask that Congress support this effort by ensuring FEMA has
adequate staffing to take on the monumental task of closing this
massive project.
Insurance Considerations
Looking forward to post-construction, subrecipients in Puerto Rico
have struggled through delays caused by implementation of FEMA's post-
construction insurance requirements. As a condition of receiving FEMA
Public Assistance, applicants must obtain and maintain insurance
coverage for the facility receiving Federal assistance for the type of
hazard. Coverage must, at a minimum, be equal to eligible project
costs. This is often referred to as the ``obtain and maintain'' or
``O&M'' requirement. We have requested FEMA not to require O&M for
``Canopy-style'' structures, since these are roofed but not walled
structures and therefore not identified as ``buildings.'' To meet the
definition of building, a facility must have two or more outside rigid
walls. This simple change in policy implementation would save Puerto
Rico millions in unnecessary insurance and prevent unnecessary denials
and confusion in a future disaster event.
VAYGo
For purposes of adequately tracking compliance with applicable
policies, laws, and regulations, FEMA implemented the Validate As You
Go (``VAYGo'') pilot program to test Public Assistance and certain
other disaster grant expenditures for Hurricanes Harvey, Irma, and
Maria in response to appropriations act provisions and Office of
Management and Budget guidance that agencies implement additional
measures to identify and address improper payments for disaster
programs expending more than $10 million in any one fiscal year. As
part of VAYGo, FEMA reviews project documentation for a sample of funds
as they are drawn down by recipients and conducts testing to verify
whether the project funding was appropriately expended by the
subrecipient. One goal of VAYGo is to identify potential problems
earlier, allowing FEMA and recipients--including PA recipients--to
correct or mitigate issues earlier in the process instead of waiting
until grant closeout. According to FEMA, the primary goal of VAYGo is
to test for ineligible costs, which can serve as a gateway for the
agency to be on notice of issues of fraud, waste, or abuse in the PA
program. For FEMA's VAYGo team to successfully report a recipient's
expenditure of Federal funding has been proper, all documentation
associated with the expended amount must be available for review by the
VAYGO team.
In 2019, FEMA implemented the VAYGo program in Puerto Rico. To
date, we have participated in three VAYGo reviews for fiscal years
2018, 2019 and 2020 and have taken significant strides with
subrecipients to validate most of the sampled disbursements. It should
be noted that VAYGo reviews for fiscal year 2019 mostly correspond to
disbursements done directly by FEMA (as per the manual drawdown process
that was previously discussed), while the entirety of the 2020 VAYGo
process took into account that COR3 manages the reimbursement process.
FEMA has informed us that VAYGo has been indefinitely suspended,
however, its previous ``findings'' remain unresolved and could possibly
present potential for major delay to an otherwise successful financial
closeout.
COR3 and FEMA have agreed to go through a remediation phase to
resolve the limited questioned costs. However, we were informed by FEMA
that it intends on sending a final debt/collection letter to COR3 by
the end of September. Upon COR3's request, remediation efforts are
being coordinated with FEMA, as COR3 finalizes its submission of
documents. Notably, the amount owed for Hurricane Irma is $2 million
and corresponds to projects that have been closed by COR3 and some also
by FEMA. COR3 believes that a more collaborative process with FEMA will
allow the avoidance of re-opening projects for which FEMA has completed
closeout. Such a process would certainly defeat the closeout purpose if
after closeout Puerto Rico has to perform an additional review due to
VAYGo.
Expediting EHP
According to the Public Assistance Program and Policy Guide (PAPPG)
(FP 104-009-02), the FEMA must review each Public Assistance project to
ensure the work complies with applicable federal Environmental and
Historic Preservation (EHP) laws and their implementing regulations,
and applicable Executive Orders. At the same time, we should look for
ways to expedite review process and obligate as many projects as
possible in this fifth anniversary of 4339-DR-PR.
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 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, especially FEMA Leadership, for its continued support
towards a better life for everyone in Puerto Rico. Puerto Rico
appreciates the attention and focus Congress is bringing to these
important issues, and we look forward to working with Congress to
evaluate and address the lessons we have learned, and continue to
learn, from these unprecedented events.
Figure 1
Compared to the first 3 years after Hurricanes Irma and Maria,
since 2021 Puerto Rico has moved from emergency work projects to
permanent work projects.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Figure 2
COR3 has worked diligently in increasing the speed of disbursements
for emergency work. Since 2021, for the first time since the recovery
began, disbursements have outnumbered obligations for Cat A-B projects.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
__________
Figure 3
As we move toward permanent work projects, we have seen a
significant increase in obligated permanent work projects as well as
disbursements. Since 2021 disbursements have increased by over 70%.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
* In 2020 the FAASt obligations paved way to $13,500M in C-G projects.
This amount should be considered a construction budget rather than an
obligation.
Figure 4
Prior to 2021 Puerto Rico had no permanent work projects underway
for PREPA, PRASA and Department of Education, since 2021 and the
inception of FAASt, Puerto Rico now has 29 approved permanent projects
for PREPA, 9 for PRASA and are awaiting validation from FEMA to
commence school repairs. This has been a significant step toward the
island's recovery.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
__________
Figure 5
Road to Recovery
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Titus. Thank you very much, Mr. Laboy.
And Ms. Bahramirad--will you say it for me?
Ms. Bahramirad. Good morning. It is Shay Bahramirad.
Ms. Titus. Well, I was pretty close.
Ms. Bahramirad. Thank you. Chair Titus and subcommittee
Ranking Member Webster, and members of the committee, my name
is Dr. Shay Bahramirad, and I am the senior vice president of
engineering, asset management, and capital programs with LUMA
Energy, and the president-elect of the Institute of Electrical
and Electronics Engineers Power and Energy Society. Thank you
for the invitation to appear this morning to discuss one of the
most important and urgent matters for the people of Puerto
Rico: the transformation of Puerto Rico's electric power
system.
All of us at LUMA, the over 3,000 men and women who work
very hard every day in rain and shine to repair and rebuild the
energy system in Puerto Rico, are determined to overcome the
profound operational and infrastructure challenges we inherited
from the past utility operator. Our goal is clear. We will,
over the coming months and years, build a more reliable, more
resilient, and cleaner energy future for the 1.5 million
customers we are fortunate to serve.
It is important to fully understand the scope of the
operational failures that have plagued Puerto Rico and the
amazing people who call this beautiful island their home. As we
have documented through photographic evidence provided to the
committee, the transmission and distribution system LUMA
inherited was weakened by years, if not decades, of poor
design, little to no maintenance, lack of proper inspection,
and other profound failures that continue to impact the overall
stability and reliability of the system.
The pictures we provided to you not only highlight the
stark reality we have faced, but they help reinforce the
importance of the work that our LUMA teams are undertaking
every day to repair, rebuild, and restore the electric grid to
a modern level.
Since our first day of assuming operation in June of last
year, we have implemented an operational approach that is
grounded by data, science, and sound engineering, and is
aligned with industry standards and best practices.
Guided by this approach, our team has done more to move
Puerto Rico's energy transformation forward in 15 months than
what was accomplished in the past 10 years, most notably,
connecting more than 28,000 customers to solar. That is more
solar connection made in a year than was accomplished in the
prior decade.
Improving customer service by, as an example, decreasing
average call wait time to approximately 3 minutes versus more
than 10 minutes under PREPA; improving work safety and training
procedures for operations, many of which didn't exist prior to
LUMA; replacing over 3,800 failing and broken poles; replacing
over 12,000 streetlights; clearing hazardous vegetation from
100 percent of substations; and helping reduce the number of
outages that an average customer experienced in a year by 30
percent.
With respect to moving forward FEMA infrastructure
projects, we have initiated 225 projects with FEMA,
representing more than $5 billion in federally funded projects.
Those include the approval of 29 projects that will address
critical infrastructure to reduce outages and increase the
reliability and stability of the electric system. We have also
started the construction of 14 FEMA projects, including 5
initial streetlight projects with LUMA's $1 billion Community
Streetlight Initiative. To put these numbers into context, we
have moved forward more FEMA projects in 15 months than what
was ever done the last 5 years under the prior operator.
Most importantly, it is critical for the committee to hear
this: Current and future FEMA projects will be guided by
science, data, and engineering. They will be built in a matter
that is fiscally sound and with appropriate oversight that
serves the interest of Puerto Rican people and all taxpayers.
While we are proud of the progress we have made, there is
no doubt that public concerns over operational challenges such
as outage duration still exist. We have heard those concerns
clearly, and we are determined to act. For example, we recently
launched the Outage Reduction and Response Initiative to build
the progress we have made, reduce the impact of outage
duration, and improve our response time when those outages
occur.
Lastly, given the tragic legacy of Hurricane Maria, LUMA
has spent the last year preparing and training to respond to
such emergencies. We have worked very closely with FEMA and our
other partners, and greatly appreciate the support of FEMA and
all our agency and Government partners.
In closing, I would like to thank the committee for the
opportunity to be here. To be clear, LUMA is absolutely
committed to Puerto Rico's energy future, a better energy
future that moves Puerto Rico forward, a better energy future
that is more reliable and cleaner, a better energy future that
serves the daily needs of the people of Puerto Rico. No matter
what comes next, all of us at LUMA will not be distracted from
this mission. And over the coming months and years, we will
build a better energy future that will proudly serve the people
of Puerto Rico for generations to come.
Thank you all for your time.
[Ms. Bahramirad's prepared statement follows:]
Prepared Statement of Shay Bahramirad, Ph.D., Senior Vice President of
Engineering, Asset Management, and Capital Programs, LUMA Energy
I. Introduction
Chairman DeFazio, Ranking Member Graves, Subcommittee Chair Titus,
and Subcommittee Ranking Member Webster, and members of the Committee:
Thank you for the invitation to appear this morning to discuss one
of the most important and urgent matters for the people of Puerto Rico:
the transformation of Puerto Rico's electric grid system.
All of us at LUMA, the over 3,000 men and women who work hard every
day, are determined to overcome the profound challenges we inherited
and build a more reliable, more resilient, and cleaner energy future
for the 1.5 million customers we are fortunate to serve.
Throughout this testimony, we will provide the members of this
committee with key facts and information regarding the electric grid's
condition prior to our commencement of operations on the island; LUMA's
commitment to complete repairs in a more detailed and permanent manner;
the nature of customer service improvements; as well as our
accomplishments in areas where significant challenges still exists.
We will also discuss the status of reconstruction projects that
have been submitted to FEMA; hurricane preparedness and emergency
response planning; as well as our new Outage Reduction and Response
Initiative (``ORRI'').
Lastly, all of us at LUMA fully embrace the profound responsibility
we have been entrusted with to address and redress the many operational
and fiscal failures of the past operator, PREPA, that have so deeply
impacted the people of Puerto Rico since Hurricane Maria and before.
With the support of FEMA, the Puerto Rican government, and other
partners, we will build an energy future that the people of Puerto Rico
deserve and of which they can be proud.
II. Historical Perspective of Puerto Rico's Electric Grid
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 15
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.
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 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 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 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.
In order to ensure greater transparency and efficiency, 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.
All of 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.
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, the expectation is for it occur over 8.81
days per year, which is 88 times higher than the planning standard for
North American utilities.
+ The potential for load shed from lack of generation in
California made national news.
+ Meanwhile, generation has caused load shed on 30 separate days
since LUMA commenced service.
III. LUMA's Commitment To Complete Repairs in a More Detailed and
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 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 applying for inclusion in PREPA's solar net-metering program.
We have successfully reduced this backlog and have
now integrated more than 28,000 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 and over 70% of customers are interconnected within 30 days.
+ Completed studies to support the interconnection of 844 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 2,100 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:
+ 2 million customers have been provided support by LUMA,
through 2.5 million calls, 350K+ e-mails, 430K+ DMs on social media.
+ The average wait time of customers on the phone decreased from
more than 10 minutes while under PREPA to approximately 3 minutes under
LUMA.
+ The rate of call abandonment declined from more than 50% with
PREPA to 15% under LUMA.
+ 560,000+ 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 \1\ 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.
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\1\ 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.
IV. 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 Partnership Authority, the Central Office for Recovery,
Reconstruction and Resiliency and PREPA to develop and advance a series
of federally funded infrastructure improvement projects to transform
and modernize Puerto Rico's energy system.
In 15 months, LUMA has advanced 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 September 8, 2022, LUMA has initiated 225 projects with FEMA
\2\, representing more than $5 billion worth of federally funded
projects. In contrast, only 35 project submissions had even been made
before LUMA assumed operations on June 1, 2021.
---------------------------------------------------------------------------
\2\ At the time of our latest filing to the Puerto Rico Energy
Bureau (``PREB''): the number of initiated projects stood at 206. Of
those, 204 projects have a FEMA FAAST number and two were awaiting
confirmation.
---------------------------------------------------------------------------
Obligated FEMA Projects: LUMA has received, to date, FEMA
approval for 29 critical infrastructure projects \3\ including:
---------------------------------------------------------------------------
\3\ At the time of our latest filing to the PREB: 19 projects had
received FEMA approval. This represents $756.5 million and includes the
equipment and materials for projects.
---------------------------------------------------------------------------
+ Over 21 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.
+ Three transmission reconstruction projects targeting Line
2200, Line 13300 and Line 6700 that will help improve the critical
energy infrastructure that delivers energy across the island.
+ Five substation modernization projects that will address the
critical role played by substations in helping deliver energy to
communities across Puerto Rico beginning in the municipalities of
Catano, Vieques, Culebra, Manati and Costa Sur.
FEMA Projects Under Construction: LUMA has started
construction on 14 FEMA funded projects across Puerto Rico including:
+ Five initial streetlight projects as part of LUMA's $1 billion
Community Streetlight Initiative in the municipalities of Guanica,
Lajas, Aguada, Maunabo and Luquillo--in less than three months, LUMA
has installed over 12,000 streetlights.
+ One critical transmission line repair project to reduce the
potential for future outages.
+ Eight distribution pole replacement projects to increase the
reliability and resiliency of the electric grid.
In addition to the projects initiated, approved, and under
construction, LUMA has also taken the following FEMA-related actions:
LUMA has submitted a critical EMS (emergency management
system) project to FEMA for approval, 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.
Received approval for $656M to procure long-lead
material, mainly grid equipment including breakers, transformers, and
reclosers.
Developed four proposals of Hazard Mitigation for non-
damaged infrastructure that COR3 is reviewing before submission to
FEMA, which would represent $900 million for deployment of
technologies, including an advanced metering infrastructure, an
advanced microgrid project, and mobile microgrids to enable renewable
energy and make communities resilient.
Taken in totality, over the coming months and years,
FEMA-funded projects that are being directed by LUMA will not only
represent the largest capital energy program in Puerto Rico's history,
it will represent 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, strengthen and transform the long-term future of Puerto
Rico's 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 Hurricane Maria and the lasting
effects it has had on the people of Puerto Rico, LUMA has made
preparing for emergency events, like hurricanes, a daily and year-round
priority.
As part of our emergency preparedness efforts, we have worked
closely with FEMA, PREMB and 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 the Federal Emergency
Management Agency (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 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 8,000 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:
+ 21,000 poles
+ 17 million feet of cables
+ 3,200 transformers
+ 58,000 LED luminaries
+ 154,000 insulators
+ 1,800 switches/breakers
+ 29,000 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
Caribbean Electric Utility Services Corporation (CARILEC), Edison
Electric Institute (EEI) and the American Public Power Association
(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.
V. New Outage Reduction and Response Initiative (ORRI)
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.
The new initiative launched by LUMA, named the Outage Reduction and
Response Initiative (ORRI), is part of an increased operational
activity designed to reduce customer outage duration by 55 million
Customer Minute Interruptions (CMI) in the next 90 days--which will
represent a 20% improvement for highly impacted customers.
The seven key organizational and operational actions that define
ORRI include:
Establishing a New LUMA Outage Reduction Task Force that
will Lead ORRI and the Operational Effort to Reduce Outages Across the
System.
Increasing Outage Response Crews and Resources.
Enhancing Vegetation Management to Target Critical Areas.
Installing New Automated Devices to Reduce the Number of
Customers Impacted.
Increasing Inspections of Critical Substations and Lines
that Serve Essential Services Like Hospitals and Work with these
Facilities to Assess Status of Back-up Generation and Resiliency.
Expanding Aerial Patrols of Key Lines with Thermal
Imaging to Identify and Repair Potential Failure Points.
Accelerating Inspections of Substations to Identify and
Address Issues.
Since the new initiative was launched on August 24, 2022, LUMA
teams have already accomplished the following:
Formed the Outage Reduction & Response Initiative task
force, which includes a cross-functional LUMA team who have initiated
an action plan designed to improve outage response and address the root
cause of outages.
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 24 new automation devices in San Juan, Ponce
and Humacao, which 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 69 miles of critical
lines identified as impacting frequent outages, in addition to the 700
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 16
critical substations.
Launched essential services outreach to hospitals and the
hospital association to determine areas impacting their energy
reliability and discuss the status of their backup generation.
Over the coming weeks and months, LUMA will continue to take
additional actions and expand on current programs and efforts in order
to improve the reliability of the energy grid. While we are transparent
about the fact that challenges in the reliability of the energy grid
will remain given the years and decades of neglect it has suffered,
LUMA will focus with greater urgency on the goal of addressing the root
cause of outages and advancing projects that will improve the
reliability and resiliency of the island's electric system.
VI. 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.
We believe that the energy future we are 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.
Attachments
The following attachments are retained in committee files and are
available online at https://docs.house.gov/meetings/PW/PW13/20220915/
115108/HHRG-117-PW13-Wstate-BahramiradS-20220915.pdf, beginning on page
12:
FEMA Projects
+ 9/12/22--FEMA Project Progress
Progress Summary
+ 6/30/22--A Year of Progress
Fuel Cost Adjustment
+ Fuel Cost Adjustment Bill Insert
Pre-LUMA System and Facility Conditions Deck
Videos
+ LUMA Progress Videos
Ms. Titus. Thank you, Doctor. I hope as an engineer you
appreciated my previous comment about pencil ready and not just
shovel ready.
Ms. Bahramirad. Indeed, I did, Congresswoman.
Ms. Titus. Thank you.
Mr. Colon?
Mr. Colon-Ortiz. Good morning, Chairman DeFazio, Chairman
Titus, Ranking Member Graves, and members of the committee, and
also to our Congresswoman Gonzalez-Colon for allowing me to
testify before you today. My name is Josue Colon, and I was
appointed as executive director of PREPA in September 29 of
last year.
PREPA is a public power corporation of the government of
Puerto Rico and the sole provider of electric power on the
island. Our system consists of generation, transmission, and
distribution systems including six main powerplants in four
locations that generate and transfer base load power throughout
the electrical grid.
In addition to these main powerplants, PREPA owns and
operates simple cycle combustion turbines as well as
hydroelectric stations around the island. Approximately 70
percent of the power generating capacity of Puerto Rico is
located along the southern coast of the island, whereas
approximately 50 percent of the electric power consumption is
located in the northeastern coast in the San Juan metropolitan
area.
PREPA relies on our transmission lines that traverse the
island, generally running south to north over mountainous
terrain, to deliver electricity to almost 1 million customers
in the San Juan metropolitan area. Therefore, even a small
disruption in the transmission lines can cause a loss of power
to a large segment of the population of Puerto Rico.
On the morning of September 20, 2017, 14 days after the
passage of Hurricane Irma and before PREPA could finish power
restoration work required as a result of that hurricane,
Hurricane Maria directly impacted Puerto Rico, causing a total
blackout. Emergency power restoration efforts after Hurricane
Maria lasted more than 1 year. PREPA received the help and
support of the Federal Government, several utilities from the
mainland, and also contractors. FEMA ultimately awarded more
than $1.9 billion in Public Assistance for emergency work, for
which PREPA is grateful.
When these extreme storms moved across Puerto Rico, PREPA's
grid was already vulnerable due to the bankruptcy process that
was initiated during the summer of 2014. Our fiscal situation
was the worst-case scenario under which any electric utility
could face two category 5 hurricanes in a period of 2 weeks.
After these hurricanes, conditions were further aggravated by
the devastating 2020 earthquakes and also by the pandemic of
COVID-19.
PREPA is now in the permanent reconstruction phase of
recovery. Our partnership with FEMA and other Federal partners
has led to some tremendous progress. In September 2020, FEMA
announced the FEMA Accelerated Awards Strategy, or FAASt,
process and guidance, which allows critical infrastructure
projects to be grouped together in order to expedite the energy
grid work in Puerto Rico. This provides a faster and more
flexible process for the application of Federal funds needed to
increase the reliability and resiliency of Puerto Rico
infrastructure.
Through FAASt, FEMA has obligated over $9.5 billion in
Public Assistance for permanent reconstruction work. This
amount represents 90 percent of the total estimated cost of the
permanent works and is complemented with a cost share of 10
percent amounting to more than $1 billion that will be covered
by local funds from the government of Puerto Rico and CDBG-DR
funds.
So far, 38 scopes of work have been submitted to FEMA for
approval, and close to $183 million will be disbursed to PREPA
in the near future. This funding will be used to rebuild
substations, distribution and transmission lines, and repair or
replace generation assets for suitable and reliable power for
the long-term future.
In addition to FEMA 428 funds, FEMA obligated approximately
$1.5 billion in Federal funds under the Hazard Mitigation Grant
Program or FEMA 404 funds for permanent work on the electrical
generation and water infrastructure. FEMA's support of PREPA
recovery has been invaluable to our people, but it has not been
without challenges. PREPA's path ahead will be focused on
ensuring the proper expenditure of its Federal grants that will
be used to create a modern, reliable, efficient, and resilient
energy system.
Our goal is to ensure, through the partnership with our
transmission and distribution system operator, that we will
build an electric system that can adequately withstand any
future storm. Such a monumental rebuilding project will take
time. We ask that this committee continue to support Puerto
Rico and FEMA in this long-term endeavor.
PREPA continues to strive for the full obligation and
execution of its recovery and reconstruction projects to
achieve a resilient, stable energy system that our 3.2 million
U.S. citizens living in Puerto Rico can depend on. The use of
those Federal funds will promote economic opportunity for our
citizens, goals that we are confident are shared by FEMA, this
Congress, and the rest of the Federal Government.
Those are my words. Thank you.
[Mr. Colon-Ortiz's prepared statement follows:]
Prepared Statement of Josue A. Colon-Ortiz, Executive Director, Puerto
Rico Electric Power Authority
I. Acknowledgments
Good morning, Chairman DeFazio, Ranking Member Graves, members of
the Committee, and our Resident Commissioner Congresswoman Gonzalez.
Thank you for the opportunity to appear before you today to discuss the
Puerto Rico Electric Power Authority's experience regarding the
recovery and reconstruction of Puerto Rico's electric system in the
aftermath of Hurricanes Irma and Maria. My name is Josue A. Colon
Ortiz. I am an engineer and the Executive Director of the Puerto Rico
Electric Power Authority, since September 29, 2021.
The Puerto Rico Electric Power Authority (referred to as ``PREPA''
in Puerto Rico) is a public corporation and governmental entity of the
Commonwealth of Puerto Rico, created pursuant to Law 83 of May 2, 1941,
with the duty of providing electric power in a reliable manner,
contributing to the general welfare and the sustainable future of
Puerto Rico, and maximizing the benefits and minimizing the social,
environmental, and economic impacts.
