[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
EXAMINING PUERTO RICO'S ELEC-
TRICAL GRID AND THE NEED FOR.
RELIABLE AND RESILIENT ENERGY
=======================================================================
OVERSIGHT HEARING
BEFORE THE
SUBCOMMITTEE ON INDIAN AND INSULAR AFFAIRS
OF THE
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
Thursday, September 26, 2024
__________
Serial No. 118-148
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Printed for the use of the Committee on Natural Resources
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
or
Committee address: http://naturalresources.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
56-911 PDF WASHINGTON : 2025
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COMMITTEE ON NATURAL RESOURCES
BRUCE WESTERMAN, AR, Chairman
DOUG LAMBORN, CO, Vice Chairman
RAUL M. GRIJALVA, AZ, Ranking Member
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Gregorio Kilili Camacho Sablan,
Tom McClintock, CA CNMI
Paul Gosar, AZ Jared Huffman, CA
Garret Graves, LA Ruben Gallego, AZ
Aumua Amata C. Radewagen, AS Joe Neguse, CO
Doug LaMalfa, CA Mike Levin, CA
Daniel Webster, FL Katie Porter, CA
Jenniffer Gonzalez-Colon, PR Teresa Leger Fernandez, NM
Russ Fulcher, ID Melanie A. Stansbury, NM
Pete Stauber, MN Mary Sattler Peltola, AK
John R. Curtis, UT Alexandria Ocasio-Cortez, NY
Tom Tiffany, WI Kevin Mullin, CA
Jerry Carl, AL Val T. Hoyle, OR
Matt Rosendale, MT Sydney Kamlager-Dove, CA
Lauren Boebert, CO Seth Magaziner, RI
Cliff Bentz, OR Nydia M. Velazquez, NY
Jen Kiggans, VA Ed Case, HI
Jim Moylan, GU Debbie Dingell, MI
Wesley P. Hunt, TX Susie Lee, NV
Mike Collins, GA
Anna Paulina Luna, FL
John Duarte, CA
Harriet M. Hageman, WY
Vivian Moeglein, Staff Director
Tom Connally, Chief Counsel
Lora Snyder, Democratic Staff Director
http://naturalresources.house.gov
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SUBCOMMITTEE ON INDIAN AND INSULAR AFFAIRS
HARRIET M. HAGEMAN, WY, Chair
JENNIFFER GONZALEZ-COLON, PR, Vice Chair
TERESA LEGER FERNANDEZ, NM, Ranking Member
Aumua Amata C. Radewagen, AS Gregorio Kilili Camacho Sablan,
Doug LaMalfa, CA CNMI
Jenniffer Gonzalez-Colon, PR Ruben Gallego, AZ
Jerry Carl, AL Nydia M. Velazquez, NY
Jim Moylan, GU Ed Case, HI
Bruce Westerman, AR, ex officio Raul M. Grijalva, AZ, ex officio
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CONTENTS
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Page
Hearing Memo..................................................... v
Hearing held on Thursday, September 26, 2024..................... 1
Statement of Members:
Hageman, Hon. Harriet M., a Representative in Congress from
the State of Wyoming....................................... 1
Velazquez, Hon. Nydia M., a Representative in Congress from
the State of New York...................................... 3
Westerman, Hon. Bruce, a Representative in Congress from the
State of Arkansas.......................................... 4
Statement of Witnesses:
Laboy Rivera, Manuel, Executive Director, Central Office for
Recovery, Reconstruction, and Resiliency, San Juan, Puerto
Rico....................................................... 6
Prepared statement of.................................... 8
Questions submitted for the record....................... 15
Torres Miranda, Antonio, Associate Commissioner, Puerto Rico
Energy Bureau, San Juan, Puerto Rico....................... 16
Prepared statement of.................................... 18
Questions submitted for the record....................... 23
Saca, Juan, Chief Executive Officer, LUMA Energy, San Juan,
Puerto Rico................................................ 26
Prepared statement of.................................... 28
Questions submitted for the record....................... 32
McElmurray, Brannen, Chief Executive Officer, Genera PR LLC,
San Juan, Puerto Rico...................................... 35
Prepared statement of.................................... 37
Questions submitted for the record....................... 39
Additional Materials Submitted for the Record:
Questions Submitted for the Record
Deanne Criswell, Administrator, Federal Emergency
Management Agency...................................... 68
Jennifer Granholm, Secretary, U.S. Department of Energy.. 71
Adrianne Todman, Acting Secretary, U.S. Department of
Housing and Urban Development.......................... 74
Submissions for the Record by Representative Westerman
Puerto Rico Chamber of Commerce, Statement for the Record 75
Submissions for the Record by Representative Velazquez
PREPA, Letter to FOMB for Puerto Rico.................... 52
PR100, Puerto Rico Grid Resilience and Transitions to
100% Renewable Energy Study, Summary Report............ 66
Assured Guaranty, GoldenTree Asset Management, National
Public Finance Guarantee Corp. and Syncora Guarantee,
Statement for the Record............................... 77
Submissions for the Record by Representative Grijalva
CNE, Policy Brief, ``Connecting the Dots of the Puerto
Rico Electric Power System''........................... 79
Submissions for the Record by Representative Ocasio-Cortez
Washington Post article, ``Can rooftop solar panels
survive hurricanes?''.................................. 47
National Renewable Energy Laboratory, Key Findings....... 80
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
To: House Committee on Natural Resources Republican Members
From: Indian and Insular Affairs Subcommittee staff: Ken
Degenfelder ([email protected]), and Justin Rhee
(Justin.Rhee@mail. house.gov), x6-9725
Date: Thursday, September 26, 2024
Subject: Oversight Hearing: ``Examining Puerto Rico's Electrical Grid
and the Need for Reliable and Resilient Energy''
________________________________________________________________________
_______
The Subcommittee on Indian and Insular Affairs will hold an
oversight hearing titled ``Examining Puerto Rico's Electrical Grid and
the Need for Reliable and Resilient Energy'' on Thursday, September 26,
2024, at 10 a.m. in 1324 Longworth House Office Building.
Member offices are requested to notify Haig Kadian
([email protected]. gov) by 4:30 p.m. (EDT) on Wednesday,
September 25, 2024, if their member intends to participate in the
hearing.
I. KEY MESSAGES
Puerto Rico's residents deserve access to affordable,
reliable, and resilient energy, particularly as the
island's residents pay among the highest utility costs in
the U.S. The continued instability of the electrical grid
is a barrier to short and long-term economic growth.
The transfer of management of Puerto Rico's electrical
grid from the Puerto Rico government-controlled entity, the
Puerto Rico Electricity Power Authority (PREPA), to private
utility firms LUMA Energy (LUMA) and Genera PR (Genera) was
a step in the right direction. However, LUMA and Genera are
responsible for explaining recent blackouts and must do
better to increase transparency and communication.
The Biden-Harris administration's priority of renewables
such as solar and wind over reliable sources of base load
power is unsustainable for Puerto Rico. The administration
is placing its political agenda over the island's practical
realities and is putting the livelihood of the 3.2 million
residents at risk.
It is alarming that the U.S. Department of Energy (DOE),
the Federal Emergency Management Agency (FEMA), and the
U.S. Housing and Urban Development Agency (HUD), the
primary U.S. agencies charged with assisting Puerto Rico in
rebuilding their electrical grid, have elected to ignore
the practical realities on the island and instead have
prioritized renewable energy projects. Furthermore, despite
providing ample notice, these agencies have declined to
testify before the Committee.
II. WITNESSES
PANEL I:
The Hon. Deanne Criswell, Administrator, Federal Emergency
Management Agency, U.S. Department of Homeland Security,
Washington, D.C. [Declined to testify]
The Hon. Jennifer M. Granholm, Secretary, U.S. Department
of Energy, Washington, D.C. [Declined to testify]
The Hon. Adrianne Todman, Acting Secretary, U.S.
Department of Housing and Urban Development, Washington,
D.C. [Declined to testify]
PANEL II:
Mr. Manuel Laboy Rivera, Executive Director, Central
Office for Recovery, Reconstruction, and Resiliency, San
Juan, Puerto Rico
Mr. Antonio Torres Miranda, Associate Commissioner, Puerto
Rico Energy Bureau, San Juan, Puerto Rico
Mr. Juan Saca, Chief Executive Officer, LUMA Energy, San
Juan, Puerto Rico
Mr. Brannen McElmurray, Chief Executive Officer, Genera PR
LLC, San Juan, Puerto Rico
III. BACKGROUND
This hearing will examine Puerto Rico's electrical grid and the
need for reliable and resilient energy on the island. Puerto Rico's
electrical grid is undergoing major rebuilding following its collapse
from natural disasters in 2017 and 2022 and, most recently, hurricane
Ernesto in 2024. The government of Puerto Rico is also continuing to
undergo an extensive debt restructuring process established under the
Puerto Rico Oversight, Management, and Economic Stability Act
(PROMESA).\1\
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\1\ P.L. 114-187. For more information on PROMESA and Puerto Rico's
debt restructuring process, see: ``Puerto Rico's Public Debts:
Accumulation and Restructuring.'' Congressional Research Service,
https://crsreports.congress.gov/product/pdf/R/R46788/5.
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As part of the debt restructuring process, the Puerto Rico Electric
Power Authority (PREPA), Puerto Rico's original electrical utility and
a public corporation of the Government of Puerto Rico, has undergone
and continues to undergo a significant overhaul of its management,
operations, and finances. This overhaul includes entering into public-
private partnerships that privatize the management of a majority of
PREPA's assets. PREPA's control over electrical transmission and
distribution (T&D) in Puerto Rico and its customer-facing service
offices were contracted to LUMA in 2021.\2\ PREPA's operation and
maintenance of its thermal generation assets was contracted with Genera
in 2023.\3\
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\2\ Coto, Danica. ``Private Company Takes over Puerto Rico Power
Utility Service.'' AP News, June 1, 2021. https://apnews.com/article/
caribbean-puerto-rico-business-135b9ec52e130f3716f886 2021a524d4.
\3\ Acevedo, Nicole. ``Puerto Rico officially privatizes power
generation amid protests, doubts.'' NBC News, January 25, 2023. https:/
/www.nbcnews.com/news/latino/puerto-rico-officially-privatizes-power-
generation-genera-pr-rcna67284.
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Over the past three years, there has been broad dissatisfaction and
protests against LUMA related to many power outages, rising electricity
rates, and a perceived lack of customer service.\4\ The power outages
have been significant in both frequency and duration.\5\ While LUMA
bears responsibility for addressing customer concerns and the seeming
lack of improvement to the electrical grid, placing sole blame on LUMA
for the island's energy woes ignores the legacy issues of PREPA's
mismanagement of finances, past underinvestment in infrastructure
across system, the fragility of Puerto Rico's aging power generation
fleet, and the role of federal agencies in supporting the island's
electrical grid.
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\4\ New Lines Magazine. A Private Company Provokes an Energy Crisis
in Puerto Rico. https://newlinesmag.com/reportage/a-private-company-
provokes-an-energy-crisis-in-puerto-rico/.
\5\ Id.
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Federal agencies have obligated over $21 billion in assistance for
energy reconstruction projects on the island, but much of this funding
has yet to be disbursed due to delays in the grant awarding process and
project execution.\6\
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\6\ Information provided by the Congressional Research Service upon
request by House Committee on Natural Resources GOP staff.
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As Puerto Rico is particularly prone to natural disasters, recent
power outages have amplified concerns of a major collapse in the
electrical grid and rippling effects on water supply and critical
infrastructure.\7\ These concerns have been exacerbated amid the annual
hurricane season. In light of these concerns, this hearing will assess
the progress made by LUMA and Genera, the role of federal agencies, and
the policy recommendations for ensuring Puerto Rico has access to
reliable and resilient energy.
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\7\ Simpkins, Kelsey. ``Puerto Rico's precarious relationship
between power and water.'' University of Colorado Boulder. https://
www.colorado.edu/today/2022/09/30/puerto-ricos-precarious-relationship-
between-power-and-water.
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Overview of Puerto Rico and Recent Natural Disasters
The Commonwealth of Puerto Rico is a self-governing, unincorporated
island territory of the United States located on the easternmost island
of the Greater Antilles chain.\8\ San Juan, the capital, is located on
the island's northern coast.\9\
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\8\ Puerto Rico, Britannica. https://www.britannica.com/place/
Puerto-Rico.
\9\ San Juan Puerto Rico, Britannica. https://www.britannica.com/
place/San-Juan-Puerto-Rico.
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The island is less than 100 miles south of the Puerto Rico Trench,
which descends to more than 5 miles below sea level and is the deepest
point of the Atlantic.\10\ This feature leads to continuing tectonic
movement and earthquakes that affect Puerto Rico, including earthquakes
that occurred in late 2019 through the beginning of 2020.\11\
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\10\ Id.
\11\ Grace Hauck, ``Magnitude 5.9 earthquake rocks Puerto Rico and
causes landslide in Penuelas'' USA Today. Jan 23 2020 https://
www.usatoday.com/story/news/world/2020/01/11/puerto-rico-earthquake-6-
0-magnitude-quake-causes-damage-ponce/4441511002/.
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In addition to earthquakes, Puerto Rico is particularly prone to
hurricanes. The September 2017 hurricanes, Irma and Maria, passed over
Puerto Rico and left massive damage in their wake.\12\ The hurricanes
knocked out 80% of Puerto Rico's power grid,\13\ taking 11 months for
power to be fully restored, the longest blackout in U.S. history.\14\
It is estimated that 3.4 million Puerto Rican residents were left
without power for months,\15\ and over a million homes were
damaged.\16\ In addition to the electricity grid, Puerto Rico's roads,
hospitals, schools, businesses, water systems, and other critical
systems were severely affected.\17\ Seven years later, Puerto Rico is
still recovering from the effects of these hurricanes.\18\
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\12\ Hurricanes Irma and Maria, Official Portal of the Government
of Puerto Rico, https://recovery.pr.gov/en/hurricanes.
\13\ Murali Baggu, Puerto Rico Grid and Recovery Post Hurricane
Maria, Institute of Electrical and Electronics Engineers, https://
www.nrel.gov/docs/fy22osti/82860.pdf, p. 2.
\14\ GAO Watch Blog, ``Hurricane Recovery Can Take Years--But For
Puerto Rico, 5 Years Show Its Unique Challenges.'' Nov 14, 2022.
https://www.gao.gov/blog/hurricane-recovery-can-take-years-puerto-rico-
5-years-show-its-unique-challenges.
\15\ Peter Anagnostakos et al., Banks versus Hurricanes: A Case
Study of Puerto Rico after Hurricanes Irma and Maria, Federal Reserve
Bank of New York, No. 1078 Nov 2023, https://www.newyorkfed.org/
medialibrary/media/research/staff_reports/sr1078.pdf , p. 1.
\16\ Hurricanes Irma and Maria, Official Portal of the Government
of Puerto Rico, https://recovery.pr.gov/en/hurricanes.
\17\ Government Accountability Office, ``Puerto Rico Disasters:
Progress Made, but the Recovery Continues to Face Challenges.'' Feb 13,
2024. https://www.gao.gov/products/gao-24-105557.
\18\ Id.
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On September 18, 2022, Tropical Storm Fiona strengthened into a
category one hurricane as it made landfall on the southern part of
Puerto Rico.\19\ The effects of winds and rain on key electric
transmission and distribution lines caused the electrical grid to go
down and generation to go offline as a safeguard, with all 3.2 million
residents losing power. On October 14, 2022, LUMA announced restoration
of power to the 1.46 million customers who lost power, and that it was
demobilizing their emergency posture put in place after Hurricane Fiona
hit the island.\20\ It took LUMA 26 days to return electrical service
to Puerto Rico.\21\ For comparison, after Hurricane Maria, some parts
of the island were without power for over a year under PREPA
control.\22\
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\19\ Matthew Cappucci, et. al. ``All of Puerto Rico without power
as Hurricane Fiona slams island.'' Washington Post. Sept. 18, 2022.
https://www.washingtonpost.com/climate-environment/2022/09/18/fiona-
puerto-rico-hurricane-outages/.
\20\ Press Release. ``LUMA Restores Power to 1.46 million customers
& begins process of demobilizing emergency posture'' LUMA. Oct. 14,
2022. https://lumapr.com/news/luma-restores-power-to-1-46-million-
customers-begins-process-of-demobilizing-emergency-posture/?lang=en.
\21\ Id.
\22\ Sullivan, Emily. ``Nearly a Year After Maria, Puerto Rico
Officials Claim Power Is Totally Restored.'' NPR. https://www.npr.org/
2018/08/15/638739819/nearly-a-year-after-maria-puerto-rico-officials-
claim-power-totally-restored.
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Primary Stakeholders of Puerto Rico's Energy Reconstruction
PREPA
Formed in 1941, PREPA was a public corporation owned by the
Commonwealth of Puerto Rico.\23\ As a government-controlled entity, the
impression of many was that leadership posts at PREPA were coveted
patronage jobs believed to be held by individuals who were unqualified
to hold these positions, contributing to the inefficiency of
operations.\24\ For decades, PREPA was plagued by mismanagement,
inefficiency, political cronyism, and a lack of transparency.\25\ The
utility has a record of unacceptable rates of electricity theft,
failure to collect accounts from government and municipal users, and a
history of continually foregoing critical maintenance of the island's
electrical infrastructure.\26\
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\23\ GAO-21-264. Puerto Rico Recovery. https://www.gao.gov/assets/
gao-21-264.pdf and ``About PREPA--History'', PREPA. https://aeepr.com/
en-us/QuienesSomos/Pages/History.aspx.
\24\ January 11, 2016 House Committee on Natural Resources
Subcommittee on Energy and Mineral Resources Oversight Hearing:
``Exploring Energy Challenges and Opportunities Facing Puerto Rico.''
http://naturalresources.house.gov/uploadedfiles/
emr_hearing_memo_1_12_16.pdf.
\25\ Id.
\26\ September 26, 2022 House Committee on Natural Resources Full
Committee Oversight Hearing: ``Puerto Rico's Post-Disaster
Reconstruction and Power Grid Development.''
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For further information on PREPA's history, ongoing reforms, and
debt restructuring, see the November 17, 2022, House Committee on
Natural Resources Republicans full committee oversight hearing
memo.\27\
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\27\ November 14, 2022 House Committee on Natural Resources Full
Committee Oversight Hearing: ``Puerto Rico's Post-Disaster
Reconstruction & Power Grid Development''. https://
naturalresources.house.gov/UploadedFiles/
FC_Oversight_Hearing_Memo_Hurricane_Recovery_
and_Elec_Grid_11.17.22.pdf.
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LUMA
In June 2020, LUMA was awarded the contract to operate PREPA's
electricity T&D system through a competitive awards process.\28\ On
June 1, 2021, LUMA took control of Puerto Rico's electrical grid.\29\
LUMA is a joint venture between Houston-based Quanta Energy and
Calgary-based ATCO/Canadian Utilities Ltd. Their scope of work is
defined by the Puerto Rico Transmission and Distribution System
Operation and Maintenance Agreement with PREPA and the government of
Puerto Rico's Public-Private Partnership Authority (P3).\30\
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\28\ Puerto Rico Public-Private Partnership Authority, Press
Release, ``Government of Puerto Rico Selects LUMA Energy to Operate and
Transform Electric Power Transmission and Distribution System'' Jun.
22, 2020. https://www.p3.pr.gov/wp-content/uploads/2020/07/govpr-
selects-luma-energy-ope-trans-electric-power-transmi-dist-sis.pdf.
\29\ ``In Puerto Rico, private company takes over power utility
service.'' Associated Press Jun. 2, 2021. https://www.nbcnews.com/news/
latino/puerto-rico-private-company-takes-power-utility-service-
rcna1091.
\30\ The Puerto Rico Public-Private Partnership Authority (P3) is a
government-owned corporation of Puerto Rico created to regulate public-
private partnerships.
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The LUMA energy contract has been a political issue with opposition
from many partisan, labor, academic, and non-profit
sectors.31,32 Rate increases, significant power outages in
frequency and duration, and a perceived lack of customer service have
also eroded support for LUMA on the island.\33\ Recent rate increases
can be attributable to the increase in fuel prices, supply chain
issues, and the fact that PREPA is unable to negotiate long-term
contracts for fuel while they are in bankruptcy proceedings. To that
regard, there is little LUMA can influence with respect to rate
increases resulting from fuel price increases. Furthermore, the impact
of PREPA's debt on its credit rating and revenue generation has
severely limited LUMA's capacity to make capital investments.\34\
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\31\ Stephanie Gomez Aolvaraz, ``Luogaro, Dalmau Would Cancel
Contract with LUMA Energy'' The Weekly Journal. Sept. 17, 2020. https:/
/www.theweeklyjournal.com/politics/l-garo-dalmau-would-cancel-contract-
with-luma-energy/article_3c5ca040-f8ec-11ea-a2da-b7cfab428ed1.html.
\32\ Nelson Reyes Faria, ``Multiple Sectors Join Protests Against
LUMA'' The Weekly Journal. May 31, 2021. https://
www.theweeklyjournal.com/online_features/multiple-sectors-join-
protests-against-luma/article_e67a784e-c223-11eb-9991-
2b97ae45d62d.html.
\33\ Alejandra O'Connell-Domenech ``Why are some Puerto Ricans
demanding the island cancel its contract with power company LUMA
Energy'' The Hill. Sept. 10, 2022. https://thehill.com/changing-
america/sustainability/energy/3636534-why-are-some-puerto-ricans-
demanding-the-island-cancel-its-contract-with-power-company-luma-
energy/.
\34\ Information provided by LUMA upon request by House Committee
on Natural Resources GOP Staff.
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Genera
Following a competitive bidding process, Genera PR LLC, a
subsidiary of New Fortress Energy,\35\ entered into a ten-year
agreement with the P3 for Genera to be the sole generator of PREPA's
thermal generation system beginning July 1, 2023.\36\ Genera also
handles contracts related to fuel purchases for the island's power
facilities.\37\ Electricity rates are determined by a regulatory
process run by the Puerto Rico Energy Bureau (PREB).\38\ While Genera
does not control electricity rates, the firm claims to be committed to
reducing the cost of electricity generation in Puerto Rico through
better maintenance and operation of the existing fleet, investment in
new technologies and more efficient systems, and fuel optimization.\39\
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\35\ ``Genera PR tapped to run Puerto Rico's energy generation''
Puerto Rico Fiscal Agency and Financial Advisory Authority https://
aafaf.pr.gov/press-room-articles/genera-pr-tapped-to-run-puerto-ricos-
energy-generation/.
\36\ ``Se materializa la transicion a Genera PR como operador de la
flota generatriz de la AEE'' El Nuevo Dia. June 30 2023 https://
www.elnuevodia.com/noticias/noticias/notas/se-materializa-la-
transicion-a-genera-pr-como-operador-de-la-flota-generatriz-de-la-aee/.
\37\ Danica Coto, ``Puerto Rico selects company to privatize power
generation'' AP News. Jan 25, 2023, https://apnews.com/article/united-
states-government-caribbean-puerto-rico-climate-and-environment-
business-12587fe080ed71f545ddd1e520db50e4.
\38\ ``Operaciones.'' Genera PR. https://genera-pr.com/operaciones.
\39\ ``Nosotros.'' Genera PR. https://genera-pr.com/sobre-nosotros.
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PREPA maintains control over the management and operations of
hydropower generation and land-flow gas generation assets.\40\
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\40\ Information provided during a briefing by PREPA for House
Committee on Natural Resources GOP staff.
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Regulatory Agencies in Puerto Rico
Within the Government of Puerto Rico, P3 is responsible for
regulating public-private partnerships in Puerto Rico and securing
private capital for public projects.\41\
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\41\ ``P3'' Puerto Rico Public-Private Partnerships Authority.
https://www.p3.pr.gov/p3.
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The Central Office for Recovery, Reconstruction, and Resiliency
(COR3) is a Puerto Rico government agency responsible for ensuring that
FEMA funds are used for their intended purpose.\42\ In effect, COR3 is
the recipient and pass-through entity for the disbursement of FEMA
funds for PREPA and projects performed by LUMA and Genera as PREPA's
contract partners. COR3 is tasked with assuring the compliance and
transparency of disbursed funds.
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\42\ `Fraud, Waste, and Abuse'' COR3. https://recovery.pr.gov/en/
fraud-waste-and-abuse.
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An independent regulatory agency established under Puerto Rico's
local laws, PREB regulates, monitors, and enforces the government of
Puerto Rico's energy public policy.\43\ One of PREB's additional
functions is to oversee the island's solar renewable process for
permitting approval onto the grid. Any energy plan and policy within
Puerto Rico must be reviewed and approved by PREB. PREB also
establishes standards for energy power plants and facilities.\44\
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\43\ ``About the Puerto Rico Energy Bureau.'' PREB. https://
energia.pr.gov/en/about-the-commission/
#::text=Specifically%2C%20the%20PREB %20has%20the,the%20Government%20
of%20Puerto%20Rico.&text=To%20achieve%20a%20reliable%2C%20efficient,powe
r%20services %20at%20reasonable%20prices.
\44\ ``About the Puerto Rico Energy Bureau'' Negociado De Energia
De Puerto Rico. https://energia.pr.gov/en/about-the-commission/.
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A notable use of PREB's authority was the rejection of PREPA's
proposal to gasify the electrical grid through a new liquefied natural
gas (LNG) terminal and gas-fired generation in its August 2020
Integrated Resource Plan. PREPA had proposed shutting down old fuel
plants and replacing them with new natural gas plants, but PREB denied
that proposal in favor of renewable energy and solar grid projects.\45\
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\45\ Id.
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Federal Agencies
The reconstruction of Puerto Rico's electrical grid is primarily
supported, whether directly or indirectly, by federal assistance.
According to the Congressional Research Service, the federal government
has obligated over $21 billion in assistance to help restore and
rebuild the electrical grid for Puerto Rico post-hurricanes.\46\
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\46\ Analysis provided by the Congressional Research Service at the
request of the U.S. House Committee on Natural Resources Republican
staff.