PREPA is the sole provider of electric power in Puerto Rico,
including the islands of Vieques and Culebra. Our system consists of
generation, transmission, and distribution systems including six main
power plants in four locations that generate and transfer base load
power throughout the electrical grid. In addition to these main power
plants, PREPA owns and operates simple cycle gas turbine stations in
the cities of Mayaguez and Arecibo, 18 peaking units located in remote
sites, as well as hydroelectric stations located around the main
Island. For various reasons, including geographical factors and major
changes to industrial, commercial, and residential population
distribution since the system was originally established, approximately
70% of the power generating capacity of Puerto Rico is located along
the Southern coast of the main Island, while approximately 50% of the
electric power consumption is in the Northeastern coast, especially in
the San Juan metropolitan area. As currently configured, PREPA relies
on its transmission lines that traverse the Island, generally running
South to North over mountainous terrain, to deliver electricity to
almost 1 million residents in the San Juan metropolitan area.
Therefore, even a small disruption in the transmission lines can cause
a loss of power to a large segment of the population of Puerto Rico,
the primary business and commercial center of the main island, most of
the governmental offices and buildings, the airport, and the Port of
San Juan.
II. Background
Puerto Rico is an archipelago of the Antilles located between the
Caribbean Sea and the Atlantic Ocean, essentially in the typical path
of storms and hurricanes that form just off the West coast of Africa
and move West Northwest along the Atlantic Ocean towards the
continental United States. It is very common for these storms and
hurricanes to first reach the Antilles at the Caribbean Sea. The best
example of Puerto Rico's exposure to the path of major weather
disturbances is the hurricane map of Figure 1 in Annex 1 which shows
recorded storms and hurricanes that crossed or impacted the archipelago
since 1852.
The most recent recorded major hurricanes affecting Puerto Rico
occurred in 2017. During the evening of September 6, 2017, Hurricane
Irma passed about 50 nautical miles to the north coast of Puerto Rico
as a category 5 hurricane. Figure 2 in Annex 1 shows the closest
location of Hurricane Irma from the coast of Puerto Rico.
As can be seen in the radar image of Figure 2, Hurricane Irma
affected almost all of Puerto Rico. According to the National Hurricane
Center Tropical Cyclone Report, Hurricane Irma, September 24, 2021 \1\,
Hurricane Irma had the following characteristics when it passed near
Puerto Rico:
---------------------------------------------------------------------------
\1\ https://www.nhc.noaa.gov/data/tcr/AL112017_Irma.pdf.
---------------------------------------------------------------------------
The highest wind speed reported in Puerto Rico was about
55 miles per hour with gusts of 74 miles per hour at San Juan. Tropical
storm force winds were experienced across all of Puerto Rico.
Heavy rains were experienced across all of Puerto Rico.
Maximum inundation levels of 1 to 2 feet above ground level occurred
along the coast of Puerto Rico, with the city of Arecibo being the
location with the highest water level.
These tropical storm force winds and heavy rains impacted Puerto
Rico's electrical infrastructure causing interruptions of the power
service to almost all customers in the archipelago. The Puerto Rico
Electric Power Authority or PREPA started the emergency restoration
works just after the passage of Hurricane Irma, which lasted more than
two weeks.
On the morning of September 20, 2017, fourteen days after the
passage of Hurricane Irma and before PREPA could finish the power
restoration work required as a result of Hurricane Irma, Hurricane
Maria directly impacted Puerto Rico. According to the National
Hurricane Center's Tropical Cyclone Report, Hurricane Maria, February
14, 2019 \2\, ``Maria's center crossed the southeast coast of Puerto
Rico near Yabucoa around 1015 UTC (6:15 A.M., local time), and the
hurricane's maximum winds at that time were near 135 knots ( 155 miles
per hour), i.e., just below the threshold of category 5 intensity. The
hurricane's center crossed the island, roughly diagonally from
southeast to northwest, for several hours and emerged into the Atlantic
around 1800 UTC (2:00 P.M., local time). By that time, Maria had
weakened after interacting with the land mass of Puerto Rico and its
maximum winds were estimated to be 95 knots ( 109 miles per hour).''
Figure 3 in Annex 1 shows the landfall of Hurricane Maria on the
southeast coast of Puerto Rico.
---------------------------------------------------------------------------
\2\ https://www.nhc.noaa.gov/data/tcr/AL152017_Maria.pdf
---------------------------------------------------------------------------
The Hurricane Maria Report mentioned above also stated, among
others, that:
In Puerto Rico, winds of category 5 intensity were almost
certainly felt at some elevated locations on the island.
Maximum flood levels of 6 to 9 ft above ground level were
registered along the coasts of Humacao, Naguabo, and Ceiba
municipalities, levels of 3 to 5 ft occurred along the coast of
Northeastern Puerto Rico, especially in the municipalities of Ceiba and
Fajardo, and levels of 2 to 4 ft occurred along much of the northern
coast of Puerto Rico.
Heavy rainfall occurred in Puerto Rico, where one
location had a storm total of nearly 38 inches, river discharges at
many locations in the island were at record or near record levels, and
severe flooding and mud slides affected most of the island, with the
most significant flooding associated with the La Plata River.
These extreme weather conditions devastated Puerto Rico, including
its electrical infrastructure, causing a total blackout of the system,
and interrupting the power service to all customers in Puerto Rico. The
emergency power service restoration efforts after the passage of
Hurricane Maria lasted more than one year, including areas that did not
have power due to the passage of Hurricane Irma. A collapsed
transmission and distribution system (T&D System), no power, no water,
no communications, airports, and most of our main and secondary roads
closed due to the debris and damages, were some of the dire
circumstances under which our recovery and reconstruction process
began, with help and support of the U.S. Federal Government and several
utilities and contractors from the mainland in conducting these
efforts. However, the road to the permanent reconstruction of the
transmission and distribution of power is still in its initial stages.
III. Disaster Declarations
On September 10, 2017, the Commonwealth of Puerto Rico received a
Presidential declaration of a major disaster (FEMA-4336-DR) due to the
passage of Hurricane Irma, under the authority of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (the ``Stafford
Act''). For this disaster, the Federal Emergency Management Agency or
FEMA obligated approximately $17.5 million in Categories A and B funds
for the reconstruction of the electrical infrastructure, of which PREPA
has received reimbursements of about $15.1 million.
Due to the passage of Hurricane Maria, the Commonwealth of Puerto
Rico received a Presidential declaration of a major disaster (FEMA-
4339-DR) on September 20, 2017, under the authority of the Stafford
Act. For this disaster, FEMA obligated approximately $1.9 billion in
Categories A and B funds for the reconstruction of the electrical
infrastructure, of which PREPA has received reimbursements of about
$1.6 billion.
The President separately declared emergencies and major disasters
for both Hurricanes Irma and Maria. This created some initial confusion
at first identifying and assigning damage to each storm separately.
FEMA's eventual decision to put all Hurricane Irma work under Hurricane
Maria helped tremendously streamline and bypass this confusion.
IV. Reconstruction of Puerto Rico's Electrical and Water Infrastructure
In September 2017, Hurricanes Irma and Maria decimated PREPA's
electrical grid, causing an island-wide blackout. The transmission and
distribution network infrastructure suffered the most damage: over
2,700 transmission poles or structures were damaged, and 92% of
inspected substations were affected, with 41% of substations suffering
major damage.\3\ About 75% of the distribution system circuits were
damaged, while certain generation units also suffered significant
damage.\4\
---------------------------------------------------------------------------
\3\ PREPA Central Office for Recovery, Reconstruction and
Resiliency, Energy System Modernization Plan.
\4\ Puerto Rico Energy Resiliency Working Group, Build Back Better.
---------------------------------------------------------------------------
Furthermore, PREPA's water assets, including its irrigation
systems, dams, reservoirs, and hydroelectric plants, suffered damage
due mostly to Hurricane Maria. In particular, the Patillas and
Guajataca dams suffered structural damage, and all reservoirs
accumulated significant amounts of sediment. In addition, debris that
typically is dragged by heavy rains affected other components of the
hydroelectric system.
It is important to note that PREPA serves a unique population.
Puerto Rico has been identified as a disadvantaged community by the
Justice 40 Climate and Economic Justice Screening Tool. Unemployment
and poverty are above the 90th percentile for many communities. Unlike
the continental United States, there are no alternative power options
for critical facilities in Puerto Rico. All schools, hospitals,
communications, and emergency providers rely daily on the ability of
PREPA's lines to deliver sufficient power to provide those critical
services necessary to save lives, protect public health and safety, and
protect the improved property across the Island from mold.
Particularly vulnerable is the capital of San Juan with an
estimated population of over 300,000. As discussed above, the San Juan
metropolitan area receives the energy mainly from the power plants on
the South coast of the main island. The northeastern portion of the
Island around the San Juan area is growing the most rapidly in
population and is the most vulnerable to power outages due to the
current concentration of generation on the southern portion of the
island. Until the permanent hurricane restoration work is completed, or
at least substantially advanced, the San Juan metropolitan area will
remain vulnerable to reoccurring power outages.
Further, most of the Island's medical facilities are also found in
this vulnerable region. But the need for reliable power is a safety
concern beyond just producing power for critical facilities.
Streetlights need to stay lit, residents need to bathe children and
cook food, and businesses need to be able to open their doors and
provide services and commodities. Power is the lifeline to recovery and
basic human needs.
When these extreme storms moved across Puerto Rico, PREPA's grid
was already vulnerable due mainly to its fiscal challenges and the
unique design characteristics as I mentioned earlier.
V. Bankruptcy Impact on Recovery
During the summer of 2017, and two months before the passage of
Hurricanes Irma and Maria, PREPA started a bankruptcy process under
Title III of the Puerto Rico Oversight, Management, and Economic
Stability Act of 2016 (``PROMESA''), which was enacted by the Federal
Government to oversee Puerto Rico's debt restructuring.
Pursuant to PROMESA, the Puerto Rico Fiscal Oversight and
Management Board (``FOMB'') provides oversight and is charged with
approving the Fiscal Plan required under PROMESA. The entity
responsible for drafting that Fiscal Plan is the Fiscal Agency and
Financial Advisory Authority (or its acronym in Spanish, ``AAFAF'').
AAFAF is an executive agency of the Government of Puerto Rico.
Our fiscal situation was, without a doubt, the worst-case scenario
under which any electric utility could face two category 5 hurricanes
in a period of two weeks.
VI. Other Disasters Impact on Recovery
As the U.S. Federal Government is well aware, after these
disastrous hurricanes, conditions were further aggravated by two (2)
additional Presidentially declared major disasters: the 2020 seismic
activity that impacted the Southern region of Puerto Rico, including
important PREPA generation assets in the area where most of our
Island's energy generation takes place, and the global pandemic, health
crisis and consequential economic issues caused by COVID-19.
PREPA's situation was not isolated, as other infrastructure of the
Commonwealth of Puerto Rico, which was also under the PROMESA Title III
process, was severely damaged, like roads, highways, bridges, and water
supply facilities. The typical FEMA Public Assistance program
contemplates individual assessments, estimates, and scope of work for
individual projects--a process in our case proved to be incredibly slow
due to the extensive damage not only to PREPA but to all infrastructure
across the Island.
Given these scenarios, the U.S. Federal Government amended the FEMA
policy procedures to provide a speedier and more flexible process for
the application of federal funds to execute the permanent works needed
to increase the reliability and resiliency of Puerto Rico's essential
infrastructure. In 2020, FEMA announced the FEMA Accelerated Awards
Strategy or ``FAASt'' process, which allows critical infrastructure
projects to be grouped together to expedite the energy grid work in
Puerto Rico.
In addition to approving the FAASt process, the U.S. Federal
Government provided additional support by increasing the federal cost
share for the Hurricane Maria disaster FEMA-4339-DR from 75% to 90%.
Federal funds available for permanent work have a cost-sharing
structure, which requires the applicant for federal funding to use its
own funds for part of the project. Typically, FEMA provides 75% of the
investment and the remaining 25% is provided by the local government.
Increasing the federal contribution to 90% resulted in a decrease of
the local share that the Commonwealth of Puerto Rico, including PREPA,
must cover for the reconstruction projects to 10%. In the process of
allocating federal funds for the reconstruction of the Puerto Rico
power grid, PREPA was able to cover part of its 10% cost-share with
funds from the Community Development Block Grant (``CDBG'') Program
\5\, specifically the Disaster Recovery grant or CDBG-DR funds.
---------------------------------------------------------------------------
\5\ The CDBG Program is managed by the U.S. Department of Housing
and Urban Development (HUD).
---------------------------------------------------------------------------
While FEMA prepared the FAASt process, in the summer of 2019, PREPA
began formulating initial scopes of works for permanent work necessary
for the reconstruction of the electrical system of Puerto Rico as a
result of the damages suffered by Hurricanes Irma and Maria. On
September 24, 2020, FEMA obligated about $9.5 billion in FEMA 428 \6\
funds for PREPA, which in turn submitted its work plan along with eight
initial scopes of work to FEMA, on December 7, 2020. Then, on March 26,
2021, the Puerto Rico Energy Bureau (Energy Bureau) issued a Resolution
and Order conditioning that all projects to be executed with federal
funds shall be submitted for Energy Bureau's approval.
---------------------------------------------------------------------------
\6\ 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), https://devrecovery.pr.gov/tp3/documents/
PAAP_Guide_for_Permanent_
Work_DR_4339_PR_V3_2_10_2020_FINAL_508.pdf.
---------------------------------------------------------------------------
The Energy Bureau, as Puerto Rico's electric system regulator for
all energy-related matters, has been deeply involved in the
reconstruction process. Before formally submitting a project for the
consideration of FEMA and the Central Office for Recovery,
Reconstruction, and Resiliency (``COR3''), PREPA must obtain regulatory
approval from the Energy Bureau to ensure consistency with applicable
laws and regulations. This requirement applies to the request for all
federal funding for development projects in the energy sector.
Transformation of PREPA
Considering the vulnerable position that the electric power
transmission and distribution system was before the storm events, and
the devastating blow it took during the hurricanes, Puerto Rico
embarked on a process to transform PREPA from a vertically organized
utility into a corporation composed of different subsidiaries,
facilitating the participation of the private sector in the operations
and maintenance of the electrical infrastructure in Puerto Rico. This
transformation's goal is 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 costing electricity service to all
customers in Puerto Rico. As a first step, the Government of Puerto
Rico entered into an operation and maintenance contract with LUMA
Energy, LLC (``LUMA''), which became the Operator of PREPA's
transmission and distribution system on June 1, 2021.
Before this transition, PREPA had already prepared a total of 73
initial scopes of work, 68 for the transmission and distribution system
and other facilities and five in the areas of generation,
hydroelectric, dams, reservoirs, and irrigation systems. As of that
date, there were already 46 scopes of work approved by the Energy
Bureau and with assigned FEMA numbers of placeholders to continue the
formulation process for obligation, 41 for the transmission and
distribution system, and five for generation and water assets.
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. This has
been accomplished with the support of the U.S. Federal Government,
provided through the different federal funding programs made available
to Puerto Rico. Regarding the transmission and distribution system and
other facilities, since June 1, 2021, PREPA has delegated to LUMA, the
responsibility of developing the repairs, reconstruction,
rehabilitation, and modernization of such systems, including following
the processes of project formulation and reimbursement requests.
VII. Federal Funds for Reconstruction and Rehabilitation Works
The devastation caused by Hurricanes Irma and Maria in Puerto Rico,
only a couple of weeks apart, paved the way for a historic obligation
of federal funds from the Public Assistance program to Puerto Rico
under FEMA's Public Assistance Alternative Procedures, commonly known
as FEMA 428 funds. Of these funds, over $9.5 billion are destined for
the reconstruction works related to PREPA's electrical and water
infrastructure. This amount, which represents 90% of the total
estimated cost of the permanent works to be executed, is complemented
by a cost share of 10% amounting to more than $1 billion. The 10% cost
share program under Community Development Block Grant Section Energy
Grid Rehabilitation and Reconstruction Cost Share Program (ER1),
estimated cost of the permanent works to be executed, is complemented
with a cost share of 10% to be covered partially with funds CDBG-DR
Program up to $500 million and funds from the commonwealth of Puerto
Rico.
The permanent works total cost was initially estimated at
approximately $10,704.76 million. Subtracting an estimated insurance
contribution of $193.75 million from this amount results in a total
estimated cost of $10,511.01 million, of which 90% equals approximately
$9,459.91 million and the remaining 10% approximately $1,051.10
million.
Specifically, this funding will be used to rebuild the electrical
infrastructure and repair or replace essential components of the
electrical system that are to be hardened and modernized, for more
resiliency and for providing sustainable and reliable power for the
long-term future of Puerto Rico.
Given the above, the total amount of assigned federal and local
funds to execute permanent works under the Public Assistance program is
approximately $10.5 billion. PREPA estimates that its insurers will
contribute nearly $194 million to the works under this program, for a
final estimated investment of approximately $10.7 billion. From the
insurance contribution of $193.75 million, approximately $184.06
million are allocated to the transmission and distribution system and
other facilities, and about $9.69 million are allocated to the
Guajataca dam repair project of the generation system and water assets
area. It is noted that claims to the insurance companies are still in
process and, thus, these amounts are subject to changes.
In addition to the FEMA 428 Funds, FEMA obligated approximately
$1.5 billion in federal funds under the Hazard Mitigation Grant Program
(HMGP) or FEMA 404 funds for conducting permanent works on the
electrical generation and water infrastructure.
Therefore, currently, there is a total of approximately $12.2
billion assigned for the reconstruction of PREPA's electrical system
and water infrastructure in FEMA 428, FEMA 404, insurance, and local
funds. The following chart shows the initial allocation of these funds:
----------------------------------------------------------------------------------------------------------------
FEMA 428 FEMA 404 Total
Asset Operator --------------------------------------
in millions in millions in millions
----------------------------------------------------------------------------------------------------------------
Buildings................................. LUMA........................ $ 125.09 $ 125.09
Substations............................... LUMA........................ 781.89 781.89
Distribution.............................. LUMA........................ 5,499.84 5,499.84
Transmission.............................. LUMA........................ 2,642.13 2,642.13
Generation................................ PREPA....................... 108.95 853.20 962.15
IT/Telecomms.............................. LUMA........................ 685.93 685.93
Dams, Irrigation and Reservoirs........... PREPA....................... 860.93 658.53 1,519.46
----------------------------------------------------------------------------------------------------------------
$ 10,704.76 $ 1,511.73 $ 12,216.49
--------------------------------------
Insurance reduction...................................... $ 193.75 $ 193.75
Local Share.............................................. $ 1,051.10 $ 1,051.10
--------------------------------------
Federal Share.......................................... $ 9,459.91 $ 1,511.73 $ 10,971.64
----------------------------------------------------------------------------------------------------------------
Currently, PREPA is allocating approximately $1.2 billion for
permanent works on the generation system and water assets, which
results in about $8.2 billion of FEMA 428 funds for works on the
transmission and distribution system and other facilities. The latter
federal funds, when added to the estimated insurance contribution of
$184 million and the local cost share of $913 million result in a
current total of about $9 billion of funds for projects for the
transmission and distribution system and other facilities. The
following chart provides a summary of the current allocation:
----------------------------------------------------------------------------------------------------------------
FEMA 428 FEMA 404 Total
Asset Operator --------------------------------------
in millions in millions in millions
----------------------------------------------------------------------------------------------------------------
Transmission, Distribution, and Other LUMA........................ $ 9,313.21 $ 9,313.21
Facilities.
Generation................................ PREPA....................... 502.70 853.20 1,355.90
Dams, Irrigation and Reservoirs........... PREPA....................... 888.85 658.53 1,547.38
----------------------------------------------------------------------------------------------------------------
$ 10,704.76 $ 1,511.73 $ 12,216.49
--------------------------------------
Insurance reduction...................................... $ 193.75 $ 193.75
Local Share.............................................. $ 1,051.10 $ 1,051.10
--------------------------------------
Federal Share.......................................... $ 9,459.91 $ 1,511.73 $ 10,971.64
----------------------------------------------------------------------------------------------------------------
The current allocation responds to the need of repairing Puerto
Rico's generation system and water assets to assure a reliable, safe,
and resilient energy and water supply. In particular, the current
limitations on the dependable generation available to supply the energy
demand in Puerto Rico are confirmed by the need to run emergency
generating units, including the new mobile generators at the Palo Seco
power plant, after the earthquakes of January 2020 and last year's
major load shedding events caused by the lack of generation capacity.
In addition to the FEMA 428 and FEMA 404 funds assigned to the
generation system and water assets, PREPA applied to the Puerto Rico
Department of Housing for the assignment of approximately $300 million
in CDBG-DR funds for the retrofit of PREPA's hydroelectric generating
units. This, under Section Electrical Power Reliability and Resilience
Program (ER2) of CDBG electrical system optimization action plan.
Annex 2 of this document includes a detailed list of fifty-seven
(57) projects to be developed on the generation system and water
infrastructure, of which a summary follows \7\:
---------------------------------------------------------------------------
\7\ The shown quantities are estimates and the numbers are rounded.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projects Amounts (Millions) Quantity of Projects
--------------------------------------------------------------------------------------------------------------------------------------------------------
Water Generation Water Generation
Funds Type Assets System Total Funds Type Assets System Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
FEMA 428 \(1)\................................. $ 888.85 $ 502.70 $ 1,391.55 FEMA 428.......................... 18 20 38
FEMA 404....................................... 658.53 853.20 1,511.73 FEMA 404.......................... 2 2 4
CDBG-DR........................................ 0.00 300.00 300.00 CDBG-DR........................... - 15 15
---------------------------------------- ----------------------------
Total........................................ $ 1,547.38 $ 1,655.90 $ 3,203.28 Total............................. 20 37 57
--------------------------------------------------------------------------------------------------------------------------------------------------------
\(1)\ The quantities shown for this funds type include FEMA 428
funds, the insurance contribution, and the cost share.
Under the Public Assistance program, to date, FEMA has obligated
approximately $182 million through the FAASt process, approving eleven
(11) Project Worksheets or PWs submitted by PREPA for repairs to its
power generation plants at Aguirre, Costa Sur, Palo Seco, San Juan,
Mayaguez, and Cambalache. These 11 projects group 65 scopes of work
approved by the Energy Bureau for the repair of PREPA's generating
units. PREPA completed 1 of these 11 projects and has requested
reimbursement for an amount of $18 million, of which $15.9 million were
received in reimbursements. In addition, PREPA is in an advanced stage
of construction works in other three of the 11 projects. The three
projects that PREPA has in an advanced stage are in the San Juan power
plant (PWs 10615 and 10608), that total $62.4 million and are over 60%
of completion; and Cambalache Power Plant Permanent Repairs (PW 10607)
that total an amount of $2 million in which PREPA has an 85% of
completion of the total work. For these three PWs, PREPA has already
submitted the request for reimbursement to COR3.