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Of the $21 billion, $9.5 billion is public assistance funds, $7.8
billion is hazard mitigation from FEMA, over $1 billion is community
development block grants from HUD, and $1 billion is energy resilience
funds from DOE.\47\ The scale of federal assistance in supporting
Puerto Rico's electrical grid is unprecedented, even compared to the
continental U.S.\48\
\47\ Id.
\48\ Information provided by COR3 during a briefing for House
Committee on Natural Resources GOP staff.
The DOE provides technical assistance to Puerto Rico energy
stakeholders through training, tools, and modeling support to enable
``planning and operation of the electric system with greater resilience
against further disruptions.'' \49\ The DOE's $1 billion Puerto Rico
Energy Resilience Fund has primarily been used to support residential
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rooftop solar projects and battery storage installations.\50\
\49\ ``Puerto Rico Grid Recovery and Modernization.'' U.S.
Department of Energy. https://www.energy.gov/gdo/puerto-rico-grid-
recovery-and-modernization.
\50\ ``Puerto Rico Energy Resilience Fund.'' U.S. Department of
Energy. https://www.energy.gov/gdo/puerto-rico-energy-resilience-fund.
Federal assistance supporting the reconstruction of Puerto Rico's
electrical grid is primarily derived from FEMA funding. Within Puerto
Rico, two primary types of FEMA funding are used to support the
reconstruction of its electrical grid: Public Assistance (PA) and
Hazard Mitigation Assistance (HMA).\51\ FEMA has obligated
approximately $9.5 billion in PA funding for Puerto Rico's electrical
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grid reconstruction.\52\
\51\ Information provided by COR3 during a briefing for House
Committee on Natural Resources GOP staff.
\52\ Id.
FEMA's PA grant review and awarding process within Puerto Rico is
unique to the island as this complex process is different from FEMA
processes in other states and territories.\53\ According to COR3,
Puerto Rico has a unique process due to the unprecedented challenge of
rebuilding Puerto Rico's electrical grid. The FEMA PA grant review
process can take 15 to fifty days which creates an additional process
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challenge.\54\
\53\ Id.
\54\ Information provided by FEMA during a briefing for House
Committee on Natural Resources GOP staff.
FEMA's HMA grants provide funding for eligible mitigation measures
that reduce disaster losses. These funds are meant to reduce long-term
risk from future disasters, and thus, PA funds are the primary funding
mechanism for immediate recovery. Puerto Rico has received
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approximately $7.8 billion in HMA funds, also managed by COR3.\55\
\55\ ``Hazard Mitigation Assistance.'' COR3. https://
recovery.pr.gov/en/recovery-programs/hazard-mitigation-assistance.
While tens of billions of dollars in FEMA funds for Puerto Rico
have been obligated, most of these funds have yet to be disbursed.\56\
The Government Accountability Office found that FEMA has obligated
approximately $23.4 billion in PA for Puerto Rico's reconstruction,
which includes other sectors beyond energy.\57\ Of this amount, only
$1.8 billion has been expended. Projects have either been delayed or
not yet started. This has led to increasing questions about why these
funds have yet to be used and what must be done to expedite the grant
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process.
\56\ Government Accountability Office, ``Puerto Rico Disasters:
Progress Made, but the Recovery Continues to Face Challenges.'' Feb 13,
2024. https://www.gao.gov/products/gao-24-105557.
\57\ Id.
While FEMA funding represents the majority of federal assistance to
Puerto Rico, HUD provides approximately $1.93 billion in funds for
improving the island's electrical grid including climate resilience and
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green energy initiatives in Puerto Rico.\58\
\58\ ``HUD Officials Highlight Climate Resilience Funding
Opportunities in Puerto Rico and US Virgin Islands. ``HUD. April 19,
2024. https://www.hud.gov/press/press_releases_media_ advisories/
hud_no_24_083.
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June 2024 Outages
From June 2 to June 9, 2024, blackouts occurred in the Puerto Rico
municipalities of Santa Isabel, Aibonito, and Coamo \59\ due to a
broken electrical transformer at the Santa Isabel substation.\60\ LUMA
increased the capacity of the transmission line and installed temporary
generators to restore service to the substation.\61\ LUMA is replacing
the broken Santa Isabel transformer with a mega transformer \62\ which
is currently being installed,\63\ as well as rebuilding affected lines
to remedy this issue.\64\
\59\ Manuel Guillama Capella, ``LUMA accepts that the transformer
that caused the breakdown in Santa Isabel had doubled its utility'', El
Nuevo Dia June 7 2024, https://www.elnuevodia.com/english/news/story/
luma-accepts-that-the-transformer-that-caused-the-breakdown-in-santa-
isabel-had-doubled-its-utility.
\60\ LUMA Progress Update June 2024 provided to U.S. House
Committee on Natural Resources Republican staff.
\61\ Id.
\62\ Adriana Diaz Tirado, ``The transfer of the mega transformer to
Santa Isabel is completed'', El Nuevo Dia June 22 2024, https://
www.elnuevodia.com/english/news/story/the-transfer-of-the-
megatransformer-to-santa-isabel-is-completed/.
\63\ ``LUMA Initiates Second Phase of Transformer Transfer to Santa
Isabel,'' LUMA June 20 2024, https://lumapr.com/news/luma-initiates-
second-phase-of-transformer-transfer-to-santa-isabel/?lang=en.
\64\ Id.
On the eve of Wednesday, June 12, 2024, a widespread power outage
hit Puerto Rico, leaving 350,000 \65\ customers without electricity
after two power plants shut down.\66\ LUMA's chief executive officer
stated that overgrown vegetation caused the outages and that LUMA has
launched an initiative to clear vegetation across 16,000 miles of
powerlines.\67\ While power was restored the following day, this series
of blackouts sparked uproar and frustrations among Puerto Rico's
residents over managing the island's electrical grid. The governor of
Puerto Rico, Pedro Pierluisi, ordered an investigation into the June 12
blackout and stated that ``if negligence is found,'' then LUMA will not
be reimbursed with public funds for repairs or restoration of
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service.\68\
\65\ John Yoon, ``Outage Leaves About 350,000 Customers in Puerto
Rico Without Power,'' New York Times June 13 2024, https://
www.nytimes.com/2024/06/13/us/puerto-rico-outage.html
?searchResultPosition=1.
\66\ ``Widespread outage hits Puerto Rico as customers demand
ouster of private electric company'' AP News June 12 2024, https://
apnews.com/article/puerto-rico-power-outage-luma-
0253fa691daa472b41ec44b28ecfda91.
\67\ Id.
\68\ Gloria Ruiz Kuilan, ``Pedro Pierluisi ordena investigar el
apagon del miercoles y activa la Guardia Nacional: `Esto no se debe
repetir' '' El Nuevo Dia June 13 2024 https://www.elnuevodia.com/
noticias/gobierno/notas/pedro-pierluisi-ordena-investigar-el-apagon-
del-miercoles-y-activa-la-guardia-nacional-esto-no-se-debe-repetir/.
Further adding to public frustrations, LUMA announced that a
transformer the company transported to the Santa Isabel substation had
internal problems and was not operational.\69\ The transportation of
these transformers costs $4 million.\70\ LUMA has since announced that
it is moving a replacement transformer from the Maunabo substation.
Still, it appears the mayor of Maunabo has blocked access to the
facility over fears of potential blackouts from no longer having a
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backup transformer.\71\
\69\ Manuel Guillama Capella, ``The transformer that LUMA
transported to Santa Isabel substation at a cost of $4 million is out
of order.'' El Nuevo Dia. July 11, 2024. https://www.elnuevodia.com/
english/news/story/the-transformer-that-luma-transported-to-santa-
isabel-substation-at-a-cost-of-4-million-is-out-of-order/.
\70\ Id.
\71\ ``LUMA insists transformer removal will not impact Maunabo''
The San Juan Daily Star. https://www.sanjuandailystar.com/post/luma-
insists-transformer-removal-will-not-impact-maunabo.
---------------------------------------------------------------------------
Tropical Storm Ernesto and August 2024 Load Sheds
On August 13 and 14, 2024, Tropical Storm Ernesto passed just above
the northern tip of Puerto Rico, bringing tropical storm-force winds,
heavy flooding, and landslides \72\ to the island.\73\ On August 14,
torrential downpours of up to 10 inches of rain from Ernesto blanketed
parts of Puerto Rico.\74\ Approximately 750,000 LUMA customers lost
service during the peak of the outage.\75\
---------------------------------------------------------------------------
\72\ Jan Wesner Childs, ``Ernesto Slams Puerto Rico: Half Of The
Island Loses Power''. The Weather Chanel. Aug. 15, 2024. https://
weather.com/storms/hurricane/news/2024-08-13-ernesto-puerto-rico-
tropical-storm.
\73\ U.S. Department of Energy Situation Report #8/Tropical Storm
Ernesto. Aug. 20, 2024 (p. 1).
\74\ Id.
\75\ NOAA, ``Ernesto Brings Dangerous Seas to North America's
Atlantic Coast.'' https://www.nesdis.noaa.gov/news/ernesto-brings-
dangerous-seas-north-americas-atlantic-coast.
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On August 23, LUMA stated they restored power to 729,000 customers
who lost service due to Ernesto.\76\ While it is positive to see that
power has largely been restored, the storm has once again raised
concerns over the fragility of the electrical grid. There are
speculations that the grid could have collapsed completely if the storm
had strengthened into a hurricane.
---------------------------------------------------------------------------
\76\ LUMA--Tropical Storm Ernesto Update #10. Aug 23. 2024.
---------------------------------------------------------------------------
Policy Considerations
As policymakers assess Puerto Rico's electrical grid and seek
solutions to improve the island's access to reliable energy, several
factors must be considered.
Recovery from PREPA's Mismanagement of the Electrical Grid
When LUMA and Genera took over managing T&D and power generation
from PREPA, they took on a highly fragile and mismanaged system.
Decades of neglect and lack of investment have resulted in the island's
outdated and failing transmission and generation fleet.\77\ Much of
PREPA's assets acquired by LUMA and Genera were either non-operational
or required significant repair. Since beginning operations, LUMA and
Genera have worked to bring the power fleet up to industry
standards.\78\ As most of the equipment and generators are decades
beyond their recommended service life, this will require a significant
amount of time and investment.\79\
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\77\ Gianpaolo Pietri, ``Neglect, Corruption Left Puerto Rico's
Power Grid Ripe for Failure, Observers Say.'' Voice of America News.
Nov. 30, 2017. https://www.voanews.com/a/experts-say-neglect-
corruption-left-puerto-rico-power-grid-ripe-for-failure/4144129.html.
\78\ Information provided by Genera PR to the U.S. House Committee
on Natural Resources Republican staff in July 2024.
\79\ Id.
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Impact of Renewable Prioritization on Supply Chain and Capacity
Further exacerbating the challenge, the push for the Biden-Harris
administration's purchase and use of electric vehicles (EVs) has
severely impacted the supply chain for transformers. The increasing
demand for EVs has led to a surge in electrification in the U.S. This
increased demand has placed further strain on the supply of
transformers, which is already taxed from ongoing efforts to replace
outdated transformers across the country.\80\ Moreover, the batteries
and chargers used for EVs require materials and precious metals similar
to those used in power plants. This double effect by prioritizing EVs
has led to significantly longer lead times for LUMA to receive new
transformers, often taking 1-3 years for an order to be fulfilled and
transported.\81\
---------------------------------------------------------------------------
\80\ ``The U.S. is facing an ``unprecedented'' shortage of electric
transformers, NREL says'' EUCI. March 27, 2024. https://www.euci.com/
the-u-s-is-facing-an-unprecedented-shortage-of-electric-transformers-
nrel-says/.
\81\ Information provided by LUMA during a briefing for House
Committee on Natural Resources GOP staff.
The use of EVs in Puerto Rico has also affected the island's
electrical generation capacity.
According to Genera representatives, the increase in the number of
EVs on the island has led to an increase in electrical usage used for
recharging vehicles.\82\ EV recharging often takes place when
electricity is already in peak demand, as residents are at home in the
evening. Solar power is insufficient to mitigate this issue as it takes
place during sunset, and most residents do not have batteries for
reserving solar power. As such, this has forced Genera to seek ways to
increase power generation capacity.
---------------------------------------------------------------------------
\82\ Information provided by Genera PR during a briefing for House
Committee on Natural Resources GOP staff.
---------------------------------------------------------------------------
Federal regulations against non-renewable sources have further
jeopardized attempts to revitalize Puerto Rico's electrical grid. In
addition to severely slowing the PA grant process, Puerto Rico nearly
lost access to two critical temporary LNG-based generators installed in
San Juan and Palo Seco power plants due to emissions concerns. These
generators were initially operated by FEMA and were scheduled to end
operations by March 15, 2024.\83\ Following outcry over the negative
impact of removing the generators before hurricane season and the
installation of permanent generators, FEMA agreed to hand over
operational control of these generators to the government of Puerto
Rico.\84\ However, the Puerto Rico government had to receive a permit
from the U.S. Environmental Protection Agency (EPA) to allow Genera to
operate the generators.\85\ The permit application was at risk of being
rejected over EPA's concerns about the impact of the generators on
greenhouse gas emissions, but the EPA agreed to conditionally approve
the permits based on terms to be set between the agency and Genera.\86\
---------------------------------------------------------------------------
\83\ Bernal, Rafael, ``Puerto Rico raises alarms as FEMA ends power
generation mission.'' November 17, 2023.
\84\ Id.
\85\ Bernal, Rafael, ``Puerto Rico waits anxiously for EPA power
plant approval.'' March 6, 2024. https://thehill.com/latino/4513548-
puerto-rico-epa-power-plant-approval-fema/.
\86\ Information provided to House Committee on Natural Resources
Republican staff by Genera.
---------------------------------------------------------------------------
The practical reality is that the Biden-Harris administration's
prioritization of solar projects is neither feasible nor sustainable,
as approximately 43 percent of Puerto Rico's residents live in
poverty.\87\ The upfront cost of solar panel installation is $28,500 in
cash.\88\ For context, the median household income in Puerto Rico in
2023 was $24,002.\89\ In addition to their high costs, solar panels are
highly ineffective against severe weather, as storms can damage and
strip away residential and in some cases, large-scale solar panels.\90\
---------------------------------------------------------------------------
\87\ ``Pervasive Poverty in Puerto Rico: a Closer Look.'' CENTRO
PR. September 22. 2023. https://centropr.hunter.cuny.edu/reports/
pervasive-poverty-in-puerto-rico/.
\88\ Tom Sanzillo & Cathy Kunkel, Solar at a Crossroads in Puerto
Rico, Institute for Energy Economics and Financial Analysis, p. 10.
\89\ ``QuickFacts Puerto Rico'' United States Census Bureau July 1,
2023. https://www.census.gov/quickfacts/fact/table/PR/PST045223.
\90\ April 11, 2024 House Committee on Natural Resources
Subcommittee on Indian and Insular Affairs Oversight Hearing:
``Promoting Affordable and Reliable Energy Sources for the U.S. Insular
Areas/Indian and Insular Affairs Subcommittee.'' https://
naturalresources.house.gov/calendar/eventsingle.aspx?EventID=415818.
---------------------------------------------------------------------------
The Biden-Harris administration has ignored this reality as it
continues to champion rooftop solar projects as its solution for
stabilizing power on the island. Following the mid-June 2024 outages,
the DOE announced in early July 2024 a project to install 3,000
residential solar panels and storage by the end of the year.\91\ This
announcement disregards the fact that more than 300,000 residents were
affected by the mid-June outages and over 1.5 million electricity
consumers in Puerto Rico.
---------------------------------------------------------------------------
\91\ Walton, Robert. ``DOE to deploy over 3,000 solar + storage
home systems in 2024 for most vulnerable Puerto Ricans.'' July 16.
2024. https://www.utilitydive.com/news/doe-solar-storage-home-systems-
puerto-rico/721429/.
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The Responsibilities of LUMA and Genera
While LUMA and Genera face a monumental task in attempting to
restructure Puerto Rico's fragile electrical grid, these firms also
have the responsibility of ensuring transparency in their processes.
Privatizing PREPA was a step in the right direction, but LUMA and
Genera must work carefully to earn the public's trust and clearly
explain the challenges they face and their plans to rebuild the grid.
There have been concerns regarding LUMA's lack of transparency and
bureaucratic processes regarding customer engagement.\92\ With a lack
of or insufficient explanations as to why outages occur and multiple-
stage processes for requesting service repair, customers have expressed
frustrations over LUMA's management. Greater transparency and
communication would allow customers to better understand why outages
happen, the challenges to energy stabilization, and how LUMA is
addressing these challenges. While Genera has received less criticism
than LUMA over the recent blackouts, perhaps due to the infancy of its
contract, the firm still bears the responsibility of improving
transparency and keeping its customers informed on the status of
operations and the impact of future projects. A long-term challenge for
LUMA and Genera will be to decrease their reliance on federal funds.
\92\ Information during a meeting between House Committee on
Natural Resources GOP staff and Puerto Rican companies and
organizations affected by the recurring outages in Puerto Rico.
---------------------------------------------------------------------------
Potential Solutions
The negative impact of the blackouts on Puerto Rico's residents'
livelihoods and the island's economy cannot be overstated. Small
business owners constantly deal with electricity losses that impede
revenue and productivity.\93\ When blackouts occur, consumers incur
damages to their appliances, and the spoiling of their foods and
medicines adds additional costs.\94\ The most recent blackout cost
Puerto Rico's economy approximately $1.8 million per hour, not
accounting for damaged equipment costs.\95\
\93\ Marian Diaz, ``Merchants on Ponce de Leon Avenue have been
without electricity for more than a week'', El Nuevo Dia June 5 2024
https://www.elnuevodia.com/english/business/notas/merchants-on-ponce-
de-leon-avenue-have-been-without-electricity-for-more-than-a-week/.
\94\ Nicole Acevedo, ``Puerto Ricans struggle to grasp economic
impact of recurrent power outages'' NBC News June 14 2024 https://
www.aol.com/puerto-ricans-struggle-grasp-
economic_161535619.html?guccounter=1.
\95\ Maricarmen Rivera Sanchez et al. `` `Esto ha sido una historia
de terror': pequenos comercios temen irse a pique por la falta de
electricidad'' El Nuevo Dia June 13 2024 https://www.elnuevodia.com/
negocios/economia/notas/esto-ha-sido-una-historia-de-terror-pequenos-
comercios-temen-irse-a-pique-por-la-falta-de-electricidad/.
Policy solutions will need to consider the immediate and long-term
needs of Puerto Rico. In the short term, Puerto Rico needs practical
solutions that will provide reliable energy without the need to
overhaul its infrastructure. In the long term, Puerto Rico will need
cost-effective energy options that increase the electrical grid's
---------------------------------------------------------------------------
resilience to natural disasters.
House Republicans continue to support an all-of-the-above energy
approach that allows for diversification of Puerto Rico's energy
sources and increases access to secure, reliable and affordable energy.
OVERSIGHT HEARING ON EXAMINING PUERTO RICO'S ELECTRICAL GRID AND
THE NEED FOR RELIABLE AND
RESILIENT ENERGY
----------
Thursday, September 26, 2024
U.S. House of Representatives
Subcommittee on Indian and Insular Affairs
Committee on Natural Resources
Washington, DC
----------
The Subcommittee met, pursuant to notice, at 10:02 a.m., in
Room 1324, Longworth House Office Building, Hon. Harriet M.
Hageman [Chair of the Subcommittee] presiding.
Present: Representatives Hageman, Radewagen, LaMalfa,
Gonzalez-Colon, Moylan, Westerman; and Velazquez.
Also present: Representatives Stauber, Valadao, Gimenez;
Ocasio-Cortez, and Torres.
Ms. Hageman. The Subcommittee on Indian and Insular Affairs
will come to order.
Without objection, the Chair is authorized to declare a
recess of the Subcommittee at any time.
The Subcommittee is meeting today to hear testimony on
``Examining Puerto Rico's Electrical Grid and the Need for
Reliable and Resilient Energy.''
Under Committee Rule 4(f), any oral opening statements at
hearings are limited to the Chairman and the Ranking Minority
Member. I therefore ask unanimous consent that all Members'
opening statements be made part of the hearing record if they
are submitted in accordance with Committee Rule 3(o). Without
objection, so ordered.
I ask unanimous consent that the gentleman from Minnesota,
Mr. Stauber; the gentlewoman from New York, Ms. Ocasio-Cortez;
the gentleman from New York, Mr. Torres; the gentleman from
California, Mr. Valadao; the gentleman from New York, Mr.
Garbarino; and that the gentleman from Florida, Mr. Gimenez be
allowed to sit and participate in today's hearing. Without
objection, so ordered.
I will now recognize myself for an opening statement.
STATEMENT OF THE HON. HARRIET M. HAGEMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
When Hurricanes Irma and Maria made landfall in Puerto Rico
in September 2017, they left massive damage in their wake. The
storms knocked out 80 percent of Puerto Rico's electrical grid,
causing an 11-month blackout, the longest in U.S. history.
These hurricanes revealed the fragility and dire strait of
Puerto Rico's electrical grid, which had been suffering from
years of mismanagement and deferred maintenance by the Puerto
Rico Electric Power Authority, or PREPA, the island's public
electrical utility.
Since then, PREPA has undergone a major overhaul of its
management, operations, and finances. This overhaul included
entering into private-public partnerships that privatized the
management of most of PREPA's assets. In 2021, the management
of PREPA's electrical transmission and distribution
infrastructure was awarded to LUMA Energy. And in 2023,
operations of PREPA's thermal generation assets were awarded to
Genera.
At the Federal level, the DOE, FEMA and HUD are all engaged
in efforts aimed at rebuilding Puerto Rico's electrical grid.
Of the three Federal agencies, FEMA, or the Federal Emergency
Management Agency, provides the lion's share of Federal
funding. Of the $21 billion of Federal funds obligated for
Puerto Rico, approximately $16.8 billion are FEMA funds.
It has been 7 years since Hurricanes Irma and Maria. Yet,
Puerto Rico continues to suffer major power outage incidents
with no clear end in sight. To that end, I am deeply
disappointed that our witnesses from the Biden-Harris
administration have declined to testify today. As you all can
see, our first panel today has empty chairs, as the
Administration witnesses refused to show up to address this
incredibly important issue.
We had hoped that their testimony would help us better
understand the Federal Government's efforts in Puerto Rico and
how the over $20 billion in obligated taxpayer dollars are
being spent on the island. Troublingly, the Biden-Harris
administration has pushed an energy agenda on the island
focused on building unreliable energy resources such as wind
and solar, while ignoring the need for reliable and affordable
baseload energy sources to meet the island's basic needs. Their
radical approach is neither feasible nor sustainable and
disregards the basic needs of the island's more than 3 million
residents.
I am particularly disappointed in the lack of participation
from FEMA and the DOE. When declining the invitation to
testify, the DOE stated that their ``senior leaders on Puerto
Rico matters remain at a critical juncture with starting
installations of solar panels and batteries in Puerto Rico.''
It is hard to believe that not a single person is available to
testify across an entire Federal department.
FEMA responded to this Committee by stating that they are
not willing to testify if the DOE is not. Quite mature in their
response. Given the fact that nearly 80 percent of the Federal
funds obligated for Puerto Rico come from FEMA, it is troubling
that FEMA believes that they can sideline themselves on this
issue. It is unacceptable that our invited witnesses from
Washington, DC are unwilling to testify when all of our
witnesses from Puerto Rico have traveled to be here with us
today.
The Biden-Harris administration's lack of participation in
this hearing is yet another sign that, while they may talk the
talk, they are unwilling to walk the walk when it comes to
helping the American people. Our fellow Americans in Puerto
Rico and across the nation deserve better. Needless to say, we
will be submitting questions for the record to the
Administration witnesses after this hearing.
I want to thank the witnesses who have come before us today
for traveling many miles to be here. I look forward to hearing
from them on their ongoing work to rebuild Puerto Rico's
electrical grid and the challenges that they have been facing.
And I want to thank those of you who came to my office
yesterday to provide me with additional information about the
challenges that you have. I learned so much and I am extremely
appreciative that you are all here today to address this
important issue.
All the stakeholders involved in rebuilding Puerto Rico's
electrical grid must understand the importance of committing to
addressing the issues that are raised here today. The residents
of Puerto Rico deserve access to reliable, affordable, and
resilient energy.
Once again, I would like to thank our witnesses who are
with us today, and I look forward to their testimony.
The Chair now recognizes the Ranking Minority Member for
any statements.
STATEMENT OF THE HON. NYDIA M. VELAZQUEZ, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
Ms. Velazquez. Thank you, Madam Chair.
October 6, 2021. That day marks the first and only time to
this date that the House Committee on Natural Resources held a
hearing on the LUMA contract at the request of Ranking Member
Grijalva and myself. It took this Committee 2 long years to
finally examine Puerto Rico's energy crisis. And in that time,
the situation has only worsened.
Puerto Rico endured the devastation of Hurricane Fiona and
Tropical Storm Ernesto, the latter striking just last month. As
a result, half of the island's energy consumers, all 750,000
households, were left in darkness. A full week after the storm,
40,000 people were still without power. The reliable,
resilient, and clean energy future that LUMA promised Puerto
Ricans has yet to materialize.
It is shameful that this Committee has chosen the last day
on September's calendar, when many Members are already flying
back to their district, to hold this critical hearing. And it
is very nice to come and criticize the Administration, but why
didn't we have this hearing 6 weeks, 6 months ago, a year ago,
and use every tool at our disposal to compel the Federal
agencies to come before us?
This is a convenient platform for certain Members to feign
interest in Puerto Rico's energy future. But let's be clear.
Congress had ample time to question LUMA, Genera, COR3, and all
other key players about what has happened with the over $21
billion allocated to repair and modernize the grid.
Republicans are only addressing this now as the current
Congress nears its end and are pushing a proposal to diversify
Puerto Rico's energy sources. This so-called diversification
plan could be construed as a path to keep Puerto Rico reliant
only on fossil fuels and natural gas, ensuring that residents
continue to pay 41 percent more for energy than the average
U.S. consumer. Since these energy sources must be imported,
their ability to lower kilowatt hour prices is minimal.
Moreover, this hearing is incomplete. Key agencies
responsible for managing the grid's reconstruction, FEMA, the
Department of Energy, and notably the Puerto Rico Public-
Private Partnership Authority, P3A, one of the few entities
with oversight of LUMA, are not present.
Despite these significant limitations, I hope today's
hearing can still be productive. We need to understand how
Congress can better support the restoration of Puerto Rico's
grid moving forward. Above all, we must commit to achieving
energy justice and reliability for the island. Puerto Ricans
have suffered from long-standing government neglect, and it is
time to break this cycle.
I yield back.
Ms. Hageman. Thank you. The Chair now recognizes Chairman
Westerman for an opening statement.
STATEMENT OF THE HON. BRUCE WESTERMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS
Mr. Westerman. Thank you, Chair Hageman, for holding this
hearing today. Even though it has been scheduled and we were
supposed to be here today, a lot of people headed home. But it
is great to see so many people have stuck around for the
hearing because it is so important. It is of utmost importance
for Puerto Rico, as blackouts continue to affect the island's
residents.
I want to take a moment to recognize my colleague,
Representative Jenniffer Gonzalez-Colon, for requesting the
hearing, and for her tireless efforts representing the people
of Puerto Rico in this Committee and all throughout the halls
of Congress.
I also want to thank you, Chair Hageman, and my colleagues
again for being here, even with the change in schedule.
Puerto Rico is still recovering from multiple disasters
that have devastated the island. Hurricanes, tropical storms,
and earthquakes have left long lasting impacts on Puerto Rico,
particularly its electrical grid. The fragility of the
electrical grid and continued blackouts have affected the
livelihoods of Puerto Rico's residents and the island's
economy. And today's hearing is particularly salient, as it is
hurricane season. With the growing risk of powerful storms
making landfall on the island, there are increasing concerns
that a hurricane could collapse the island's electrical grid.
In fact, last month, outages caused by Tropical Storm Ernesto
resulted in approximately 750,000 customers losing power in
Puerto Rico during the outage's peak. Fortunately, this storm
did not become a severe hurricane when passing over the island.
However, the incident, along with other significant blackouts,
has made it clear that ensuring the resiliency of Puerto Rico's
electrical grid is not an issue to be put off for tomorrow, but
a challenge that needs to be addressed today that should have
been addressed long ago.
Today, as we discuss the current state of Puerto Rico's
electrical grid, I encourage our witnesses to promptly address
the challenges and concerns raised not only in this hearing,
but also by the residents of Puerto Rico. Residents' concerns
regarding the underwhelming progress in modernizing the
island's energy infrastructure should not be ignored. At the
same time, I urge us all to look at this issue with an
understanding that it is complex and cannot really be traced
back to a single problem.
We also must consider the practical realities on the
island. It is abundantly clear to us that the Biden-Harris
administration's prioritization of renewable energy over less
costly, more reliable, and actually cleaner alternatives is not
sustainable in Puerto Rico. Solar and wind have been proven to
be less reliable, less resilient, and more costly than baseload
sources such as natural gas.
I want to take a moment to really express a sincere
disappointment in the Biden administration's decision not to
participate in this important hearing, even after all three of
the invited departments were given a month's notice. The lack
of participation by the DOE, FEMA, and HUD cast serious doubt
over the Biden-Harris administration's commitment to Puerto
Rico and the millions of American citizens living on the
island.
Considering that much of the $21 billion obligated for
Federal assistance in Puerto Rico's energy reconstruction has
not yet been disbursed, it is not surprising that the
Administration would want to avoid appearing before Congress.
But to be clear, their absence today will not spare them from
the oversight efforts of this Committee. We will not allow the
Administration to run away from providing the information
Congress needs to address the dire issue, and we will be
sending the Administration witnesses written questions for them
to answer on the record following the hearing.
You know, I was in Puerto Rico in a helicopter a few years
ago. And as we were flying over, I kept seeing these
transmission lines that it looked like there had never been a
right-of-way because the trees were grown up right up under the
lines. And I found out that FEMA has authorized $1.2 billion to
clear 16,000 miles of transmission lines, clear the right-of-
ways that should have been cleared and kept clean all along.
Which shows the utter disarray of the electrical grid when we
cannot even keep the right-of-ways clean.
But 16,000 miles sounds like a lot. It is 100,000 acres,
when you look at an average 50-foot right-of-way. Some are
wider, some are narrower. But $12,000 an acre is what FEMA is
proposing to be spent to clear the right-of-ways. It is
shocking. And if I was them, I would not come here either,
because I do not think there is any way they can defend that. I
think it shows the absurdity of FEMA and the amount of money
they are pouring into places and not getting the results out of
it.
I had a meeting with some tribal forestry leaders. And I
said, do you do right-of-way work? They said, yes, we do that.
I said, what does it cost? They said, it is expensive because
you have to masticate the wood. And I said, well, what does
that cost. They said, it could get up to $1,000 to $1,200 an
acre. I said, really? And they said, if it is really steep, it
can be more than that. I said, well, what is the absolute most
it should ever cost to do that? They said, around $2,000 an
acre. So, that is high.
I said, well, what if FEMA were involved? And they just
laughed and said, oh, multiply that by five or six.
Five or six times the cost to do something, just because we
get one of these Federal agencies involved. Something has to
change.
The people of Puerto Rico deserve to have reliable
electrical power. And the bureaucracy and the waste of money
has to stop. And I hope this hearing sheds light on that.
I yield back.
Ms. Hageman. Thank you, Chairman Westerman.
As the invited witnesses from the Biden-Harris
administration chose not to appear before us today, we will
move on to the second panel. And I invite the witnesses for our
second panel to be seated at the witness table.
While the Clerk is resetting the table, I will introduce
each of the witnesses who will be testifying today.
Mr. Manuel Laboy Rivera, Executive Director for the Central
Office for Recovery, Reconstruction, and Resiliency, from San
Juan, Puerto Rico; Mr. Antonio Torres Miranda, the Associate
Commissioner with the Puerto Rico Energy Bureau, from San Juan,
Puerto Rico; Mr. Juan Saca, the Chief Executive Officer for
LUMA Energy from San Juan, Puerto Rico; and Mr. Brannen
McElmurray, the Chief Executive Officer for Genera PR LLC, from
San Juan, Puerto Rico.
If you would all join us at the table, that would be
wonderful.
Let me remind the witnesses that under Committee Rules,
they must limit their oral statements to 5 minutes, but their
entire statement will appear in the hearing record. To begin
your testimony, please press the ``talk'' button on the
microphone. And we use timing lights. When you begin, the light
will turn green. When you have 1 minute left, the light will
turn yellow. And at the end of 5 minutes, the light will turn
red, and I will ask you to please complete your statement.
I will also allow all witnesses on the panel to testify
before the Members begin their questioning.
The Chair now recognizes Mr. Laboy Rivera for 5 minutes.
STATEMENT OF MANUEL LABOY RIVERA, EXECUTIVE DIRECTOR, CENTRAL
OFFICE FOR RECOVERY, RECONSTRUCTION, AND RESILIENCY, SAN JUAN,
PUERTO RICO
Mr. Laboy Rivera. Thank you. Chairwoman Harriet Hageman,
Vice Chair Jenniffer Gonzalez-Colon, and members of the
Subcommittee, good morning. Thank you for the opportunity to
testify on Puerto Rico's recovery and the critical efforts to
rebuild our electrical grid.
I am Manuel Laboy, Executive Director of the Central Office
for Recovery, Reconstruction, and Resiliency, and the
authorized representative of the Governor of Puerto Rico.
As you are aware, the U.S. Government Accountability Office
has determined that the recovery from Hurricanes Irma and Maria
has been the largest and most complex in our nation's history.
After these storms struck in 2017, it took almost a year and
$1.9 billion of FEMA emergency funding to power and fully
restore electric service in Puerto Rico. That was just the
beginning of a unique and unprecedented long-term recovery.
In 2019, FEMA implemented for the first time an accelerated
award strategy known as FAASt, resulting in a $9.5 billion
obligation in September 2020 to build back better and more
resilient our electrical infrastructure. However, this
obligation effectively acted as a master recovery budget, since
FAASt did not authorize any construction activity or
disbursement of funds. In order to do that, scopes of work must
be submitted to FEMA to conduct an environmental and historic
preservation review and approve additional funding to finance
hazard mitigation measures. Once the scope of work is
obligated, the project is then authorized for construction and
allows COR3 to process requests for disbursements.
Furthermore, FEMA operates on a reimbursement model. To
address liquidity issues, COR3, with FEMA's approval, launched
the Working Capital Advance Program in June 2022. This program
provides a 25 percent cash advance for approved permanent work,
up to 75 percent of the Federal share, expediting the pace of
recovery. This has been highlighted by FEMA as an example of
innovation in the field.
Up to 2021, there were zero projects approved for the
electrical grid. Zero. Since then, there have been 189 projects
duly approved for construction and disbursements worth $5.8
billion. Thanks to the Working Capital Advance, about $1.3
billion has been disbursed. This represents 26 percent of the
$5.8 billion that FEMA has authorized to do the reconstruction
of the electrical grid.
In January 2023, FEMA implemented the island-wide benefit
cost analysis allocating $6.8 billion of hazard mitigation
funds, increasing the total estimated funding to $16.3 billion.
In March 2023, FEMA notified COR3 that vegetation clearance
around critical infrastructure is an eligible hazard mitigation
activity.
In parallel, COR3 has been actively engaging with LUMA,
Genera, FEMA, DOE, among other key stakeholders to accelerate
the execution of those critical projects. Consequently, as
indicated by the GAO and FEMA, we have made real progress.
Nevertheless, certain challenges persist, and further steps
are needed to sustain the momentum of our recovery. We urge
Congress to take a deeper view and consider statutory and
regulatory changes to remove unnecessary red tape at the
Federal level related to environmental and historic
preservation requirements that will expedite the review and
approval process. Also to rationalize and simplify the
administrative framework to manage multiple simultaneous
declared disasters in a more efficient manner. To also
retroactively apply policies that will benefit the recovery
process, and to allow FEMA to increased fixed cost estimates on
obligated funding on their Section 428, due to severe
inflation, construction material cost increases, and labor
shortages.
In conclusion, while we have made meaningful progress,
certainly much more needs to be done. COR3 is committed to
ensuring compliance, transparency, and efficiency in managing
Federal funds, and we look forward to continuing our
collaboration with FEMA and Congress to rebuild our electrical
system in order to provide reliable, affordable baseload
resilient energy to the people of Puerto Rico.
Thank you for your time and attention, and I am happy to
answer any questions you may have.
[The prepared statement of Mr. Laboy Rivera follows:]
Prepared Statement of Hon. Manuel A. Laboy, Authorized Representative
of
the Governor of Puerto Rico, Central Office for Recovery,
Reconstruction and Resiliency
Chairman Westerman and Members of the Committee:
On behalf of the Governor and the Citizens of Puerto Rico, I thank
you for once again giving me the opportunity to discuss Puerto Rico's
electrical grid and the need for reliable and resilient energy. In
addition to serving as the Executive Director of Puerto Rico's Central
Office for Recovery, Reconstruction and Resiliency (COR3) I am also the
Authorized Representative of the Governor of Puerto Rico and as such
have worked directly in the recovery efforts due to the aftermath of
various disasters, including hurricanes Irma and Maria. As you are
aware, the US Government Accountability Office (GAO) has determined
that ``the recovery from Hurricanes Irma and Maria has been the largest
and most complicated in our nation's history''. I am pleased to appear
today to share with you the significant progress that has been made on
our energy recovery efforts over the last two years.
Background
It is not a secret that Puerto Rico's infrastructure had been in
decline for decades due to a lack of maintenance and critical capital
improvements, leaving the island vulnerable to natural disasters and
other shocks and stressors. Our electrical grid was particularly
susceptible. The Puerto Rico Electric Power Authority (PREPA)--the
vertically integrated public utility that owned and operated the
island's power system--had long relied on infrastructure that dates
back to the 1960s. PREPA had also long depended on imported oil,
resulting in vulnerability to supply disruptions and price volatility.
The devastating impact of Hurricanes Irma and Maria in September 2017
exposed the full extent of the electrical grid's weakness. The
hurricanes destroyed 80% of the transmission and distribution network,
causing an island-wide blackout and a prolonged state of emergency.
Most residents did not have power for months, in some areas, even a
year. Hospitals, schools, and businesses stopped operations, crippling
the economy and endangering public health. The aftermath was
overwhelming and made clear that we urgently needed not only to repair
but also to reconstruct and modernize the electrical grid to make it
more reliable and resilient.
It is undeniable that emergency work on the electrical grid began
immediately following the hurricanes, which allowed the Island to
recover 100% electric power service by mid-2018 after a $1.9 billion
investment by FEMA. On September 10 and September 20, 2017, President
Donald Trump issued two major disaster declarations for Puerto Rico
(DR-4336 and DR-4339) that unlocked federal assistance for the response
and recovery efforts, including funds from the Federal Emergency
Management Agency's (FEMA) Public Assistance Program. Later that year,
then Governor of Puerto Rico, Ricardo Rossello created the Central
Office of Recovery, Reconstruction and Resiliency (COR3) to lead the
response and recovery efforts, manage the federal funds, and ensure
their proper use.\1\ Since then, COR3 has managed the Public Assistance
and Hazard Mitigation Grants programs at the local level, and thus has
been responsible for disbursing funds that FEMA has obligated to
subrecipients the Public Assistance program.
---------------------------------------------------------------------------
\1\ P.R. Exec. Order No. 2017-65 (2017); P.R. Exec. Order No. 2017-
69 (2017) (amending Exec. Order No. 2017-65).
---------------------------------------------------------------------------
On February 9, 2018, Congress passed the Bipartisan Budget Act
(BBA), instituting a variety of changes to how FEMA can implement
disaster assistance. One provision of the law gives FEMA the authority
in Puerto Rico and the U.S. Virgin Islands (specific to impacts related
to Hurricanes Irma and Maria) to provide assistance to restore
disaster-damaged facilities or systems to industry standard and to
restore functionality of the disaster-damaged facility or system
without regard to pre-disaster condition. This provision is applicable
to critical services, specifically, electrical grid, aqueduct and
sewer, education and healthcare.
Furthermore, to address PREPA's longstanding inefficiencies and
reform the island's outdated and dilapidated energy system, in June
2018, the island's legislature enacted the Puerto Rico Electric Power
System Transformation Act.\2\ This Act, later amended by the Puerto
Rico Energy Public Policy Act of 2019,\3\ established a framework for
restructuring PREPA's operations by (1) unbundling generation,
transmission, and distribution, and (2) introducing private operators.
Following its enactment, the Puerto Rico Public-Private Partnerships
Authority (P3A) and PREPA entered into public-private partnership
agreements with two private entities to transfer PREPA's transmission
and distribution responsibilities to LUMA Energy in 2020 and its
generation responsibilities to Genera-PR in 2023. These private
operators are now responsible for reconstructing and modernizing the
electrical grid, aligning it with best practices and standards.
---------------------------------------------------------------------------
\2\ Puerto Rico Electric Power System Transformation Act, Act No.
120 of June 21, 2018.
\3\ Puerto Rico Energy Public Policy Act, Act No. 17 of April 11,
2019.
---------------------------------------------------------------------------
Moreover, due to the unprecedented devastation and the limitations
of recovery programs at the time of the disasters, the permanent and
resilient reconstruction phase was not able to proceed with earnest for
three years. The magnitude of the damage caused by the hurricanes,
coupled with safety challenges caused by widespread non-compliance with
building codes in Puerto Rico (many homes and roads in Puerto Rico had
been built without permits, often in flood-prone or landslide areas),
the earthquakes and the COVID-19 pandemic, extended the response period
from 2017 to 2020. As a matter of fact, the Washington Post published
in January 2020 that, ``Puerto Ricans still waiting on disaster funds
as Hurricane Maria's aftermath, earthquakes continue to affect life on
the island.'' The Center for a New Economy, a local think tank,
published on September 2021 that, ``The COVID-19 pandemic may delay
Hurricane Maria's reconstruction efforts.''
During that time, PREPA, FEMA, and COR3 worked together to approve
and fund emergency (Category A and B) work such as debris removal,
replacement of utility poles and transmission centers and substations
repairs. The agencies could not initiate permanent (Category C to G)
work, including the reconstruction and modernization of the electrical
grid, until 2021.
Then, as we entered the long-term recovery phase, further
challenges arose. As has been noted, FEMA operates on a reimbursement
model, meaning that Public Assistance subrecipients have to cover the
costs of large infrastructure projects which required significant
upfront investment. However, Puerto Rico's economic resources have
historically been scarce, so subrecipients struggled to secure capital
to finance the necessary work. Additionally, in 2019, FEMA established
a manual drawdown process for Puerto Rico as a means of fiscal control.
Under this process, COR3 had to submit detailed funding requests with
supporting documentation for FEMA's approval before drawing down grant
funds for recovery projects. The manual drawdown process further
hindered the recovery phase.
Also, in 2019, in an effort to expedite the process to obligate
permanent work funds for Puerto Rico's electrical grid, FEMA
implemented--for the first time--its FEMA Accelerated Award Strategy
(FAASt). Under FAASt, FEMA uses statistical sampling to calculate fixed
cost estimates for a group of critical infrastructure projects instead
of requiring inspections and cost estimates for each individual
project. Thus, FAASt allowed FEMA to expedite fund obligations in
September 2020 ($9.5 billion--federal share) that effectively act as a
master recovery budget for each subrecipient. However, FAASt does not
authorize any related construction or funds disbursements. All projects
still must go through the traditional obligation steps of FEMA's
National Delivery Model. This includes the submission of Scopes of Work
with required engineering and design data to allow FEMA to conduct an
Environmental and Historic Preservation (EHP) review and potentially
approve additional funding to finance hazard mitigation measures under
Section 406 of the Stafford Act. Once the Scope of Work is obligated by
FEMA, the project is authorized for construction and allows COR3 to
process requests for disbursements petitioned by the Applicant (PREPA).
By December 2020, no Scopes of Work had been submitted to or approved
by FEMA for the electrical grid long-term reconstruction.
Adding another layer of required administrative hurdles to commence
work, on March 26, 2021, the Puerto Rico Energy Bureau issued a
Resolution and Order requiring that all projects to be executed with
federal funds shall be submitted for Energy Bureau's approval. 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 COR3, LUMA, Genera and PREPA must obtain regulatory approval
from the Energy Bureau to ensure consistency with applicable laws and
regulations (refer to Diagram 1).
[GRAPHIC] [TIFF OMITTED] T6911.001
Diagram 1--Simplified Process for Scopes of Work Review,
Approval and Execution
However, by April 2021--when Puerto Rico had complied with the
manual drawdown process for two consecutive years--COR3 formally
requested that the special oversight be lifted, allowing the island to
be treated like other U.S. jurisdictions. On September 22, 2021, FEMA
approved the request. As a result, COR3 was able to streamline the
reimbursement process and accelerate the distribution of federal funds
to subrecipients.
Then, to address the liquidity issue, COR3, with FEMA's approval,
developed and launched the Working Capital Advance (WCA) pilot program
in June 2022. The program provides cash advances to subrecipients for
approved permanent work, up to 75% of the federal share of the project
disbursed in installments of 25%. These cash advances ensure that
projects can move forward before reimbursement funds are made
available, addressing cash flow issues upfront. Through the WCA, we
have been able to expedite the pace of recovery across the island. This
has been highlighted by FEMA in a 2024 report, stating that,
``Innovation in the Field: Working with the Government of Puerto Rico
to identify and remove recovery barriers, FEMA is actively supporting
the government's Working Capital Advance program, which began in
2022.''
In September 2022, shortly after the permanent and resilient
reconstruction of the electrical system finally kicked-started,
hurricane Fiona Hurricane Fiona hit Puerto Rico as a Category 1 storm,
almost exactly five years after Hurricane Maria, dropping record
rainfall, unleashing landslides and mudslides, flooding neighborhoods
and leaving most of the island without power or water. Hurricane Fiona
exacerbated the vulnerability of Puerto Rico's electrical
infrastructure.
Further, on January 2023, FEMA, with the support from COR3,
implemented the Island-Wide Benefit Cost-Analysis (IWBCA), a
methodology to evaluate the cost-effectiveness of Hazard Mitigation
projects for the electrical infrastructure based on an integrated
system (generation, transmission and distribution). FEMA estimated the
projects' maximum aggregated benefit at $6.8 billion (federal share) by
treating PREPA's infrastructure as a single, interconnected system
across the island. The approach allowed multiple projects to be
evaluated simultaneously, expediting the funding process and reducing
double counting and project duplication. FEMA awarded the IWBCA an
Administrator's Award for Innovation for promoting efficiency and
innovation in public service. In March 2024, FEMA notified COR3 that
vegetation clearance around critical infrastructure, such as the
transmission and distribution (T&D) system, is an eligible hazard
mitigation activity.
Clearly, we have faced and still face numerous challenges
throughout this process but, at every step, we have developed
innovative strategies to overcome them. Thanks to these efforts, all
emergency work has now been completed and we have successfully
transitioned to the long-term recovery phase, focusing on permanent
work and hazard mitigation to reduce the grid's vulnerability and
enhance its resilience. There has been significant progress in
approving and commencing permanent work, but many challenges still lie
ahead.
Significant Progress for Permanent Work
FEMA's Puerto Rico Region 2 Interim Report
We have made significant progress toward Puerto Rico's recovery.
Indeed, in the April 2024 Puerto Rico Region 2 Interim Progress
Report--which highlights recovery milestones and the ongoing efforts to
rebuild stronger--FEMA noted that ``efforts to help rebuild [Maria,
Fiona, Earthquakes] are paving the way for an unprecedented recovery
and, in coordination with the Government of Puerto Rico, the pace of
the recovery has gained momentum in the last several years as new
infrastructure, permanent repairs and reconstruction can be seen across
the island.'' Moreover, the report also established that ``Puerto Rico
should serve as an example for other states and territories in terms of
innovation and leading an unpresented recovery.''
Allocation, Obligation, and Disbursement of Funds
To date, FEMA has allocated approximately $16.3 billion in funds
for permanent work through its Public Assistance Program. The permanent
work allocation includes approximately $9.5 billion in funds under
Section 428 (FAASt September Master Recovery Budget)) and $6.8 billion
in mitigation funds (FEMA January 2023 Letter to COR3) under Sections
406 and 404 of the Robert T. Stafford Disaster Relief Act.\4\ Of the
$16.3 billion allocation, FEMA has obligated $4.835 billion for 188
Project Worksheets (PW's), based on detailed Scopes of Work submitted
by LUMA, Genera and PREPA (refer to Table 1). The obligations include
$3.55 billion for LUMA ($2.95 billion under Section 428 and $596.6
million under Section 406), $1 billion for Genera (all under Section
428), and $271 million for PREPA (all under Section 428). The PW's with
the largest obligations of funds are: Global Engineering/Architectural
Services, Global Equipment & Materials (for long-lead items), and for
Advanced Metering Infrastructure (AMI). Additionally, FEMA has
obligated $620 million to cover eligible administrative costs for LUMA,
Genera and PREPA.
---------------------------------------------------------------------------
\4\ Robert T. Stafford Disaster Relief and Emergency Assistance
Act, 42 U.S.C. Sec. Sec. 5121-5207 (2018). Under Section 428, the Act
provides for alternative procedures for the Public Assistance Program,
allowing for more flexibility in funding disaster recovery projects by
permitting the use of fixed estimates for project costs and simplifying
the administrative process. Under Sections 404 and 406, the HGMP aims
to reduce the risk of future disasters by funding projects that
minimize hazard impacts, enhance resilience, and protect public
infrastructure following a disaster and in the future.
---------------------------------------------------------------------------
Of the $4.9 billion in obligated funds, COR3 has disbursed
approximately $1.3 billion: $490 million to LUMA, $255 million to
Genera, and $528 million to PREPA. Disbursements made by COR3 can only
occur when FEMA obligates a detailed Scopes of Work (sub-FAASt Project
PW's), and when LUMA, Genera or PREPA submits to COR3 a request for
reimbursement or request for advance (i.e. Working Capital Advance). As
a result, COR3 has disbursed 26% of the $4.9 billion obligated by FEMA,
directly corresponding to the disbursements under the Working Capital
Advance (WCA) pilot program. The vast majority of PW's have been
processed through WCA, following requests from LUMA and Genera.
[GRAPHIC] [TIFF OMITTED] T6911.002
Table 1--Summary of FEMA FAASt Obligation and Disbursements of
funds
Collaborative Efforts to Modernize Puerto Rico's Electrical Grid
LUMA, Genera, and PREPA are working collaboratively to rebuild and
modernize the island's electrical infrastructure. Every fiscal year,
they develop a consolidated budget to ensure that each entity has the
necessary funding to meet its regulatory, operational, and capital
needs. Further, the consolidated budget aims to maximize federal
funding--especially Public Assistance and Hazard Mitigation funding--
while maintaining compliance with federal, state and local energy
requirements. Additionally, LUMA, Genera and PREPA, with the support
from COR3, developed a joint Five-Year Infrastructure Investment Plan
that lays out their infrastructure investment strategy for the
generation, transmission and distribution components of the electrical
grid. Through the joint plan, the three entities can best align on
critical infrastructure projects and leverage their expertise and
resources to ensure that all work meets the most advanced standards of
reliability, sustainability, and resilience. Equally important, at the
request from FEMA, LUMA, Genera and PREPA, with the support of COR3,
also developed a joint Integrated Resilience Plan. Both the Five-Year
Plan and the Integrated Resilience Plan were submitted to FEMA for the
proper review process (refer to Diagram 2).