11 Approved Project work sheet (PW) for Generating Units Repairs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Project Percentage
PW# Location Project Title #SOW Fund Asset Formulation FEMA Date of of
Status Approval Completion Completion
--------------------------------------------------------------------------------------------------------------------------------------------------------
10571........................ Aguirre........ FAASt Aguirre 4 428 Generation..... Approved....... 3,031,265 Apr-23......... 19%
Power Plant
Infrastructure
Projects 001.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10568........................ Aguirre........ FAASt Aguirre 4 428 Generation..... Approved....... 14,937,046 Aug-23......... 43%
Power Plant
002 Units 1 &
2 Projects.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10622........................ CC............. FAASt Aguirre 5 428 Generation..... Approved....... 5,405,870 Jun-23......... 17%
Power Plant
003 Combined
Cycle.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10615........................ San Juan....... FAASt San Juan 12 428 Generation..... Approved....... 60,080,016 Mar-24......... 60%
001--Units 5 &
6.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10608........................ San Juan....... FAASt San Juan 9 428 Generation..... Approved....... 2,368,247 Jan-23......... 67%
Power Plant--
Auxiliary
Infrastructure.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10702........................ Costa Sur...... FAASt Costa Sur 20 428 Generation..... Approved....... 42,299,739 Oct-24......... 20%
Permanent
Repairs 5 & 6.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10694........................ Costa Sur...... FAASt Costa Sur 2 428 Generation..... Approved....... 1,250,000 Nov-22......... 16%
Permanent
Repairs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10606........................ Palo Seco...... FAASt Palos 11 428 Generation..... Approved....... 28,774,423 Jan-24......... 36%
Seco Steam
Plant Unit 3-4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10609........................ Palo Seco...... FAASt Palo Seco 2 428 Generation..... Approved....... 3,495,578 Jun-24......... 20%
Steam Plant
Permanent
Repairs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10607........................ Cambalache..... FAASt 4 428 Generation..... Approved....... 2,038,588 Jun-24......... 85%
Cambalache
Power Plant
Permanent
Repairs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
10455........................ Mayaguez....... FAASt Mayaguez 1 428 Generation..... Approved....... 18,192,583 Jul-22......... 100%
Hydro-Gas
Power Plant
Permanent
Repairs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
PREPA will submit for FEMA approval 4 additional Project Worksheets
amounting approximately $176.35 million, which group 37 scopes of work
for the repair of the generating units 7, 8, and 10 in San Juan and
unit 1 at Cambalache, once it gets the approval of 6 scopes of work
that are currently under the reconsideration of the Energy Bureau, as
the regulator already approved 31 from the total of 37 scopes of work
that make up the 4 Project Worksheets. The Energy Bureau denied the six
scopes of work mentioned above in its resolution and order on June 4,
2022. After that order, PREPA submitted two reconsideration motions
requesting the approval of these six scopes of work for the repairs of
generating units. Currently, PREPA continues assessing the condition of
its power plants to prepare additional scopes of work to complete the
repairs of all its generating units.
In the case of the water assets projects, PREPA already received
approval from the Energy Bureau and FEMA for eighteen (18) initial
scopes of work and two (2) application packages for approximately
$1,547.38 million that are currently in the architecture and
engineering phase, which is required by FEMA before approving the
corresponding Projects Worksheets of this type of project.
It is noted that FEMA obligated a Project Worksheet amounting
approximately $486 million for architecture and engineering design
services to be utilized in the development of detailed scope of works
to be submitted to FEMA for approval. PREPA is using these funds to
procure architecture and engineering design services to develop
detailed scopes of work for its dams, hydroelectric system, and
irrigation systems. Once the architecture and engineering phase is
complete, PREPA will submit the resulting documents to FEMA for the
approval of the construction Project Worksheets. In the case of the
water assets projects, the Project Worksheets will amount to nearly
$889 million in FEMA 428 funds and $658.53 million in Hazard Mitigation
Grant Program or FEMA 404 funds.
Regarding the approved FEMA 404 funds for new generation amounting
$853.20 million, PREPA submitted a reallocation strategy of such funds
for the Energy Bureau's approval on August 2, 2022. Annex 3 of this
document includes, among other motions, a copy of PREPA's motion
requesting the Energy Bureau's approval, which is currently under
evaluation provided by the Energy Bureau. This Annex also includes
PREPA's motions requesting the Energy Bureau's approval for the repair
of generating units and conversion to natural gas. Out of the $853.20
million, $280.82 million are currently assigned for emergency-
generation or simple cycle combustion turbines, $5 million for
engineering studies of a new combined cycle in the North of Puerto
Rico, and $567.38 million for the new combined cycle project.
After analyzing the development of these projects considering the
current needs of Puerto Rico's power system, PREPA determined to
redistribute the available FEMA 404 funds, in particular the $572.38
million approved by FEMA, as follows:
------------------------------------------------------------------------
Estimated Cost
FEMA 404 Funds Purpose -----------------
in millions
------------------------------------------------------------------------
Emergency Generation Peaker Units..................... $ 490.00
Costa Sur and Yabucoa Black-Start Units............... 190.00
Fuel Conversion of San Juan Units 7 to 10............. 138.50
Small-scale residential PV with storage............... 34.70
-----------------
Total............................................... $ 853.20
------------------------------------------------------------------------
The feasibility studies of the current projects for the new
generation mainly resulted in that, even though a new combined cycle at
San Juan or Palo Seco power plants is feasible and recommended from an
engineering point of view, this construction is a long-term project, as
it will take about ten (10) years to be completed. In addition, the
original estimated cost of $572.38 million was calculated in 2020
dollars and, when updated to reflect 2023 dollars and inflation,
resulting in approximately $723.6 million. This means that there are
insufficient funds to develop the combined cycle project, as there is a
deficiency of $151.22 million. Given PREPA's current power generation
struggles, and that the development of the combined cycle project is a
long-term effort, PREPA must execute short- and medium-term measures to
improve the existing thermal generation assets.
Considering the constraints described above, PREPA found that, even
though the construction of the combined cycle in the North is feasible
and beneficial for the electrical system, there are not enough funds
for completing the project and there are more imperative actions to be
taken on the short- and medium-term, for which the combined cycle
project approved funds can be used. These actions include those needed
to keep the existing thermal generating units operational and in
service to supply the energy demand in Puerto Rico, support the
reliable and safe integration of renewable energy, and provide the
energy needed during the restoration of the electrical service after
major events. It is essential that the generating units' operation
comply with all environmental regulations.
Therefore, PREPA submitted to the Energy Bureau that the combined
cycle project would be delayed until sufficient funds are available and
its assigned funds of $572.38 million would be allocated to the above-
mentioned projects:
Emergency Generation Peaker Units--This generation
project is the second one approved by FEMA to be funded with FEMA 404
funds. The original project estimate was $280.82 million in 2020
dollars, but considering inflation, the estimate of executing this
project is a minimum of $490 million. Hence, it is needed to add funds
to this project for executing it.
Costa Sur and Yabucoa Black-Start Units--Currently, this
project is defined under the Public Assistance program with an original
FEMA 428 funds assignment of $90.4 million. However, this estimate was
updated to account for the inflation and the recent disruption in the
supply chain, resulting in a new estimate of $190 million. Hence, it is
needed to add funds to this project for execution. This project was
previously approved by the Energy Bureau.
Fuel Conversion of San Juan Units 7 to 10--This project
has the main purpose of keeping the steam units in the San Juan Power
Plant operational and in service, burning natural gas as their main
fuel. The fuel conversion of these units will allow them to achieve
environmental compliance with the Sulfur Dioxide (SO2) State
Implementation Plan in the Non-Attainment area of San Juan and the
Mercury and Air Toxics Standards (MATS) rule. On February 11, 2022,
PREPA submitted this project for the evaluation of the Energy Bureau.
Small-scale residential PV with storage--PREPA intends to
invest the remainder of the $572.38 million after executing the
projects detailed above, if any, on the installation of PV plus storage
systems behind the meter of customers located at those sectors where
the power service was restored last after Hurricane Maria. Currently,
the remaining amount is estimated at about $34.7 million.
This amount does not consider what could potentially be hundreds of
millions of dollars in additional funding for hazard mitigation
measures as allowed by the Public Assistance program under the Stafford
Act, and such measures will be part of each project's scope of work to
be developed. While the Public Assistance program or FEMA 428 is
focused on attending to damages caused by a disaster, FEMA 404 funding
is used to provide protection to undamaged parts of a facility or to
prevent or reduce damages caused by future disasters.
----------------------------------------------------------------------------------------------------------------
Project Number Project Title Asset Approved Amount Reimbursed
----------------------------------------------------------------------------------------------------------------
4339-0010......................... Simple Gas Turbines. Generation.......... 280,822,500 268,437
4339-0012......................... Early Warning System Dams................ 100,000,000 -
4339-0008......................... North Generation.... Generation.......... 572,377,050 363,095
4339-0010......................... Patillas Dams....... Dams................ 558,530,000 -
----------------------------------------------------------------------------------------------------------------
$ 1,511,729,550 $ 631,532
----------------------------------------------------------------------------------------------------------------
Furthermore, PREPA is completing the formulation of the following
projects related to the 2020 earthquakes, mostly focused on one of
PREPA's most important generation power plant known as Costa Sur, which
are sure to positively impact the generation-side of PREPA's
operations:
----------------------------------------------------------------------------------------------------------------
Approved
Project Number Project Title Asset Estimated Cost Amount Reimbursed
----------------------------------------------------------------------------------------------------------------
171513....................... Costa Sur Work Generation..... 3,444,365 3,444,365 -
Completed.
171515....................... Costa Sur Generation..... 3,623,083 529,036 -
Buildings.
171512....................... Costa Sur Tanks. Generation..... 5,071,207 5,660,599 -
171517....................... Costa Sur Generation..... 6,700,000 66,576 59,919
Discharge
Channel.
----------------------------------------------------------------------------------------------------------------
$ 18,838,655 $ 9,700,577 $ 59,919
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Project Approved Pending Reimbursed
Scopes of Amount Funding Funding -------------
Permanent Work Assets Works ---------------------------------------
in millions in millions in millions in millions
----------------------------------------------------------------------------------------------------------------
New Generation Units............................ 4 943.6 853.2 90.4 0.3
Aguirre Power Plant............................. 3 29.5 18 11.5 0.7
Aguirre Combined Cycle.......................... 1 5.3 5.4 -0.1
San Juan Power Plant............................ 4 133.5 62.4 71.1
Costa Sur Power Plant........................... 2 40.8 40.8 0 0.3
Palo Seco Power Plant........................... 4 96.3 32.3 64 0.8
Cambalache Power Plant.......................... 2 38.5 2 36.5
Mayaguez Power Plant............................ 1 18.2 18.2 0 15.9
Repairs to Peaking Units--Islandwide............ 1 50.2 0 50.2
Hydroelectric Units--Islandwide................. 15 300 0 300
Dams, Reservoirs, Irrigation Channels........... 20 1547.4 0 1547.4
---------------------------------------------------------------
57 3203.3 1032.3 2171 18
----------------------------------------------------------------------------------------------------------------
VIII. Path Ahead
PREPA's path ahead will be focused on ensuring the proper
expenditure of its Federal grants that will be used to create a modern,
sustainable, reliable, efficient, and resilient energy system. Our goal
is to ensure, through the partnership with LUMA, that we are building
an electric system that can adequately withstand any future storm. It
is imperative that we provide the people of Puerto Rico with a more
reliable system that has fewer and shorter outages, if any, and at a
reasonable cost.
We believe that doing so, will jumpstart a long-term revitalization
of the Puerto Rican economy. Reliable power means more investment in
the Island and support for economic development.
We recognize, however, that taking on such a monumental rebuilding
project will take time. We ask that this Committee continue to support
Puerto Rico and FEMA in this long-term endeavor. FEMA should be
encouraged to continue to make timely, reasonable, and flexible
decisions to support this unique recovery.
Regarding PREPA's renewable energy initiatives, 18 solar
photovoltaic (``PV'') projects, totaling 844.47 MW, have been submitted
by PREPA for regulatory approval. In addition to reaching the execution
of 18 solar PV PPOAs amounting to 844.47 MW, PREPA executed two (2)
contracts for energy service storage agreements (``ESSA'') totaling 100
MW each, for a four-hour duration utility-scale battery energy storage
project that is co-located and operationally integrated with two of the
solar PV PPOA's for Incentive Tax Credit (ITC) compliance. PREPA is
currently negotiating six (6) additional ESSAs, which are currently
under review by LUMA. The illustrations and tables in Annex 4 provides
further details regarding PREPA's renewable energy initiatives.
IX. Conclusion
PREPA continues to strive for the full obligation and execution of
its recovery and reconstruction projects, which will allow for a
better, more resilient Puerto Rico and ultimately achieve a stable
energy system that our 3.2 million U.S. citizens living in Puerto Rico
can depend on. The use of federal funds will not only reduce costs but
will create better economic opportunities for our people, all of which
are goals that we are confident are shared by FEMA, this Congress, and
the rest of the federal government.
Ms. Titus. Thank you very much, Mr. Colon.
We will now begin with questions. I will recognize each
Member for 5 minutes of questions. I will start by asking
questions first myself.
I have heard a lot of references to inflation and the
impact of inflation on getting equipment, on the supply chain,
on the cost today, but I haven't heard so much about the
pandemic. I think we need to acknowledge--I think, Mr. Currie,
you asked: Who could have anticipated this level of inflation?
Who could have anticipated the pandemic? We need to
acknowledge that the pandemic has contributed to the inflation,
and also, having to manage two disasters at the same time, one
in healthcare and one, infrastructure, certainly caused the
problem. So, when you talk about what has contributed maybe to
the length of time or the inability to get this done more,
well, expeditiously, I guess, let's be sure we keep that in
mind and don't just blame it on inflation.
The purpose of the hearing is to really come with something
substantive that Congress can do to make the situation better.
And some of you have mentioned things--Ms. Williams-Octalien, I
think you said that you were concerned about the waiver of the
local match requirement in areas where the devastation is so
great and you don't have that underpinning of a good fiscal
system anyway. That is one thing that we ought to look at.
Another thing was, you mentioned the lack of qualified
personnel to oversee some of these projects. What could we do
to help with that?
Another thing was, in addition to section 428 and the
problems that causes because of the estimates maybe being
overrun, is there anything that we can do to address the
reimbursement-based assistance program for recipients or
applicants with few financial resources?
I would just ask you all to give us something specific that
we can take back and look at legislation or regulation or
something we can actually accomplish aside from what the Agency
is trying to do and those things that I mentioned from your
testimony.
You want to start?
Ms. Williams-Octalien. Thank you for the question, Madam
Chair. I think one of the first things that we have been
looking at is the issues relative to capacity and the ability
to have contractors and personnel to be able to do the work in
a Territory. FEMA commissioned a RAND study that said that if
every able-bodied Virgin Islander was engaged in the recovery,
we would need 5,000 more workers in order to get this done.
One of the areas that we are looking at is our neighboring
Caribbean islands, where we have resources there that may be
able to come to the Territory but, of course, they would need
legislation because they are countries of their own. But
creating those opportunities for our neighboring Caribbean
residents to come to the Virgin Islands to be able to assist
with the recovery is an area that we believe can get some
attention and provide some relief.
Mr. Laboy. Thank you.
From our perspective, I would like to highlight three
particular items. It has been mentioned, the low level of
disbursements and that there is a reality that the Federal
regulation limits advances. We have to remind everyone that our
recovery, once FEMA obligates funds, is based on reimbursement.
So, Puerto Rico, for example, we have a huge challenge in
terms of accessing cash. Let's use as an example the
municipalities. They have thousands of large projects that are
based on reimbursement. If they don't have the cash, they
cannot do the work; therefore, they cannot come to COR3 and ask
for reimbursement. Same thing with the public corporations.
That has been a major issue because it is limited by
regulation.
And let me give you another important aspect of that. FEMA
adopted 2 CFR in 2014, and that is the limitation before that.
The regulation previously adopted allowed for 50 percent
advancements after obligations. So, imagine Puerto Rico being
under bankruptcy, no cash, no access to capital, how will we be
able to push forward permanent work projects if there is no
cash, and then you have to rely on reimbursements?
That is the reason why we came up with this creative
program called Working Capital Advance. It was instituted 2
months ago. It was first in place for municipalities, then
expanded to the power authority, and then to the water
authority, and soon will be expanded to the Puerto Rico
Department of Education, and then public housing.
That is the reason why you have seen a major increase in
disbursements, because in the last 2 months, we have been
advancing 25 percent of the obligated money by FEMA.
The second ask, I will say, is that we mentioned the match,
the global flexible match, for Public Assistance. Although FEMA
has granted us to apply the global match for the FAASt
projects, which is a major advancement, there is a restriction
in the Stafford Act that has been integrated as a limitation to
apply global match for the whole recovery. Therefore, that
could be an opportunity to go back to the Stafford Act and take
a look at that.
And number three, the FAASt implementation. I think the
FAASt was a novel, great idea to accelerate the obligation of
funds, the availability of a budget, to have certainty. And it
was approved, remember, in September 2020. This is for PREPA,
for the Department of Education, also obligated in September
2020; and for PRASA, the water authority, January 2021; and for
public housing, January 2022.
But the implementation of the FAASt is one of the greatest
lessons learned, because I think it was stated before that you
have to go back individual project by project and resubmit that
to FEMA. And FEMA has to make sure that it complies with the
environmental and historic preservation statutes at the Federal
level and also look at opportunities for hazard mitigation
measures.
I have to say that in the last 6 months there has been a
major improvement in the FAASt implementation, but at the
beginning, it was very, very challenging. I will give you an
idea. Last year, zero projects were approved for the energy
reconstruction. Today, actually, we have 47, and we expect to
have 100 before the end of the year. So, that is a major
improvement, but at the beginning, it was very challenging.
And the last comment I want to make is about capacity. I
think that the gentleman from GAO mentioned something very
important. We recognized that when we enter in COR3 in 2021,
January, that is why we dedicated a lot of resources and time
for 2021, for the most part, and part of 2022, to increase
capacity through the municipalities, the agencies, and the NGOs
that are receiving money from FEMA for their repairs.
I will tell you this, in the beginning, there was a risk. I
will admit that. But 20 months later, the capacity has been
increasing dramatically in a good way. We feel very confident
that now the municipalities can execute, and they have the full
support of COR3 because we provide the technical assistance to
ensure that the procurement is done right, that the projects
are executed, and that they comply with all the Federal FEMA
requirements.
Thank you.
Ms. Titus. Thank you.
Mr. Webster?
Mr. Webster of Florida. Yes. Thank you, Chair.
Mr. Currie, of the work you have done reviewing the
recovery efforts, are there any key provisions or lessons that
have been learned that could be used in future responses and
recovery in other disasters?
Mr. Currie. Yes, sir. First of all, the situation in Puerto
Rico and USVI is so unique, just given their fiscal situation
when the disasters hit, that other than some of the other
Territories in the Pacific, I am not sure I can draw a parallel
to other States. Because one of the biggest challenges, Mr.
Laboy just summarized it extremely well, is that, unlike
Florida or Nevada or Mississippi or any other State, when there
is a disaster, they have the ability to front the funds through
loans or bonds or things like that, so they can do debris
removal, start the repairs and things like that, and then get
reimbursement later.
I think the biggest lesson learned for me with this is
that, first of all, maybe not rolling out a brandnew program
that even FEMA itself or the Federal Government hasn't tested
in a disaster like this. I think that was the biggest
challenge. I think upfront, there were a lot of mismatched
expectations, and I think both Puerto Rico and Virgin Islands
were under the assumption that these section 428 disbursements
were going to be funds that would be provided once they got to
some sort of agreement. That has not been the case.
It is just a promise of funding, and as Mr. Laboy said,
even though you got to those agreements, there is a back and
forth that is going to go on for many more years about
individual projects. So, I think the question has come up of,
should we have just used that process to begin with instead of
putting all that work upfront to come to some of these upfront
cost estimates? So, that is one lesson learned.
Mr. Webster of Florida. Thank you very much.
Director Williams-Octalien, the USVI Water and Power
Authority has received a significant amount of funding since
the 2017 hurricanes. However, it seems that they have planned a
transition to solar energy, despite outstanding obligations for
the existing liquid propane gas system.
What is the USVI doing to ensure existing obligations are
met and that Federal funding is being used to support
rebuilding that will integrate into the existing power
capabilities?
Ms. Williams-Octalien. Thank you for that question. The
Water and Power Authority has developed a transformational plan
that includes the various sources of energy in trying to move
our archaic dependency on fossil fuel into more renewables. We
have utilized all of the Federal funding sources, including the
Public Assistance to its mitigation, as well as the Hazard
Mitigation Grant Program, and also the CDBG funding program,
recovery program, in order to transform. It is a combination of
developing composite poles, undergrounding, microgrid projects,
battery energy projects, as well as the new generation projects
that we have had that will transform the Water and Power
Authority to more efficient fuels.
So, we have developed this overall plan that is working
together with the Water and Power Authority. The first project
that is really going to impact us is a new generation project
of the powerplant on the island of St. Thomas that we are
expecting the batteries to come online in the first quarter of
next year, allowing to impact not only our energy reliability
in the Virgin Islands, but also our effectiveness in terms of
keeping the power on and keeping the cost down.
You may be aware, the Virgin Islands has some of the
highest energy costs in the Territory, so the recovery funds
have been chartered and directed towards making sure that we
address not only reliability, but cost in shift--being able to
load shift from--to our end battery energy solutions, as well
as moving back and forth in terms of keeping the power on in
the Territory.
Ms. Titus. Thank you, Mr. Webster.
Ms. Norton?
Ms. Norton. Thank you, Madam Chair.
Mr. Laboy, although FEMA approved 95 percent of Public
Assistance projects for Puerto Rico's recovery, after 5 years,
much of this reconstruction has yet to be completed and, in
many cases, not even yet begun.
What are the challenges that hinder reconstruction efforts,
and what is COR3 doing to ensure timely progress on approved
projects?
Mr. Laboy. Thank you. When we started this role in 2021
January, FEMA had obligated about $13.5 billion worth of
permanent projects. And they continue to obligate permanent
work funds until today. That number went from $13.5 billion to
close to $22 billion in about 20 months.
The challenge that we saw at that point, it was that there
was already enough money obligated, and we wanted to get these
projects going to get into construction. But the reality is
that, once the project is obligated, there are multiple steps
that the municipality or the agency needs to take into account
in order to see that project into construction. In the case of
the FAASt projects, PREPA, PRASA, and the Department of
Education, they need to develop scopes of work.
I think that there was this expectation in 2020 that when
FEMA obligated the funds for PREPA and the Department of
Education, the next day there would be projects, shovels in the
ground. That was never the case because that obligation never
authorized construction. It was just a budget. Then, PREPA and
the Department of Education, and later PRASA, have to go
project by project, submit scopes of work to FEMA to go through
the whole, entire process evaluation, and then get the approval
so then they can go to construction.
In the case of the municipalities, in the beginning, we saw
certain gaps for capacity. We addressed those gaps because we
did a lot of training, and we provided a lot of technical
assistance and tools, and then started to see much progress on
the municipalities' projects. Then again, the cash strap, the
cash limitation. That is why we were able to implement the
Working Capital Advance, and for the last 2 months, it has been
a total success, because most of the funds that we have been
able to disburse for permanent work, the majority have been
disbursed for the last 2 months because of the Working Capital
Advance.
There is also another challenge that we saw, is that for
the section 428, the fixed-cost estimate, aside from the rising
cost of construction and the inflation impact, the reality is
that they provide an opportunity to do things differently, to
actually build back better, to provide opportunities to submit
improved projects or even alternate projects. The issue is
that, every time you want to do that, you have to go back to
FEMA. So, in every instance, the way you look at it, for the
most part, you have to go back to FEMA to get an approval,
whether you are versioning the project worksheet, whether you
are changing the scope of work, whether you are improving the
project, whether you are proposing an alternate project, or in
the case of the FAASt, every time that you develop a project,
you have to submit a scope of work.
In the case of the energy infrastructure, it is even more
complicated, because they need the approval of the independent
energy regulator. So, before even going to FEMA, after 2020,
every project, even today, has to go to the Puerto Rico Energy
Bureau, get their blessing, and after that, then, develop the
scope of work, submit it to FEMA, and then from FEMA, get the
approval for construction.
Now, the good news is that we have overcome basically
almost all of those challenges since 2021. That is why we are
very optimistic that there is really a paveway for the road to
recovery because of the number of projects that we have in
construction, the projects that have been completed, and the
projects we expect to be in construction in the years to come.
So, certainly, there are still challenges. I will say that
the rising cost is something that we need to monitor closely,
number one. Number two, the availability of skilled labor, it
is very important; and then keep addressing the cash gap. Once
we do all those three, I think that the future looks even more
optimistic, from our point of view. But I will say that the
contrast has been really 180 degrees in the right direction.
The support has been there from FEMA. I will say that we
are very appreciative about the support, and that is why we are
seeing this progress. But there is a lot of work that remains
to be done to continue this momentum.
Ms. Norton. I must say, Madam Chair, that this process
needs to be streamlined.
But my time has expired, and I yield back.
Ms. Titus. Thank you. I think you are exactly right.
Miss Gonzalez-Colon?
Miss Gonzalez-Colon. Thank you, Madam Chair.
I want to begin by something Mr. Laboy just brought, the
suggestion about Stafford Act amendments. And to that end, I
have H.R. 2017 before this committee, which includes an
extension of the global match and other measures to ease these
procedures. And I think this bill, after being in the Virgin
Islands, being in Puerto Rico, and managing decisions for the
last 5 years, between FEMA and the Government agencies as well,
it is a way to put this money that has been approved by
Congress in the right hands to work. So, I encourage--you can
see it, and we are ready to work with you and this committee to
try to ease the situation.
So, having said that, there is another issue regarding
opportunities, and that is the Working Capital Advance that
will allow the government of Puerto Rico to use it for FAASt
projects, specifically for schools and public housing on the
island as well. So, those are opportunities that if we can--of
course, that is a question to FEMA that we are going to be
submitting in writing to see if we can have that Working
Capital Advance and manage the reimbursement situation. We have
got a hospital that Congress allocated funding to Vieques that
has not been built because of the lack of funds, and the island
is still waiting for that.
But I want to make my questions now to LUMA. Last April, we
were in a total blackout due to equipment malfunction. And
since then, we have repeated interruptions on the island,
sometimes involving hundreds of thousands of customers being
without power, including me, right. Just to make that clear, I
go to my house every weekend, and I am one of the people that
suffers this directly, and I don't have a generator.
So, this situation is not involving disasters, and that is
my main concern. People in Puerto Rico always expect those
interruptions to happen during May to September, to November,
due to the hurricane season. So, you must have known the
condition of the grid when you took over, and honestly, we
don't see improvement.
I read your numbers and your briefing today to this
committee. And actually, you brought more information than ever
before LUMA has said to the public in Puerto Rico regarding the
electric grid on the island. And you were hired, actually, to
fix the problem.
So, my question to you would be: What is the estimated time
for the grid to be up to date and ready to be considered up to
current standards? And how much of that will rely on FEMA
funding?
Ms. Bahramirad. Congresswoman, that is an excellent
question. I would answer that it has already improved. Since we
took over, as I mentioned in my testimony, the design of the
system was extremely poor. The foundational standards and the
models that every utility around the country, they have it in
order to scope the projects right, never existed. So, we had to
go out. And as I stated, scoping the project needs to be done
per data, sound engineering, and science. And that is something
that we have taken seriously.
Miss Gonzalez-Colon. And what is the estimated time to have
the system up to standards?
Ms. Bahramirad. Yes. So, as of in the past 15 months, the
system reliability has improved by 30 percent.
Miss Gonzalez-Colon. So sorry to interrupt. I have just got
1 minute. If I can know, what is going to be the specific time
that Puerto Rico will have an updated system? Can you have that
number?
Ms. Bahramirad. This is a journey, Congresswoman. As----
Miss Gonzalez-Colon [interrupting]. One year? Two years?
Five years? Ten years?
Ms. Bahramirad. The importance of FEMA projects is that it
is going to help continuing and building on the progress that
has been made. As I stated, the frequency of the outages has
improved by 30 percent, and the projects in the pipeline----
Miss Gonzalez-Colon [interrupting]. You are an engineer,
right?
Ms. Bahramirad. I am. I have a Ph.D. in electric power
systems.
Miss Gonzalez-Colon. So, you do plans for the future. My
question here is: What is the timeline for having the power
grid on the island fixed? That is the simple question. Is it 1
year? Two years? How many months?
I know that you rely on Federal funding to make part of
that progress. Do you have that timeline?
Ms. Bahramirad. In the upcoming months and years, I can
commit to you that the reliability of the system is going to
be----
Miss Gonzalez-Colon [interrupting]. So, you don't have that
data that I am asking for?
Ms. Bahramirad. What I can share with you is that the
number of projects that are currently in the pipeline of FEMA,
and every single one of them is going to improve the
reliability of the system.
Miss Gonzalez-Colon. OK. We don't have a timeline of when
the system is going to be ready. I just want that answered.
How many personnel are in the field right now actually
rebuilding the grid?
Ms. Bahramirad. So, we have 3,428 employees at LUMA, and
over 1,300 of them work in the field. But this is a team sport.
The people in the field that work from substations,
restoration, and commissioning transmission and distribution,
they get supported by dispatchers, by the operation control
center and others, and they work very hard to restore the
system.
Miss Gonzalez-Colon. So, if we--I mean, if you have the
personnel there, and right now we are in hurricane season as we
speak, my question is: How long will it take for you to use the
mutual agreements LUMA may have at this time--if there is a
hurricane this weekend, how long will it take for you to bring
people to the island to fix this?
Ms. Bahramirad. There has been a lot done in terms of
preparation for hurricanes that I am very happy to share with
you. I have been very closely monitoring what has been going on
today, and as you might have heard, Tropical Storm Fiona, the
current maximum sustained wind of 50 miles per hour is----
Miss Gonzalez-Colon [interrupting]. Sorry. I know that. I
don't have enough time. My question is: The mutual assistance
agreements that you have in place, when are they going to be
arriving to the island, and with whom do you have mutual
assistance agreements right now?
Ms. Bahramirad. Oh, we have a number of mutual agreements
in place. We have established an agreement with Caribbean
Electric Utility Services Corporation, Edison Electric
Institute, and American Public Power Association. I have been
in calls with every single one of them making sure that there
is a process in place. And if an issue happens, they are going
to be providing support and assistance as part of the process.
Miss Gonzalez-Colon. What is the deployment time for them
to reach the island?
Ms. Bahramirad. So, it depends on the forecast of the
hurricane. We make calls to those mutual assistance agencies,
and we inform them. I can tell you that today, our team in the
morning, they have made those calls. And depending on how the
storm or hurricane approaches the island, we will inform them,
in collaboration with PREMB and FEMA, ESF 12, COR3 and a number
of other governmental agencies.
In addition to that, there are 120 assets and units
deployed as part of our preparedness commitment to the island,
and it is ready for the line workers to be flown to the island
and help with the restoration of the system.
Miss Gonzalez-Colon. Ma'am, I know my time has expired. I
will submit a lot of questions for the record, and we should
know why we should have LUMA continuing in charge of the grid.
I am really concerned about the outages in the island, even
when there is no disaster onsite. So, I am really concerned
about that.
Thank you, Madam Chair. I yield back.
Ms. Titus. Thank you. I am sure there will be a number of
questions submitted to the record, and we will pass them on to
you all. I appreciate the answers.
I have allowed almost everybody to go over the 5 minutes
because this information is so important. And rather than
stopping you and coming back and doing a second round, I think
it makes sense just to get the answers as we go.
We will now go to Mr. Garcia.
Mr. Garcia of Illinois. Thank you, Madam Chair.
This is a question for Director Currie. A number of low-
income households are forced to move from their communities in
order to receive reconstruction aid due to the lack of
mitigation projects in hazard areas. Even if flooding never
occurred before, during, or after the hurricanes, too many are
denied help to rebuild their homes, and no mitigation
alternatives are given.
My first question is this: In your opinion, has FEMA taken
the needed steps to consistently integrate hazard mitigation
into its recovery process, and has there been effective
planning on the project together with other agencies such as
HUD to effectively attend to the needs of the most vulnerable
populations in Puerto Rico?
Mr. Currie. Quick answer is, no, I don't think enough
mitigation has been incorporated into the programs. And part of
that is because of the way the programs were managed in the
past. Most of these programs were designed to rebuild
infrastructure the way it was before, not to build past current
condition for the future. So, I think they have gotten better
over the last 5 years or so, but there is a long way to go.
And then, to answer your second question about low-income
communities, I mean, one of the things we have reported on is
that FEMA and HUD and others all have not done a very good job
of considering the impact of these programs, specifically on
these communities and how the capacity of these communities
impacts the recovery. And we have made several recommendations
to try to get these agencies to think a little bit more about
the impact and how these programs can be targeted to help these
communities.
Because every community is different. I think some
communities have a huge level of capacity and a lot of
resources to manage recovery and a lot of staff, and others
don't. And that is not just the case in Puerto Rico and VI, but
that is the case in certain parts of the States as well.
Mr. Garcia of Illinois. Thank you for your candid answer,
disappointing as it may be.
My second question is a two part. Has the GAO developed and
published the Disaster Resilience Framework to support analysis
of Federal opportunities to facilitate and promote resilience
to natural disasters, part 1? And part 2 is, has it been
applied to Puerto Rico and with what conclusions?
Mr. Currie. Yes, sir. The answer to the first question is
yes. We have issued a Disaster Resilience Framework, and the
idea behind that is that we think that resilience should be
built in by decisions by policymakers at all levels throughout
the process, including before, during, and after a disaster.
These disasters are terrible, but they also damage a lot of
infrastructure and provide an opportunity to rebuild that.
There really would be no other way you could get this much
funding at one time. So, it is a tremendous opportunity. So,
yes, we have done that, sir.
And I am sorry, your second question, again?
Mr. Garcia of Illinois. The second part was: Have these
lessons been applied to Puerto Rico and with what conclusions?
Mr. Currie. Well, I think Congress went a long way in doing
this in the BBA and trying to build this into the recovery from
the very beginning, recognizing that we weren't just going to
be able to rebuild the way things were. We needed to rebuild
past preexisting condition. However, I just don't think,
because of some of the complexity and the bureaucracy of these
processes, it has been easy to incorporate resilience into the
recovery thus far.
So, one of my biggest concerns is that, to speed up
recovery, we are going to bypass some of the resilience
measures that we could build in, which are a lot more
complicated to implement.
Mr. Garcia of Illinois. Thank you.
And cognizant of my time, I want to switch gears and ask
Executive Director Laboy the following question regarding
Vieques. The hospital is taking too long to build back. People
are dying or having to abandon their communities due to the
lack of specialized medical care in Vieques, and now even in
Fajardo. And the provisional infirmary that has been put up in
place is crassly insufficient.
What are the main obstacles to advance the reconstruction
of the hospital, and has COR3 identified other more effective
ways to provide medical service to the people of Vieques while
the hospital is built back completely? And if not, what is
hindering you from doing so?
Mr. Laboy. Thank you, Congressman Garcia. That is an
excellent question.
The first thing is that FEMA obligated the funds for the
Vieques hospital early in January 2020. And sadly, the
municipal leadership at the time probably had some challenges
of how to move forward with the processes that need to be in
place after the funds are obligated.
The good news is that when Governor Pierluisi took office
in January 2021, about the same time that I also entered COR3,
it was clear that the hospital was going to be a top priority.
So, we devised a strategy to do the conceptual design of the
hospital, present it to FEMA, get the approval from FEMA, and
from there, also secure funding. At that point, the obligation
was about $39 million for the Federal share. After we were able
to proceed with the adjustments of insurance, it was actually
increased to $43 million.
We worked together with the State agency that dedicates its
efforts on infrastructure projects, and together, the good news
is that the old facility was demolished, finally. Actually, it
was demolished about 1 or 2 months ago. And now, the design-
build or the request for proposals to finish the design for the
new hospital and also to construct the new hospital is already
published, and we are receiving the different proposals from
the contractors.
So, it will be awarded according to the Federal procurement
that applies to this, and then secure the final permitting, and
then begin construction. It is right now running on schedule.
And it is expected that it finally will begin construction at
the end of December this year maybe, but most likely it will be
early January 2023. And it is going to be built in phases, and
the last phase should be operational before the end of 2024.
The obstacle I will say that something related to Mr.
Currie. I think that once the funds were obligated to the
municipality of Vieques, I think that there was a gap in terms
of execution, the capacity to execute on the municipal side.
Once it changed administration, the new major was able to work
together with COR3, work together with the Pierluisi
administration, and things have been turned around positively.
Now, it is going to be a reality. Construction is going to
start very soon, and we hope that by 2024, the people of
Vieques will have what has been deserved, which is access to
healthcare.
If I may, Chairman Titus, one question that Congresswoman
Gonzalez-Colon mentioned about the plans for the grid. For the
record, LUMA and PREPA have to submit to FEMA and COR3 every
quarter 90-day plans for the projects, and they also submitted
a 5-year plan to FEMA and COR3. So, there is a 5-year plan for
projects associated with the reconstruction of the grid.
Mr. Garcia of Illinois. And, Mr. Laboy, with the services
until the hospital is built and operational?
Mr. Laboy. That is something that has been delegated to the
Department of Health. It is a top priority, and they have right
now a plan, an executed plan, that while the hospital is being
built and hopefully before 2024, it is going to be operational;
in parallel, the Department of Health has to secure the
services for healthcare in the municipality of Vieques and also
Culebra, because Culebra also benefits from these services. So,
it has been appointed to the Department of Health to ensure
that it happens.
Mr. Garcia of Illinois. Madam Chair, thank you for your
indulgence. I yield back.
Ms. Titus. Thank you, Mr. Garcia.
Well, thank you to our witnesses. We have heard that you
just can't build back to the way it was. It makes no sense.
With climate change, there is not going to be fewer hurricanes.
We can expect there may be more, so to build back to the old
standards just won't do. We have got to build back better and
take that mitigation into consideration.
Also, we heard a lot about the renewable energy moving to
cleaner energy as part of this administration's emphasis.
Another part of the administration's agenda is an across-
Government emphasis on justice. And that can be economic
justice, can be environmental justice, can be social justice.
So, as we look at building back, we need to keep that always in
the forefront to be sure that it is built back with
consideration of environmental justice so some areas don't
benefit and others are left behind.
Well, we thank you very much. This has been very
interesting and something that we needed to do.
Thank you, Miss Gonzalez-Colon, for helping us with this.
I would like to ask unanimous consent that the record of
today's hearing remain open until such time as our witnesses
have provided answers to questions that will be submitted in
writing.
I also ask unanimous consent that the record remain open
for 15 days for any additional comments and information
submitted by the Members or by the witnesses that you would
like to have included in the record.
Without objection, so ordered.
And the subcommittee stands adjourned.
[Whereupon, at 12:05 p.m., the subcommittee was adjourned.]
Submissions for the Record
----------
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chair Titus.
This hearing is timely, given we are now 5 years out from the
devastation that struck Puerto Rico and the U.S. Virgin Islands with
hurricanes Maria and Irma.
As FEMA's committee of primary jurisdiction, we have worked over
the years on a bipartisan basis to improve our Nation's emergency
management system.
While there have been reforms and improvements to FEMA processes,
there is still a lot that needs to happen to speed up recovery from
disasters and build in mitigation.
I look forward to hearing the updates from our witnesses, including
progress and challenges, and your suggestions on how we can better
streamline and speed up the process.
I look forward to hearing from our witnesses today.
Thank you, Chair Titus. I yield back.
Statement of Dawn Bauman, CAE, Senior Vice President, Government and
Public Affairs, Community Associations Institute, Submitted for the
Record by Hon. Dina Titus
About Community Associations Institute and the Community Association
Housing Model
CAI is the only international membership organization dedicated to
inspiring professionalism, effective leadership, and responsible
citizenship in homeowner associations, condominium associations, and
housing cooperatives. At CAI, we believe homeowner and condominium
associations and housing cooperatives (collectively, community
associations) should strive to exceed the expectations of their
residents. We work toward this goal by identifying and meeting the
evolving needs of the professionals and volunteers who serve
associations, by being a trusted forum for the collaborative exchange
of knowledge and information, and by helping our members learn,
achieve, and excel.
CAI and its 64 chapters provide education, tools, and resources to
the volunteers who govern community associations and the professionals
who support them. CAI's 43,000 members include community association
volunteer leaders (homeowners), community managers, association
management firms, and other professionals who provide products and
services to associations. CAI's vision is reflected in community
associations that are preferred places to call home.
The community association housing model is prevalent across the
nation and is a growing component of the national housing stock.
According to the Foundation for Community Association Research, 74
million individuals have chosen to make one of America's 355,000
community associations their home.\1\ Residents are attracted to
community associations for many reasons including access to amenities,
proximity to schools, and a stronger sense of community. All community
association homeowners pay regular assessments to fund the governance
activities of their association.\2\
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\1\ Foundation for Community Association Research: Statistical
Review 2020-2021. Available at https://foundation.caionline.org/wp-
content/uploads/2021/07/2021StatsReview_Web.pdf.
\2\ All community associations have three defining characteristics:
(1) membership is mandatory and automatic for all owners; (2) certain
legal documents bind all owners to be governed by the community
association; and (3) mandatory lien-based assessments are levied on
each owner to fund association operations and services. There are three
basic forms of community associations: condominiums, cooperatives, and
planned communities.
---------------------------------------------------------------------------
Community Associations and Disaster Recovery
In the wake of a major natural disaster, many community association
homeowners discover their neighborhood is not eligible for the full
measure of federal disaster response and recovery resources. Rules
governing the Federal Emergency Management Agency's (FEMA) Public
Assistance Program and Individuals and Households Assistance Program
are designed to support disaster recovery in traditional, non-community
association neighborhoods. This disparity forces association homeowners
to absorb significant debris removal costs and prevents the use of
Individuals and Households Assistance for repairs to essential common
elements in condominium and cooperative buildings. In areas of our
nation where housing laws, practices, and traditions vary from those
anticipated by Stafford Act programs, federal disaster assistance can
be delayed or inaccessible. CAI supports updating the Stafford Act's
Public Assistance Program and the Individuals and Households Assistance
Program to effectively reach our fellow citizens where they live. This
is all the more critical when housing systems differ from those
contemplated or accommodated by policymakers when the Stafford Act was
enacted and its implementing regulations were written.
Community associations are a new model of housing for our nation,
evolving and growing over the past 30 years. Because the community
association housing model was not anticipated by policymakers when
first designing disaster assistance programs, association homeowners in
all states and territories of the US., and the District of Columbia
face large special assessments as their community association seeks
funds to recover from natural disasters.
Community associations lack the resources of a municipal
government, and the sole source of funds are association residents.
Community association insurance products frequently contain exclusions
and special conditions regarding debris removal. Policy exclusions and
limits can lead to lower insurance claims, leaving condominium
homeowners to fund disaster debris removal and repairs to essential
common elements like roofs, HVAC systems, and elevator machinery. Non-
association homeowners do not receive a special tax assessment from
their municipal government to fund debris removal costs. Non-
association homeowners may use Individuals and Households Assistance to
fund uninsured repairs to their home's roof, HVAC system, and utility
access points. These disaster recovery program disparities extend the
misery of a natural disaster for community association residents and
increase recovery costs for community association disaster victims.
H.R. 5298, The Disaster Assistance Equity Act of 2021
Rep. Jerry Nadler and Rep. David Rouzer introduced H.R. 5298, the
Disaster Assistance Equity Act of 2021, to address the disparities in
federal disaster assistance available to community association
residents compared to non-association residents. H.R. 5298 allows
municipal governments to be reimbursed by FEMA for debris removal
activities in planned communities when a State or local government
finds that disaster debris in a planned community threatens life,
public health and safety, or the economic recovery of the community.
H.R. 5298 further allows condominium and cooperative homeowners to use
Individuals and Households Assistance to fund repairs to essential
building elements damaged by a major natural disaster.
H.R. 5298 enjoys bipartisan support because the legislation treats
disaster victims fairly. The legislation allows all disaster victims
access to essential services on an equal basis. H.R. 5298 also enjoys
bipartisan support based on the growth of the community association
housing model--the places we choose to live are changing. Federal
disaster response and recovery statutes must accommodate this change.
Had H.R. 5298 been law when hurricanes Irma and Maria struck Puerto
Rico and the U.S. Virgin Islands, community association residents--
condominium association homeowners and residents in particular--could
have funded a portion of the difference between insurance claims and
repair costs with Individuals and Households Program repair assistance.
As it was, condominium associations and homeowners faced significant
gaps between insurance claims payments and amounts required to restore
their homes to habitable status.\3\ H.R. 5298 would have allowed
condominium homeowners to reduce the gap between insurance claims and
amounts necessary to repair condominium buildings. Condominiums in San
Juan, Puerto Rico remain in various states of disrepair, which can lead
to threats to human life and health and depress the economic recovery
of the region.\4\
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\3\ Francis Robles and Patricia Mazzei, ``After Disasters, Puerto
Ricans Are Left with $1.6 Billion in Unpaid Insurance Claims,'' The New
York Times, February 6, 2020. Available at https://www.nytimes.com/
2020/02/06/us/puerto-rico-insurance-tsunami.html
\4\ Jack Hanks, ``Surfside condo collapse should be a lesson for
Puerto Rico'' Orlando Sentinel, July 06, 2021. Available at https://
www.orlandosentinel.com/opinion/guest-commentary/os-op-condo-collapse-
lessons-for-puerto-rico-20210706-ndlrjwmi4jhj5fuhu7ypbfwqka-story.html
---------------------------------------------------------------------------
CAI urges Congress to enact H.R. 5298. Providing all homeowners
access to the same disaster benefits notwithstanding differences in
housing traditions and forms is not special treatment--it's the right
thing to do.
Appendix
----------
Questions from Hon. Dina Titus to Anne Bink, Associate Administrator,
Office of Response and Recovery, Federal Emergency Management Agency
Question 1. It has been 5 years since Hurricane Maria and Irma
struck Puerto Rico and the U.S. Virgin Islands. Although FEMA has
obligated billions of recovery funds to both locations, very little
construction has started and full recovery remains a distant goal.
Although FEMA is primarily responsible for approving funding for
obligation, what actions, if any, has FEMA taken to assist the
governments of Puerto Rico and the U.S. Virgin Islands with the
disbursement of funding?
Answer. The Federal Emergency Management Agency (FEMA) is aware of
the liquidity issues affecting the Government of Puerto Rico and is
working to obligate projects as quickly as possible. FEMA is
coordinating with the Central Office for Recovery, Reconstruction and
Resiliency (COR3) to expedite the implementation of projects. This
assists the Commonwealth with expediting its Requests for Proposal/
contracts process.
FEMA is supportive of COR3's Working Capital Advance program, which
aims to provide the liquidity that sub applicants need to execute
contracts and begin construction work. The Working Capital Advance
program originally sought to provide municipalities with a 25 percent
advance of FEMA obligated funds for permanent projects, the program
will now provide up to 50 percent of working capital per project, based
on need, for immediate liquidity to advance recovery forward.