[GRAPHIC] [TIFF OMITTED] T6911.003
Diagram 2--Short, Medium and Long-Term SOW's (Five-Year and
Integrated Resilience Plans)
Permanent Work and Hazard Mitigation Projects Pipeline
Up to 2021 there were zero PW's approved for energy projects. Since
then, there have been 189 approved projects worth $5.8 billion,
including administrative costs. These projects include legacy power
plant repairs, substation rebuild, vegetation clearance and mitigation,
implementation of Advanced Metering Infrastructure (AMI), and
streetlight, utility pole, and conductor repairs and replacement (refer
to Diagrams 3 and 4).
[GRAPHIC] [TIFF OMITTED] T6911.004
Diagram 3--Summary of FAASt Scopes of Work Obligated by FEMA
[GRAPHIC] [TIFF OMITTED] T6911.005
Diagram 4--Example of Scopes of Work currently in Construction
Stage
LUMA ENERGY
Currently, LUMA is focusing on obtaining approval for approximately
$10 billion in funding for its permanent projects. The vegetation
clearance, distribution automation, substations repairs and AMI
programs are particularly noteworthy given the impact they will have on
grid reliability, customer experience and project execution complexity.
According to data provided by LUMA, unmaintained vegetation is the
leading cause of service interruptions (approximately 50% of power
outages). With vegetation clearance and mitigation work, LUMA aims to
significantly improve reliability and overall customer experience over
the next three years. The goal is to clear over 16,000 miles of
transmission and distribution lines, manage debris, and apply targeted
herbicides in critical areas, including more than 300 substations and
telecommunication sites. The program consists of 31 projects organized
by region and asset type.
Furthermore, these projects will address immediate vegetation risks
(with rapid responses to high-risk sites that frequently disrupt
service or pose safety hazards) and will reestablish rights of way
(ROWs) to standard widths. However, the vegetation clearance program
will be complicated by the need to navigate the FEMA EHP process. FEMA
EHP reviews are mandated to ensure that projects comply with federal
regulations aimed at protecting cultural and natural resources. This
often involves assessing the potential impacts on historical sites,
endangered species, and other environmental factors, which can
significantly lengthen the project approval timeline. Delays in
obtaining the necessary permits can impede progress, complicating the
urgency of addressing vegetation-related outages. Additionally, the
requirement for public consultation and the evaluation of alternative
actions can further prolong the process, creating challenges in
balancing immediate infrastructure needs with regulatory compliance.
The AMI program involves the replacement of approximately 1.5
million electric meters and the establishment of a communication
network to support real-time monitoring and system management. The
program aims to integrate AMI with existing utility systems for billing
and outage management. Thus, AMI will enhance system reliability,
resiliency, and cost-efficiency by providing detailed real-time data on
outages, voltage, theft, and load, allowing operators to detect and
address issues proactively. AMI will also support broader goals, such
as fault location, load forecasting, and sustainability, while aligning
with FEMA and COR3 in an $877 million project to deploy the system.
This effort is one of the largest FEMA-funded initiatives in Puerto
Rico.
GENERA PR
Genera's efforts will concentrate on improving legacy generation
assets through plant repairs, critical component repairs, and baseload
projects. Significant projects include the installation of Battery
Energy Storage Systems (BESS) and Peaking Units in seven assets:
Cambalache, Vega Baja, Palo Seco, San Juan, Yabucoa, Aguirre, and Costa
Sur. The BESS system is crucial for improving grid reliability. BESS
can store excess energy generated during periods of low demand and
release it when needed, helping to balance supply and demand
fluctuations. BESS can also provide backup power during outages, reduce
reliance on fossil fuel generators, and stabilize grid frequency and
voltage. By integrating BESS with new Peaking Units, Genera will be
able to enhance efficiency, reliability and stability. This can support
a smoother transition to renewable energy sources. We are extremely
pleased that FEMA recently approved this effort and obligated $235
million for its implementation and $510 million for equipment purchase.
[GRAPHIC] [TIFF OMITTED] T6911.006
Diagram 5--Genera PR Plan for Grid Stabilization Centers
PREPA
These projects are categorized into dredgings, dam and
hydroelectric plant repairs, irrigation channels, and others, including
minor repairs to the Nuclear Power Plant and system upgrades for the
dam communications. Recently, PREPA submitted five major FEMA FAASt
projects, including the Hydroelectric System, multiple Dams and
Irrigation channels repair that represents $475 million. Of these three
have advanced to FEMA's Atlantic Consolidated Resource Center for cost
and scope validation. Additionally, PREPA is preparing to submit or
revise detailed SOWs for other irrigation and hydroelectric projects
that totals $30 million.
Leadership teams from LUMA, Genera, and PREPA meet weekly with COR3
and FEMA to closely monitor project developments, resolve shared
concerns, and manage risks that may impact the integration of these
entities. The goal of these meetings is to ensure that federal and
local objectives are aligned for the smooth execution of electrical
grid projects. The collaboration also supports LUMA's and Genera's
operation under their respective public-private partnership agreements.
Challenges to Long-Term Recovery
In its February 2024 report about Puerto Rico Disasters Recovery,
GAO highlighted that ``Progress made, but the Recovery continues to
face challenges.'' Indeed, COR3 and the Government of Puerto Rico has
communicated to FEMA, as well as to Members of Congress various
existing and emerging challenges that must be addressed to avoid losing
momentum. First, we are experiencing a convergence of multiple,
interconnected shocks that amplify the severity of each other. This is
known by emergency management scholars as a poly-crisis.\5\ Puerto
Rico's recovery efforts are not only responsive to Hurricanes Irma and
Maria, but also to subsequent disasters and broader issues that create
a complex and unpredictable environment (e.g. PREPA's bankruptcy). The
recovery challenges have been compounded by a series of events that
occurred following the hurricanes, including a swarm of earthquakes in
2020, a world-wide pandemic, Hurricane Fiona in 2022, and more
recently, severe floods and Tropical Storm Ernesto. These compound
events have significantly impacted the long-term recovery process and
continue to impact the daily lives of Puerto Rican citizens.\6\
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\5\ Navigating Poly-crisis: The New Reality for Crisis Management
in the United States from Belfer Center for Science and International
Affairs, Harvard Kennedy School by Mark Swilling
\6\ See U.S. Gov't Accountability Office, Hurricane Recovery Can
Take Years: Puerto Rico, 5 Years On, Shows Its Unique Challenges, GAO
WatchBlog (Sept. 15, 2022), https://www.gao.gov/blog/hurricane-
recovery-can-take-years-puerto-rico-5-years-show-its-unique-challenges.
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Second, cost inflation has posed as another significant challenge
for the present and future. As you are well aware, under Section 428 of
the Stafford Act, subrecipient awards are fixed, so increased expenses
that result in a budget overrun can jeopardize successful project
completion. This is very worrisome since all of the FEMA funding for
the long-term reconstruction of the electrical system is tied to
Section 428. As the GAO noted in its February 2024 report, ``cost
increases are of concern because a subrecipient's award acts as a fixed
budget to complete projects across its various facilities. Therefore,
increased costs for one project could excessively reduce the
established budget to complete later projects.'' \7\ COR3 has prepared
and submitted to FEMA various reports documenting the impact of
unanticipated inflation, for example, for the electrical system
reconstruction, which its fixed-cost estimates were conducted between
2019 and 2020. COR3 has proposed FEMA to agree on a one-time adjustment
to successfully address the expected long-term gap of funding. COR3
believes that FEMA has the authority to reach an agreement to bring
back the risk to acceptable levels for both the federal government and
the Government of Puerto Rico.
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\7\ U.S. Gov't Accountability Office, Puerto Rico Disasters:
Progress Made, but the Recovery Continues to Face Challenges, GAO-24-
105557 at 2 (Feb. 2024), https://www.gao.gov/assets/gao-24-105557.pdf.
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Third, due to the instability caused by Hurricane Fiona, FEMA
established a Power Stabilization Task Force, with a main focus to
provide temporary generation. Missions led by FEMA and USACE resulted
in the deployment of 350 MW of temporary power between June and
September 2023, by installing 17 generating units at the San Juan and
Palo Seco sites. To ensure this critical temporary power generation
capacity remain in Puerto Rico beyond the FEMA missions, COR3 and the
Government of Puerto Rico crafted a deal with FEMA in March 2024 to
obligate a new PW for the acquisition of 14 temporary units. The 14
units were purchased by PREPA with FEMA funds, allowing Puerto Rico to
produce temporary power until December 2025. COR3 is working with FEMA
to request additional funding to cover federal environmental compliance
requirements, as well as to extend the December 2025 deadline to ensure
this vital temporary generation is available to fully support the long-
term reconstruction of the electrical infrastructure, as well as the
effective integration of renewable energy technologies.
Fourth, as indicated previously, all FEMA SOW must comply with EHP
federal requirements prior to obligating funds and beginning
construction work. Even though the collaboration with FEMA has been
outstanding, and they have committed to expedite the review process,
the reality is that complex projects (such sensitive-scope vegetation
or cross-island transmission centers) take months (or years), since the
process mandate that federal partners such as Fish & Wildlife are
consulted, and some of the projects most likely will require
Environmental Assessments (EA) or more stringent Environmental Impact
Statements (EIS). Hence, COR3 recommends to Congress to take a deeper
view of statutory and regulatory requirements related to EHP, in order
to expedite the review process.
Fifth, COR3 has argued to FEMA the necessity to apply retroactively
certain policy decisions that will positively impact the Hurricane
Maria long-term recovery and resilience. One example is the small
projects threshold. For disasters declared after 2022, this threshold
is $1 million, compared to Hurricane Maria which is $123,100 thousand.
Another example is FEMA's announcement in January 2024 that the agency
will expand funding to tackle the climate crisis, improve resilience
and cut energy costs through net-zero projects. For the first time,
FEMA will fund net-zero energy projects, including solar, heat pumps,
and efficient appliances, through its largest grant program--Public
Assistance, which covers the rebuilding of schools, hospitals, fire
stations, and other community infrastructure investments post-
disasters. FEMA is also funding net-zero energy projects for its Hazard
Mitigation Grant Program (HMGP) and now offers incentives through its
Building Resilient Infrastructure and Communities (BRIC) annual grant
program to encourage more communities to use net-zero projects that
increase community resilience. Nevertheless, this new action is
applicable for any federal disaster declared after August 16, 2022,
hence, funds under Hurricane Maria cannot benefit from it.
Additionally, COR3 requests congress to assess potential statutory and
regulatory changes that will provide FEMA with the authority to
retroactively implement such beneficial measures such as small projects
thresholds and climate resilience actions. Furthermore, such statutory
and regulatory revisions must include new authority for FEMA to include
renewable energy technologies such as offshore wind, ocean thermal
energy conversion and hydro power, to be funded under Public Assistance
and/or Hazard Mitigation programs.
Finally, Public Assistance (and Hazard Mitigation) processes can be
administratively burdensome, particularly when managing processes for
multiple disasters. As mentioned above, recovery in Puerto Rico must
overcome the overlapping and complex layers of bureaucracy that delay
both the obligation and disbursement of critical funds, hindering
timely recovery and resilience-building efforts.
Closing Remarks
We hope this statement has provided you with a clearer
understanding of our significant progress in the last two years and our
current challenges. We are committed to ensuring compliance and
transparency in managing the federal funds allocated to Puerto Rico and
welcome any assistance in addressing the existing and emerging
challenges we identified.
On behalf of the entire COR3 team, we extend our gratitude to
Congress and the U.S. Government for their ongoing support in improving
the quality of life for all Puerto Ricans. We appreciate Congress's
attention to these critical issues and look forward to continuing our
collaboration to assess and address the lessons learned from these
unprecedented challenges.
______
Questions Submitted for the Record to Manuel Laboy Rivera, Executive
Director, Central Office for Recovery, Reconstruction, and Resiliency,
San Juan, Puerto Rico
Mr. Laboy Rivera did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. From your perspective, what are the key reasons for the
continued blackouts in Puerto Rico and what is your recommendation for
addressing these challenges and for ensuring that Puerto Rico has
access to reliable and resilient energy?
Question 2. There have been growing concerns about LUMA and
Genera's capacity to carry out the responsibilities they took on when
receiving their respective contracts. However, it must be made clear
that the challenges to rebuilding Puerto Rico's electrical grid will
not be resolved by simply finding alternative utility firms to carry
out these responsibilities. This would inevitably result in further
delays in ensuring Puerto Rico has access to reliable and resilient
energy. A productive way forward is to find ways to address the
challenges and concerns together.
2a) Does COR3 and the Government of Puerto Rico agree that the best
way forward is not to start from scratch but to get all stakeholders to
address this issue and work on substantively addressing the challenges
facing Puerto Rico's electrical grid?
Question 3. How much of the obligated FEMA funds have been
disbursed? If not all funds have been disbursed, why not? What barriers
exist that slow down the process from obligation to disbursement? How
has the fact that FEMA funds have not been fully disbursed affected the
rebuilding process for Puerto Rico's electrical grid?
Questions Submitted by Representative Grijalva
Question 1. What is the status of the FEMA ``Integrated Resiliency
Plan'' (IRP) to budget the $20 billion in recovery and repair funds
provided by Congress? Does the IRP include enough funding to enhance
the resilience and reliability of the electric grid? What is the
allocation included in the IRP to future-proof the island's
distribution grid to enable the high integration of renewables as
required by Puerto Rico Law 17 of 2019?
Questions Submitted by Representative Gonzalez-Colon
Question 1. Background: The P.R. Electric Power Authority remains
as the titled owner of the fixed assets so it is the recipient of
Public Assistance funds from FEMA.
However, since FEMA pays by reimbursement, PREPA and the COR3 find
themselves having to make advances to LUMA and Genera from their
limited reserves.
1a) Are LUMA's submissions consistently compliant with federal
requirements so that COR3 and FEMA can accelerate reimbursements,
minimize additional Requests For Information, and obtain the 10% local
share funding?
Question 2. LUMA has expended nearly $1.3 billion in FEMA-eligible
capital project expenses but in the hearing states they only have
obtained $173 million in reimbursements. A large part of Luma's
expenditures are covered by transfers from PREPA up front, to then
await recovery from the reimbursements
2a) Is this a drain on PREPA's standing accounts?
2b) How does this affect PREPA's ability to continue with its
reassigned functions and deal with its fiscal restructuring and its own
emergency recovery and mitigation work?
______
Ms. Hageman. Thank you, Mr. Rivera. The Chair now
recognizes Mr. Torres Miranda for 5 minutes.
STATEMENT OF ANTONIO TORRES MIRANDA, ASSOCIATE COMMISSIONER,
PUERTO RICO ENERGY BUREAU, SAN JUAN, PUERTO RICO
Mr. Torres Miranda. Good morning, Chair Hageman, Ranking
Member Velazquez, and distinguished members of the Committee.
My name is Antonio Torres Miranda, and I am an associate
commissioner of the Puerto Rico Energy Bureau.
On behalf of the Energy Bureau, I appreciate the
opportunity to present our review regarding the challenges
facing Puerto Rico's electrical system, and the steps the
Energy Bureau has taken to address these challenges.
The Energy Bureau is an independent and specialized body
that regulates, monitors, and enforces the Puerto Rico energy
public policy. This is a responsibility that is not filled by
any other entity in Puerto Rico.
Recent events highlight our ongoing challenges, such as the
outages that occurred in June of this year. These events
highlight the fragility of our electrical infrastructure and
the urgent need for the comprehensive improvements.
In early June of this year, a major outage occurred at the
Santa Isabel transmission substation, affecting customers in
the municipalities of Santa Isabel, Coamo and Aibonito. On June
12, Puerto Rico experienced another large-scale outage
affecting over 300,000 customers. The Energy Bureau immediately
launched formal investigations into each of these events.
We engaged the Electric Power Research Institute to serve
as the independent technical lead in these investigations,
ensuring our analysis is based on current industry codes and
standards and best practices. We are committed to thoroughly
addressing the root causes of these outages and preventing them
from reoccurring.
The Energy Bureau is also addressing the lack of available
generation, which is another significant cause of the rolling
blackouts Puerto Rico is experiencing. The Energy Bureau
initiated a docket through which it ordered LUMA, PREPA, and
Genera to develop priority stabilization plans. Such plans are
to be incorporated improvements to the electrical system within
a period of the next 2 years. The review process for these
plans includes technical conferences and public hearings. The
objectives are to mitigate rolling blackouts and for utility
consumers to receive adequate electrical services.
Despite ongoing efforts to reform Puerto Rico's electrical
system, including the transition to private operators such as
LUMA and Genera, we face several persistent issues. Vegetation
management remains a critical concern. More than half of our
outages are vegetation related. We are requiring frequent
updates from LUMA regarding the federally funded $1.2 billion
island-wide vegetation management reset initiative that is
currently under way.
Repairing baseload generators and increasing resource
adequacy of the bulk power system to meet industry reliability
standards are short-term solutions to ensure customer service
availability.
Federal funding is essential to advance any other temporary
generation required to ensure customer service availability
when the electrical system is brought to an acceptable level of
reliability.
PREPA's ongoing bankruptcy, in place since 2017,
complicates long-term planning and investments. Its resolution
is crucial for restoring access to capital markets and focusing
on operational improvements.
Puerto Rico's goal is an electrical system that is
reliable, resilient, sustainable, and affordable for all its
citizens. This includes integrated resources of renewable and
nonrenewable energy sources to meet the immediate need for
improving resource adequacy and diminishing rolling blackouts.
It also includes the targeted repair of generating plants in
conjunction with a critical replacement program that seeks to
reduce the likelihood that when a failure is repaired, this
failure will reoccur.
The Energy Bureau recognizes that achieving this vision
requires more than technical solutions. It demands a holistic
approach that considers Puerto Rico's social and economic
realities. This will ensure a just and equitable transition
that creates opportunities for local workforce development and
economic growth.
In conclusion, the Energy Bureau will ensure completion of
an ongoing transformation of the Puerto Rico electric system
with continued support from Congress and our Federal partners.
Thank you for your concern and attention to this critical
manner affecting more than 3 million American citizens. I stand
ready to answer any questions you might have. Thank you.
[The prepared statement of Mr. Torres Miranda follows:]
Prepared Statement of Antonio Torres Miranda, E.I.T., Esq., Associate
Commissioner, Puerto Rico Energy Bureau
I. INTRODUCTION
Chair Hageman, Ranking Member Grijalva, Congresswoman Gonzalez-
Colon, and distinguished Members of the Committee, thank you for the
opportunity to appear before you today to discuss the critical issues
surrounding Puerto Rico's electric system.
My name is Antonio Torres Miranda, and I serve as the Associate
Commissioner of the Energy Bureau of the Puerto Rico Public Service
Regulatory Board (``Energy Bureau'').\1\ The Energy Bureau is an
independent, regulatory body consisting of five (5) commissioners that
regulate the electric utility serving the island and functions
similarly to the Public Utilities Commissions (``PUC'') found across
the mainland. The Commissioners have equal voting powers. The Energy
Bureau has a mandate to implement and enforce the energy public policy
enacted in Puerto Rico, as well as to adopt the regulations necessary
for such implementation.
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\1\ Formerly known as the Puerto Rico Energy Commission.
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Having an effective regulator is crucial to the development of a
stable and robust electric delivery system and the transformation of
the Puerto Rico electric system. The Energy Bureau, by law is an
independent regulator that is subject to judicial review. This
stability fosters an environment where long-term plans and strategies
can succeed. In the intervening period since our last appearance before
this esteemed Committee,\2\ the landscape of Puerto Rico's energy
sector has undergone significant changes. The Energy Bureau has
diligently exercised its regulatory authority to scrutinize and
evaluate the comprehensive plans put forth by both LUMA,\3\ the private
Transmission and Distribution System operator, and Genera, the newly
instated Legacy Generation Assets operator, to ensure that these plans
are conducive to improving the delivery of electric service and
increasing the resilience of the electric infrastructure against future
weather events by making smart use of the federal reconstruction
dollars available to the island, and ensuring that the shift toward
100% renewable generation is aligned with the targets imposed by our
energy public policy.
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\2\ Committee on Natural Resources/Office of Insular Affairs,
October 6, 2021, Oversight hearing on ``Puerto Rico Electric Power
Authority (PREPA) Post-Implementation of the LUMA Transmission and
Distribution Contract.
\3\ LUMA Energy, LLC and LUMA Energy ServCo, LLC (jointly
``LUMA'').
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The Energy Bureau's expanded purview now encompasses the oversight
of both the T&D system, as well as legacy generation asset planning and
operations as well as the future generation market. This comprehensive
regulatory approach allows for a holistic evaluation of the entire
electricity value chain, ensuring that improvements and investments are
coordinated and mutually reinforcing across all segments of the power
system. Both the T&D and the LGAs in Puerto Rico are now operated and
maintained by LUMA and Genera, respectively, with oversight from the
Puerto Rico Energy Bureau.\4\
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\4\ LUMA Energy, LLC and LUMA Energy ServCo, LLC are certified
electric service companies that operate under the jurisdiction of the
PREB, Certification Number: NEPR-CT-2020-0008 and Certification Number:
NEPR-CT-2020-0007, respectively. Genera PR, LLC is a certified electric
service company that operates under the jurisdiction of the PREB,
Certification Number: NEPR-CT-2023-0001.
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The electric system in Puerto Rico, despite ongoing efforts and
investments, continues to face formidable challenges. The recent outage
events of June 2024, which affected over 300,000 customers, serve as a
stark reminder of the fragility of our infrastructure and the urgent
need for comprehensive improvements. These incidents highlight the
complex interplay of aging assets, deferred maintenance, and the
increasing impacts of climate change on our island's power grid.
However, it is crucial to contextualize these challenges within the
broader narrative of Puerto Rico's energy transformation. Puerto Rico
stands at a pivotal juncture, where the transition to private operators
for both transmission and distribution, as well as legacy generation
assets, offers new opportunities for innovation and efficiency.
Concurrently, we are witnessing an unprecedented infusion of federal
funding aimed at rebuilding and modernizing our electric system within
the parameters of current industry safety and reliability codes and
standards.
The path forward is not without its obstacles. Federal fund
utilization, the ongoing bankruptcy proceedings of the Puerto Rico
Electric Power Authority, and the intricate process of transitioning
from a monopoly to a generation market, all contribute to the
multifaceted nature of our challenges. Yet, these very challenges also
present opportunities for transformative change.
As we delve into the specifics of recent events and our strategic
response, The Energy Bureau ask the Committee to consider the broader
context of Puerto Rico's energy landscape--a landscape marked by both
significant hurdles and promising horizons. Today's discussion is not
merely about addressing immediate crises, but about charting a course
toward a resilient, sustainable, and equitable energy future for all
our citizens as required by local law.
II. THE ENERGY BUREAU--OVERVIEW
The Energy Bureau was created in 2014 by the Puerto Rico Energy
Transformation and RELIEF Act \5\ serving as a key component for the
full and transparent implementation of the Act's energy reform goals.
Specifically, the Energy Bureau has the responsibility to regulate,
monitor and enforce the energy public policy of the Government of
Puerto Rico. The Energy Bureau has a mandate to ensure electric service
is safe, reliable, and affordable.
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\5\ Act 57-2014, as amended.
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A. Expertise
1. Commissioners
By statute,\6\ The Energy Bureau Commissioners have diverse
professional backgrounds. Currently, three commissioners hold
dual degrees in engineering and law, one commissioner is a
seasoned energy, land use, and environmental attorney who
serves in the National Association of Regulatory Utility
Commissioners (``NARUC'') Board of Directors, and one
commissioner is a licensed engineer specialized in the design
of electrical power systems.
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\6\ Section 6.6 of Act 57-2014, as amended.
2. The Energy Bureau is supported by Nationally Recognized
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Technical Resources
The Energy relies on recognized experts in the utility
regulatory field to assist its informed and grounded regulatory
development. These resources include former commissioners and
staff from multiple U.S. Public Utility Commissions (``PUCs''),
some with first-hand experience dealing with the current
arrangement found in Puerto Rico: a private operator running
the T&D system for the public electric utility. The Energy
Bureau is also advised by experts in the areas of energy
regulatory affairs, economics, engineering, energy efficiency
and resource/system/operations planning, among others. These
experts also provide consulting services throughout the USA and
other international jurisdictions.
III. RECENT OUTAGE EVENTS OF JUNE 2024
In regard to the deeply concerning outage events that occurred in
mid-June of this year. On June 12, 2024, Puerto Rico experienced two
significant power outages that affected hundreds of thousands of our
citizens.
The first incident occurred at approximately 3 p.m., which impacted
Units of the San Juan Power Plant, as well as the temporary emergency
units at that site. This event left more than 100,000 customers without
power.
At about 9 p.m. on the same day, a second event plunged
approximately 350,000 customers into darkness, primarily affecting the
regions of Bayamon, San Juan, and Carolina.
Also, on June 2, 2024, a major outage occurred at the Santa Isabel
transmission substation. As a result of the outage, customers in the
municipalities of Santa Isabel, Coamo and Aibonito suffered service
interruptions, some of which persisted for more than a week.
These outages represented a significant disruption to daily life,
compromised public safety, and are clear examples of the persistent
fragility of our electric system. Hospitals were forced to rely on
backup generators, businesses had to close, and families were left in
the dark during periods of peak demand.
A. The Energy Bureau's immediate response and investigations
Upon learning of these outages, the Energy Bureau, on June 14,
2024, issued Resolutions and Orders initiating formal investigations
into the causes of these incidents and the investigative and corrective
actions taken by LUMA in response.\7\
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\7\ See, Resolutions and Orders, In re: Initiation of
Investigation; Initial Reporting and Incident Report, Case No. NEPR-IN-
2024-0003, June 14, 2024 and In re: Initiation of Investigation;
Initial Reporting and Incident Report, Case No. NEPR-IN-2024-0002, June
14, 2024.
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The Energy Bureau demanded immediate Incident Reports from both
LUMA and Genera, requiring detailed explanations of the events, their
causes, and the steps taken to prevent such occurrences in the future.
The Energy Bureau's investigations are ongoing, and committed to a
thorough and transparent process to uncover the root causes of these
failures.
Furthermore, the Energy Bureau have engaged the services of the
Electric Power Research Institute (EPRI) to serve as the independent
technical lead for the Energy Bureau in these investigations. EPRI's
involvement ensures that the analysis will be based on the most current
industry knowledge and best practices. The Energy Bureau will, in the
near future, review and act upon the findings and recommendations made
by EPRI.
IV. PERSISTENT ROLLING BLACKOUTS
Besides large scale outages such as the events that occurred this
past June, Puerto Rico experiences an unacceptably large number of
frequently occurring rolling blackouts.
In response, the Energy Bureau initiated a docket, through which,
it ordered LUMA and Genera to develop priority stabilization plans
which were to be aggressive preliminary plans of improvement to the
electric system with a maximum implementation period of two years.
The Energy Bureau established a robust review process for the
plans, including a technical conference and a public hearing. Through
this proceeding, the Energy Bureau will mitigate the rolling blackouts
for the people of Puerto Rico to receive the level of electric service
that adheres to industry reliability standards.
Also, the Energy Bureau worked closely with the utilities to secure
from FEMA and fund the 14 TM2500 temporary generators which total
350MW, which could be used to supplement generation, when necessary,
but also enable Genera to perform necessary maintenance on the legacy
generators which provide most of the electricity for Puerto Rico.
Without the availability of these temporary generators, the system
operator would have had to resort to more frequent load sheds in times
of high electric demand, resulting in increased rolling blackouts.
A. PREB's directives
More specifically, on June 13, 2024, the Energy Bureau ordered
PREPA, LUMA and Genera, to each develop within 20 days, an ``aggressive
preliminary plan of improvements to the electric system'' with a
maximum implementation period of two years. Each of the parties filed
their plans and the Energy Bureau established a schedule for their
comprehensive review. As of this date, the virtual technical workshop
has concluded. The general public will have the opportunity to present
its comments and suggestions regarding the Preliminary Plans during the
Virtual Public Hearing scheduled for October 2, 2024 and may also
submit written comments and suggestions.
Along with implementing these plans the TM2500 temporary generators
that were obtained through FEMA are fundamental in alleviating the need
for load shed in times of increased electric demand or unexpected
outages and have enabled Genera to facilitate planned outage scheduling
for maintenance at the legacy generation plants. In the recent budget
review, the Energy Bureau approved funding to operate the 14 temporary
generators requested by Genera. These temporary generators are
essential to facilitate the repairs of the legacy generation. The
Energy Bureau is grateful for the financial assistance that has already
been afforded to Puerto Rico, without which, due to the extent of the
damage inflicted by past hurricanes and earthquakes, Puerto Rico would
not be on the path to recovery.
V. VEGETATION MANAGEMENT INITIATIVES
The Energy Bureau emphasizes that vegetation management is a
critical factor that is a persistent threat to our system's
reliability.
It is well known that overgrown vegetation continues to be a
leading cause of outages across Puerto Rico. Despite repeated
directives from the Energy Bureau and significant federal funding
allocated for this purpose, the pace of vegetation management has to be
accelerated.
In fact, data shows that vegetation-related issues contribute to
more than half of the outages experienced in Puerto Rico.\8\ This is
not a new problem, but rather a longstanding issue that has been
exacerbated by years of deferred maintenance and the challenges of
Puerto Rico's tropical climate.
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\8\ LUMA Energy, LLC, ``Motion Submitting LUMA's Updated Vegetation
Management Plan,'' In Re: Review of the Puerto Rico Electric Power
Authority's Comprehensive Vegetation Management Plan, Case No. NEPR-MI-
2019-0005, June 14, 2024, Exhibit 1: Vegetation Management Plan, p. 31,
Section 4.3.1 Reliable Electric Service, https://energia.pr.gov/wp-
content/uploads/sites/7/2024/06/20240614-MI20190005-Motion-Submitting-
LUMAs-Updated-Vegetation-Management-Plan.pdf (accessed June 17, 2024).
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The events of June 2024 have only heightened the urgent need for a
comprehensive, island-wide vegetation management program. It is clear
that without addressing this fundamental issue, Puerto Rico cannot hope
to achieve the reliable and resilient electric system that it deserves.
The Energy Bureau is fully committed to continue its regulatory
power to increase the pace of vegetation management. The Energy Bureau
will continue to push for accelerated implementation of these critical
efforts.
The recent outages serve as a stark reminder of the work that still
lies ahead. But they also strengthen the Energy Bureau's resolve to
transform Puerto Rico's electric system into one that is reliable,
resilient, and worthy of the trust of our citizens.
The Energy Bureau has long identified vegetation-related outages as
a leading cause of power interruptions in Puerto Rico. The Energy
Bureau have directed LUMA to prioritize comprehensive vegetation
management as a cornerstone of efforts to improve system reliability
and resilience.
This program, unprecedented in its scale and impact, aims to clear
and maintain over 16,000 miles of transmission and distribution lines
across our island.
Based on information submitted by LUMA to the Energy Bureau, as of
June 2024:
Cleared vegetation from over 4,800 miles of powerlines and
electric infrastructure
All 230kV transmission lines have been cleared of
hazardous vegetation
All 300 of Puerto Rico's electric substations are now free
from vegetation-related risks
The Energy Bureau has established oversight mechanisms for this
program. The Energy Bureau requires quarterly progress reports, review
on-site inspection data, and have established performance metrics to
ensure accountability. Where necessary, the Energy Bureau have issued
directives to accelerate progress. For example, to address major cause
of outages on transmission lines that carry most of the baseload
generation, the Energy Bureau directed the acceleration of the
vegetation clearing for all 230kV transmission lines.
The Energy Bureau emphasizes that the pace of implementation
remains a concern. The magnitude of the challenge is substantial, and
it will take time to fully address vegetation issues across the entire
system.
The Energy Bureau's regulatory goal is to establish a proactive,
environmentally sensitive vegetation management system that will serve
Puerto Rico for generations to come.
The Energy Bureau is committed to the oversight of effective
vegetation management as a critical step toward a more reliable,
resilient, and sustainable electric grid for Puerto Rico.
VI. PROGRESS AND CHALLENGES IN ELECTRIC SYSTEM IMPROVEMENT
LUMA has reported clearing vegetation from over 4,500 miles of
power lines and 100% of Puerto Rico's approximately 300 electric
substation sites. LUMA have also installed over 8,400 automated and
protection devices to help detect and reduce service interruptions.
Additionally, more than 11,500 poles have been repaired or replaced
with infrastructure designed to withstand wind gusts of up to 160 mile-
per-hour.
Despite these improvements, the current state of our electric
system is far from the remediated condition Puerto Rico aspire to
achieve. The Energy Bureau has consistently pushed for accelerated
improvements including addressing the following:
The sheer scale of the necessary improvements after years
of neglect and the impact of natural disasters.
Challenges in efficiently utilizing available federal
funding.
The ongoing bankruptcy proceedings of the Puerto Rico
Electric Power Authority (PREPA), which complicate long-
term planning and investments.
The Energy Bureau's role in this context has been to continually
push for accelerated improvements while maintaining rigorous oversight.
The Energy Bureau have issued numerous orders and resolutions to
address critical issues, such as vegetation management, reliability
improvements, and federal funding utilization.
For instance, in Resolution and Orders of June 14, 2024, the Energy
Bureau directed LUMA, Genera and PREPA to develop a priority plan for
system improvements in response to the June outage events.
The Energy Bureau is committed to its vision of a reliable,
resilient, and sustainable electric system for Puerto Rico. The Energy
Bureau continues to work diligently to balance the need for immediate
reliability improvements with the long-term goals of system
transformation and renewable energy integration.
The Energy Bureau acknowledge the progress made by all the parties
and recognizes the substantial work that lies ahead. The Energy Bureau
will continue to leverage its regulatory authority to drive the
necessary improvements and ensure that the people of Puerto Rico
receive the reliable and affordable electric service they deserve.
VII. FEDERAL FUNDING AND RESOURCE UTILIZATION
The Energy Bureau has taken an active role that the federal funds
are designated for projects that comply with the approved Integrated
Resource Plan. The Energy Bureau's oversight includes:
Review and approval processes for proposed projects: The
Energy Bureau have established a comprehensive framework to
evaluate projects based on their alignment with Puerto
Rico's energy policies (specially the IRP), cost-
effectiveness, and potential to improve system reliability
and resilience.
Regular monitoring and reporting requirements: The Energy
Bureau requires detailed, periodic reports on the progress
of federally funded projects. This reporting has been
shared with local Legislation.
Emphasis on transparency: The Energy Bureau decisions and
orders related to federal funding are made publicly
available, fostering accountability and public trust.
During a June 21, 2024 Technical Conference, part of the evaluation
proceeding of the electric utility budget for fiscal year 2025, LUMA
reported that $18.1 million had been obligated by FEMA for one
vegetation management project in the San Juan region, out of the 31
projects submitted for the island-wide vegetation clearance reset
estimated at $1.2 billion.
The Energy Bureau understands that the efficient and effective use
of these federal resources is absolutely critical to achieving the
transformation of Puerto Rico's electric system. The Energy Bureau is
committed that these funds are deployed rapidly, responsibly, and in
the best interest of the people of Puerto Rico.
The Energy Bureau emphasizes that while the challenges are
significant, the opportunity in benefit to Puerto Rico is immense. With
continued support from Congress and federal agencies, Puerto Rico will
build the modern, resilient, and sustainable electric system that
Puerto Rico needs and deserves.
VIII. PREPA'S BANKRUPTCY AND ITS IMPACT
The PREPA has been operating under Title III of PROMESA since July
2017, making it one of the largest public power utility bankruptcies in
U.S. history. This prolonged bankruptcy process has had significant
implications for Puerto Rico's electric system and its ability to
modernize and improve reliability.
As of today, PREPA remains in bankruptcy, with ongoing negotiations
between the Financial Oversight and Management Board, bondholders, and
other stakeholders.
The resolution of PREPA's bankruptcy is critical to the future of
Puerto Rico's electric system. A successful exit from bankruptcy would
provide PREPA with a more stable financial footing, potentially
improving its ability to invest in much-needed infrastructure
improvements and maintenance. It could also restore PREPA's access to
traditional capital markets, enabling it to finance long-term projects
more efficiently.
The conclusion of the bankruptcy process would allow PREPA, LUMA,
and Genera to focus more fully on operational improvements rather than
complex financial restructuring. However, the terms of any bankruptcy
resolution will likely have implications for future electricity rates,
which in turn affects the affordability of power for Puerto Rico's
residents and businesses.
A clearer financial picture post-bankruptcy would provide greater
certainty about PREPA's long-term financial structure. The Energy
Bureau remains committed to ensuring that any resolution to PREPA's
bankruptcy aligns with a reliable, resilient, and affordable electric
system for Puerto Rico.
A sustainable resolution to PREPA's bankruptcy can be reached soon,
as it would remove a significant obstacle to the comprehensive
transformation of Puerto Rico's electric system that we all seek to
achieve.
IX. CONCLUSION
Chair Hageman, Ranking Member Grijalva, esteemed members of the
Committee, the Energy Bureau appreciates your attention to this
critical matter affecting the lives of over 3 million American citizens
in Puerto Rico. The Energy Bureau stands ready to answer any questions
you may have regarding our oversight role and the current state of
Puerto Rico's electric system.
The Energy Bureau welcomes the opportunity to provide further
clarity on any aspect of this testimony.
The Energy Bureau is eager to hear your perspectives and concerns.
Your insights are invaluable as we navigate this critical period in
Puerto Rico's energy transformation.
Once again, the Energy Bureau thanks the Committee for this
opportunity to testify and for your ongoing commitment to addressing
Puerto Rico's energy challenges. On behalf of the Energy Bureau I now
stand ready to answer your questions.
______
Questions Submitted for the Record to Antonio Torres Miranda, Associate
Commissioner, Puerto Rico Energy Bureau, San Juan, Puerto Rico
Mr. Torres Miranda did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. From your perspective, what are the key reasons for the
continued blackouts in Puerto Rico and what is your recommendation for
addressing these challenges and for ensuring that Puerto Rico has
access to reliable and resilient energy?
Question 2. In August 2020, PREPA proposed replacing old fuel
plants with a new liquefied natural gas terminal. PREB rejected this
proposal in favor of solar grid projects. This is concerning as
baseload sources such as LNG and coal are proven to be more reliable
and resilient than renewable sources such as solar and wind.
2a) I am assuming that PREB agrees with me that Puerto Rico
deserves to have access to reliable and resilient energy. If that is
the case, why did PREB decide to reject a plan that would have utilized
resilient and reliable baseload energy sources?
Questions Submitted by Representative Grijalva
Question 1. Genera is asking for 560 MW of new liquified natural
gas (LNG) generation capacity. Is it true that the FOMB unilaterally
canceled 593 MW of utility-scale solar projects that the Energy Bureau
had already approved in 2021, and that had the FOMB not canceled them,
those projects would likely be built or under construction today at a
time when that extra capacity would prevent blackouts?
Question 2. Puerto Rico has a plan for six tranches of utility-
scale solar projects to provide a total of 3750 MW of solar PV
generation and 1,500 MW of battery storage. The proposals for the final
tranche of projects were supposed to be done in June 2023, according to
the original timelines outlined by PREB, but now we are seven years
post Hurricane Maria and not a single project from the FIRST tranche is
operational yet.
2a) What needs to be done to get these projects online as soon as
possible? What are the projected timelines for Tranches 1-3?
2b) Do you believe the Puerto Rico's generation shortfall can be
met with renewables on a reasonable timeline?
Question 3. As you know, the people of Puerto Rico are buying up
solar and batteries for their homes because they know it will keep the
lights on better than the grid will, both after and between hurricanes.
These systems are particularly important for people with energy-
dependent disabilities, like those on dialysis. Solar and batteries
also make disaster recovery easier on first responders after a
hurricane because it keeps fridges working, keeps people away from the
hospital, and allows the utility to prioritize other households with
urgent energy needs. Further, each new home with solar and batteries
means that less fuel has to be shipped to the island at extra cost. Do
you think that a decision about whether to peel pack financial
incentives that make solar and batteries accessible to low-income
families should consider those wider social benefits, or do you think
it's better to just do a narrow cost benefit analysis from the
perspective of the utility, which excludes those broader
considerations?
Question 4. Has PREB had any written or verbal communications with
the FOMB regarding net metering before, during or after the enactments
of both Act 17-2019 and Act 10-2024? If so, when was the first such
communication? When was the most recent?
Question 5. Genera's parent company, New Fortress Energy, supplies
Puerto Rico with most of its natural gas. It seems then that Genera
stands to benefit from the delay of renewables implementation because
more natural gas would be purchased from its parent company. Would you
agree there is a financial incentive for Genera to slow-walk renewables
implementation? What tools does PREB have at its disposal to counter
Genera's incentive to slow walk renewables growth?
Question 6. Republicans like to say that solar can't be relied on
because the sun doesn't always shine, and we know that argument doesn't
work because that's what the batteries are for. But now they claim the
benefits of large fossil fuel plants can't be replaced. Can solar and
batteries provide frequency regulation services for the grid? Can large
battery banks start from a dead stop faster than oil or even methane
plants? Can solar and batteries provide ramping or spinning reserve,
which allows generators to respond quickly to outages and surges in
demand for energy? What about arbitrage--can battery banks do that?
Question 7. Democrat committee staff recently met with several
stakeholders in the process of implementing utility scale solar and
storage in Puerto Rico. Accion, the contractor PREB hired to implement
the tranches of solar and storage to do a better job than PREPA did,
was roundly criticized for failing to improve the process. There seems
to have been very little movement on the second and third tranches of
utility-scale solar projects. What oversight of Accion is PREB doing to
ensure the utility scale solar projects are getting done and that the
massive delays, which are contributing to blackouts, come to an end?
Also, why is it not a conflict of interest to have the regulator engage
in a regulated activity?
Question 8. In previous Committee hearings on energy in Puerto
Rico, witnesses have testified that the single biggest reason that
energy costs are so high in Puerto Rico compared to the rest of the
U.S. is because the fossil fuel must be imported. Is that still true?
Questions Submitted by Representative Gonzalez-Colon
Question 1. Background: As discussed, Puerto Rico may face 18 to 24
months of being short of peak capacity reserves until new installations
are completed. Therefore, the Island needs fast deployment of reliable
generation capacity to meet full demand now.
Additional mobile LNG units would be fastest for the short-term.
However, it is true they would have lesser economy of scale. So this
alternative should also include fast-tracking the removal of one or
more existing obsolete or unusable unit or units, and installing new
technology units integrated with batteries for stabilization and
backup, in the same footprint of the old units. Puerto Rico can fast-
track its own permitting, but this would require a federal champion to
clear hurdles from federal regulators.
Genera PR brought up in the hearing a proposal for meeting the
short/medium term need:
Fast conversion of the Palo Seco, Cambalache and Mayaguez
oil-fired units to LNG
Deployment of 550MW of supplementary energy through Corps
of Engineers support generators for the short/medium term
need until the more permanent development happens energy.
1a) Does anything prevent fast approval and implementation of all
or parts of such a strategy?
1b) Would these actions come under the aegis of the recovery plans
already approved for Puerto Rico or would they require substantial
modifications to it?
1c) Genera is a wholly-owned subsidiary of NFE, a LNG fuel
supplier. Genera is motivated to reduce costs and receives a share of
the costs savings per their contract. What safeguards are in place to
ensure potential conflicts of interest between Genera and NFE are
properly addressed and mitigated?
1d) What is the timeline for allowing industrial customers to sell
surplus power back to the grid to help stabilize the island's
electrical infrastructure and what is the plan for permitting and rate
setting?
Question 2. Background: The Puerto Rico Energy Policy requires that
by 2025 there be 40% of electricity from renewable resources, going up
to 100% by 2050. In the Hearing, Genera PR indicated the first number
was not going to be reached and expressed doubts of the reaching of the
end goal.
2a) Does PREB expect the 40% by 2025, 50% by 2030 goals to be
reached in view of current trends and progress of work?
2b) What would be required to be at pace to achieve the 100% by
2050 goal?
2c) Until the full renewables portfolio can be deployed does
anything prevent PREB from approving other energy sources if they can
be demonstrated to be economically viable?
Question 3. One program that Luma has often quoted has been that of
the use of a Virtual Power Plant (VPP) model by which users with their
own distributed power or storage are available for dispatch through the
grid operator.
3a) Is the Virtual Power Plant seen as a model for the deployment
of renewables? Is this available reserve counted toward the Puerto Rico
Law 17 of 2019 renewables percentage?
Question 4. What is the status of LUMA/PREB interconnection
requirements for community and critical microgrids to expedite their
interconnection to the grid? Does PREB believe LUMA is cooperating
adequately with microgrid developers?
Question 5. Puerto Rico's cheapest fuel-using power source, the AES
power plant in Guayama, provides up to 454 MW of generation when
running at capacity and is by law required to stop burning coal after
2027. That has been known since 2019.
5a) Have any specific plans been presented for replacement of this
base load?
5b) How critical is this power unit to the stability of the grid?
Question 6. There has been a steady march through our doors of
proponents of other ideas about how to address the Puerto Rico Energy
Recovery that are not incorporated into the existing action plans but
that they want the authorities to adopt, including proposals for inter-
island submarine power cables around the Caribbean, from both American-
Based (starting with PR-USVI--Bob Garcia Interconnection) and Dominican
Republic-Based (starting with PR-DR--Hostos project) proponents--that
requires the governments of other jurisdictions, including foreign, to
be aboard.
6a) Have these proposals been presented to you, and how viable and
suitable for addition have you seen them?
Questions Submitted by Representative Velazquez
Question 1. Why has LUMA not fulfilled its mandate to reduce energy
rates and instead proposed multiple increases? Has the Energy Bureau
considered imposing penalties for LUMA's failure to meet its obligation
to reduce rates?
Question 2. Do you consider LUMA has made the necessary grid
investments to accommodate the growing number of households with solar
and battery systems?
Question 3. LUMA has failed to complete an Integrated Resource Plan
for the island. What explanation has LUMA provided to the Bureau for
this delay? Is the lack of this plan hindering Puerto Rico's progress
toward renewable energy goals?
Question 4. In July 2024, Genera PR submitted a ``Stabilization
Plan for the Electricity System'' to the Puerto Rico Energy Bureau,
which included a project to install supplementary generating units that
would add 565 megawatts (MW) to the fleet. How has this project
progressed? Has the Bureau noted any obstacles to its completion?
Question 5. Is it true that last month LUMA requested the PREB an
additional $200 million per year? What were the reasons for this
request? What impact would a budget increase of this size have on
electricity rates?
Question 6. Does the Energy Bureau have the authority to impose
penalties on LUMA for underperformance in key reliability metrics? Has
the Bureau imposed any penalties to date?
______
Ms. Hageman. Thank you, Mr. Torres Miranda. And I now
recognize Mr. Saca for 5 minutes of testimony.
STATEMENT OF JUAN SACA, CHIEF EXECUTIVE OFFICER, LUMA ENERGY,
SAN JUAN, PUERTO RICO
Mr. Saca. Good morning. My name is Juan Saca. I am the CEO
at LUMA. With me today is Mario Hurtado, LUMA's chief
regulatory officer, and Juan Rodriguez, who is our
transformation lead for the Puerto Rico grid.
I would like to thank Chairman Westerman and Subcommittee
Chair Hageman, Ranking Member Velazquez, and members of the
Subcommittee for the invitation to appear before you today and
discuss our progress in building a more reliable and resilient
energy system for Puerto Rico, as well as the challenges LUMA
continues to face as a result of decades of neglect by the
previous utility operator, as has been stated, combined with
damages from Hurricane Maria and frequent powerful storms due
to the effects of more extreme weather.
As many of you know, LUMA took over as the transmission and
distribution operator of Puerto Rico's electric grid in June
2021, only 4 years following the devastating impacts of
Hurricane Maria, a storm that took the island's entire energy
grid offline and left customers in the dark for 11 months.
Even before Hurricane Maria, Puerto Rico's electric grid
was well below utility reliability standards. The entire system
was also allowed to deteriorate due to the financial
mismanagement, eventually resulting in a $10 billion bankruptcy
in 2017, which today remains unresolved.
While the over 4,000 LUMA team members, of whom I am very
proud for the work that they are doing, continue to make
progress across multiple areas to build a better energy future
for our 1.5 million customers, the impact of FAASt failures
which predate LUMA remain an enduring challenge to process,
which we are working incredibly hard to overcome.
Reflecting that determination that we have to improve, our
team works every day to replace aging and failing
infrastructure that was neglected for decades with new,
reliable equipment. These are long-term reliability
investments, not quick fixes, and making the necessary
structural changes is a monumental and time-consuming task. But
we are making significant progress.
To date, we have replaced over 17,850 utility poles, which
on the average take about 6 to 8 hours to replace per pole,
with new poles able to withstand 160 mile per hour winds and
installed over 9,000 automated devices to reduce the duration
and impact of outages, which have already prevented over 140
million interruptions minutes. That number has been updated to
170 million minutes, thankfully.
The impact of this has been real. Over the last year, more
than 95 percent of customers had concurrent service more than
98 percent of the time, this is in the last year, when
generation was available.
In addition to our day-to-day improvement efforts, LUMA has
also initiated 460 critical projects to FEMA representing $12.3
billion in Federal funding, with 171 approved and 87 percent of
those, or 149 projects, already in construction or completed.
Progress is being made.
A significant achievement of its own, considering PREPA did
not move one capital project to construction, as Mr. Laboy
mentioned earlier today. LUMA is utilizing all available
Federal programs to fund capital projects across Puerto Rico,
but securing effective FEMA funding takes time. We will
continue to work together with our partners at FEMA, DOE, COR3
and others who are committed to providing these critical
resources for the Puerto Rico energy grid.
Thanks to their support, LUMA has recently launched two
major federally funded initiatives, which when complete, will
significantly improve service for our customers. The first
initiative is an historic multi-year island-wide vegetation
safety and reliability initiative, which will clear, and I
repeat, clear, vegetation from over 16,000 miles of power lines
and reduce outages by up to 45 percent once complete. Our
vegetation management team continues to remove hazardous trees
and brush as part of our daily operations, and to date have
cleared more than 5,000 miles of power lines.
The second initiative is the smart meter initiative to
replace 1.5 million smart meters across Puerto Rico, and new
technology that will help detect outages faster, enable a more
timely response when they occur, and improve customer service.
Even as historic progress is being made by LUMA, we want to
be very clear about challenges that remain. Enduring issues
around generation persist for the island's energy producers, in
large part, and I repeat, in large part, because of a legacy of
failures. The infrastructure will take time to modernize. This
is and will be a multi-year transformation that will require
even greater cooperation with local Federal partners, including
members of this Committee who we hope will work with us to
address these legacy challenges to help advance critical FEMA
funding. We have specific requests for you that I will make
during our conversation.
In closing, LUMA is committed to Puerto Rico. Our team is
committed to Puerto Rico. I am very proud of them. We will
complete this transformation. We will get the job done. Thank
you very much.
[The prepared statement of Mr. Saca follows:]
Prepared Statement of Juan Saca, President and Chief Executive
Officer at LUMA
I. INTRODUCTION
Subcommittee Chair Hageman, Ranking Member Fernandez, and members
of the Subcommittee:
Thank you for the invitation to appear before you today to discuss
our progress toward building a more reliable and resilient energy
system for Puerto Rico, as well as the challenges LUMA continues to
face due to decades of neglect by the utility operator that preceded
LUMA, combined with damages from Hurricane Maria and frequent powerful
storms due to the effects of more extreme weather.