According to COR3, approximately 2,132 recovery projects are under
construction and roughly 1,190 are complete. Some of the most
vulnerable municipalities have the largest funding amounts obligated
and reconstruction activities in their communities are underway.
Several roads in Barranquitas, Jayuya, Orocovis, and other mountain
towns are already repaired or rebuilt, providing residents with safe
access routes.
Loiza, one of the most disadvantaged towns on the island, has
completed projects like parks and community centers. These community
centers and recreational spaces are the cornerstones of many of the
island's neighborhoods. The Juan F. ``Cheo'' Lopez Baseball Park in
Camuy, a town in central Puerto Rico, held its first night game in four
years with the help of FEMA's obligation, which included funds to
repair its lighting system. More than 1,000 families in the remote
towns of Hormigueros and Aibonito now have repaired basketball courts
with an allocation of over $2.2 million for several facilities. The
Felix Millan stadium in Yabucoa has been demolished. The bid proposal
request for the construction of the new stadium is expected to occur
between January and March 2023. More than a baseball stadium, this
facility is a local icon and the flagship of the municipality.
Once funds are obligated, those funds are available to COR3 to
manage and provide to subrecipients, as appropriate. COR3 is solely
responsible for ensuring that reimbursements for recovery projects meet
the statutory, regulatory, and programmatic requirements established by
FEMA. As the unprecedented recovery continues, FEMA is providing a
historic level of support to Puerto Rico, both financially and in the
form of technical guidance. Through continuous interaction and
communication with COR3 and subrecipients, FEMA can clarify
documentation requirements and conditions to help avoid delays and
ensure project formulation processes can move forward. Likewise, FEMA,
through its Office of Chief Counsel and in close coordination with the
Procurement Disaster Assistance Team, has provided detailed procurement
compliance review to COR3 as part of its technical compliance
assistance. The intent behind this type of review is that projects meet
not only federal contracting requirements, but state and local ones as
well.
FEMA and its federal partners will continue to provide technical
assistance to COR3 and all subrecipients to ensure recovery continues
to move forward. To this end, FEMA has an active multi-year interagency
funding agreement with the U.S. Department of Energy (DOE). Under this
agreement, DOE--together with FEMA--is providing technical assistance
to the Commonwealth to identify, review, and prioritize electric grid
solutions. Through this collaboration, the focus is on increasing grid
resilience for Puerto Rico communities in line with the Government's
goal of reaching 100 percent renewable electricity in the next 25
years. Known as PR100, the overall community-driven study is led in
close collaboration with DOE. PR100 also aims to improve power sector
resilience and increase access to more affordable energy and cleaner
air. The Puerto Rico Technical Coordination Team and the PR100 Advisory
Group meet monthly to discuss progress and next steps related to this
unprecedented study. FEMA remains committed to continue working closely
with the Government of Puerto Rico to advance long-term recovery.
Response Regarding U.S. Virgin Islands (USVI) Recovery:
FEMA is aware of the liquidity issues affecting the Government of
the Virgin Islands and is working to obligate projects as quickly as
possible. FEMA is coordinating with the Office of Disaster Recovery
(ODR) and Virgin Islands Territorial Emergency Management Agency
(VITEMA) to expedite the implementation of projects. This assists the
territory with expediting their Requests for Proposals/contracts
process. Once funds are obligated, those funds are available to the
Grantee to manage and provide to subrecipients, as appropriate.
Public Assistance: As of September 15, 2022, FEMA has
obligated $4.3 billion and the Territory has expended/drawn down nearly
$2.4 billion.
Hazard Mitigation Grant Program (HMGP): FEMA has
obligated $138.2 million. The Territory has expended $18.4 million of
HMGP funding as of September 14.
+ FEMA has designated another $324.6 million in HMGP funding for
phase 2 project construction and strategic funds management to assist
the territory.
Much of the funding obligated under HMGP is phased to provide
funding for engineering design; upon phase 1 completion of design, FEMA
reviews the scope and cost to provide approval to proceed to
construction. Due to Territorial contracting processes and availability
of contractors, many of the engineering designs have longer-than-usual
timelines. FEMA has supported the Territory in expediting the phase 1
engineering required for many complex projects including supporting the
Territory's consolidation of engineering design for transportation and
drainage projects under the Department of Public Works. In contrast to
the aforementioned process in Puerto Rico, ODR provides Territorial
disbursement packages to FEMA for review, these include sub-recipient
invoices. FEMA provides concurrence to the Territory to allow
reimbursement of project costs in a timely manner.
To assist in expediting the project scoping and implementation,
FEMA meets at a minimum twice weekly with the Territory to provide
guidance and technical assistance. For large priority projects (428
Public Assistance Alternative Procedures), FEMA and VITEMA have
established a bi-weekly project management meeting to address questions
and track the development of the projects. In addition, for projects
with funding that would be derived from FEMA and its federal partners
such as U.S. Department of Housing and Urban Development and United
States Army Corps of Engineers, the FEMA Interagency Recovery
Coordination office coordinates with the other agencies in support of
the Territory to assist in expediting project actions. We also continue
to meet with the Territory to assist in moving projects forward
including collaboration with the USVI Department of Natural Resources
to support the territorial sub applicants.
Question 2. Municipalities and agencies in Puerto Rico have raised
concerns about costs increases due to inflation. This is of particular
concern for projects with fixed costs estimates under Public Assistance
alternative procedures and FAASt. Some officials have noted that they
will not be able to repair all damages originally identified.
2.a. Please explain the extent of cost overruns that FEMA has
observed for launched FAASt projects in Puerto Rico. What actions may
FEMA take if actual costs of FAASt projects consistently exceed
estimates on which FEMA awards are based?
Answer. To date, FEMA has not seen any examples of project cost
overruns for the FEMA Accelerated Awards Strategy (FAASt) projects in
Puerto Rico. FEMA continues to work with the Government of Puerto Rico
to address any concerns they may have regarding cost overruns.
FEMA recognized early on that inflation, supply chain, and job
market issues would have major impacts on the recovery in Puerto Rico
and USVI. As a result, FEMA includes cost factors in every fixed cost
estimate for all Public Assistance Section 428 projects. This includes
a specific adjustment for inflation over the length of the project, and
a separate adjustment called the Future Price Factor (FPF) to account
for anticipated changes to labor, materials, and equipment costs
associated with the anticipated shock to Puerto Rico's and USVI's
construction industry over the time. These factors are regularly
updated based on changing conditions, and each fixed cost estimate is
developed and mutually agreed upon by the Recipient, Subrecipient, and
FEMA. Additionally, as part of the flexibility of Section 428 projects,
the Government of Puerto Rico (Recipient) or Subrecipient may use all
or part of the excess funds to cover overruns on other Section 428
projects under the same applicant.
Once an agreement is reached, adjustments to the fixed-cost
estimate are limited to insurance adjustments, adjustments for approved
Scope of Work changes associated with Section 406 Hazard Mitigation
proposals or the outcome of a Bipartisan Budget Act (BBA)-related
appeal.
2.b. Please explain the extent the concern for cost overruns has
delayed the obligation of alternative procedure projects in the USVI.
Answer. To date, FEMA has not seen any examples of project cost
overruns for Section 428 projects in the USVI. However, FEMA has been
informed of instances where obligated amounts exceeded the public
requests for proposals, with the difference serving to benefit the
subrecipient. FEMA continues to work with the USVI to address any
concerns they may have regarding cost overruns.
FEMA recognized early on that inflation, supply chain, and job
market issues would have major impacts on the recovery in Puerto Rico
and USVI. As a result, FEMA includes cost factors in every fixed cost
estimate for all Public Assistance Section 428 projects. This includes
a specific adjustment for inflation over the length of the project, and
a separate adjustment called the FPF to account for anticipated changes
to labor, materials, and equipment costs associated with the
anticipated shock to Puerto Rico's and the US Virgin Islands'
construction industry over the time. These factors are regularly
updated based on changing conditions, and each fixed cost estimate is
developed and mutually agreed upon by the Recipient, Subrecipient, and
FEMA. Additionally, as part of the flexibility of Section 428 projects,
the USVI may use all or part of the excess funds to cover overruns
within each 428 project.
In addition, FEMA and the USVI have agreed to engage in a Dispute
Resolution process to address any disagreements in the Section 428
project's Scope of Work and/or Cost, prior to the fixed cost estimate
being accepted.
2.c. In FEMA's estimate, has the required use of Alternative
Procedures for most large-scale recovery projects in Puerto Rico proved
successful?
Answer. Alternative Procedures provides applicants with the most
flexibility in order to successfully recover, including applicants in
Puerto Rico recovering from Hurricanes Irma and Maria. This
flexibility, when paired with historic investments in FEMA Public
Assistance funding for Puerto Rico's recovery--including the largest
permanent work project ever obligated ($9.5 billion)--will drive a
successful recovery for Puerto Rico.
2.d. Would FEMA again require the use of Alternative Procedures
for large-scale projects for a major disaster, particularly those with
severity comparable to Hurricane Maria?
Answer. Regardless of the size of an incident, FEMA continues to
encourage all applicants as the first option to consider Section 428
Alternative Procedures for all large permanent work projects in order
to simplify the delivery of assistance and ensure the ability of
Applicants to drive their own recovery. Under this process, Section 428
Alternative Procedures are considered for all large Permanent Work
Projects. This ensures Applicants have awareness of the opportunities
and benefits provided by the Alternative Procedures, including:
flexibility in meeting post-disaster recovery needs, as opposed to
being limited to rebuilding back to what existed prior to the disaster;
ability to share funds across all Alternative Procedures Permanent Work
Projects; ability to retain and use excess funds to reduce risk and
improve future disaster operations (subject to timely closeout); and
eligibility for cost-effective hazard mitigation on Replacement
Projects. Applicants will be able to agree to a fixed cost estimate or
choose to pursue funding under standard, actual cost procedures.
2.e. Hurricane Fiona likely caused additional damage to some 428
projects for which funds have already been obligated. How will FEMA
work with COR3 and applicants to adjust the scope of work for these
projects? Will FEMA consider adjusting the obligations for these
projects if necessary?
Answer. FEMA and the COR3 are developing an action plan to address
Hurricane-related disaster damage caused by Hurricane Fiona to
facilities that were previously damaged by Hurricane Maria or by the
earthquakes and had repair work funded under Section 428 of the Robert
T. Stafford Relief and Emergency Assistance Act (Stafford Act). While
FEMA cannot adjust the scopes of work or funding amounts for Section
428 projects obligated under previous disasters, FEMA is making sure
that the Applicants receive additional funding to address the damages
specifically caused by Hurricane Fiona as long as this work is also
eligible for Public Assistance. The Puerto Rico Joint Field Office and
Joint Recovery Office will continue to provide a coordinated effort to
address challenges as appropriate.
Question 3. While progress has been made to obligate funds for PA
projects in Puerto Rico and the US Virgin Islands very little
reconstruction work has begun. The territories and RAND have expressed
concern regarding the shortage of contractors available in the
territories compared to the number of recovery projects.
To what extent, and in what industries, has FEMA observed
shortfalls in local industry and contractor availability critical to
the completion of federally funded recovery projects?
What specific actions, if any, could FEMA take to mitigate the
severity of these shortfalls?
Answer. There is a limited pool of professional services available
in Puerto Rico and USVI, including engineering, architecture, and
construction services. While there are a few larger construction
companies, the labor pool is also extremely limited, with contractors/
subcontractors vying for the same persons to perform work.
There are more than 2,450 projects under construction across Puerto
Rico and the US Virgin Islands. FEMA bases any observations on
information provided by the Governments of Puerto Rico and USVI and
studies like the mentioned RAND report. The RAND report indicates a
projected shortfall of about 40,000 construction workers, particularly
foremen, plumbers, and electricians.\1\ While this issue falls under
the purview of the Governments of Puerto Rico and USVI, FEMA
participates in discussions with government and industry stakeholders,
including the Puerto Rico Department of Commerce, to identify ways to
help the Government of Puerto Rico address this challenge.
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\1\ Strong, Aaron, Jeffrey B. Wenger, Isaac M. Opper, Drew M.
Anderson, Kathryn A. Edwards, Kyle Siler-Evans, Jessie Coe, and R. J.
Briggs, Future Price Forecasting in the Wake of Large-Scale Disasters:
The Case of Puerto Rico After Hurricane Maria. Homeland Security
Operational Analysis Center operated by the RAND Corporation, 2022.
https://www.rand.org/pubs/research_briefs/RBA1116-4.html.
Question 4. How has FEMA's interpretation of the authorities in the
BBA changed since its implementation in 2018? Congress intended that
this authority to enable FEMA to approve alternative procedure projects
without consideration for pre-disaster damage.
Is this consistent with FEMA's current interpretation of their
authority?
Would FEMA recommend Congress provide authorities like what was
included in the Bipartisan Budget Act of 2018 to expedite the recovery
of future catastrophic disasters?
Answer. FEMA interprets and uses the authority provided by section
20601 of the BBA as broadly as possible to support the recovery in USVI
and Puerto Rico. FEMA first put out FEMA Recovery Policy FP-104-009-5,
Implementing Section 20601 of the 2018 BBA Through the Public
Assistance Program, in September 2018, then, after Congress further
amended the provision in 2019, FEMA updated and released version 2 of
the policy in September 2019. Version 2 further expanded on the
flexibilities provided in section 20601 and explicitly stated that FEMA
would maximize the supplemental assistance made available through this
special authority to improve recovery outcomes for Puerto Rico and
USVI.
Given the state of the infrastructure, particularly the electrical
grids, in Puerto Rico and the U.S. Virgin Islands prior to the
catastrophic impacts of Hurricanes Irma and Maria, section 20601 of the
BBA was critical to allow FEMA to support the restoration of critical
facilities and systems in these territories in a resilient manner.
FEMA does not believe that any amendments to its Public Assistance
authorities are necessary to expedite recovery from future events. If
that changes, we will work with Congress to pursue any such amendment.
Question 5. Does FEMA recommend Congress provide the agency any
additional authorities to aid the recovery in Puerto Rico following
Hurricane Fiona. For example, does FEMA recommend that Congress expand
BBA authorities?
Answer. FEMA believes its current Public Assistance authorities are
sufficient to support a resilient recovery from Hurricane Fiona in
Puerto Rico. If that changes, we will work with Congress to pursue any
such amendment.
Question 6. USVI recovery is often overshadowed by the recovery in
Puerto Rico. What are the unique challenges that USVI faces and what
steps are needed to address them?
Answer. FEMA acknowledges that the needs in the USVI are unique and
separate from those in Puerto Rico. For example:
The United States Census reported that the 2020
population of the USVI (spread across all the islands) was 87,146. The
total cost estimate for the USVI is $14.3 billion, of which only $4.2
billion is already obligated (31 percent). Per capita, that breaks down
to $164,000 per person in the USVI (for comparison, Puerto Rico's per
capita cost estimate is $11,000).
According to the Bureau of Economic Analysis, the 2020
Gross Domestic Product (GDP) of the USVI was only $4.2 billion.
The GDP of Puerto Rico, a measure of its overall economy
and capacity to recover, is larger than approximately a dozen states.
In addition, the USVI reports a lack of project management capacity.
Individual government agencies, such as the Office of Disaster Recovery
or the Housing Finance Authority manage grants and various funding
streams. However, due to the lack of project management capacity, there
are delays to major infrastructure improvements. Additionally, capacity
remains a challenge across government agencies. For instance, The
Department of Public Works, or Waste Management Authority are tasked
with their day-to-day responsibilities while also implementing
additional disaster-related projects.
To this end, the USVI has enlisted the services of consultants to
assist in the recovery from Hurricanes Irma and Maria.
Question 7. The Governor Juan F. Luis Hospital is a critical
hospital in the U.S. Virgin Islands and FEMA had determined that it
should be replaced (a process known as `determination of prudence for
replacement'). What is the status of construction and replacement for
this hospital?
Answer. The proposed replacement cost estimate and schedule for
this hospital are being formulated. Several outstanding items have
recently been agreed to, including number of rooms, size of rooms and
specific industry standards to upgrade the facility. The current
challenge is the length of time the applicant anticipates it will take
to complete the construction. Updates to construction schedules/
timelines have been ongoing, and FEMA continues to review and validate
submitted scope of work and costs. We expect to see an updated
construction schedule in October 2022, and upon review completion the
FEMA-validated estimate will be provided to the Juan F. Luis Hospital
for consideration.
Question 8. In 2020, RAND estimated that USVI faced a shortage of
more than 5,000 workers needed to efficiently implement recovery
efforts. What assistance, if any, do you think may FEMA provide to the
USVI to mitigate this shortfall?
What authorities, if any, should Congress consider to ensure the
availability of a qualified, sufficient workforce to execute recovery
in the USVI?
Answer. FEMA cannot provide direct workforce assistance to the
USVI. However, management costs are provided to the Recipient and
Subrecipients that can be used to secure technical assistance to
support USVI in identifying and securing an additional qualified
workforce.
Should Congress request Technical Drafting Assistance on
legislative proposals, FEMA would be happy to provide it.
Question 9. USVI stakeholders report that ``[a]s more projects are
put out to bid, it is becoming a frequent occurrence for bids to exceed
the obligated project costs for FEMA funding.'' Has FEMA and/or ODR
observed consistent, significant cost shortfalls in FEMA PA awards as
projects are put to bid?
Answer. To date, FEMA has not seen any examples of project cost
overruns for Section 428 projects in the USVI. However, FEMA has been
informed of instances where obligated amounts exceeded the public
requests for proposals, with the difference serving to benefit the
subrecipient. FEMA continues to work with the USVI to address any
concerns they may have regarding cost overruns.
Question 10. To date, how much money has been obligated for
Alternative Procedures projects in the Virgin Islands? How much of the
obligated funds has been disbursed?
Answer. As of September 15, 2022, FEMA has obligated $870 million
in Alternative Procedures 428 projects to the USVI. A total of $7.4
million have been disbursed/drawn down, with $862.9 million remaining
available to be disbursed/drawn down by USVI.
Question 11. How many Fixed-Cost Estimates have been completed in
the Virgin Islands by now, and how many need to be completed?
Answer. As of September 15, 2022, 127 Fixed-Cost Estimates have
been accepted for a total of $870 million. There are 77 Fixed-Cost
Estimates remaining to be accepted, representing approximately $6.8
billion.
Question 12. What is the status of the request of the Virgin
Islands for adjustment of the Future Price Factor to be incorporated
into Fixed-Cost Estimates to ensure that the actual costs of permanent
rebuilding on the islands are captured?
Answer. FEMA completed the study to develop an FPF in July 2019.
Following the study, FEMA has incorporated the FPF into its Fixed Cost
Estimates. Recognizing that future price conditions change, the FPF is
updated quarterly.
Question 13. Why did FEMA reverse its previous approval of
permanent rebuilding projects for roads in the Virgin Islands? The
revisiting of projects already approved has slowed the recovery
locally.
Answer. As FEMA's Public Assistance program is, generally, a
reimbursement program, each project needs to be reviewed for
eligibility individually and FEMA is unable to issue blanket approvals
and did not do so for USVI. Upon reviewing the submissions, there were
39 road projects that were determined to be eligible (approximately
$60MM in funding) and 41 road projects that were determined to be
ineligible.
Question 14. In its most recent annual report, ODR raised concerns
that the most recent Building Cost Index reflected construction costs
rising by more than 17%, with no corresponding increase in FEMA's cost
estimating model for the USVI. Has FEMA observed such cost increases,
and what specific actions has FEMA taken to update cost estimate models
to ensure that PA awards accurately estimate the specificities of local
costs in USVI and inflation?
Answer. In anticipation of impacts to the local economy and
fluctuations in labor, material, and equipment costs, FEMA provides a
quarterly update of the FPF that utilizes data received from several
sources, including the USVI Bureau of Economic Research and the USVI
Department of Labor, resulting in a City Cost Index (CCI). The CCI for
the USVI, allocated to each island, is applied to projects as a
percentage which increases project costs in anticipation of potential
cost overruns.
Question 15. What, if any, actions may FEMA take in the case that
Applicants in USVI report significant, widespread cost overruns?
Answer. FEMA recognized early on that inflation, supply chain, and
job market issues would have major impacts on the recovery in Puerto
Rico and USVI. As a result, FEMA includes cost factors in every fixed
cost estimate for all Public Assistance Section 428 projects. This
includes a specific adjustment for inflation over the length of the
project, and a separate adjustment called the FPF to account for
anticipated changes to labor, materials, and equipment costs associated
with the anticipated shock to Puerto Rico and USVI's construction
industry over the time. These factors are updated quarterly based on
changing conditions, and each fixed cost estimate is developed and
mutually agreed upon by the Recipient, Subrecipient, and FEMA.
Additionally, as part of the flexibility of Section 428 projects, the
Government of Puerto Rico (Recipient) or Subrecipient may use all or
part of the excess funds to cover overruns on other Section 428
projects under the same applicant.
Question 16. Will FEMA approve campus-wide prudent replacements
under circumstances which involve a mix of badly damaged buildings, and
damaged but repairable buildings, within a single campus of a critical
facility like a school or a hospital?
Answer. FEMA may not approve campus-wide prudent replacements. In
adherence to FEMA policy (per BBA Policy FP-104-009-5 V2), each
facility/building is considered individually unless it is part of a
system (electric, water, communications).
Question 17. In part due to its experience in the islands following
Hurricanes Irma and Maria, FEMA has decided not to use the Sheltering
and Temporary Essential Power (STEP) Program during future disaster
recovery efforts. How does FEMA plan to address emergency sheltering
needs in the event of future major disasters in communities that face
challenges and circumstances like those in Puerto Rico and the Virgin
Islands after Hurricanes Maria and Irma?
Answer. FEMA may provide financial and direct assistance for
disaster-caused housing needs not covered by insurance or provided by
any other source as part of the Housing Assistance provision of the
Individuals and Households Program. Financial housing assistance is
funding provided to eligible applicants for temporary lodging expenses,
rental of temporary housing or repair or replacement of a damaged
primary residence. Direct housing assistance may also be provided as
Direct Temporary Housing Assistance in the form of transportable
temporary housing units (recreational vehicle or manufactured housing
unit), Multi-Family Lease and Repair, and Direct Lease and Permanent
Housing Construction.
FEMA also provides technical assistance for the development of
sheltering plans with our state, Tribal, and territorial partners. As
part of this pre-incident support, FEMA Individual Assistance staff in
the Region 2 Caribbean Area Division are based in Puerto Rico and USVI
to support mass care planning. For example, USVI has the USVI Mass Care
Pandemic Implementation Plan that identifies sheltering methods and
prioritization for certain types and levels of events. And Puerto Rico
has developed a Mass Care Annex, which includes details on how Puerto
Rico implements congregate sheltering missions and captures lessons
learned and best practices.
Question 18. What specific actions has FEMA taken to ensure
sufficient emergency housing will be available if needed?
Answer. Puerto Rico and USVI face unique housing challenges due to
their geographic location. In addition to the strategies previously
mentioned, FEMA took the below actions prior to the 2022 hurricane
season to help to meet survivor needs and provide assistance more
effectively and consistently:
Established informed and consistent Enhanced Applicant
Services to provide proactive and targeted case work for disaster
survivors. This will help to ensure that survivors in Puerto Rico and
USVI can navigate the recovery process, maximize assistance from FEMA,
and are provided with necessary referrals for additional unmet needs
from other partners and disaster case management.