As many of you know, LUMA took over as the transmission and
distribution operator of Puerto Rico's electric grid in June 2021, only
four years following the devastating impacts of Hurricane Maria--a
storm that took the island's entire energy grid offline, and left
customers in the dark for months.
Even before Hurricane Maria, Puerto Rico's electric grid was well
below utility reliability standards. The entire system was also allowed
to deteriorate due to financial mismanagement, eventually resulting in
a 10-billion-dollar bankruptcy in 2017, which today remains unresolved
in arbitration and remains a serious obstacle to achieving the
widespread progress that is critical for Puerto Rico's energy future.
While the over 4,000 LUMA team members continue to make progress
across multiple areas to build a better energy future for our 1.5
million customers, the impact of past failures, which pre-date LUMA,
remain an enduring challenge to progress which we are working
incredibly hard to overcome.
II. TROPICAL STORM ERNESTO RESPONSE AND DAILY EMERGENCY PREPAREDNESS
One of our most important responsibilities is emergency response,
and I would like to first brief you on LUMA's response to Tropical
Storm Ernesto just over a month ago.
On August 14, Ernesto brought more than 10 inches of rain and over
70 mile-per-hour winds, leading to flooding and widespread damage to
the grid, primarily in the eastern and mountainous areas of the island,
as well as the neighboring islands of Vieques and Culebra.
Thanks to the hard work and dedication of our entire LUMA team,
including more than 1,700 trained field workers, in just 54 hours,
power was restored to more than 90% of customers impacted by the storm.
With two months left in this hurricane season, emergency
preparedness continues to be our top priority. Our team is taking
actions to prepare our response to storm-related outages and has over
$282 million in on-hand materials to use in an emergency and over 1,100
field workers ready to respond quickly to any outage.
Both in our response to Tropical Storm Ernesto as well as Hurricane
Fiona in 2022, our LUMA team has shown how determined we are to
overcome the terrible legacy of Hurricane Maria.
III. RELIABILITY PROGRESS
Reflecting that determination to improve, our team works every day
to replace aging and failing infrastructure with new, reliable
equipment.
These are long-term reliability investments, not quick fixes, and
making the necessary structural changes is a monumental and time-
consuming task, but we are making significant progress.
To date, we have replaced over 17,850 utility poles with new poles
able to withstand 160 mile-per-hour winds and installed over 9,000
automation devices to reduce the duration and impact of outages, which
have already prevented over 140 million service interruption minutes.
The impact of this has been real--over the last year, more than 95%
of customers had concurrent service more than 98% of the time when
generation was available.
IV. FEMA-FUNDED CAPITAL PROJECT PROGRESS
In addition to our day-to-day improvement efforts, LUMA has also
initiated 460 critical projects to FEMA representing $12.3 billion in
federal funding, with 171 approved and 87% of those, or 149 projects,
already in construction or completed.
A significant achievement on its own, considering PREPA did not
move one capital project to construction.
LUMA is utilizing all available federal programs to fund capital
projects across Puerto Rico but securing effective FEMA funding takes
time.
We will continue to work together with our partners at FEMA, DOE,
COR3 and others who are committed to providing these critical resources
for the Puerto Rico energy grid.
Thanks to their support, LUMA has recently launched two major
federally-funded initiatives, which when complete, will significantly
improve service for our customers.
The first initiative is the historic multi-year, island-wide
Vegetation Safety and Reliability Initiative, which will clear
vegetation from over 16,000 miles of powerlines and reduce outages by
up to 45% once complete.
Additionally, our vegetation management teams continue to remove
hazardous vegetation as part of our daily operations, and to date, have
cleared more than 5,000 miles of powerlines.
The second initiative is the Smart Meter Initiative to replace all
1.5 million electric meters across Puerto Rico with new technology that
will help detect outages faster, enable a more timely response when
they occur and improve customer service.
To keep our customers and stakeholders informed of these important
initiatives, and more, we created a Progress for Puerto Rico Dashboard,
a public website that provides monthly updates on our work to improve
service, highlighting what real progress looks like and reflecting our
determination to achieve this important goal--a goal we are determined
to achieve for Puerto Rico.
V. BUILDING A CLEANER, MORE CUSTOMER-FOCUSED ENERGY GRID
To further advance the resilience of the grid and improve Puerto
Rico's ability to generate renewable energy, LUMA has connected over
100,000 rooftop solar customers to the grid, representing 650 MW of
clean energy, the most in Puerto Rico's history.
LUMA is also dedicated to building a customer-focused energy system
that best serves the needs of our customers. We improved our response
time to service requests by 36% in fiscal year 2024 over 2023, and
reduced average call wait times by 40% to nearly one minute--the
shortest wait time on record for Puerto Rico.
Throughout all our work, LUMA remains committed to transparency in
our operations as we continue our mission to build an energy system
founded on operational excellence for all our customers.
VI. CONCLUSION
Even as historic progress is being made by LUMA, we want to be very
clear about the challenges that remain.
Enduring issues around generation persist for the island's energy
producers, in large part because of a legacy of failures.
The infrastructure will take time to modernize--this is and will be
a multi-year transformation that will require even greater cooperation
with local and federal partners, including members of this subcommittee
who we hope will work with us to address these legacy challenges and
help advance critical FEMA funding.
However, the repeated attacks on LUMA personnel and leadership
serve to thwart progress.
They not only ignore the lasting impacts of past failures, but also
the efforts of our partners and the thousands of dedicated LUMA
personnel who remain focused on building a reliable energy system that
the previous operator failed to deliver.
In closing, LUMA is committed to Puerto Rico. Our team is committed
to Puerto Rico. We will complete this transformation.
And working together with our partners, LUMA will build a more
reliable, safer, resilient, and cleaner energy future for the island we
are proud to call home.
VII. LUMA'S PROGRESS UPDATE
C. Three-Year Progress
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
B. Reliability & Resiliency Projects
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
D. Clean Energy & Emergency Preparedness
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
E. Tropical Storm Ernesto Response
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
F. Outage Response to Recent Events
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
G. Looking Ahead
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
H. Appendix
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__
Questions Submitted for the Record to Mr. Juan Saca, Chief Executive
Officer, LUMA Energy, San Juan, Puerto Rico
Mr. Saca did not submit responses to the Committee by the appropriate
deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. From your perspective, what are the key reasons for the
continued blackouts in Puerto Rico and what is your recommendation for
addressing these challenges and for ensuring that Puerto Rico has
access to reliable and resilient energy?
Question 2. Of the $1.4 billion capital budget spent by LUMA in
2021, $1.1 billion was federal funding while only $300 million was from
non-federal funding. While the federal government has made commitments
to assist with the recovery of Puerto Rico's infrastructure after it
experienced a devastating series of hurricanes, we can all agree that
the ultimate goal is to have a reliable and resilient electrical grid
operated by private utilities for the long-term.
2a) How does LUMA plan to decrease their reliance on federal funds
to operate and maintain Puerto Rico's electrical grid? Do you see a day
when LUMA can perform their operations without injections of taxpayer
dollars, and what needs to be done to achieve that goal?
Question 3. For the areas where you have already cleared
vegetation, have you seen an increase in the reliability of the systems
or a decrease in outages? If so, can you quantify that benefit and its
economic impacts?
Question 4. Federal environmental regulations have clearly delayed
LUMA's vegetation clearing project plans.
4a) Are there local environmental regulations contributing to these
delays? If so, have you raised these concerns with the Government of
Puerto Rico? What has the response been?
Question 5. How does LUMA select vendors for contracting out
projects such as vegetation clearing projects or substation upgrades?
Are there any issues with finding and hiring the workforce LUMA needs
to complete its maintenance projects ahead of it and maintain the grid
for the long term? If there are, how does this impact LUMA's operations
and capacity to rebuild Puerto Rico's electrical grid?
Questions Submitted by Representative Grijalva
Question 1. The solar market in Puerto Rico is growing rapidly,
helping thousands of families avoid blackouts. LUMA is approving
thousands of new rooftop solar installations a month. How is LUMA
making the necessary upgrades to facilitate this growth? For example,
how much federal funding is LUMA planning to spend on feeder upgrades
to accommodate the widespread use of distributed generation?
Question 2. We know that rooftop solar has averted blackouts in
Puerto Rico. There are about 900 megawatts of distributed solar
(``rooftop solar'') capacity on the island installed across 130,000
homes. Without these systems, overall power demand would exceed
available generation capacity. Do you agree that these systems help
avoid blackouts, either by contributing to the grid via net metering or
by reducing demand? How is Puerto Rico prioritizing rooftop solar as a
resiliency measure?
Question 3. You testified that unmaintained vegetation is
responsible for about 50% of service interruptions in Puerto Rico. LUMA
is rolling out an initiative to clear vegetation from 16,000 miles of
powerlines using federal funds. How is LUMA working with FEMA, U.S.
Fish and Wildlife Service, and other agencies to ensure this initiative
complies with review process requirements without delay? How will LUMA
maintain the vegetation when this lump sum of funding runs out? Can
LUMA promise that it will not come to the federal government or the
ratepayers to ask for more vegetation management funds?
Question 4. LUMA's aims to enroll over 6,000 customers with solar
and batteries in its Customer Battery Energy Sharing pilot program to
help prevent blackouts in the evenings. There are over 100,000
customers with batteries that could theoretically enroll in this
program. How many customers with solar and batteries are currently
enrolled in the program? How are you encouraging greater enrollment in
this ``Virtual Power Plant''? Has additional funding been identified to
grow this program beyond its initial pilot?
Questions Submitted by Representative Gonzalez-Colon
Question 1. Mr. Saca, as discussed in the hearing, LUMA needs to
source the power from multiple providers. Besides Genera there are
private fossil-fueled plants like AES and EcoElectrica, utility-scale
renewables under power purchase agreements; PREPA's limited hydro
plants, distributed renewables--all also contribute to the grid.
1a) Please provide the subcommittee with the breakdown of how much
capacity is provided from the different suppliers and what share of
demand does it represent?
1b) We have seen news reports of failures or defects in the private
power plants--what has been the reliability of the private generators?
1c) Is it true that one of our problems with not meeting demand is
that at sunset every day we lose much solar capacity that is not backed
by storage? How much is the relative loss?
1d) Does LUMA operate a model of Virtual Power Plant to draw
reserve from private storage sources through the net metering system?
How many customers participate and how large could this become? Is
there a plan to expand it?
Question 2. What is the status of establishing regional microgrids
to power communities and critical loads such as hospitals, seaports,
airports, and industrial parks? What is the status of LUMA/PREB
interconnection requirements for community and critical microgrids to
expedite their interconnection to the grid? Has LUMA not cooperated
with microgrid developers?
Question 3. The Puerto Rico Financial Oversight Board's Executive
Director recently stated, in a 45th public meeting, that the pace of
grid reconstruction was unacceptably slow. He further indicated that
the FOMB would be getting involved more directly in reconstruction
matters and federal funds, along with LUMA and Genera.
3a) Four years and 3 months after taking over the system, why does
LUMA need FOMB's assistance, when it was selected based on
representations from its Partners (ATCO Ltd., and QUANTA Services) that
it had the experience and know-how to operate, maintain and reconstruct
the grid, maximizing federal taxpayer funds?
Question 4. Puerto Rico's cheapest fuel-using power source, the AES
power plant in Guayama, provides up to 454 MW of generation when
running at capacity and is by law required to stop burning coal after
2027. That has been known since 2019.
4a) Have any specific plans been presented for replacement of this
base load?
4b) How critical is this power unit to the stability of the grid?
Question 5. There has been a steady march through our doors of
proponents of other ideas about how to address the Puerto Rico Energy
Recovery that are not incorporated into the existing action plans but
that they want the authorities to adopt, including proposals for inter-
island submarine power cables around the Caribbean, from both American-
Based (starting with PR-USVI--Bob Garcia Interconnection) and Dominican
Republic-Based (starting with PR-DR--Hostos project) proponents--that
requires the governments of other jurisdictions, including foreign, to
be aboard.
5a) Have these proposals been presented to you, and how viable and
suitable for addition have you seen them?
Questions Submitted by Representative Velazquez
Question 1. What are LUMA's plans to decrease reliance on federal
funding?
Question 2. What types of projects are being prioritized by LUMA,
and what general obstacles are you facing in advancing these projects?
Question 3. According to LUMA's website, the consortium expects to
clear 680 miles of vegetation by December 2024. As of October 2024,
LUMA has cleared 15 miles of vegetation, or 2% of the stated goal. How
does LUMA plan to meet its own timeline by the end of the year?
Question 4. LUMA has failed to complete an Integrated Resource Plan
for the island. Why has LUMA been unable to finish this analysis? Do
you consider the absence of this plan a barrier to Puerto Rico's
renewable energy goals?
Question 5. It is estimated that over the next 10 years, more than
5 Gigawatts of solar capacity will be installed in Puerto Rico, with
only 8.8% coming from the utility-scale segment. Does LUMA consider the
grid equipped to absorb the growing number of households with solar and
battery systems? Could you share details of the infrastructure
investments LUMA is planning to make to adapt to this new reality?
Question 6. LUMA has expressed a commitment to support transparency
efforts. Why, to date, has LUMA not shared power outage data with the
Outage Data Initiative Nationwide (ODIN)? Are you willing to commit to
sharing this data going forward?
______
Ms. Hageman. Thank you, Mr. Saca. And I now recognize Mr.
McElmurray for 5 minutes.
STATEMENT OF BRANNEN McELMURRAY, CHIEF EXECUTIVE OFFICER,
GENERA PR LLC, SAN JUAN, PUERTO RICO
Mr. McElmurray. Thank you for the opportunity to speak
before this Committee on behalf of Genera PR. My name is
Brannen McElmurray, and I have the pleasure as serving as the
CEO and President of Genera.
First, I want to emphasize that the entire Genera team
understands the significant responsibility we undertake every
day, which is to generate reliable, affordable energy for the
people of Puerto Rico. We take this responsibility seriously.
Electricity is an essential service without which modern
life does not work, economies do not grow, and real people are
not able to realize their God-given potential. We appreciate
the opportunity to share our objectives and to provide an
update on our progress to this honorable Committee.
Genera's mission is to generate reliable, affordable energy
to Puerto Rico. We understand that this is critical for both
economic development and quality of life on the island. Genera
was founded in the wake of Hurricanes Maria and Fiona, two of
the deadliest storms to hit Puerto Rico in recent memory.
After learning firsthand of Puerto Rico's energy needs and
the damage that these storms wrought to Puerto Rico's electric
grid, Genera took over the operation and management of PREPA's
existing generation assets to improve their capacity and
resilience. This means that Genera manages electricity
generation, which is the process of creating energy, whether
that be by fossil generation, solar power, or wind turbines.
Energy transmission is distinct from generation. Transmission
is the process of transporting energy from these generation
sites to where it is needed most.
Genera is made up of a team of seasoned executives and
partners with extensive global and local power, fuel, and
operation experience. I am proud to say that our management
team, most of them were born in Puerto Rico, raised, educated,
and are deeply committed to the communities that we serve.
Collectively, we have direct experience with every single type
of power plant technology that PREPA owns across the fleet.
If I can speak personally, my background is in engineering.
I am a proud engineering graduate of the U.S. Naval Academy,
and I have spent over two decades working in the energy sector
as both an engineer and an executive. I have expertise in
leading companies in the energy transmission space. I bring
that expertise to Genera. And my team and I are deeply
committed to stabilizing Puerto Rico's energy grid and
delivering reliable, affordable energy to the people of Puerto
Rico.
At Genera, we started operating PREPA's legacy thermal
generation fleet on July 1, 2023, just over a year ago. This
fleet is made up of approximately 60 percent of generating
capacity connected to the Puerto Rican grid. Independent
thermal power producers, renewable energy providers, and
publicly-owned hydroelectric resources provide roughly 40
percent of that capacity.
When Genera inherited administration of the PREPA fleet, we
took over a set of generation assets that were roughly 30 years
older than the electricity power average in the United States.
And issues related to age and general obsolescence of the fleet
continue to persist today. Over the last year, we have worked
tirelessly to provide electric generation service with fewer
interruptions, which we know is necessary to ensure that every
family on the island has access to reliable power. But let me
say this. The work that we have done is not enough and can be
improved, and every Puerto Rican deserves access to power.
When structuring our operation and maintenance contract, we
built it around four key priorities that we believe will
improve and stabilize the electric generation system for all of
Puerto Rico. First, we aim to improve reliability of power
availability throughout the island through continuous upgrades
to the current fleet. Ensuring reliable power is fundamental to
the success of Genera and we understand the importance of
improving generation system reliability.
Our team at Genera has developed and implemented an
electric system stabilization plan to ensure the continuous,
reliable generation of energy in tandem with the integration of
renewable energy resources. Since we have inherited the fleet,
we have increased availability of generation capacity, and we
are working steadily to deliver our plans to further increase
capacity and improve reliability.
Genera also hopes to utilize Federal funds to expand the
island's temporary supplemental generation reserves in
coordination with FEMA, DOE, and the Army Corps of Engineers.
This step will provide additional capacity to the system.
One possible way to help Puerto Rico immediately is to
access the current $5 billion MATOC contract that U.S. Army
Corps has in place to serve Puerto Rico and provide electrical
power. As this Committee is aware, after Hurricane Fiona, the
U.S. Army Corps of Engineers installed 17 generators at Palo
Seco in San Juan. Collectively, those generators produce 350
megawatts of power, providing enough power to meet the needs of
100,000 homes. Without these generators today, there would be
Puerto Ricans that had no power. These generators were
installed in 120 days and provide an example of what can be
done when we work in concert.
Second, Genera's contract ensures that our priorities are
aligned with Puerto Rico's. Our fee structure largely relies on
a 50/50 share with the government of Puerto Rico in savings and
cost efficiencies generated. We agreed to this because we are
confident that our contract is primarily based on the
performance that we execute every day. And I am happy to say
that in Fiscal Year 2024, we have generated over $100 million
in savings for the ratepayers of Puerto Rico.
Third, Genera appreciates and supports Puerto Rico's
transition to renewable energy and the projected influx of
Federal funding and aligned public policy, and the commitment
of engaged public and private stakeholders. In support of this
essential transition, we treat the task of retiring and
decommissioning antiquated power plants as they are replaced by
renewables as a key component of our strategy, adhering to the
approvals in the integrated resource plan. We look forward to
working closely with PREB to ensure that there are adequate
generation sources available and that plants are retired
responsibly.
Supporting and being part of Puerto Rico's transition to
renewables is one of the main reasons why we founded Genera. We
look forward to closely working with all stakeholders involved
to ensure this transition is done efficiently and effectively.
Last but certainly not least, having an energy business in
Puerto Rico and working closely with PREPA plant employees over
the last several years, we have come to recognize the
invaluable talent and dedication of PREPA's plant operators.
They work incredibly hard and ensure that Puerto Rico's legacy
power plants continue to operate. And let me emphasize, these
plants and the service that we provide could not be possible
without the 733 employees that we have every day and the folks
that come in 24/7, 365 days a year to make these assets work.
Finally, I want to reiterate that we understand just how
important this undertaking is to provide an essential service
to the Puerto Rican people. And Genera is committed to
continually improving the limited set of assets under its
control. But this alone will not be enough to achieve the
broader system results that the island needs and customers
deserve.
With the assistance of FEMA and the U.S. Army Corps of
Engineers on temporary supplemental generation projects, we can
quickly improve the resiliency and redundancy of Puerto Rico's
electric grid to ensure we can bridge the gap between the
current fleet and the future of a reliable, affordable, clean
energy generation that Genera is working towards.
We look forward to building a meaningful relationship with
you and a brighter future for the Puerto Rican people. We are
here to cooperate and provide the Committee all the information
that it needs so that we can work together to resolve issues
which are extremely important to the daily lives of Puerto
Ricans. We are confident that we can work together to ensure
that this is a successful energy system transformation that we
can all be proud of the role we played in. Thank you.
[The prepared statement of Mr. McElmurray follows:]
Prepared Statement of Brannen McElmurray, President & CEO
of Genera PR
Thank you for the opportunity to speak before the U.S. House
Committee on Natural Resources on behalf of Genera PR (``Genera''). My
name is Brannen McElmurray, and I have the pleasure of serving as the
CEO and President of Genera. First, I want to emphasize that the entire
Genera team understands the significant responsibility we undertake
every day, which is to generate reliable energy for the people of
Puerto Rico. We take this responsibility seriously. We appreciate the
opportunity to share our objectives and to provide an update on our
progress to this Honorable Committee.
Genera's mission is to generate reliable, affordable, and clean
energy to all of Puerto Rico. We understand that this is critical for
both economic development and quality of life on the Island. Genera was
founded in the wake of Hurricanes Maria and Fiona, two of the deadliest
storms to hit Puerto Rico in recent memory.
After learning firsthand of Puerto Rico's energy needs and the
damage that these storms wrought to Puerto Rico's electric grid, Genera
took over the operation and management of the Puerto Rico Electric
Power Authority's (``PREPA'') existing generation assets to improve
their capacity and resiliency. This means that Genera manages
electricity generation, which is the process of creating energy whether
it be from fossil fuels, solar power, or wind turbines. Energy
transmission is distinct from generation. Transmission is the process
of transporting electricity from these generation sites to where it is
needed on the Island.
Genera is made up of a seasoned team of executives and partners
with extensive global and local power, fuel and operational experience.
Collectively, we have direct experience with every single type of power
plant technology that PREPA owns across the fleet.
If I can speak personally, my background is in engineering. I am a
proud engineering graduate of the U.S. Naval Academy, and I have spent
over two decades working in the energy sector. As both an engineer and
an executive, I have expertise in leading companies through the energy
transition space. I bring that expertise to Genera, and my team and I
are deeply committed to stabilizing Puerto Rico's electric grid and
delivering reliable, affordable, clean energy to the people of Puerto
Rico.
At Genera, we started operating PREPA's legacy thermal generation
fleet on July 1, 2023, just over a year ago. This fleet makes up
approximately 60% of the generating capacity connected to the Puerto
Rico grid. Independent thermal power producers, renewable energy
providers, and publicly owned hydroelectric resources provide roughly
40 percent of that capacity. When Genera inherited administration of
the PREPA fleet, we took over a set of generation assets that were
roughly 30 years older than the electric power industry average in the
United States, and issues related to the age and general obsolescence
of the fleet continue to persist today. Over the last year, we have
worked tirelessly to provide electric generation service with fewer
interruptions, which we know is necessary to ensure that every family
on the island has access to reliable power.
When structuring our operation and maintenance contract, we built
it around four key priorities that we believe will improve and
stabilize the electric generation system for all of Puerto Rico:
First, we aim to improve the reliability of power availability
throughout the Island through continuous upgrades to the current fleet.
Ensuring reliable power is fundamental to the success of Genera and we
understand the importance of improving generation system reliability.
Our team at Genera has developed and implemented a two-year Electric
System Stabilization Plan to ensure the continuous, reliable generation
of energy in tandem with the integration of renewable energy sources.
Since we inherited the fleet, we have increased the availability of
generation capacity from 46% to over 60%, and we are working steadily
to deliver on our plans to further increase available capacity and
improve reliability.
Genera also hopes to utilize federal funds to expand the island's
temporary supplemental generation reserves in coordination with the
Federal Emergency Management Agency (``FEMA''), U.S. Department of
Energy (``DOE''), and the U.S. Army Corps of Engineers. This key step
will provide additional capacity to the system. One possible way to
help Puerto Rico immediately is to give the U.S. Army Corps of
Engineers the authority to provide States and territories with
temporary assistance to stabilize their electrical grids, including
assistance through the provision of temporary electricity generation
and assistance with equipment. As this Committee is aware, after
Hurricane Fiona, the U.S. Army Corps of Engineers installed 17
generators in Palo Seco and San Juan and those generators collectively
produced 350 megawatts of power on the island, providing enough power
to meet the needs of 100,000 homes.
Second, Genera's contract ensures that our priorities are aligned
with Puerto Rico's. Our fee structure largely relies on a 50/50 share
with the Government of Puerto Rico in savings and cost efficiencies
generated. We agreed to this because we are comfortable with a contract
that is predominantly based on performance.
Third, Genera appreciates and supports Puerto Rico's transition to
renewable energy with the projected influx of federal funding, an
aligned public policy, and the commitment of engaged public and private
stakeholders. In support of this essential transition, we treat the
task of retiring and decommissioning antiquated power plants as they
are replaced by renewables as a key component of our responsibility,
adhering to the approved Integrated Resource Plan. We look forward to
working closely with the Puerto Rico Energy Bureau to ensure that there
are adequate generation resources available and that plants are retired
responsibly.
Supporting, and being part of, Puerto Rico's transition to
renewables, is one of the main reasons why we founded Genera. We look
forward to working closely with all the stakeholders involved to ensure
this transition is done efficiently and effectively.
Last, but certainly not least, having an energy business in Puerto
Rico and working closely with PREPA plant employees over the last
several years, we have come to recognize the invaluable talent and
dedication of PREPA's plant operators. They work incredibly hard and
ensure that Puerto Rico's legacy power plants continue to operate.
Finally, I want to reiterate that we understand just how important
this undertaking is, to provide an essential service to the Puerto
Rican people, and Genera is committed to continually improving the
limited set of assets under its control. But this alone will not be
enough to achieve the broader system results that the Island needs and
consumers deserve. With assistance from FEMA and the U.S. Army Corps of
Engineers on temporary supplemental generation projects, we can quickly
improve the resiliency and redundancy of Puerto Rico's electric grid,
to ensure that we can bridge the gap between the current fleet and the
future of reliable, affordable, and clean energy generation resources
that Genera is working towards.
We look forward to building a meaningful relationship with you and
a brighter future for the People of Puerto Rico. We are confident we
can work together to ensure that this is a successful energy system
transformation we can all be proud of playing a role in.