Established Direct Housing Implementation Teams comprised
of employees with experience implementing direct housing missions to
ensure timely and consistent implementation of direct temporary housing
for disaster survivors. The teams are ready and operational for
deployment in the 2022 hurricane season. These teams will also help to
ensure disaster survivors are provided with disaster case management
services earlier in their recovery through the modern Disaster Case
Management approach. In disasters where these teams have been deployed,
the time to award for State, Tribal, and Territorial Federal awards has
been significantly decreased.
Sheltering support available prior to an incident includes
technical assistance and training to strengthen and enhance
jurisdictional capacity to support sheltering activities. Available
technical assistance from FEMA includes:
An analysis of mass care operations, incorporating best
practices and lessons learned into preparedness activities.
Advising shelter operators of applicable laws such as the
Americans with Disabilities Act.
Developing of contracts, pre-scripted mission
assignments, agreements, and other mechanisms to provide resources,
programs, and services for sheltering during disaster response
activities.
Also, the National Mass Care Strategy provides a unified approach
to the delivery of mass care services by establishing common goals,
fostering inclusive collaborative planning and identifying resource
needs to build a national mass care capacity that engages the whole
community, including underserved and vulnerable populations. Part of
the National Mass Care Strategy outlines sheltering activities that
include identifying facilities, providing life sustaining and essential
services, and supporting the closing of shelters and placement of
shelter residents into longer-term housing solutions. These activities
include:
Congregate shelters to include schools, churches,
community centers and armories.
Non-congregate shelters to include hotels, cruise ships,
dormitories, converted buildings, staying with friends and family or
other facilities with private sleeping spaces.
Questions from Hon. Sharice Davids to Anne Bink, Associate
Administrator, Office of Response and Recovery, Federal Emergency
Management Agency
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects?
Answer. The repair or replacement of facilities (e.g., sewer
replacement, hospital replacement) are technical and complex. FEMA
continually analyzes its processes to be as efficient and effective as
possible. Once an applicant submits the Scope of Work for a specific
project, the typical turnaround time for funds to be approved is on
average, 70 days.
In USVI, FEMA's Interagency Recovery Coordination has strengthened
the long-term recovery with stronger coordination and collaboration
among multiple federal partners. Economic Development Agency continues
to provide workshops and webinars in collaboration with national and
local agencies, business, and nonprofit organization. The IRC group, in
partnership with Small Business Administration, Virgin Island Economic
Development Authority, and Small Business Development Center, hosted a
workshop to present information on the Surety Bond Guarantee Program.
This resulted in a significant increase in issuance of surety bonds
from August 2021 to May 2022--resulting in a net increase of more than
$7 million in Surety Bond Guarantees issued. In Puerto Rico, the FAASt,
has helped to streamline recovery by allowing critical infrastructure
projects to be grouped together to expedite energy grid work in Puerto
Rico. FEMA has provided, and will continue to provide, technical
assistance to applicants and sub applicants to help accelerate these
projects.
Question 2. Are there any legislative changes that we could make to
improve this process?
Answer. FEMA does not believe that any amendments to its Public
Assistance authorities are necessary for expediting recovery from
future events. If that changes, we will work with Congress to pursue
any such amendment.
Questions from Hon. Daniel Webster to Anne Bink, Associate
Administrator, Office of Response and Recovery, Federal Emergency
Management Agency
Question 1. A key goal of disaster funding is to help States
rebuild their infrastructure following a disaster. Recognizing the
benefit to the taxpayer of mitigation, Congress authorized funding to
ensure States could build in mitigation as they rebuild existing
infrastructure \2\. However, mitigation is different than funding
completely new and duplicative infrastructure. Building in mitigation
is building back existing infrastructure to more resilient standards.
For example, despite the United States Virgin Islands' (USVI) existing
Liquid Propane Gas (LPG) system, FEMA may be pushing for USVI to
transition to solar in the rebuilding.
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\2\ See 42 U.S.C. Sec. 5133; 42 U.S.C. Sec. 5172; 42 U.S.C.
Sec. 5189f; 42 U.S.C. Sec. 5170c
---------------------------------------------------------------------------
1.a. Is FEMA encouraging USVI and any other grantees to convert to
solar or any other energy source than what they had existing prior to
disaster? If so, how and please provide citations to authorities on
which such actions are based.
Answer. FEMA's role is to support the priorities of USVI and guide
them on how they can leverage FEMA funding. FEMA is coordinating with
the USVI on its territory-wide mitigation strategy to establish
alternate generation, including solar and wind power, to reduce
dependency on fossil fuel, diversify power generation and resilience,
and to lower costs to the consumers who pay some of the highest
electrical rates in the world. The authorities allowing FEMA to fund
these types of actions are found in sections 404 and 406 of the
Stafford Act and codified under 44 CFR Sec. Sec. 206.226(e) and
206.434(d). Under the HMGP, FEMA includes the funding of microgrids as
an approved mitigation action. A microgrid is a self-sufficient energy
system that serves a discrete geographic footprint, such as a college
campus, hospital complex, business center or neighborhood. Within
microgrids are one or more kinds of power generation technologies (e.g.
solar panels, wind turbines, combined heat and power, generators) in
addition to energy storage, typically from batteries.
1.b. What is FEMA's role and what are its policies on funding new
systems rather than rebuilding and fixing the ones that exist? Please
provide copies of relevant policies.
Answer. FEMA's Public Assistance Program provides several options
for restoring disaster-damaged infrastructure. If an applicant
determines that the public welfare is not best served by restoring the
function of a damaged facility, it may decide to replace it with a
different facility. This is called an Alternate Project. In other
cases, an applicant may decide it wants to make improvements to a
facility beyond repairing the disaster damage. This could include
replacing the facility with a new facility that serves the same
function (e.g., replacing a damaged elementary school with a new
elementary school). This is called an Improved Project. In both cases,
these are decisions the applicant and FEMA make to serve the
community's needs. Eligible funding in both cases is capped based on
what it would have cost to repair the disaster damage (44 CFR Sec.
206.203(d), FEMA Public Assistance Program and Policy Guide (PAPPG
Version 3.1 Chapter 2.VII).
In some cases, the damage to a facility is so extensive that FEMA
and the applicant work together to determine whether it could be
eligible for replacement instead of repair. This is referred to as the
repair vs. replacement determination (50 percent Rule, 44 CFR Sec.
206.226(f)). However, even if replacement is determined to be the more
prudent approach, the applicant can still choose to repair the
facility, but FEMA will limit the eligible cost to the estimated cost
to repair or replace, whichever is less.
In other instances, federal/state/local laws would prohibit
substantial work from taking place in disaster-prone areas or a
facility may be subject to repetitive heavy damage. In those cases,
FEMA may approve a relocation out of the disaster damaged area, which
would typically involve reconstructing the facility in an alternate
location (44 CFR Sec. 206.226(g);), PAPPG Version 3.1 Chapter 2.VII).
1.c. What funding has FEMA provided to USVI for new solar systems?
Were these systems damaged by the hurricanes or are they new systems?
If new, did FEMA assess the necessity of new systems given existing
power generation capability?
Answer. FEMA has obligated over $10.5 million for the design phase
(Architectural/Engineering (A/E) obligations) for three new microgrids
under the USVI Disaster Declaration for Hurricane Maria (FEMA-4340-DR-
VI).
1. STX St Croix: DR 4340-0063: $4,486,720 A/E Obligated; 100 percent
Federal Share under HMGP (404)
The first of these three microgrids is located on St Croix. The
purpose of the Western St. Croix Microgrid Project is to provide a
stable and resilient alternative energy source to the western portion
of St. Croix. The microgrid will be designed and constructed to operate
with the existing Water and Power Authority grid, including an 18
megawatt (MW) solar power generation photovoltaic plant and a 20MWh
battery energy storage system (BESS). The estimated project cost is
approximately $130 Million.
2. STT St Thomas: DR 4340-0064: $4,352,634 A/E Obligated; 100 percent
Federal Share under HMGP (404)
The second microgrid located in St Thomas includes wind turbine
power generation. The purpose of the St. Thomas Bovoni Eastern BESS &
Microgrid project is to provide an alternative energy source to a
portion of southeastern St. Thomas, currently only serviced by the
Randolph Harley Power Plant. The proposed HMGP project will include the
construction and installation of a 9.9 MW wind power generation plant
and battery energy storage system. This system would cost approximately
$116 million, of which FEMA's HMGP anticipates funding approximately
$59 million of this microgrid; the wind turbines would be funded
through a partnership between USVI Water and Power Authority and a
corporate partner.
3. STJ St John Microgrid: $1.8 million A/E Obligated; 90/10 percent
cost share (approx. $1.62 M Federal Share) under Public
Assistance 406 funding
A third microgrid on St John is also approved for design. This
microgrid will be funded under section 406 of the Stafford Act, under
the Public Assistance Program section 406 hazard mitigation, to include
a solar array for power generation. This project is currently approved
for design and is projected to cost $15 million. The hybrid microgrid
would consist of the installation of two previously approved 4-MW
stand-alone generators, two 2-MW solar arrays, and two 2-MW / 8-MW
lithium-ion battery energy storage system (BESS). The microgrid would
mitigate future similar damage by ensuring continued power and reducing
damage experienced to critical facilities due to a loss of power during
and after similar natural disasters. In a July 6, 2020 response letter,
FEMA granted approval for the Architectural and Engineering component
of the project.
Questions from Hon. Jenniffer Gonzalez-Colon to Anne Bink, Associate
Administrator, Office of Response and Recovery, Federal Emergency
Management Agency
Power Grid:
Question 1. FEMA has allocated $9.5 Billion in Federal Funding for
the rebuilding and upgrading of the Puerto Rico Electric Grid, and is
working with the Department of Energy in the PR100 study to determine
the best way to achieve 100% renewables goal.
1.a. What can you tell us briefly about the status of FAASt
funding, and the timelines involved?
Answer. In 2020, FEMA announced the FAASt, which allows critical
infrastructure projects to be grouped together in order to expedite
energy grid work in Puerto Rico. As one of the largest and most complex
disasters in FEMA history, Hurricane Maria provided an opportunity to
implement FEMA's FAASt to help streamline recovery projects.
Due to the volume of inspections and the time required to finalize
cost estimates for the disaster-damaged assets of the Puerto Rico
Electric Power Authority (PREPA), FEMA and COR3 agreed to use a
Statistical Sampling Methodology to arrive at fixed cost estimates.
This led to the obligation of four FAASt projects. $9.4 billion for
PREPA, $3.6 billion for the Puerto Rico Aqueduct and Sewer Authority,
$2 billion for the Puerto Rico Department of Education, and $554
million for the Puerto Rico Public Housing Administration.
The FAASt approach provides a recovery budget from which Applicants
can plan their long-term recovery. Unlike the standard procedures that
govern Public Assistance projects, in which the awards are based on the
costs of the actual work undertaken, the FAASt approach allowed for the
acceptance of an initial Fixed Cost Estimate, where the awards were
capped based on up-front and mutually agreed-to estimates of the cost
of the work to be done. This approach reduces costs, encourages timely
completion of Public Assistance projects, and allows Applicants to
complete projects on basis of need rather than pre-disaster design.
FEMA is currently working with COR3 and the Government of Puerto Rico
to look for opportunities of improvement in the post-award processing
of the recovery projects' scopes of work and the addition of mitigation
funds.
The FAASt project obligation for the energy sector required PREPA
to submit a workplan to COR3 and FEMA within 90 days of project
obligation and provide an update every 90 days thereafter. The plan
requires a list of projects to be submitted to FEMA for evaluation
along with the Subrecipient's priorities. The initial plan and the
subsequent updates have been presented in a timely manner. FEMA has
provided, and will continue to provide, technical assistance to help
expedite recovery.
1.b. Have the Action Plans and the quarterly reviews been
presented in a timely manner?
Answer. Yes, the action plans and quarterly reviews have been
presented in a timely manner.
1.c. How many projects have been submitted? How much funding do
they represent?
Answer. As of September 15, 2022, a total of 77 Scopes of Work have
been sent from PREPA/LUMA Energy (LUMA) to FEMA. Of the 77 submitted,
45 have already been approved, representing roughly $1.3 billion. The
32 Scopes of Work that have not yet been approved are either under
review by FEMA or require additional information from PREPA/LUMA so
that the project can be processed. The funding can vary on these
projects until a complete Scope of Work is provided and the project is
signed.
These scopes of work are part of FEMA's FAASt, where FEMA obligated
a $9.5 billion budget from which PREPA can plan its recovery projects.
This funding does not include the additional funding available for
hazard mitigation. Once an energy FAASt subproject is approved, the
funds that correspond to that scope of work are transferred from the
original ``donor'' project, which is the $9.5 billion obligation, to
the subproject.
1.d. Is LUMA in any way involved in determination of use of this
funding?
Answer. Yes, PREPA authorized LUMA, its Operator, to act as its
agent in connection with any federal funding requests related to the
Transmission and Distribution System submitted to FEMA. Though LUMA is
very involved, the ultimate responsibility on energy grid projects lies
with PREPA as the Subrecipient. This is related to all FEMA funding
streams to be used for grid recovery, rebuilding, or mitigation, not
just FAASt projects.
1.e. Counting not just the FAASt funding but also all FEMA funding
streams to be used for grid recovery or rebuilding or mitigation: How
many electric grid projects have been submitted, obligated, approved,
and disbursed for? What is the total amount under each stage as of
today?
Answer. In total, 137 electric grid projects have been obligated
for PREPA for over $11.4 billion (including just over $1.9 billion in
emergency protective measures during the initial response after
Hurricane Maria in 2017 and 2018). As of September 15, 2022, according
to COR3's Transparency Portal, COR3 has disbursed over $1.67 billion to
PREPA.
Each project approved by FEMA must have the prior approval of the
Puerto Rico Energy Bureau, which at the same time must be consistent
with the Puerto Rico Integrated Resource Plan.
Energy Policy:
Question 2. Groups in the Island and mainland have demanded that
FEMA deny funding to anything that is not distributed renewables, or
even that Congress should command that.
Is it within the purview of FEMA to impose energy policy directly
or through denial of funding?
Is it wise to micromanage this from DC, or should that be subject
to Puerto Rico's resources plan, and following the science?
Answer. The use of non-renewable energy sources is not a factor in
determining eligibility for FEMA's Public Assistance Program funding
for the repair and restoration of disaster-damaged facilities.
Question 3. Are there any FEMA funds obligated or allocated to
Puerto Rico at any risk of being clawed back or of being lost because
the work is not done? If so, we would require specifics of which are
most time critical.
Answer. There are no funds from FEMA that are currently obligated
or allocated to Puerto Rico, which are at risk of being lost because
the work was not complete. In September 2022, FEMA approved another
extension for the Period of Performance for all Permanent Work Projects
for Maria until March 20, 2023. Time Extensions for Emergency Work (Cat
A & B) projects are reviewed on a case by case basis. The only
conditions in which funds may be at risk is if the entity fails to
comply with the US Constitution, federal statutes, regulations, or the
terms and conditions of the federal award.
Small Projects:
Question 4. Mayors in towns in Puerto Rico bring up a need for
enabling communities to attend to immediate needs for so-called ``small
projects'' that can be managed through simplified procedures. Today
that is a project under $124,000 which with rising costs is now too
easily exceeded.
Does the agency support HR 5641, the SPEED Recovery Act, recently
passed in the House, that increases to $1 million the threshold for
eligibility for assistance for what qualifies as a small project under
the Stafford Act?
Answer. Simplifying the Public Assistance Program is an Agency
priority. To that end, on August 3, 2022, FEMA published a final rule
raising the small project threshold to $1 million, to be adjusted for
inflation annually thereafter. Subsequently, on October 10, 2022 the
SPEED Recovery Act was enacted into law, also directing FEMA to raise
the small project threshold to $1 million.
Question 5. Not just with the electricity issue, but with every
other area of rebuilding: There is concern that with inflation, supply
chain and job market issues that have developed in the past 3 years,
the estimates upon which obligations were made may no longer suffice
for completion of the work for which they were approved.
How is this to be addressed, how should it be addressed, how CAN it
be addressed?
Are we stuck with ``this is what you have, do what you can?'' Or
will it be required to change the rebuilding plans and potentially
delay even more the start of work?
Answer. FEMA recognizes that inflation, supply chain, and job
market issues would have major impacts on the recovery in Puerto Rico
and USVI. As a result, FEMA includes cost factors in every fixed cost
estimate for all Section 428 projects. This includes a specific
adjustment for inflation over the length of the project, and a separate
adjustment called the FPF to account for anticipated changes to labor,
materials, and equipment costs associated with the anticipated shock to
Puerto Rico's and USVI's construction industry over the time. These
factors are updated quarterly based on changing conditions, and each
fixed cost estimate is developed and mutually agreed upon by the
Recipient, Subrecipient, and FEMA. Additionally, as part of the
flexibility of Section 428 projects, the Government of Puerto Rico
(Recipient) or Subrecipient may use all or part of the excess funds to
cover overruns on other Section 428 projects under the same applicant.
Question 6. Mayors in rural Puerto Rico continue to address us
questions about rebuilding of local road and bridge infrastructure. I
want to ask the agency to provide a substantive, municipality by
municipality report on FEMA-funded road and bridge reconstruction:
location, funding, status, obligation date.
Answer. A municipality-by-municipality report is attached. For
supplemental information please check out the COR3 website: Puerto Rico
Disaster Recovery Transparency Portal--COR3 (pr.gov).
[Editor's note: The municipality-by-municipality report is retained
in committee files.]
Payments and Chargebacks:
Question 7. When FEMA makes a mistake in granting aid, and reverts
the decision then requires the grant to be given back, how do we deal
with a victim who is unable to pay back, when they may have already
spent the aid to rebuild? HR 539, by Mr. Graves of Louisiana and Ms.
Gonzalez-Colon, is pending in the Senate and designed to prevent that.
What steps is FEMA taking to ensure that decisions on approval of
both public and individual assistance is done both promptly and
accurately?
Answer. FEMA is required to take action to identify and recover
improper payments, whether made in error or obtained by fraud. FEMA
employs a deliberate process to recover payments where disaster
assistance was given to applicants who were not eligible for some or
all the money they received. This process was developed to minimize the
burden on the applicant to the greatest extent possible.
If/when FEMA determines assistance was given to applicants who were
not eligible for some or all of the money received, FEMA program staff
notifies the applicant in writing and with a phone call of their
potential debt and their right to appeal the decision. After the
applicant exhausts their appeal rights, or the period to appeal the
debt expires, a debt is then officially established. The applicant then
receives a letter from the FEMA Finance Center to provide information
on next steps available to them and their repayment options. These next
steps include requesting payment arrangements, compromise, and/or a
waiver of the debt. FEMA may compromise the value of the debt, up to
the full amount, when it determines it cannot collect the debt because
of an applicant's inability pay. FEMA considers special factors like
the applicant's age, income and health in making its determination. If
the applicant does not qualify for a full compromise, FEMA will review
an applicant's waiver request. Where an overpayment was based on FEMA's
error and there was no fault by the applicant, FEMA will grant a waiver
where collection of the debt would be against equity and good
conscience.
Question 8.a. There is a perception in Puerto Rico recovery that
different parties move slowly out of not daring to act without absolute
certainty that FEMA approves and will not change a decision, or not
being sure if the BBA 2018 provisions for ``building back better''
really extend to the sites being inspected.
Answer. The majority of FEMA assistance is provided via automated
processes, based on information provided by individuals when they
register for assistance, and checked against eligibility criteria. Some
forms of assistance do require manual review and processing. Staff that
process these forms of assistance receive training, undergo quality
control reviews, have automated pop ups and error checks in the
processing system and have access to various technical assistance and
support groups to help prevent errors.
Question 8.b. How can we make it easier for those on the front line
to feel sure that their decisions will stand?
Answer. The Office of Response and Recovery's Field Operations
Directorate is working on building a workforce readiness cycle that
accounts for sustained increases in operational tempo. Part of this
initiative includes a focus on improved training and qualification,
which will help FEMA employees feel more prepared for deployment to
disaster sites.
Every recovery is unique, and FEMA works closely with survivors on
a case-by-case basis for individual assistance, and a project-by-
project basis for public assistance, to ensure needs are met and
recovery is supported. Should Congress request Technical Drafting
Assistance on bills like HR539, FEMA would be happy to provide it.
GAO Reports:
Question 9.a. GAO reported that workforce-related issues impacted
the quality of recovery services. In January 2022, GAO identified
factors limiting FEMA's workforce readiness of high turnover rates,
burnout due to increased pace of disasters, and low morale have made it
challenging for FEMA's workforce to implement the COVID-19 funeral
assistance program.
How has FEMA addressed these findings?
How can Congress help the Agency do so better?
Answer. FEMA is working on multiple initiatives to address the
findings of the Government Accountability Office (GAO) report. The
Office of Response and Recovery's Field Operations Directorate is
leading the charge on building a workforce readiness cycle that
accounts for sustained increases in operational tempo. More
specifically, this initiative is focusing on ensuring effective
recruitment and retention, improved training and qualification,
predictable deployment and demobilization, and support for our
workforce with adequate rest/reset periods during and between
deployments for development and retention.
Additionally, as part of the FEMA Administrator's Annual Planning
Guidance, Individual Assistance is implementing a workforce
modernization strategy. This work focuses on increasing the staff to
meet the demand for most minor to moderate disasters without the need
for just in time augmentation staffing solutions. On an annual basis,
80 percent of disasters are classified as a Type II or Type III event.
Despite its challenges, COVID-19 Funeral Assistance was an
extraordinary form of assistance provided during an unprecedented
pandemic. FEMA developed a specific structure to implement COVID-19
Funeral Assistance which required additional requirements for the
workforce and additional training. As a result of this work, FEMA has
been able to provide $2.8B to more than 551,000 individuals for COVID-
19 Funeral Assistance.
FEMA continues to identify opportunities and resources necessary to
invest both in our workforce and technology advancements necessary to
serve our survivors.
Question 9.b. In a report on recovery efforts in Puerto Rico of May
2021, GAO made two recommendations: (1) That FEMA should, in
coordination with the Government of Puerto Rico and other federal
agencies, identify and assess risks to the remainder of the recovery,
including internal and external factors such as capacity to carry out
projects. For example, taking into consideration if we have the
resources to start and finish projects within a time limit or if more
time is needed. (2) That FEMA should identify potential actions to
manage risks to the remainder of Puerto Rico's recovery and
continuously monitor risks.
Same questions: what follow-up has there been to these
recommendations?
How can Congress help the Agency do better?
Answer. GAO recommended that the FEMA Administrator, in
coordination with the Government of Puerto Rico and relevant federal
agencies:
Recommendation 1: Identify and assess the risks to the
remainder of Puerto Rico's recovery, including internal and external
factors, such as Puerto Rico's capacity to carry out projects.
FEMA's Response: FEMA concurred with this recommendation and
in March 2021, FEMA Region 2, in coordination with the Federal
Disaster Recovery Coordinator and the Government of Puerto
Rico, started a formal risk assessment process modeled after
FEMA's enterprise risk management framework. FEMA also
coordinated with relevant federal agencies, as appropriate,
while continuing the risk assessment process to identify and
assess the risks to the remainder of Puerto Rico's recovery,
including internal and external factors.