______
Questions Submitted for the Record to Mr. Brannen McElmurray, Chief
Executive Officer, Genera PR LLC, San Juan, Puerto Rico
Mr. McElmurray did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. From your perspective, what are the key reasons for the
continued blackouts in Puerto Rico and what is your recommendation for
addressing these challenges and for ensuring that Puerto Rico has
access to reliable and resilient energy?
Question 2. Of the $1.4 billion capital budget spent by LUMA in
2021, $1.1 billion was federal funding while only $300 million was from
non-federal funding. While the federal government has made commitments
to assist with the recovery of Puerto Rico's infrastructure after it
experienced a devastating series of hurricanes, we can all agree that
the ultimate goal is to have a reliable and resilient electrical grid
operated by private utilities for the long-term.
2a) How does Genera PR plan to decrease their reliance on federal
funds to operate and maintain Puerto Rico's electrical grid? Do you see
a day when Genera PR can perform their operations without injections of
taxpayer dollars, and what needs to be done to achieve that goal?
Question 3. Puerto Rico currently pays among the highest
electricity rates in the nation. Genera says it is committed to
reducing electricity generation costs in Puerto Rico. What is Genera
currently doing, and what actions is it planning to take in the future,
to lower generation costs in Puerto Rico?
Question 4. Electrical generation redundancy ensures that if own
power source fails, then there will be a backup to ensure that there
are no disruptions in power. It is therefore important for an electric
utility to create redundancies in order to reduce the risk of outages.
4a) How redundant is Puerto Rico's electrical generation system?
And is it up to industry standard?
4b) What is Genera doing to increase redundancy for the short and
long term? And how will it impact the frequency of outages?
Questions Submitted by Representative Grijalva
Question 1. At an investors meeting held earlier this year, you
stated that Puerto Rico's energy future will be ``powered by natural
gas supplemented by solar and batteries.'' This is in direct opposition
to Puerto Rico's policy to rapidly phase out fossil fuels and reach
100% generation from renewables by 2050. Why would Genera tell its
investors one thing and its customers the opposite?
Question 2. In the hearing you indicated you do not think Puerto
Rico will be able to meet its next interim renewable energy goal of 60%
by 2040. Please explain why in detail, including why you think the
Department of Energy PR100 study, which concluded that Puerto Rico can
reach its renewable energy goals with appropriate investments and
system upgrades, is wrong.
Question 3. According to generation indicators from June 2024, a
quarter of the Puerto Rico's generation fleet is offline. Timelines
provided to the Committee last year projected repairs to units at the
Palo Seco, Aguirre, Costa Sur, and San Juan plants would be completed
by May of this year. This maintenance plan was expected to increase
generation capacity to over 2800 MW. The Aguirre plant alone should be
900 MW of power at a time, which would be enough to cover the
generation shortfall. What is the status of these repairs? Why is
Genera asking taxpayers or ratepayers to pay for new temporary fossil
fuel infrastructure instead of completing its contractual obligations
to repair these facilities?
Question 4. FEMA has obligated $745 million for Genera to install
Battery Energy Storage Systems (BESS) and Peaking Units in Cambalache,
Vega Baja, Palo Seco, San Juan, Yabucoa, Aguirre, and Costa Sur. When
will these systems be fully implemented?
Question 5. New Fortress Energy, Genera's parent company, provides
Puerto Rico with most of its natural gas. The New Fortress LNG import
terminal, which is in the heavily populated San Juan Bay, was built
without FERC's prior environmental, safety, and Environmental Justice
evaluation and without a FERC-approved Emergency Response Plan (ERP).
This spring, the Army Corps also began a dredging project to open the
San Juan Bay for larger tankers to reach the LNG terminal, despite
concerns about the potential harm to wildlife and humans. Democratic
Members wrote to FERC and the Army Corps to highlight these concerns
and uplift requests from local stakeholders for more transparency and
public engagement.
5a) What is the status of New Fortress's compliance with FERC's
requirements for the San Juan Bay terminal?
5b) Will you commit to working with New Fortress to ensure
requirements for public engagement and emergency planning are met?
Question 6. The dredging of San Juan Bay to make room for larger
LNG tankers, which is funded by the Army Corp of Engineers, will
presumably save money on LNG shipping. When will ratepayers see that
savings reflected on their bill and how much will their bill go down,
on average?
Question 7. The new LNG terminal on San Juan Bay will presumably
save money on LNG shipping and processing. When will ratepayers see
that savings reflected on their bill and how much will their bill go
down, on average?
Questions Submitted by Representative Velazquez
Question 1. According to data published on LUMA's website, as of
September 26th, the Aguirre Combined Cycle Power Plant was out of
service. How long has this been the case? What is the schedule for
providing adequate maintenance to this plant, and have there been any
issues in performing such maintenance?
Question 2. When asked about Aguirre's status, you mentioned that
Genera's Projects to Replace Critical Components and Improve Fuel
Efficiency would address the issue. Can you provide information on the
progress of these projects, and how do you plan to keep Congress and
the public informed?
Question 3. In an environment with a significant generation
deficiency, how do you plan to responsibly decommission power plants?
How are you balancing the legal requirement to decommission plants with
the current need for generation?
Question 4. In July 2024, Genera PR delivered a ``Stabilization
Plan for the Electricity System'' to the Puerto Rico Energy Bureau
(NEPR), which included a project to install supplementary generating
units adding 565 megawatts (MW) to the fleet. How has this project
progressed, and how does it represent savings for the people of Puerto
Rico?
______
Ms. Hageman. Thank you.
The Chair will now recognize Members for 5 minutes of
questioning.
My questions are first going to be directed to Mr. Saca and
Mr. McElmurray. LUMA took over operations and maintenance of
PREPA's transmission and distribution system in 2021. And
Genera took over the operation and maintenance of PREPA's
thermal generation assets in 2023.
Starting with you, Mr. Saca, would you please describe the
challenges your respective companies inherited from PREPA?
Mr. Saca. The challenges are many. First of all, it is an
aging system that is on the average 32 years older than the
average system. That means that replacing that equipment on a
yearly basis, on a daily basis, is a very important matter, and
it is actually still the cause of many of the outages that we
have today which is, you know, failing equipment. That is one.
Another one is vegetation. Vegetation is, in the short
term, the No. 1 problem that we have to reduce outages. That
is, more than 50 percent of outages come from vegetation. The
challenge with that is that we have 16,000 miles of vegetation
that has to be cleared, 16,000 miles. I think you can go around
the Earth about two thirds. I mean, it is just a massive
undertaking.
The interesting part of this is that the rights-of-way are
owned by PREPA. And we estimate that this will take 3 years to
do, in other words the clearing. And I want to make sure that
we understand clearing. We are talking about having the
clearing of all of the vegetation under the lines. And that is
so important, so that when there is wind and when there is
rain, it will not get impacted. And 3 years is a long time.
I was there for Maria. The people of Puerto Rico lost
patience after Maria. The people of Puerto Rico now have lost
tolerance for what is going on for so many years.
So, vegetation clearing is most important. And we can have
a more deep discussion----
Ms. Hageman. I am going to follow up with you on that
particular issue. But Mr. McElmurray, if you would just please
very briefly describe some of the challenges that you inherited
from PREPA?
Mr. McElmurray. Yes, ma'am. First of all, thank you,
Congresswoman, for your question. And first, I want to
acknowledge how difficult it is to be without electricity. The
practical aspect of this cannot be overlooked. Food spoils,
medicine goes bad, kids cannot go to school, businesses do not
work. It is an intolerable situation. And I think in modern
life, it is one of the worst things that can happen.
With respect to your question, I would say there are three
things. First of all is age. Just for context, the Puerto Rico
electrical system today relies on power plants that were built
before this country put a man on the moon. So, we are relying
on a set of equipment that is far beyond its useful life.
The age of the generation fleet is over 40 years, which
means essentially it was built in the first term of Ronald
Reagan, given the forum we are in today. And you see
degradation, fatigue, cracks, corrosion, and obsolete tech that
are all the contributors to lack of availability.
The second thing is lack of capital investment. It is one
thing to have old stuff. It is a second thing not to maintain
it. Because of the financial issues and the choices that have
been made over the last 20 to 25 years, there has been a lack
of maintenance into these old facilities, which contributes
just to the accelerated decline. And then the third is the
effects of renewables. Renewables are an amazing technology. I
have three children. I hope one day----
Ms. Hageman. Terribly expensive and terribly inefficient as
well.
Mr. McElmurray. And hopefully one day, given the public
policy of Puerto Rico, that is where the grid goes.
But I would say that, given the technology that exists,
those renewables put an incredible amount of stress on the type
of technology that is installed. So, not only is it old, but it
is the wrong type of technology, and it has not been
maintained.
So, those are the three contributing factors that really
get to the point, which is the availability of reliable
generation is not where it needs to be. And the only way to
really address the problem is to create additional reliable
generation.
Ms. Hageman. One of the things that I heard yesterday from
everyone that I visited within my office are the challenges
associated with red tape. For example, NEPA and having to
comply with NEPA and some of the historical preservation
requirements that you have. Would every one of you agree that
NEPA and the historical preservation obligations that you have,
have been one of the primary challenges associated with
providing reliable and affordable electricity to the Puerto
Rican citizens? Yes?
Mr. Laboy Rivera. Yes.
Ms. Hageman. You would all agree with that?
Mr. Torres Miranda. An absolute yes.
Ms. Hageman. OK. So, one of the things we need to look at
is whether we need to make some fundamental changes to NEPA and
the historical preservation, or we are going to continue being
unable to provide electricity to the citizens of Puerto Rico;
is that correct?
Mr. Laboy Rivera. Yes.
Ms. Hageman. OK, thank you.
With that, I am going to call on Mr. Torres for 5 minutes
of questioning. Thank you.
Mr. Torres Miranda. Thank you. The people of Puerto Rico
have been deprived of affordable and reliable energy to an
extent on a scale and at a length that would be tolerated
nowhere else in the United States, nowhere else. Puerto Rico is
in a state of emergency.
My first question for Genera is what can be done
immediately to generate more power for Puerto Rico and to
prevent more outages?
Mr. McElmurray. Thank you, Congressman, for your question.
To your point, the people in Washington, DC can expect to be
without power for 1 day in 10 years. The people in Puerto Rico
can expect to be without power for 2 days every month.
Mr. Torres Miranda. We know the problem. What can be done
immediately to solve the problem?
Mr. McElmurray. From Genera's perspective, we believe that
what can be done now is we need to install 560 megawatts of
temporary generation that is the same type of project that was
done by FEMA to install the 350 megawatts. With 560 megawatts
of additional generation, we believe that provides enough
capacity to get the load loss day down to acceptable standards.
Mr. Torres Miranda. And how long would that take?
Mr. McElmurray. The Army Corps has just done this project
and took them 120 days to install those power plants. There is
an Army Corps contract available today that can be activated.
So, I think it is fair to say that in 120 days from the word
go, you could implement such a solution.
Mr. Torres Miranda. OK, is there anything else?
Mr. McElmurray. That is it.
Mr. Torres Miranda. OK. Most of the outages in Puerto Rico
may be attributable to vegetation. LUMA, how long will it take
to clear the vegetation?
Mr. Saca. At this point, we are estimating 3 years and
possibly more. Unfortunately.
Mr. Torres Miranda. And of the 3 years, how much of the 3
years is the physical process of vegetation clearance and how
much is the process of regulatory approval?
Mr. Saca. The regulatory approval and especially on the
environmental side is at least 1 year of that.
Mr. Torres Miranda. So, of the 3 years, one relates to
regulatory approval?
Mr. Saca. At least.
Mr. Torres Miranda. The regulatory approval slows down the
process of vegetation clearance by 50 percent.
Mr. Saca. Yes.
Mr. Torres Miranda. And I just feel like the fact that we
are allowing red tape to be prioritized over the energy needs
of the people on the island to be an absurdity. And it would be
comical if it were not so serious and not so dangerous.
And the vegetation clearance could be delayed not only by
regulatory approvals but also by environmental review?
Mr. Saca. That is correct. If I may be blunt with this
Committee, the No. 1 thing that you can do is provide a waiver
on very few things. Because it is just what the priorities are.
One of them is vegetation.
Mr. Torres Miranda. I am asking about environmental review.
So, there is an environmental impact statement and an
environmental assessment. How much longer would the process be
with an environmental assessment?
Mr. Saca. An environmental assessment can take 8 months to
a year and more.
Mr. Torres Miranda. And what about an environmental impact
statement?
Mr. Saca. That could take up to 5 years.
Mr. Torres Miranda. So, 3 plus 5 years. It could take 8
years to clear vegetation, which is central to preventing
outages. Is that what you are telling me?
Mr. Saca. I know of cases where it could take 10 years. And
in other case 20 years, from some people who have been in this
for a while, in the industry.
Mr. Torres Miranda. Again, I think that is outrageous.
Removing vegetation should not be rocket science. Like if we
know that vegetation is a disproportionate driver of outages,
we should be creating an expedited process by which to remove
it. I just think that is common sense.
What matters obviously is not only the quantity but also
the quality of energy, the reliability of energy. One measure
of reliability is the rate of forced outages.
Genera, what is the forced outage rate for Puerto Rico?
Mr. McElmurray. Today, the forced outage rate on the
existing assets is approximately 30 percent, which means a
third of the time they are unexpectedly unavailable.
Mr. Torres Miranda. And how does Puerto Rico's forced
outage rate compare to forced outage rates elsewhere in the
United States?
Mr. McElmurray. Comparable to, let's say for example, it
would be 3 percent. So, it is 10 times as severe.
Mr. Torres Miranda. And much has been said about unreliable
energy. I think the most unreliable energy is oil. What
percentage of Puerto Rico's energy is coming from oil?
Mr. McElmurray. Thank you, Congressman, for your question.
Of the fleet that we manage, approximately 50 percent of the
electricity is derived from oil.
Mr. Torres Miranda. Whereas, Florida is?
Mr. McElmurray. Probably less than 3 percent.
Mr. Torres Miranda. Right. So, I think there is obviously a
connection between Puerto Rico's dependency on oil and the high
rate of forced outages.
Mr. McElmurray. Absolutely. As well as the high rate of
power prices, generally.
Ms. Hageman. The Chair now recognizes Mr. LaMalfa for 5
minutes of questioning.
Mr. LaMalfa. Thank you, Madam Chair. I am pleased to see
this hearing today. I did have a visit to Puerto Rico a while
back and saw the facilities and we keep hearing the stories on
the power shortages. In my area, we call them shutoffs. We
frequent them a lot up in Northern California due to part of
its forestry. So, I was very pleased that we were able to
include in Chairman Westerman's Fix Our Forests bill an
advancement on clearing around power lines, which you
desperately need there, trying to streamline and make those
projects simpler to do and help with what should be a simple
thing and not be caught up in so much red tape.
So, I am very excited to see, having seen the generation
facilities that PREPA has let go and is letting Genera and LUMA
do the good work you are trying to do. So, I appreciate that
and stand ready to help however I can as part of this
Committee.
I would like to yield my time to my good friend and
colleague, Mrs. Gonzalez-Colon.
Mrs. Gonzalez-Colon. Thank you, Congressman LaMalfa. And I
want to say thank you, Chair Hageman, and Chairman Westerman,
for holding this critical hearing regarding Puerto Rico.
And I will say critical, because the continuing instability
of the electrical grid is a roadblock to our economic
development on the island. And it is a threat to the public
safety and to the mental and physical health of my constituents
as well.
Even though the House has canceled votes today and Members
have left for their districts, Mr. Chairman, you have
demonstrated your commitment to the island and our residents by
keeping this hearing as scheduled, all while others are more
interested in photo ops and a good headline.
I also want to thank Chair Hageman and my colleagues who
are here today, even when votes are not called.
The Committee on Natural Resources is the Committee with
jurisdiction over Puerto Rico and the rest of the U.S.
territories. Refusing to testify at this hearing is a clear
disregard not just to the Committee or to me as the only Member
elected from the island in U.S. Congress, but also more
important to my constituents.
We would have preferred to have Secretary Granholm here,
who was repeatedly invited to this hearing, to have made
herself available to provide testimony at this hearing, whose
intent is to oversee the Federal funding that we in Congress
have approved to several Federal agencies that are legally led
by the Department of Energy, as the principal agency tasked
with our nation's energy production and policies to execute an
action plan that guarantees reliable, safe, and affordable
electricity on the island.
And I am not the only one saying this. The President tasked
Secretary Granholm as the lead, personally, in Puerto Rico a
few months ago in Ponce. And I was there as well. Subsequently,
I must think that her willful and misguided decision to be
absent from this hearing has also caused the absences from the
U.S. Department of Housing and the Urban Development and the
Federal Emergency Management Agency, FEMA.
This is an issue that must be treated with all the
seriousness and urgency that it deserves from all public
officials tasked with this matter. And all the energy sector
stakeholders as well.
I wish I could sit here and tell you it was an issue of the
past, but it is not. I would be lying to you. Hurricane Maria
in 2017 revealed the weak condition of the Puerto Rican energy
infrastructure. That is the reality. We suffered months of
power outages in rural areas for almost a year. The earthquakes
in the southwest in 2020 reminded us of this tragic reality, as
well as the daily outages my constituents continue to suffer.
The reality is that 7 years later, blackouts and brownouts
still affect our everyday life. That is a reality on the
island. The system can barely meet demand. And any spike brings
it down.
This past month alone, we saw numerous outages affecting
hundreds of thousands of customers for long hours and days on
end. You cannot run a business like this. You cannot have a
stable and safe home like this. Schools, hospitals, every
sector on the island is effected by the instability of our
electricity system.
Our legacy plants are still being run to their limits, and
deferring maintenance, increasing the risk of failing before
they can be replaced. The transmission and distribution system
are still overloaded and missing basic redundancies in power
lines. All that despite total obligations for recovery for
almost $17 billion from different sources, including over $11
billion between FEMA and HUD for permanent rebuilding announced
at the end of 2020.
However, almost 4 years later, the most optimistic estimate
from the government of Puerto Rico shows the specific projects
approved, construction staged barely add up to 10 percent of
the permanent work under the obligations.
My time has expired this time, but I will continue to raise
the voice of the people of Puerto Rico in this Committee.
Chair, I yield back.
Ms. Hageman. Thank you for your perspective as well. It is
very important for this Committee.
The Chair now recognizes Representative Ocasio-Cortez for 5
minutes.
Ms. Ocasio-Cortez. Thank you very much, Chairman.
I found a lot of the opening statements today quite
interesting. But there are also some claims as well that I
think are important to clear up.
But before I go there, Mr. McElmurray, at an investors'
meeting held earlier this year, you stated that Puerto Rico's
energy future will be, ``powered by natural gas, supplemented
by solar and batteries.'' But that statement in and of itself
is in direct opposition to standing Puerto Rican law, which has
policy to phase out fossil fuels and reach 100 percent
generation from renewables by 2050.
Why would Genera tell its investors something that is so in
contradiction with Puerto Rican standing law?
Mr. McElmurray. Well, first, Congresswoman, thank you very
much for your question. Genera's mandate is very clear. We
operate on an operation and maintenance agreement that has very
prescribed responsibilities. The public policy and the rules,
whether it be the IRP or other legislation in Puerto Rico is
crystal clear about what the future will be.
From our perspective in Genera, one of our mandates is to
reduce the cost of electricity. Today, with respect to the
fleet that we operate, 50 percent of the electricity is
generated by oil and 50 percent by gas. Of the dollars that it
takes for us to operate the system----
Ms. Ocasio-Cortez. I apologize. I just have very limited
time. Are you getting to a point where basically you are trying
to drive at reducing costs as your rationale here?
Mr. McElmurray. Thank you for your question. What I was
attempting to point out is, from Genera's perspective, to
reduce costs to ratepayers, we believe that we would like to
see the oil go to zero and for controllable resources, we
believe that those should be run on gas or, quite frankly,
hydrogen in the future, should the infrastructure be there.
Ms. Ocasio-Cortez. Reclaiming my time, thank you. Would
that be blue hydrogen or green hydrogen?
Mr. McElmurray. I think what you would love to see is green
hydrogen. To the extent that possibly the renewables may be
available to produce it.
Ms. Ocasio-Cortez. I would like to reclaim my time.
Apologies. I just have very limited allocation here.
I would like to make sure that we clarify something for the
record. One of the things that we heard in our opening
statements is this claim that solar panels are ``highly
ineffective against severe weather.'' I would like to submit to
the record reporting from the Washington Post that actually
outlines that against severe weather, solar panels actually do
well in storms and, in fact, they outperform the existing T&D
system associated with Puerto Rico's fossil fuel grid.
Ms. Hageman. Without objection.
[The information follows:]
Can rooftop solar panels survive hurricanes?
Rooftop solar panels are surprisingly resilient to extreme weather, but
wind and hail damage may not be covered under your home insurance
policy.
The Washington Post, August 17, 2024 by Nicolas Rivero
https://www.washingtonpost.com/climate-solutions/2024/08/17/solar-
panel-hurricane-hail-snow/
*****
Rooftop solar panels aren't cheap--so in an especially active hurricane
season, they can create anxiety for homeowners who have a $20,000
investment strapped to their roofs.
Luckily, today's solar panels are surprisingly resilient in the face of
almost all forms of extreme weather, according to Ben Delman, a
spokesperson for Solar United Neighbors, a D.C.-based nonprofit that
helps homeowners nationwide band together to bargain down the price of
installing rooftop solar panels.
``Panels are made to withstand those elements,'' he said.
Here's what you should know about how solar panels hold up to hurricane
winds, hail and snow.
Wind
Most solar panels are certified to withstand winds up to 140 mph, which
is what you might encounter in a Category 4 hurricane or an EF-3
tornado. In Florida, the most hurricane-prone state in the country,
many local building codes have even higher wind-speed standards of 160
mph or more.
But the strength of your rooftop solar panels depends on how well they
have been installed. Contractors generally bolt metal racks onto a roof
and attach panels to them using clips certified to hold on in high
winds. A 2022 analysis of solar panel damage in the Caribbean during
recent hurricanes found that racks, clips and bolts often failed to
live up to their wind-speed certifications because of shoddy
installations. The solution, according to the authors from Princeton
and New York University, is better installations and closer
inspections.
Still, Delman says panels can weather most storms and usually take
damage only in catastrophic conditions. ``Any storm that damages panels
is already probably going to take your roof off,'' he said.
Hail
Most solar panels are protected by a layer of tempered glass, which is
strong enough to fend off light hail. But hailstones bigger than an
inch could damage internal components or crack the glass and let in
dust and moisture, which make a solar panel produce less electricity.
In parts of the country that are prone to heavy hailstorms, especially
northern Texas, Oklahoma and Kansas, it makes sense to look for hail-
resistant solar panels with a UL 61730 rating from Underwriters
Laboratories, a company that does product tests and gives safety
ratings. To test solar panels for hail resistance, the company drops
steel balls on them and shoots ice chunks at them out of a cannon. The
panels that survive the barrage are certified to withstand hailstones
as big as three inches.
Homeowners worried about hail can also buy covers for their solar
panels and put them on the roof ahead of storms. On the bright side,
Delman said, a tough solar panel can protect the roof below from hail
damage.
Snow
Snow generally won't damage solar panels, but a blanket of snow will
block sunlight and stop panels from producing electricity. Usually, the
panels will shed snow faster than the rest of your roof, because they
are installed at an angle, have smooth, glass surfaces and tend to stay
warm.
``Most of the time, the panels will melt the snow right off,'' Delman
said.
Homeowners should be careful about falling snow, Delman added. When it
slides off in big chunks, it can damage your gutters, car or outdoor
furniture, or injure people walking below. To keep that from happening,
he recommends installing a snow guard--basically, a railing that
catches snow at the edge of your roof, where it will gradually melt.
Blizzards that dump multiple feet of snow could put enough weight onto
rooftop panels to create small cracks in the glass or warp the metal
racks that hold them in place, according to the U.S. Energy Department.
But experts say that even in those conditions, you should just let the
snow melt off, because climbing on the roof to try to clear the snow
yourself could be dangerous.
Are solar panels covered by home insurance?
In most cases, if a set of solar panels is attached to your roof, it
will be covered by your home insurance policy. If your panels are
mounted to the ground, a carport or another structure on your property,
they may fall under your policy's ``other structures'' coverage. Some
policies won't cover solar panels damaged by wind or hail.
You should call your insurer before disaster strikes to ask whether
your panels are covered.
Since solar panels raise your property value, you may have to raise
your coverage limit, which could mean higher monthly premiums. Delman
said the premium hikes shouldn't be huge--maybe a few percentage points
higher than your existing bill.
______
Ms. Ocasio-Cortez. Thank you very much.
I think it is also important to note here that we have an
existing contract with LUMA in Puerto Rico. As we move on here,
Mr. Saca, LUMA's contract began in 2020; is that correct?
Negotiations began in 2020?
Mr. Saca. LUMA started operations in June 2021.
Ms. Ocasio-Cortez. 2021. Negotiations started in 2020 and
it was signed in 2021?
Mr. Saca. The operations started in June 2021, that is
correct.
Ms. Ocasio-Cortez. That was under then Governor Rossello?
Mr. Saca. I believe so, yes.
Ms. Ocasio-Cortez. The contract was extended in 2022?
Mr. Saca. What has happened is that one of the important
items which hurts Puerto Rico in a major way today, and
especially the consumer, is that PREPA is still not out of
bankruptcy. So, it was agreed that the contract would not
officially start until PREPA exits bankruptcy, which was
scheduled to have happened by today. So, there is a temporary
contract. I do not know the exact details of how that was done
because I was not there yet. But the contract actually begins
when PREPA exits bankruptcy.
Ms. Ocasio-Cortez. And to your estimation, is that an
indefinite period at this point?