Status: FEMA leadership from Region 2, Headquarters, and the
Joint Recovery Office, met with COR3 leadership for a weeklong
summit. During this conference, FEMA introduced the Risk
Framework Plan and updated implementation deadlines outlined in
Region 2's ``Interim Milestones'' within the approved September
2022 Estimated Completion Date (ECD) extension memo request.
The ECD for this work is March 31, 2023.
Recommendation 2: Identify potential actions to manage
the risks to the remainder of Puerto Rico's recovery and continuously
monitor risks.
FEMA's Response: FEMA concurred with this recommendation, and
through its risk assessment process FEMA Region 2 identified
potential actions to manage risks to the remainder of Puerto
Rico's recovery. FEMA Region 2 will also develop a process to
ensure continuous monitoring of risks.
Current Status: FEMA continues to collaborate with the
Government of Puerto Rico to provide viable solutions to risks
identified in the Risk Framework Plan and develop a plan for
consistent updates to monitor risk. The ECD for this work is
March 31, 2023.
FEMA has identified the following Interim Milestones in the
execution of the Framework:
------------------------------------------------------------------------
Interim Milestones Estimated Completion Date
------------------------------------------------------------------------
1. Risk management Stakeholder Meeting August 30, 2022--Complete.
with COR3.
2. Plan Management Efforts: Update all October 30, 2022--Complete.
deadlines in draft.
3. Adopt Plan and Continuous Update January 30, 2023.
Schedule.
------------------------------------------------------------------------
During the next quarter, Region 2 will conduct working sessions
with COR3 to finalize the Framework, coordinate and monitor the
execution of mitigation strategies.
Question 10. A complaint we have received is that there are times
when denials of assistance are caused by some incomplete documentation
at an early stage of the process, but that is not notified until after
the denial.
How can we update processes so that when there are necessary
documents missing, they are requested it immediately, instead of
waiting until late in the process?
Answer. FEMA continually reviews our policy and processes to remove
barriers to FEMA programs through a people-first approach. As part of
this effort, FEMA implemented policy and procedural changes that
reduced administrative burden, enhanced access to disaster assistance
and expanded eligibility for marginalized and underserved populations.
Some of these key changes included re-evaluating automated third party
data matching verification for identity, utilizing past disaster data
from FEMA's system of record to verify occupancy and ownership,
authorized inspectors to view and approve occupancy and ownership
verification documentation, expanded the forms of documentation to
prove ownership and occupancy, and allowed as a last resort self-
certification of occupancy and ownership for mobile homes and travel
trailers and self-certification of ownership for heirship properties.
In addition to these changes, FEMA is also working to make further
enhancements to the determination process as part of the next update to
FEMA's Individual Assistance Program and Policy Guide. FEMA anticipates
that this Guide will be sent out for public comment in Spring 2023. As
part of FEMA's ongoing efforts to remove barriers and improve the
service provided to survivors, FEMA also established informed and
consistent Enhanced Applicant Services to provide proactive and
targeted case work for disaster survivors for the 2022 Hurricane
Season. This ensures that survivors can navigate the recovery process,
maximize assistance from FEMA and be provided with necessary referrals
for additional unmet needs from other partners.
Question 11. Should Congress work towards creating a ``one stop''
process for disaster response and recovery? So that individuals and
entities governments can submit all their information just once, in one
format, be told right then if it is all in order, and not have to keep
submitting different applications with different information and
different timelines to different agencies?
What would be possible obstacles to such an action?
Answer. Should Congress wish to propose such language, FEMA would
be happy to provide technical drafting assistance. For example, FEMA
has provided technical drafting assistance on H.R. 8416, the Disaster
Survivors Fairness Act, since it was introduced in the House in July
2022. Possible obstacles to legislation creating a ``one stop'' process
is that Congress has authorized many different types of programs
responsive to response and recovery from a disaster, and such
authorities drive different information and documentation requirements.
Additionally, FEMA is working to simplify programs and reduce
barriers to improve customer experience and deliver simple, seamless,
and secure delivery of federal assistance. In part, this includes work
to simplify the registration process through simple, plain language,
needs-based forms to apply for assistance.
Question 12. As we speak, we are watching out for a tropical storm
which could leave large segments of isolated populations without
electric power, especially the case in our rural areas.
A concern that has been raised about procurement requirements is if
the technological advancements may be faster than the process for
including some technologies in the agencies' approved lists, or the
items that ARE in the approved lists may not be available at the time
of need. For example light portable solar power capabilities, flexible
panels and such to power communications equipment.
Can we count on DHS and FEMA to enable local first responders and
local governments the capability of purchasing state-of-the-art solar
power products that would be available but may not be in the pre-
approved list, if they meet the performance requirements, the made in
America requirements and so forth?
Answer. Yes. When contracting for Presidentially declared
emergencies and disasters, FEMA follows Federal Acquisition Regulation
Part 18 and either sets aside procurements for local area businesses or
includes an evaluation preference whenever possible and practicable.
Additionally, The Stafford Act ensures local businesses are given
preference during emergencies, and provides for local area set-asides
to ensure that contractors in disaster areas are given preferences to
federal contracts in response to a major disaster or emergency. FEMA's
Office of the Chief Component Procurement Officer is committed to using
local firms in disaster areas to the maximum extent practicable. As set
forth in FAR 26.204, 42 U.S.C. 5150(b)(1) requires that, subsequent to
any Presidential declaration of a major disaster or emergency, any
expenditure of Federal funds, under an emergency response contract not
awarded to a local firm, must be justified in writing in the contract
file.
Questions from Hon. Dina Titus to Chris P. Currie, Director, Homeland
Security and Justice, U.S. Government Accountability Office
Question 1. Liquidity constraints among Public Assistance Program
Applicants in the U.S. Virgin Islands and Puerto Rico have been a
longstanding concern.
1.a. What specific actions has FEMA taken to ensure that funding
is available to Applicants to launch obligated projects? What
additional actions could FEMA take towards this end?
Answer. In our body of work on disaster recovery in the U.S. Virgin
Islands (USVI) and Puerto Rico, we have identified difficulties in
providing initial construction funding for projects due to funding
liquidity constraints and FEMA's actions to address them. Specifically,
in our May 2021 report, we identified risks that could affect
construction of recovery projects in Puerto Rico due to financial
austerity measures its government put in place beginning in August
2015.\1\ To address these risks, we recommended in our May 2021 report
that, in coordination with the government of Puerto Rico and relevant
federal agencies, FEMA identify and assess the risks to the remainder
of Puerto Rico's recovery, including internal and external factors,
such as Puerto Rico's capacity to carry out projects. In addition, we
recommended that FEMA identify potential actions to manage the risks to
the remainder of Puerto Rico's recovery and continuously monitor risks.
---------------------------------------------------------------------------
\1\ GAO, Puerto Rico Recovery: FEMA Made Progress in Approving
Projects, But Should Identify and Assess Risks to the Recovery, GAO-21-
264 (Washington, D.C.: May 19, 2021).
---------------------------------------------------------------------------
In response, the U.S. Department of Homeland Security (DHS)
reported that FEMA, in coordination with the government of Puerto Rico,
started a formal risk assessment process modeled after FEMA's
enterprise risk management framework. FEMA reported that it completed
its risk assessment process in November 2021. The agency has also taken
additional steps toward addressing these recommendations by drafting a
risk assessment plan for Puerto Rico's disaster recovery and developing
plans to review it with Puerto Rico government officials before its
anticipated adoption in January 2023. Further, FEMA has set risk
assessment related goals for FEMA personnel involved in the grant
funding process for Puerto Rico. As part of our ongoing work, we plan
to identify and report on FEMA's actions to address challenges to
providing initial construction funding for recovery projects in Puerto
Rico.
In addition, we reported in May 2021, that to help address
challenges and expedite obligations, FEMA implemented changes to the
Public Assistance program in Puerto Rico by instituting a new award
strategy, known as FEMA's Accelerated Award Strategy (FAASt), for
certain recipients (August 2019). FAASt allows these recipients to use
a sample of the information needed to extrapolate costs and develop a
fixed cost estimate for permanent work projects. This is different from
the non-accelerated approach where the costs for each damaged site are
calculated to create the fixed cost estimates.
Using the accelerated award strategy, FEMA approved $10.7 billion,
$4.2 billion, and $2.35 billion in fixed cost estimates for Puerto
Rico's Electric Power Authority, Aqueduct and Sewer Authority, and
Department of Education, respectively, and obligated $9.46 billion,
$3.66 billion, and $2.06 billion in federal share, respectively as of
January 15, 2021. Under this approach, the obligation of the fixed cost
estimate works as a recovery budget rather than authorization for
construction of projects. Puerto Rico agencies must still submit
documentation to FEMA for review and approval of individual projects.
This is different from the non-accelerated approach where projects are
approved along with the obligation of funds.
In our ongoing work, our preliminary observations are that the
FAASt process has permitted obligation drawdowns for architecture and
engineering studies and design work prior to the construction of
projects. This allows for the reimbursement of grant subrecipients
earlier in the grant process and affords the opportunity for
subrecipients to reuse funds in subsequent phases of recovery. We plan
to monitor and report on FAASt funding obligations and disbursements
for recovery projects as part of our ongoing work.
1.b. What authorities, if any, should Congress consider to address
the strains that FEMA's reimbursement-based assistance model places on
Applicants with few financial resources?
Answer. We have not specifically examined this issue; however, our
body of work on disaster recovery has identified opportunities for
Congress to streamline the appropriation of disaster recovery funding--
specifically the Department of Housing and Urban Development's (HUD)
Community Development Block Grant Disaster Recovery (CDBG-DR) funding.
In March 2019, we reported that, due to the lack of permanent statutory
authority, CDBG-DR appropriations require HUD to customize grantee
requirements for each disaster in Federal Register notices--a time-
consuming process that has delayed the disbursement of funds.\2\ The ad
hoc nature of CDBG-DR has created challenges for CDBG-DR grantees, such
as lags in accessing funding and varying requirements. CDBG-DR grantees
have also experienced administrative challenges not related to the lack
of permanent statutory authority, such as challenges with grantee
capacity, procurement, and improper payments. HUD officials, at the
time, said that permanently authorizing CDBG-DR would allow HUD to
issue permanent regulations for disaster recovery.
---------------------------------------------------------------------------
\2\ GAO, Disaster Recovery: Better Monitoring of Block Grant Funds
Is Needed, GAO-19-232 (Washington, D.C.: Mar. 25, 2019).
---------------------------------------------------------------------------
We recommended that Congress should consider legislation
establishing permanent statutory authority for a disaster assistance
program administered by HUD or another agency that responds to unmet
needs in a timely manner and directing the applicable agency to issue
implementing regulations. A bill introduced and passed by the House of
Representatives in the 116th Congress, HR 3702, would have permanently
authorized the CDBG-DR program. However, after referral to the relevant
Senate committee, the bill did not advance.
Questions from Hon. Sharice Davids to Chris P. Currie, Director,
Homeland Security and Justice, U.S. Government Accountability Office
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes.
1.a. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects?
Answer. Our body of work on disaster recovery in the USVI and
Puerto Rico has identified several factors related to recovery project
approval and the obligation of funds that could contribute to delays in
construction. In May 2021, we reported that grant subrecipients' in
Puerto Rico lack of expertise to develop Public Assistance projects had
resulted in the need for additional coordination with FEMA officials or
hiring contractors, which could delay the process.\3\ At the time, we
said that this could specifically affect projects being developed by
Puerto Rico's Electric Power Authority, Aqueduct and Sewer Authority,
and Department of Education under FEMA's Accelerated Award Strategy
(FAASt) procedures that had been obligated and required completion
within 5 years. Additionally, FEMA officials told us that this lack of
expertise could also affect grant subrecipients' ability to incorporate
mitigation and resilience efforts into Public Assistance projects or
Hazard Mitigation Grant Program projects.
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\3\ GAO-21-264
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Further, we reported that Puerto Rico's fiscal condition at the
time made it difficult for grant subrecipients to provide initial
funding to begin construction on projects. Because the Public
Assistance grant program is a reimbursement program and grant
subrecipients must provide initial funding for projects before seeking
reimbursement, many projects had been approved and obligated, but work
on the projects had not started. To begin construction, we reported
that grant subrecipients could use other federal funding sources, such
as HUD's Community Development Block Grant Disaster Recovery (CDBG-DR)
funds, or request advance payments from Puerto Rico's Central Office of
Recovery, Reconstruction, and Resiliency (COR3) to access initial
funding for a project. However, FEMA and Puerto Rico officials said
these options were unlikely to fully address the need for funding. In
addition, officials said that even after funds had become available,
Puerto Rico would likely face risks finding the capacity to handle the
sheer number of projects needing construction due to the simultaneous
need to procure labor, equipment, and materials to start construction.
As we mentioned in our September 2022 testimony based on our
preliminary observations from our ongoing work, another contributing
factor to delays in approving funds includes difficulties between FEMA
and grant applicants in reaching agreement on scopes of work for Public
Assistance projects. For example, grant subrecipients stated that they
have experienced challenges getting approval from FEMA to make
improvements to a project beyond damages sustained from Hurricane Maria
and having them covered by Public Assistance funding.
Our body of work has not included an examination or recommendations
related to how the federal government can speed up disaster related
projects; however, as part of our ongoing work, we plan to identify and
assess the actions FEMA is taking to address challenges to Puerto
Rico's disaster recovery.
1.b. Are there any legislative changes that we could make to
improve this process?
Answer. We have not identified any legislative additions or changes
that Congress should consider to improve FEMA's obligation process for
Public Assistance and Hazard Mitigation Grant Program projects.
Questions from Hon. Jenniffer Gonzalez-Colon to Chris P. Currie,
Director, Homeland Security and Justice, U.S. Government Accountability
Office
Question 1. Not just with the electricity issue, but with every
other area of rebuilding: There is concern that with inflation, supply
chain and job market issues that have developed in the past 3 years,
the estimates upon which obligations were made may no longer suffice
for completion of the work for which they were approved.
1.a. How are such considerations addressed today?
Answer. As part of our ongoing work, our review includes meeting
with FEMA and Puerto Rico officials to obtain their perspective on
challenges to recovery, such as rise of inflation and supply chain
issues affecting the fixed cost estimates developed under Public
Assistance alternative procedures. Further, we plan to identify and
report on FEMA's actions to address these challenges. As we stated in
our September 2022 testimony, Puerto Rico agency officials that we have
interviewed thus far have stated concerns that inflation will increase
the cost of executing projects and exceed FEMA's grant obligations for
some projects. In addition, some grant subrecipients we have
interviewed have said that they have started to see increases in the
cost of some basic supplies, such as concrete. FEMA officials have told
us that Public Assistance fixed cost estimates accounted for escalation
in costs, but they are monitoring for cases of project cost increases
that exceed 50 percent of the original fixed-cost estimate.
Further, as mentioned in our September 2022 testimony, FEMA is
developing a risk management plan to monitor and mitigate risks to
recovery in the USVI and Puerto Rico, such as insufficient construction
supplies in Puerto Rico for grant subrecipients to complete recovery
projects. According to FEMA officials, they anticipate adoption of this
plan in January 2023.
1.b. Is there a better way this could be addressed? What can
Congress do? How do we prevent the recovery from falling short?
Answer. Our prior work has not included an examination or
recommendations related to the impact of inflation on obligations based
on fixed cost estimates under the Public Assistance Alternative
Procedures; however, as part of our ongoing work, we plan to identify
and assess the actions FEMA is taking to address challenges to Puerto
Rico's disaster recovery.
1.c. Puerto Rico municipalities and even state government offices
do not have the cash flow or the credit to support a reimbursement-
based process. Is there an alternative that still safeguards taxpayer
funds?
Answer. We have not specifically examined alternative approaches to
FEMA's reimbursement-based process for Public Assistance projects.
However, in our ongoing work, our preliminary observations are that
FEMA has allowed certain flexibilities to disburse funding for certain
aspects of a Public Assistance project. Specifically, our preliminary
observations are that FEMA's Accelerated Award Strategy (FAASt) process
has permitted obligation drawdowns for architecture and engineering
studies and design work prior to the construction of projects. This
allows for the reimbursement of grant subrecipients earlier in the
grant process and affords the opportunity for subrecipients to reuse
funds in subsequent phases of recovery. Additionally, according to FEMA
and COR3 officials we spoke with, COR3 disburses all Public Assistance
funds for small projects that FEMA has obligated directly to the
subrecipient (effective August 3, 2022, the threshold of small projects
was increased from $132,800 to $1,000,000 for unobligated projects for
major disasters and emergencies declared on or after March 13,
2020).\4\
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\4\ See 87 Fed. Reg. 47359 (Aug 3, 2022).
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GAO Reports:
Question 2.a. GAO reported that workforce-related issues impacted
the quality of recovery services. In January 2022, GAO identified
factors limiting FEMA's workforce readiness of high turnover rates,
burnout due to increased pace of disasters, and low morale have made it
challenging for FEMA's workforce to implement the COVID-19 funeral
assistance program.
2.a.i. How has FEMA addressed these findings?
Answer. The increased frequency and cost of disasters and FEMA's
support of numerous efforts outside of its normal core responsibilities
present challenges to FEMA's workforce. Some of FEMA's key workforce
challenges related to turnover, burnout, and morale, along with the
steps FEMA has taken to address them are listed below:
Staffing shortages. As we stated in our January 2022
testimony, FEMA has faced a number of staffing challenges that can
affect the agency's ability to achieve its mission to help people
before, during, and after disasters. While our current recommendations
do not directly address these challenges, we have ongoing work
examining FEMA's hiring and staffing processes. We expect to report on
this work in spring 2023.
Workplace culture and morale. In recent years, there have
been concerns about FEMA's workplace culture and climate, specifically
regarding harassment and discrimination, which can affect workforce
morale and retention.\5\ In December 2020, FEMA issued its first action
plan for culture improvement, which has since been incorporated into
other strategic planning efforts. Since issuing this plan, FEMA has
taken various steps to implement its culture improvement efforts. For
example, FEMA's senior leaders held town halls to address FEMA's
culture improvement initiatives and engaged with FEMA's employee groups
to discuss how they can help build employee engagement. To ensure
continuity and to determine the effectiveness of its efforts, we
recommended that FEMA designate an individual or entity responsible for
oversight, and establish goals and measures for its cultural
improvement efforts.\6\ FEMA concurred with this recommendation,
stating that it plans to address these recommendations through its
Diversity, Equity, Inclusion, and Accessibility Strategic Plan, which
is currently being drafted.
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\5\ In 2018, FEMA began an investigation into allegations of
harassment and misconduct by a senior executive within the agency. In
2019, FEMA commissioned a survey from the RAND Corporation to estimate
the prevalence of harassment and discrimination. In its 2020 report,
the RAND Corporation estimated that 29 percent of FEMA employees
experienced discrimination or harassment related to sex, gender, or
race/ethnicity in the previous year. See RAND Corporation, Harassment
and Discrimination on the Basis of Gender and Race/Ethnicity in the
FEMA Workforce (2020).
\6\ GAO, FEMA Workforce: Additional Actions Needed to Help Prevent
and Respond to Discrimination and Harassment, GAO-23-105243
(Washington, D.C.: Oct. 20, 2022).
2.a.ii. How can Congress help the Agency do so better?
Answer. Our body of work on this issue has not identified any
actions Congress should consider taking in relation to employee
turnover, burnout, or morale. However, to further explore these issues,
we are currently conducting work related to FEMA's recruitment and
hiring.
Question 2.b. In a report on recovery efforts in Puerto Rico of May
2021, GAO made two recommendations: (1) That FEMA should, in
coordination with the Government of Puerto Rico and other federal
agencies, identify and assess risks to the remainder of the recovery,
including internal and external factors such as capacity to carry out
projects. For example, taking into consideration if we have the
resources to start and finish projects within a time limit or if more
time is needed; and (2) that FEMA should identify potential actions to
manage risks to the remainder of Puerto Rico's recovery and
continuously monitor risks.
2.b.i. Same questions: what follow-up has there been to these
recommendations?
Answer. In response to our May 2021 report, DHS reported that FEMA,
in coordination with the government of Puerto Rico, started a formal
risk assessment process modeled after FEMA's enterprise risk management
framework. FEMA will also identify potential actions to manage risks to
the remainder of Puerto Rico's recovery through its risk assessment
process, and will develop a process to ensure continuous monitoring of
risks.
In November 2021, FEMA reported that it completed its risk
assessment process,\7\ and based on this assessment, is developing a
risk management plan that summarizes the risk management process and
mitigation measures FEMA will implement to address the assessment
findings. According to DHS, once completed, this plan will identify
potential actions to manage risks to the remainder of Puerto Rico's
recovery, and FEMA Region 2 will develop a process to ensure continuous
monitoring of risks. This plan is currently in draft form, and FEMA
expects its adoption in January 2023. According to FEMA, the agency is
in the process of collaborating with its partners to review and assess
solutions to the risks identified in the plan.
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\7\ This risk assessment process included an environmental scan to
assess the degree to which the Agency already had a risk framework,
establishment of working groups across FEMA (including headquarters and
Region II), validation of risks, and a prioritization of risks, among
other actions.
2.b.ii. How can Congress help the Agency do better?
Answer. Our body of work on this issue has not identified any
actions Congress should consider to assist the agency in its mission in
Puerto Rico.
Question 3. Should Congress work towards creating a ``one stop''
process for disaster response and recovery? So that individuals and
entities governments can submit all their information just once, in one
format, be told right then if it is all in order, and not have to keep
submitting different applications with different information and
different timelines to different agencies?
What would be possible obstacles to such an action?
Answer. We have not specifically examined cross-agency
collaboration and requirements for parallel applications submitted by
individuals and government entities. In our ongoing work, we plan to
examine and report on challenges grant recipient face obtaining
approval for and starting construction on disaster recovery projects,
which may include information on FEMA's application processes for
Public Assistance and Hazard Mitigation Grant Program funds.
Additionally, we have ongoing work examining the federal government's
approach to disaster recovery, and actions Congress or federal agencies
can take to provide a more efficient and effective approach to disaster
recovery. We expect to issue our report in mid-November 2022.
Question 4. Passed in committee and before the Senate are HR 2020
to require the Office of Management and Budget to make available
quarterly reports on the flow and use of recovery funds; and HR 2016
plans for streamlining and consolidating information collection and
preliminary damage assessments. Are these measures that would be of use
in improving recovery processes?
Answer. We have not specifically examined the potential effects of
these bills on disaster recovery processes nor has our body of work on
disaster recovery grants provided related recommendations. As part of
our ongoing work, we plan to identify and report what actions FEMA has
taken since fiscal year 2021 to address challenges and risks to
providing initial construction funding for projects, which may include
information on challenges and outcomes related development of fixed
cost estimates under FEMA's Public Assistance Alternative Procedures.
Generally, we would support a bill that streamlines the federal
disaster funding processes and any regulatory requirements across
agencies and which provides additional oversight and transparency. Our
ongoing work may include information on reforms the federal government
can make to its disaster recovery. Specifically, we are currently
examining the federal government's approach to disaster recovery and
actions Congress or federal agencies can take to provide a more
efficient and effective approach to disaster recovery. We expect to
issue our report in mid-November 2022.
Questions from Hon. Dina Titus to Adrienne L. Williams-Octalien,
Director, Office of Disaster Recovery, U.S. Virgin Islands
Question 1. Liquidity constraints among Public Assistance Program
Applicants in the U.S. Virgin Islands and Puerto Rico have been a
longstanding concern.
1.a. What specific actions has FEMA taken to ensure that funding
is available to Applicants to launch obligated projects? What
additional actions could FEMA take towards this end?
1.b. What authorities, if any, should Congress consider to address
the strains that FEMA's reimbursement-based assistance model places on
Applicants with few financial resources?
Question 2. Are there any ways in which FEMA is not making full use
of the additional statutory authorities provided to expand the scope of
rebuilding in Puerto Rico and the Virgin Islands under the Bipartisan
Budget Act of 2018 and the Disaster Relief Act of 2019?
Question 3. What are the new recovery challenges today that
Congress has not been made aware of previously? For example, how are
inflation and supply chain and labor shortages affecting your recovery?
Question 4. FEMA Administrator Criswell visited the USVI in August
2022. What topline messages did the USVI government convey in
Administrator Criswell's visit about the status of recovery efforts or
about how FEMA can better assist USVI in recovery efforts? Did FEMA
commit to working with the USVI to address those topline messages?
Question 5. Do you believe the authorities provided in the BBA
should be expanded to include roads? If the BBA covered roads what
impact would this have to the recovery in USVI?
Question 6. Due to liquidity constraints in USVI it is Congress's
understanding that the majority of USVI's CDBG-DR funding will be
directed to cover the non-federal cost-share for FEMA PA projects. What
community development projects might have USVI used this money for if
the federal cost share for FEMA projects was raised to 100%?
Answers to Questions 1-6. Answers were not received at the time of
publication. If answers arrive after publication, they will be made
available online at the House of Representatives Document Repository at
https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Question from Hon. Sharice Davids to Adrienne L. Williams-Octalien,
Director, Office of Disaster Recovery, U.S. Virgin Islands
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects? Are there any legislative
changes that we could make to improve this process?
Answer. An answer was not received at the time of publication. If
an answer arrives after publication, it will be made available online
at the House of Representatives Document Repository at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Questions from Hon. Daniel Webster to Adrienne L. Williams-Octalien,
Director, Office of Disaster Recovery, U.S. Virgin Islands
Question 1. The USVI Water and Power Authority (WAPA) has received
a significant amount of funding since the 2017 hurricanes. However, it
seems the USVI is planning to transition to solar energy despite
outstanding obligations for the existing Liquid Propane Gas (LPG)
system.
1.a. What is the USVI doing to ensure existing obligations for LPG
are met?
1.b. How is the USVI using Federal funding to support rebuilding
and repairing USVI's existing power capability?
1.c. Are effects important from the standpoint of disaster
mitigation, for example, the effects on floodplains, considered in the
event of new solar development? Please explain.
Answers to Questions 1.a., 1.b., & 1.c. Answers were not received
at the time of publication. If answers arrive after publication, they
will be made available online at the House of Representatives Document
Repository at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=115108.
Questions from Hon. Dina Titus to Hon. Manuel Laboy, Executive
Director, Central Office for Recovery, Reconstruction, and Resiliency,
Puerto Rico
Question 1. Liquidity constraints among Public Assistance Program
Applicants in Puerto Rico have been a longstanding concern.
1.a. What specific actions has FEMA taken to ensure that funding
is available to Applicants to launch obligated projects? What
additional actions could FEMA take towards this end?
1.b. What authorities, if any, should Congress consider to address
the strains that FEMA's reimbursement-based assistance model places on
Applicants with few financial resources?
Question 2. Are there any ways in which FEMA is not making full use
of the additional statutory authorities provided to expand the scope of
rebuilding in Puerto Rico under the Bipartisan Budget Act of 2018 and
the Disaster Relief Act of 2019?
Question 3. FAASt awards account for nearly $16 billion in PA
obligations, for four Applicants. However, COR3 data reflects
disbursement of $200 million (1.3%) for these Applicants' hurricane
recovery projects.
3.a. What accounts for this disparity, and what actions, if any,
can COR 3 or FEMA take to expedite these critical projects?
3.b. What actions have FEMA and the government of Puerto Rico
taken in recognition of cash flow limitations that may be limiting
these disbursements, particularly as the Public Assistance program is
generally reimbursable only?
Answers to Questions 1-3. Answers were not received at the time of
publication. If answers arrive after publication, they will be made
available online at the House of Representatives Document Repository at
https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Question from Hon. Sharice Davids to Hon. Manuel Laboy, Executive
Director, Central Office for Recovery, Reconstruction, and Resiliency,
Puerto Rico
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects? Are there any legislative
changes that we could make to improve this process?
Answer. An answer was not received at the time of publication. If
an answer arrives after publication, it will be made available online
at the House of Representatives Document Repository at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Questions from Hon. Jenniffer Gonzalez-Colon to Hon. Manuel Laboy,
Executive Director, Central Office for Recovery, Reconstruction, and
Resiliency, Puerto Rico
Question 1. 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 were made may no longer suffice for
completion of the work for which they were approved.
1.a. How is this to be addressed, how should it be addressed?
1.b. Puerto Rico municipalities and even state government offices
do not have the cash flow or the credit to support a reimbursement-
based process. Is there an alternative that still safeguards taxpayer
funds?
Question 2. Factions in the Island have demanded that FEMA deny
funding to anything that is not distributed renewables, or even that
Congress should command it. Is it wise to micromanage this from DC, or
should that be subject to Puerto Rico's resources plan, and the needs
determined on the ground?
Question 3. For a long-time during recovery there have been
complaints about contractors or providers not receiving payment in a
timely fashion. Has there been an improvement in the promptness of
processing payment for contractors of municipalities and other
subrecipients? Can you quantify the rate of this improvement?
Question 4. The first draft fiscal restructuring plan for PREPA was
rejected earlier this year and is being worked on as we speak. How does
the completion or not of that fiscal restructuring affect or not affect
the recovery plans in the long term?
Answers to Questions 1-4. Answers were not received at the time of
publication. If answers arrive after publication, they will be made
available online at the House of Representatives Document Repository at
https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Questions from Hon. Sharice Davids to Shay Bahramirad, Ph.D., Senior
Vice President of Engineering, Asset Management, and Capital Programs,
LUMA Energy
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects? Are there any legislative
changes that we could make to improve this process?
Answer. As stated in our testimony, 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 Partnership Authority, the
Central Office for Recovery, Reconstruction and Resiliency (``COR3'')
and PREPA to develop and advance a series of federally funded
infrastructure improvement projects to transform and modernize Puerto
Rico's energy system.
In 16 months, LUMA has advanced 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 October 15, 2022, LUMA has initiated 239 projects with FEMA
\1\, representing more than $6 billion worth of federally funded
projects. In contrast, only 35 project submissions for T&D repairs
related to Hurricane Maria had even been made before LUMA assumed
operations on June 1, 2021.
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\1\ At the time of our latest filing to the Puerto Rico Energy
Bureau (``PREB''): the number of initiated projects stood at 206. Of
those, 204 projects have a FEMA FAAST number and two were awaiting
confirmation.
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Obligated FEMA Projects: LUMA has received, to date, FEMA
approval for 37 critical infrastructure projects \2\ including:
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\2\ At the time of our latest filing to the PREB: 19 projects had
received FEMA approval. This represents $756.5 million and includes the
equipment and materials for projects.
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+ 27 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 transmission reconstruction projects, including those
targeting Line 2200, Line 13300 and Line 6700 that will help improve
the critical energy infrastructure that delivers energy across the
island.
+ Five substation modernization projects that will address the
critical role played by substations in helping deliver energy to
communities across Puerto Rico beginning in the municipalities of
Catano, Vieques, Culebra, Manati and Costa Sur.
+ A critical EMS (emergency management system) project to FEMA,
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 18 FEMA funded projects across Puerto Rico including:
+ Five initial streetlight projects as part of LUMA's $1 billion
Community Streetlight Initiative in the municipalities of Guanica,
Lajas, Aguada, Maunabo and Luquillo--in less than three months, LUMA
has installed over 12,000 streetlights.
+ One critical transmission line repair project to reduce the
potential for future outages.
+ Twelve distribution pole replacement projects to increase the
reliability and resiliency 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 long-lead
material, mainly grid equipment including breakers, transformers, and
reclosers.
Developed four proposals of Hazard Mitigation for non-
damaged infrastructure that COR3 is reviewing before submission to
FEMA, which would represent $900 million for the deployment of
technologies, including an advanced metering infrastructure, an
advanced microgrid project, and mobile microgrids to enable renewable
energy and make communities resilient.
Taken in totality, over the coming months and years, FEMA-funded
projects that are being directed by LUMA will not only represent the
largest capital energy program in Puerto Rico's history, but it will
also represent 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, strengthen and transform the long-term future of Puerto
Rico's energy grid.
B. Working Closely with FEMA on Emergency Preparedness
In addition to moving forward with 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 Hurricane Maria and the lasting
effects it has had on the people of Puerto Rico, LUMA has made
preparing for emergency events, like hurricanes, a daily and year-round
priority. As part of our emergency preparedness efforts, we have worked
closely with FEMA, PREMB and 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 2022, 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 the Federal Emergency
Management Agency (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 were
completed with FEMA and DOE/ESF 12/PREPA/PREMB and other local
stakeholders.
Procuring and maintaining a fleet of 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 8,000 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:
+ 21,000 poles
+ 17 million feet of cables
+ 3,200 transformers
+ 58,000 LED luminaries
+ 154,000 insulators
+ 1,800 switches/breakers
+ 29,000 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 have established mutual aid agreements with the
Caribbean Electric Utility Services Corporation (CARILEC), Edison
Electric Institute (EEI) and the American Public Power Association
(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 the 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. FEMA Process Improvements
The topic of FEMA project delays was a main conversation driver at
the September 15 hearing. The information provided by other witnesses
was very illustrative of the current challenges faced by the Government
of Puerto Rico regarding project deliveries.
As discussed during the hearing, a major obstacle to recovery in
Puerto Rico is the inability to quickly access working capital. This is
of particular importance to large infrastructure and construction
projects.
As an example, the Public Assistance program is generally
structured as a reimbursement program that requires the recipient and
subrecipients to have enough liquidity at hand to begin expensing
funds, an issue Puerto Rico also faced following the hurricanes of
2017.
In past disaster events, including those managed by recipients in
the States of Louisiana, Mississippi, Texas, and Florida following
major hurricanes in 2004, 2005, and 2008, there was greater flexibility
with respect to recipients' authority to provide advance funding to
subrecipients. During these older events, the applicable financial
management regulations contained in 44 C.F.R. Part 13 allowed
``advances to Subrecipients in the amount of 50 percent of the funds
obligated by FEMA under Public Assistance subgrants.''
However, changes in federal regulations made it more difficult to
provide the financial support that subrecipients in Puerto Rico needed
to begin the substantial recovery effort. Specifically, 2 C.F.R.
200.305(b)(1) provides that, ``Advance payments to a non-Federal entity
must be limited to the minimum amounts needed and be timed to be in
accordance with the actual, immediate cash requirements of the non-
Federal entity in carrying out the purpose of the approved program or
project.''
Although the introduction of the FEMA Accelerated Award Strategy
(``FAASt'') has allowed FEMA to expedite the obligation of funds, it
did not authorize any related construction and required that all
projects needed to be formulated through FEMA's National Delivery Model
by submitting detailed scopes of work for environmental and historic
preservation compliance, and to request additional funding on a
project-basis for hazard mitigation measures.
Furthermore, COR3 has recently released a new funding support
program available to subrecipients, implemented specifically to provide
a mechanism to advance the federal share of funds for approved
permanent work projects under FEMA's Public Assistance related to
Hurricane Maria and the earthquake disaster.
D Potential Avenues of Support from Congress
According to COR3, Puerto Rico currently has 9,186 time extension
requests pending with FEMA. Historically, FEMA has set relatively short
time extensions that are unrealistic. Congressional support encouraging
FEMA to grant longer time extension requests would go a long way to
provide stability to subrecipients and all stakeholders.
Furthermore, according to the Public Assistance Program and Policy
Guide (PAPPG) (FP 104-009-02), FEMA must review each Public Assistance
project to ensure the work complies with applicable federal
Environmental and Historic Preservation (EHP) laws and their
implementing regulations, and applicable Executive Orders. Congress
should explore alternatives to expedite the review process and obligate
as many projects as possible in light of the fifth anniversary of the
hurricanes of 2017.
Questions from Hon. Jenniffer Gonzalez-Colon to Shay Bahramirad, Ph.D.,
Senior Vice President of Engineering, Asset Management, and Capital
Programs, LUMA Energy
Question 1. FEMA has allocated $9.5 Billion in Federal Funding for
the rebuilding and upgrading of the Puerto Rico Electric Grid, and is
working with the Department of Energy in the PR100 study to determine
the best way to achieve 100% renewables goal.
1.a. What can you tell us briefly about the status of FAASt
funding, and the timelines involved?
Answer. The Puerto Rico Energy Power Authority (``PREPA'') funds
under FAASt were obligated in September 2020. According to information
provided by COR3, under FAASt, FEMA has obligated a federal share of
$9.5 billion for PREPA, $3.7 billion for PRASA, and $2.1 billion for
the Department of Education:
These subrecipients have collectively submitted 90 scopes of
work for validation by FEMA and $222.8 million has been
disbursed. Notably, the projects that will be executed under
FAASt by PREPA will be critical for renewable energy
integration to ensure sustainability and resiliency in future
disasters. (See Figure 4 in Appendix).
LUMA is currently focused on preparing Detailed SOW and cost
estimates for T&D projects that currently have both PREB approval and
FEMA project numbers.
Please see LUMA's September 16, 2022, submission to PREB \3\ for
tables that show the current set of projects, by asset category, along
with the estimated timing for Detailed SOWs submittals to COR3 and
FEMA.
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The estimation of project submission timing noted in the September
16th submission is based on the best information available to LUMA at
the time of filing our latest PREB report. LUMA is focused on meeting
or exceeding the project submission estimates listed in the table
below.
1.b. Have the Action Plans and the quarterly reviews been
presented in a timely manner? Please document.
Answer. LUMA has regularly presented plans to stakeholders
including PREB, COR3, and FEMA. Since LUMA has commenced service, we
have submitted an update to the ten-year infrastructure plan,
originally filed on July 6, 2021. Additionally, on May of 2022, we
submitted a five-year plan to stakeholders.
For the 10-year infrastructure plan, we submit 90-day plan updates
at 90-day intervals. Since LUMA began operations in June 2021, we have
submitted 90-day plan updates on: September 21, 2021, December 21,
2021, March 18, 2022, June 17, 2022, and September 16, 2022.
1.c. How many projects have been submitted? How much funding do
they represent? Please provide a breakdown.
Answer. As of October 15, 2022, LUMA has initiated 239 projects
with FEMA \4\, representing more than $6 billion worth of federally
funded projects. In contrast, only 35 T&D project submissions had even
been made before LUMA assumed operations on June 1, 2021.
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\4\ At the time of our latest filing to the Puerto Rico Energy
Bureau (``PREB''): the number of initiated projects stood at 206. Of
those, 204 projects have a FEMA FAAST number and two were awaiting
confirmation.
1.d. Is LUMA in any way involved in determination of use of this
funding?
Answer. Yes, with the support of stakeholders including COR3 and
FEMA, LUMA develops scopes of work (``SOWs'') for the use of FAASt
program, which is aimed to rebuild the transmission and distribution
grid. These SOWs are submitted to PREB who ensures the projects are in
compliance with the 10-year plan and the Integrated Resource Plan. In
addition, LUMA has been identifying funding opportunities including
from FEMA, the Department of Energy, and the Department of Housing and
Urban Development to support the increased adoption of renewable energy
and energy efficient technologies that can enhance the resiliency,
sustainability, and affordability of energy in Puerto Rico.
Question 2. Counting not just the FAASt funding but also all FEMA
funding streams to be used for grid recovery or rebuilding or
mitigation:
How many electric grid projects, whatever the funding source, have
been submitted, obligated, approved, and disbursed for? What is the
total amount under each stage as of today? Please provide a breakdown.
Answer. As of October 15, 2022, 239 projects have been initiated in
the FEMA process. Their approval would lead to $5.3 billion \5\ from
the FAAST program, and an incremental $750M from the Hazard Mitigation
program.
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\5\ The 239 initiated projects represent over $6 billion in funds
if including funding from the Hazard Mitigation Program.
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Of those 239 projects, 37 have been obligated by FEMA to fund their
execution. Those projects represent $220 million of spending and an
additional $655 million has been obligated by FEMA to advance long lead
material. An additional forty projects are awaiting obligation
determinations by FEMA. These projects represent an additional $1.4
billion in spending. The remaining 162 are in the initiated stage and
represent $4.4 billion in spending.
Additionally, LUMA develops SOWs under Sections 404 and 406 to
support further hazard mitigation, hardening, resilience, and
sustainability objectives. For example, LUMA has proposed several
technology and sustainability focused projects for submission to FEMA
under Section 404--Hazard Mitigation to further enable renewable energy
and energy efficiency. Each of the following projects represent
opportunities to transform and modernize the electric grid and were
initially proposed in March and May of 2022:
1. AMI Deployment
AMI is the foundation of a clean energy grid, including residential
energy generation (e.g., solar panels and batteries) and electric
vehicles, by providing visibility to customers and the utility about
the availability of electricity and energy usage, which can improve
both reliability, energy efficiency, and customer choice.
2. Energy Storage for Resilience
This entails the deployment of 100 MW of battery energy storage in
five locations to integrate additional renewable generation and enhance
resilience.
3. Vieques and Culebra Submarine Cable
Deploying a new submarine cable in a looped fashion would meet
reliability and resilience goals.
4. Vieques and Culebra Microgrid
A microgrid that would provide incremental resilience and
sustainability for the close to 10,000 residents who live in smaller
islands within Puerto Rico. This would include advanced control
capabilities, sensors, and switching capabilities. The microgrid will
allow us to move towards a demonstration of 100% renewable islands.
5. Two Community Microgrids
These additional microgrid projects would serve communities that
would benefit from enhanced resilience, sustainability, and equity.
This would serve as the start of a microgrid program pipeline that
could be deployed in additional communities. Incorporates community
involvement in design.
6. Mobile Microgrids
These mobile microgrids will support the rapid increase of service
in the case of a disruptive event, enhancing community resilience.
Overall, approval of these projects would significantly support
Puerto Rico's sustainability and resilience goals and achieve much
needed grid modernization for the island. In addition to specific
technologies, LUMA utilizes data-driven, engineering-based designs that
leverage industry best practices to enable energy efficiency and
increase hosting capacity to support the integration of affordable
renewable energy.
Question 3. Who will own title to the goods and equipment, such as
tools and vehicles, acquired by LUMA using the FEMA funding, for the
reconstruction of the electric grid: LUMA Energy or PREPA?
Answer. The goods and equipment will be owned by PREPA.
Question 4. What is the planned rebuilding timeline? Provide an
outline of projected milestone dates for submissions, designs, starts
of work and expected completions per the presented Action Plans. Not of
past progress: of future goals that are to be reached, what are the
programmed milestones on the way, and the time projection (year,
quarter) for that in the plan.
Answer. LUMA submitted a 5-year Plan to FEMA and COR3 which
provides an overview of LUMA's current project portfolio for
Transmission, Distribution, Substations, and Building's asset
categories.
This plan includes a summary and timing for projects to be
initiated in each of the next five years, the number of detailed SOWs
to be submitted to COR3 and FEMA for review, the targeted construction
starts for each project and the completion date for each.
Moreover, LUMA continually submits Project Plans to FEMA, COR3 and
PREB every 90 Days which outlines LUMA's activities over the previous
period and focus areas during the upcoming period.
This document captures an overview of the key next steps and
progress made on FEMA-funded projects for the Puerto Rico electrical
system.his plan also includes target dates for upcoming FEMA
submissions and construction start milestones for FEMA projects. deg.or
reference, please review LUMA's submission to PREB on September 16,
2022.\6\
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Thank you for the opportunity to provide additional insight into
LUMA's work to rebuild Puerto Rico's energy grid.
Question from Hon. Dina Titus to Josue A. Colon-Ortiz, Executive
Director, Puerto Rico Electric Power Authority
Question 1. The Puerto Rico Electric Power Authority (PREPA)
received a FAASt award in September 2020 for approximately $9.5
billion. In April 2022, FEMA reported that PREPA had not submitted
individual transmission and distribution projects and had submitted
``only 5'' detailed scopes of work for substation and generation
projects--a necessary step before work may begin.
What is the current status of PREPA's project approvals? What, if
any, actions has FEMA taken to help expedite PREPA's project approvals?
Answer. An answer was not received at the time of publication. If
an answer arrives after publication, it will be made available online
at the House of Representatives Document Repository at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Question from Hon. Sharice Davids to Josue A. Colon-Ortiz, Executive
Director, Puerto Rico Electric Power Authority
Question 1. It is my understanding that some number of recovery
projects are experiencing delays in receiving funding. Some of these
projects were submitted more than a year ago. These projects could
provide critical energy resiliency for hospitals, grocery stores,
hotels, food distribution centers, and hotels--all of which are
essential in the wake of natural disasters like hurricanes and
earthquakes. In your estimation, what is causing the delay in approving
and administering funding for these projects, and what can the Federal
government do to speed up these projects? Are there any legislative
changes that we could make to improve this process?
Answer. An answer was not received at the time of publication. If
an answer arrives after publication, it will be made available online
at the House of Representatives Document Repository at https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
Questions from Hon. Jenniffer Gonzalez-Colon to Josue A. Colon-Ortiz,
Executive Director, Puerto Rico Electric Power Authority
Question 1. 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 were made may no longer suffice for
completion of the work for which they were approved.
How is this to be addressed, how should it be addressed?
Question 2. Factions in the Island have demanded that FEMA deny
funding to anything that is not distributed renewables, or even that
Congress should command it. Is it wise to micromanage this from DC, or
should that be subject to Puerto Rico's resources plan, and the needs
determined on the ground?
Question 3. The first draft fiscal restructuring plan for PREPA was
rejected earlier this year and is being worked on as we speak. How does
the completion or not of that fiscal restructuring affect or not affect
the recovery plans in the long term?
Question 4. FEMA has allocated $9.5 Billion in Federal Funding for
the rebuilding and upgrading of the Puerto Rico Electric Grid, and is
working with the Department of Energy in the PR100 study to determine
the best way to achieve 100% renewables goal.
4.a. What can you tell us briefly about the status of FAASt
funding, and the timelines involved?
4.b. Have the Action Plans and the quarterly reviews been
presented in a timely manner? Please provide documentation.
4.c. How many projects have been submitted? How much funding do
they represent? Please provide a breakdown.
4.d. Is LUMA in any way involved in determination of use of this
funding?
Question 5. Counting not just the FAASt funding but also all FEMA
funding streams to be used for grid recovery or rebuilding or
mitigation:
How many electric grid projects, whatever the funding source, have
been submitted, obligated, approved, and disbursed for? What is the
total amount under each stage as of today? Please provide a breakdown.
Question 6. What is the planned rebuilding timeline? Provide a
breakdown of projected/expected milestone dates (year, quarter) for
starts and completions per the presented Action Plans.
Question 7. Who will own title to the goods and equipment, such as
tools and vehicles, acquired by LUMA using the FEMA funding, for the
reconstruction of the electric grid: LUMA Energy or PREPA?
Answers to Questions 1-7. Answers were not received at the time of
publication. If answers arrive after publication, they will be made
available online at the House of Representatives Document Repository at
https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=115108.
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