Mr. Saca. My understanding is that it will be at least one
more year before that happens. And one of the things this
Committee really needs to understand and for all of us to be on
the same page, as the system requires more investment, PREPA is
limited in going out to get financing, so the customers' bill
will not go up. Because a lot of the investment that should be
taking place right now on the operations side, let's leave on
the side FEMA funding, the utility is not able to do it because
it has not exited bankruptcy, and that has a huge impact on our
ability to execute and on our ability to go out and get
financing so that the ratepayers' money is not----
Ms. Ocasio-Cortez. I apologize. Just as a detail
clarification, so your assertion here is that the LUMA contract
has not functionally began because PREPA has not yet exited
bankruptcy?
Mr. Saca. It is one of the requirements in this temporary
contract that the actual agreement does not begin until they
exit bankruptcy, that is correct.
Ms. Ocasio-Cortez. I yield back to the Chair.
Ms. Hageman. Thank you. The Chair now recognizes Chairman
Westerman for 5 minutes of questioning.
Mr. Westerman. Thank you, Chair Hageman, and thank you to
the witnesses.
Mr. Miranda, I believe you mentioned that one half of the
power outages are caused by vegetation. I would associate
myself with many of the questions from Mr. Torres.
Mr. Saca, how many acres of right-of-ways have been cleared
in the past 5 years?
Mr. Saca. Since LUMA started in June 2021, we had cleared
5,000 miles of vegetation with the operating budget for the
transmission and distribution system. I make the distinction
because this has nothing to do with the clearing project that
FEMA has approved, which is critical for the immediate
reduction of outages in Puerto Rico.
We, LUMA, on a daily basis, are continuing to be as
efficient and as effective as we can in clearing vegetation.
So, the answer to your question is 5,000 miles.
Mr. Westerman. And you have 16,000 miles to go?
Mr. Saca. Yes, sir.
Mr. Westerman. Does anybody on the panel disagree with the
statement that maybe the low-hanging fruit, the most expedient
thing we could do is clear that vegetation as quickly as
possible? Does anybody see a problem with that?
Mr. Saca. Absolutely. It is the No. 1 ask, sir.
Mr. Westerman. But you also testified that it could take up
to 10 years with environmental reviews, if it ends up in an
environmental impact statement. It seems to me that one of the
most expedient things we could do would be to clear the way so
that these power lines could be cleared very quickly and that
vegetation removed.
Mr. McElmurray, you said 50 percent of the energy comes
from oil. If that 50 percent of energy were replaced with
natural gas, what would the reduction in carbon emissions be?
Mr. McElmurray. Thank you, Congressman, for your question.
From a carbon standpoint, you would cut it in half, which is
critical. But I think from an economic standpoint, you would
save a billion dollars.
Mr. Westerman. So, we would save a billion dollars for
ratepayers, and we reduce Puerto Rico's carbon footprint from
oil generation by 50 percent. That sounds like a pretty good
scenario to me.
Actually, in 2020, PREPA proposed replacing old fuel plants
with new liquified natural gas terminals and more glass plants,
but PREB rejected this proposal in favor of solar and grid
projects.
Mr. Miranda, can you explain that?
Mr. Torres Miranda. The IRP process, it is done by law, and
it requires a process that has public participation and
intervenors. And besides the modeling that was done, those were
the modifications that came out and were approved. And no party
actually requested judicial or administrative reconsideration
for that. So, that is why it has been maintained as is.
But besides the renewable project, the approved present IRP
also allows a 300 megawatt natural gas project that would be a
transition as the renewables would kick in. So, we do have a
natural gas project for that.
Mr. Westerman. You mentioned a 300 megawatt natural gas
project. How large a slot would that take, Mr. McElmurray, to
build a 300 megawatt natural gas facility?
Mr. McElmurray. Thank you, Congressman. I apologize, I did
not hear the question.
Mr. Westerman. How many acres would it take approximately
to build a 300 megawatt natural gas facility?
Mr. McElmurray. Thank you for the question. From an acreage
standpoint, probably a little under 30.
Mr. Westerman. Thirty acres. So, you can put 300 megawatts
in 30 acres. How many acres does it take to produce 1 megawatt
of solar power? It is 10, I will help you out. So, if you
wanted to get 300 megawatts of solar power, it takes 3,000
acres, versus 30 acres for a natural gas plant to produce the
same amount.
Is constructable real estate easy to find on the island of
Puerto Rico?
Mr. McElmurray. Thank you for your question. With respect
to the project that is being mentioned on this panel, the
acreage has been identified. So, there would be a viable site
to do that.
I think the issue, if I could just highlight it, would be
one of time. To build a new combined cycle from the word go is
probably a 36-month process in the U.S. mainland. Puerto Rico
would probably be similar. In addition to that, you need time
for financing as well as permit approvals. So, you are talking
about potentially a process that could take up to 7 years.
So, once you decide that you want the infrastructure, the
issue is not technological or capacity or in some ways
financing, because you can figure that out. The issue is time.
These resources take an incredibly long time to get online.
Mr. Westerman. So, 3,000 acres for 300 megawatts of solar
power, 30 acres for 300 megawatts of natural gas. And we are
not going to see any trees or vegetation growing where those
solar panels are installed. It seems like common sense has left
the discussion when it comes to clearing right-of-ways, the
type of energy generation. And $21 billion for the electric
system in Puerto Rico, that seems outrageous compared to what
states spend on their electric grids.
We have to find a better way to do this. And this hearing,
I think, is an important step in that.
I yield back.
Ms. Hageman. Thank you, Chairman Westerman, and I agree
with you.
The Chair now recognizes the Ranking Member for 5 minutes
of questioning.
Ms. Velazquez. Thank you, Madam Chair, and thank you for
holding this hearing.
Mr. Saca, is it true that Puerto Ricans experienced 4
additional hours of outages during Fiscal Year 2024, reflecting
a 19 percent increase compared to the previous year?
Mr. Saca. I do not have the exact number, but certainly the
outages are real, correct.
Ms. Velazquez. OK. I guess that you have not checked the
Puerto Rico Energy Bureau's resolution. Because that
information is contained in the report.
Is it also true that for the same Fiscal Year, LUMA saw a
17 percent increase in profit compared to Fiscal Year 2021?
Mr. Saca. An increase in what? Sorry, I could not hear you.
Ms. Velazquez. A 17 percent increase in profit compared to
Fiscal Year 2021.
Mr. Saca. In profit?
Ms. Velazquez. Yes.
Mr. Saca. We are the systems operator. It is important for
everyone to understand that there is a fee that is paid. And as
the systems operator, if we save a million dollars, this is not
something that goes to the pocket of the owners of the grid.
Ms. Velazquez. I guess we should have a conversation with
Mr. Torres Miranda, Associate Commissioner, who can clarify on
this information that has been made public by the Bureau.
Mr. Saca, is LUMA working with FEMA and Fish and Wildlife
proactively to ensure vegetation clearing progresses quickly?
Mr. Saca. Not fast enough.
Ms. Velazquez. We know that delays for environmental
assessment and permits are often because agencies lack staff
and resources. Would it be beneficial if Congress gave more
resources?
Mr. Saca. A hundred percent. And I will go further than
that. This is a huge emergency in Puerto Rico. And the No. 1
thing that the Federal Government could do is to provide some
type of waiver responsibly so that we can do a safe job at
accelerating. This is the No. 1 short-term action that could be
taken. Because at this point, and I will be happy to read to
you the time----
Ms. Velazquez. Reclaiming my time, what I am trying to say
is we cannot expect for the Federal agencies to do the work at
the speed that the people in Puerto Rico deserve when their
budget has been cut dramatically. So, we cannot expect more
with less. That is the point that I am trying to make here.
Mr. Saca, I have surveys that your company spends over $200
million a year on employees seconded from companies that are
part from LUMA's consortium. Twenty percent of these funds are
used for lavish hotel stays, allocation for themselves and
their spouses. How can LUMA justify this exorbitant dollar
amount while everyday Puerto Ricans have to almost weekly throw
away their food from the fridge due to the constant outages?
Mr. Saca. In order to address the complex and massive
challenge that LUMA faces as a result of everything that we
have just discussed, we have personnel from inside of Puerto
Rico and from outside of Puerto Rico that are necessary for the
transformation. It is important to understand----
Ms. Velazquez. OK, you are not going to answer my question.
Madam Chair, I would like to ask unanimous consent to enter a
letter from PREPA into the record.
Ms. Hageman. Without objection.
[The information follows:]
GOVERNMENT OF PUERTO RICO
Puerto Rico Electric Power Authority
June 27, 2024
Mr. Robert F. Mujica Jr., Executive Director
Financial Oversight and Management Board for Puerto Rico
PO Box 192018
San Juan, Puerto Rico 00919-2018
Re: PREPA's proposed alternatives to cover the difference between
PREPA's FY24 certified budgets and PREPA's FY25 proposed
budgets
Dear Mr. Mujica:
On June 13th, 2024, the Puerto Rico Electric Power Authority
(``PREPA'') notified its budget proposals to the Financial Oversight
and Management Board for Puerto Rico (``Oversight Board'') pertaining
to the fiscal year 2025 (``FY25'') for its holding company, and
subsidiary PREPA Property Co, LLC (jointly, for budgetary purposes,
``HoldCo''), and its other subsidiary PREPA HydroCo LLC (``HydroCo'').
In summary, PREPA proposes a budget of $62.634M for HoldCo and a budget
of $26.175M for HydroCo (jointly, the ``FY25 Proposed Budgets''). PREPA
emphasized that no rate increase will be necessary to fund either its
proposed budgets, or the budget proposals of the private operators, as
all necessary expenses can be covered through an efficient and fair
redistribution of the budget allocation made by the Puerto Rico Public-
Private Partnerships Authority (``P3A'').
On June 24th, 2024, the Oversight Board notified the Governor of
Puerto Rico, Honorable Pedro R. Pierluisi Urrutia, and PREPA a Notice
of Violation pursuant to Section 202(c)(1)(B) of the Puerto Rico
Oversight, Management, and Economic Stability Act (``PROMESA''). On
behalf of the Governor of Puerto Rico, PREPA notified the Oversight
Board with its response to the Notice of Violation on June 26th, 2024,
whereby it reaffirmed its budget proposals of $62.634M for HoldCo and
$26.175M for HydroCo. PREPA explained that: (a) its budget proposals
had been meticulously prepared using the ``bottom-up'' methodology; (b)
all budgetary requests are substantiated and correspond to each
department's essential needs; (c) the amounts sought are the minimum
necessary for PREPA to perform its basic functions and obligations; and
(d) any reductions will jeopardize PREPA's basic operations and
compliance with its legal obligations.
As the Oversight Board is aware, the difference between the FY24
HoldCo and HydroCo budgets certified by the Oversight Board and PREPA's
FY25 Proposed Budgets for HoldCo and HydroCo is $36.4M. PREPA reaffirms
that no rate increase will be necessary to fund either its FY25
Proposed budgets. In support of its position, PREPA hereby identifies
areas where LUMA expends exorbitant amounts of money without any
``demonstrated need'' or demonstrated benefit for the people of Puerto
Rico. Budgetary cuts in these areas will not only make available
sufficient funds to cover the difference between PREPA's FY24 certified
budgets and PREPA's FY25 Proposed Budgets, but will also reduce
unnecessary spending of rate-payers dollars.
A. LUMA's Seconded Employees Program
Despite LUMA's resistance to disclose any information to PREPA on
this matter, PREPA ha discovered that LUMA spends over $200M on
employees seconded from the companies that comprise the LUMA
consortium: the Canada firm ATCO and the U.S. based companies Quanta
Services Inc. and IEM (``Seconded Employees Program'' or ``Seconded
Employees''). The Seconded Program, funded by rate-payers, does not
create jobs for the people of Puerto Rico, who are equally or more
skilled in maintaining and operating the T&D Systems. The salaries,
wages, and benefits paid to the Seconded Employees far exceed those of
local employees. Moreover, 20% of the total allocation for the Seconded
Program is used to cover miscellaneous expenses such as plane tickets,
hotel stays, and car rentals for the Seconded Employees and their
spouses. These lavish expenses are unjustified and unnecessary,
benefiting only the LUMA consortium rather than the people of Puerto
Rico. Additionally, PREPA has identified that LUMA spends exorbitant
amounts of money on publicity and marketing, without any proven benefit
for rate-payers.
PREPA submits that the $36.4M variance between the FY24 and FY25
budgets for HoldCo and HydroCo can be covered by reducing the amounts
authorized in the P3A's Budget Allocation for LUMA's Seconded Employees
Program, as well as for its marketing and publicity programs. PREPA
further requests the Oversight Board to investigate LUMA's Seconded
Employees Program to determine whether said program is necessary, and
whether the salaries, wages, and benefits paid to the Seconded
Employees are reasonable.
B. The P3A's Budget Allocation should be redistributed, as the severe
liquidity shortfall is driven solely by LUMA's mismanagement
and resulting backlog of over $550M in delayed reimbursements
and working capital advances
The Budget Allocation concluded that the proper allocation of the
Projected Net Available Funds Allocation Rates would be as follows:
GridCo 65.2%, Generation 31.8% and HoldCo 3.0%. With regards to the
Generation Budget, P3A determined that a 95.4%-4.6%, Genco-HydroCo
allocation was reasonable and appropriate for FY2025. For the $89.655M
of total projected Other Income for FY2025, the P3A adopted LUMA's
recommendation and allocated it as follows: (i) $35.948M attributable
to all entities (i.e., GridCo, Generation and HoldCo); (ii) $53.011M
attributable to GridCo; and (iii) $0.697M attributable to Generation
(i.e., Genco and HydroCo).
Additionally, the P3A identified $74.741M in additional funds for
the FY2025 Budget, allocated as follows: $67.655M allocated to all
entities using the approved Allocation Factors; $3.421M allocated
directly to GenCo/GeneraPR; $165K allocated directly to HydroCo/PREPA;
and $3.5M allocated directly to HoldCo/PREPA for its FY2024 audited
financial statements. Based on the foregoing, the P3A approved a total
budget allocation for HoldCo in the amount of $33.038M and a total
budget allocation for HydroCo in the amount of $14.527M.
The P3A determination on Other Income is either internally
inconsistent or poorly reasoned and explained. On page 3 of the letter,
P3A states:
It is a rate review principle to align costs with cost
causation. Some of the revenue collected through sources other
than base rates corresponds to activities attributable to
specific entities (e.g., late payment charges, which is a
customer service activity). As such, these entities should
benefit from the revenue these activities bring. On the other
hand, in those instances in which a non-base rate revenue
cannot be attributable to a specific entity, such revenue
should be allocated to all entitles (e.g., interest from the
Operating, Construction and Sinking Funds). (Emphasis added).
Despite P3A's clear statement that Interest Income from Operating,
Construction, and Sinking Funds (``Interest Income'') should not be
attributable to a specific entity, the result of P3A's determination
allocates more than half of PREPA's Interest Income to LUMA. Given that
the $40.1M of interest income comes from the accounts of PREPA, the
Owner, it should be attributable to PREPA's operating entity budgets
and used to address the severe and growing shortfall in PREPA's
liquidity resulting from LUMA's backlog of over $550M in delayed
reimbursements and working capital advances for federally funded
projects.
Specifically, between LUMA's Interim Period Service Commencement
Date through June 2024, LUMA has expended more than $950M of federally
funded CapEx but obtained only $451M in Federal Emergency Management
Agency (``FEMA'') reimbursements and Working Capital Advances
(``WCA''), resulting in a net negative liquidity Impact to PREPA of
over $550M through Q3 2024. Unconscionably, LUMA has not been required
to correct its glaring inefficiencies. Instead, PREPA has been forced
to transfer over $445.4M from its restricted federal funds account to
compensate for LUMA's Inefficiencies. See Annex A--Status Update on
LUMA Federal Funding and Liquidity Overview and Analysis of Service
Account Funding. LUMA's unjustified overspending, along with its
inability to generate sufficient revenues either from its collection
efforts for power services or its endeavors to obtain reimbursements
from the federally funded T&D projects it oversees is simply
unsustainable.\1\ Despite PREPA's repeated warnings on the
unfeasibility of LUMA's modus operandis and invitations to discuss
solutions, LUMA has taken no action whatsoever to address this dire
problem. Conversely, with drastically less economic and human
resources, PREPA has outshined LUMA In each reimbursement category.
Between January 2021 and May 2024, LUMA only obtained $130.5M in
reimbursements for Category B--Emergency Measures, Category F--
Permanent Work, and Category Z--Management Cost. In contrast, PREPA,
with substantially much less resources, obtained a total of $1.2B in
reimbursements. The table below compares reimbursements received by
PREPA vis-a-vis reimbursements received by LUMA for disaster
declarations applicable to LUMA under each of the above-mentioned
categories during the period of January 2021 to May 2024.
---------------------------------------------------------------------------
\1\ The P3A has also concluded that LUMA's unjustified
overspending, along with its inability to generate sufficient revenues
either from its collection efforts for power services or its endeavors
to obtain reimbursements from the federally funded T&D projects it
oversees, is unsustainable. See Annex B.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
It is important to note that LUMA's failure to generate
sufficient revenues either from its collection efforts for power
services or its endeavors to obtain reimbursements from the federally
funded T&D projects it oversees has also hindered LUMA's capacity to
perform the necessary repairments and maintenance of the T&D systems.
Shockingly, LUMA has not made any attempt to solve this dire problem.
Instead, it attempts to transfer the burden of its egregious
inefficiency to the rate-payers by demanding a budgetary increase. The
Oversight Board must categorically reject LUMA's request.
Considering the foregoing, PREPA moves the Oversight Board to
revise the P3A's Budget Allocation and fully allocate the Interest
Income to PREPA's operating entity budgets to address the severe and
growing shortfall in PREPA's liquidity which, as explained, has been
unilaterally caused by LUMA's inefficiency in obtaining federal
reimbursements and WCA.
C. Conclusion
For the reasons set forth herein, PREPA moves the Oversight Board
to revise and redistribute the P3A's Budget Allocation in an efficient
and fair manner, so as to fully cover PREPA's budgetary needs for FY25
without having to resort to rate increases.
PREPA respectfully submits that both, the Energy Bureau of the
Puerto Rico Public Service Regulatory Board (``Energy Bureau'') and the
Oversight Board have incorrectly minimized PREPA's responsibilities and
role, following the commencement of the private operators. PREPA,
particularly HoldCo, continues to have significant legal and regulatory
obligations pursuant both to federal and state law. Further, the
Operation and Maintenance Agreements with the private operators, along
with recent mandates issued by both the Governor of Puerto Rico and the
Energy Bureau in connection with the outage events reported during June
2024, confirm that PREPA plays a pivotal oversight role in its
relationship with the private operators. Further, reducing PREPA's
budgets and headcount would jeopardize PREPA's ability to properly
oversee the private contractors when needed, leaving the Energy Bureau,
the P3A and, ultimately, the people of Puerto Rico without its expert
knowledge and insight.
PREPA remains available to discuss and provide further context in
connection with its FY25 proposed budgets for HoldCo and HydroCo. PREPA
remains steadfast in its commitment to continue leading the effort to
provide better, cost-efficient, and reliable energy to the people of
Puerto Rico. It is imperative that the Oversight Board recognizes the
critical role PREPA plays and ensures that the budget allocations
reflect the true operational needs of the organization. Failure to do
so not only undermine PREPA's ability to fulfill its mandate, but also
threatens the stability and reliability of Puerto Rico's entire
electric infrastructure.
Cordially,
Josue A. Colon-Ortiz,
Executive Director
______
Ms. Velazquez. Mr. Saca, it is estimated that more than 5
gigawatts of solar capacity will be installed in Puerto Rico
over the next 10 years, with only 8.8 percent coming from the
utility scale segment. Do you consider the grid is equipped to
absorb the growing number of households that will have solar
and battery systems?
Mr. Saca. The answer is that it depends at the rate at
which we are able to make progress in upgrading the grid.
Ms. Velazquez. So, it is a yes or no?
Mr. Saca. With all due respect, ma'am, it is really not a
yes or no answer. This is related specifically to how quickly
we are able to upgrade the equipment, how quickly we are able
to get reliability up.
Ms. Velazquez. Thank you. Reclaiming my time, Mr.
McElmurray, you answered a question to Mr. Torres saying that
you need to install more temporary power plants in Puerto Rico
to achieve more capacity. So, what is happening with this
Aguirre plant? I checked today, and it is out of service.
Ms. Hageman. You may go ahead and answer.
Mr. McElmurray. Thank you, Congresswoman for your question.
First let me say, Puerto Rican ratepayers and residents deserve
better in terms of the reliability of the equipment. As to
Aguirre, when I checked this morning coming into this hearing
kind of on our operational system, I did see that they had an
issue with one of the units. I would have to follow up to see
exactly what happened after we walked out of here.
Ms. Velazquez. It is out, right. Two hundred thousand
people could get service out of that plant. Do you have any
plan to have it functionally working? Is that part of your
energy resiliency plans?
Mr. McElmurray. Thank you for your question. One of the key
strategies of Genera in the short term, which is something that
can make an impact to Puerto Ricans today, not 10 years from
now, is a critical component replacement program, which I think
was mentioned on this panel, $126 million that is being
invested in motors, pumps, boiler tubes and other items that
routinely break.
The availability of Aguirre in 2022 was essentially zero.
One of the big reasons that FEMA put in the program, it is a
notoriously unreliable plant because of its age. But in terms
of strategy, the most near-term strategy is to provide critical
components and repairs to try to get the availability up.
Ms. Velazquez. Will you submit to this Committee----
Ms. Hageman. I am going to call on Representative Radewagen
for 5 minutes of questioning.
Mrs. Radewagen. Thank you, Madam Chairwoman, Ranking
Member, and Vice Chairman Gonzalez-Colon, for holding this
hearing today. I wish to yield all of my time to Representative
Gonzalez-Colon.
Mrs. Gonzalez-Colon. Thank you, my friend.
I have been hearing the questions of members of this
Committee. I believe everybody here is on the same page in
terms of the contract of LUMA has not been serving the people
of Puerto Rico. You have 1 year of a transitional contract, and
then it went into effect. And meanwhile, the utility operators
need to remember that you were contracted to provide better
services and not excuses.
And what I see here is that the people of Puerto Rico
already have it with LUMA. It has been a long time, and we have
not seen any change. Actually worse.
Mr. Saca, you mentioned that waivers will speed up LUMA's
work. To this date, what waivers have you already requested?
Mr. Saca. Specifically, as it relates to environmental. As
you know----
Mrs. Gonzalez-Colon. When did you submit those waivers?
Mr. Saca. We have not submitted----
Mrs. Gonzalez-Colon. You have not submitted any waivers to
any Federal or State agency?
Mr. Saca. Federal.
Mrs. Gonzalez-Colon. But you did not?
Mr. Saca. We have not submitted a request for a waiver.
Mrs. Gonzalez-Colon. You have not. So, you are asking for
waivers here, but you have not submitted or requested any
official waiver. And that is your answer.
What permits have LUMA requested from Federal agencies that
are currently pending and when did LUMA request it?
Mr. Saca. At this point, we have submitted for pending
obligation 217 projects. And LUMA continues on a daily basis to
work with the different agencies----
Mrs. Gonzalez-Colon. Which permits have you submitted
already?
Mr. Saca. We have submitted multiple permits that are
associated with each project.
Mrs. Gonzalez-Colon. Madam Chair, I will ask the witness to
submit to the Committee a list of the permits that LUMA has
requested or filed during the term.
You have had 3 years, correct?
Mr. Saca. LUMA started June 2021.
Mrs. Gonzalez-Colon. And it is 2024, so you do the math.
You have been 3 years, correct?
Mr. Saca. Correct.
Mrs. Gonzalez-Colon. And you told us here in 2021 that you
were already ready on Day 1. But you were not. And I do not
think you are going to be ready in a thousand years.
The reality here is that you have never begun your process
in the island. I think just last month, you went to PREB to ask
to have customers pay a rate increase to cover an upward
revision on capital expenditures to $200 million from $110
million that the PREB had already approved. And I would ask
you, Mr. Saca, exactly why should the customers give more money
to an operator who is not delivering on what the people of
Puerto Rico contracted you for?
Mr. Saca. The first obligation that LUMA received was in
May 2022. Progress has been made since then. I have seven very
specific items that I can mention. One is the----
Mrs. Gonzalez-Colon. Why should the customers give you more
money if you have not delivered?
Mr. Saca. I believe that as mentioned earlier, there is a
need for investment on the operational side to keep up with
reliability. That is a fact from an industry perspective. The
fact that PREPA has not exited bankruptcy is a huge problem
because the people of Puerto Rico should not be paying for an
increase, as it should be financed by going to the markets.
Mrs. Gonzalez-Colon. Mr. Saca, to the questions of Ms.
Ocasio-Cortez, you were saying that because PREPA is not out of
the bankruptcy situation, you technically can do whatever you
want. That was my impression of your answer.
So, how come LUMA is constantly going to PREB to ask for
more? When you enter a contract not knowing what you really
needed to operate? You knew the condition of the system; you
knew the situation of PREPA. You knew the situation after the
hurricanes. Do you misrepresent information you gave to the
government of Puerto Rico about your liquidity and cash-flow to
get the contract awarded?
Mr. Saca. I think it is very important for the people of
Puerto Rico to understand one very specific simple fact. LUMA
has not asked for a raise. This happens constantly that people
are saying that LUMA has raised rates. Since LUMA started, it
stayed with its commitment of not raising rates.
What happens is fuel costs change. LUMA has nothing to do
with fuel costs, does not purchase fuel, does not benefit from
that process.
LUMA has not raised rates one time. And as a matter of
fact, the rates that you are talking about have also gone down
seven times since LUMA has been there. Again, has nothing to do
with LUMA. It has to do with the cost of fuel.
Mrs. Gonzalez-Colon. Mr. Saca, do you misrepresent
information you gave the government of Puerto Rico about your
liquidity and cash-flow to get the contract awarded? Yes or no.
Mr. Saca. LUMA has not misrepresented any information
provided to the government of Puerto Rico.
Mrs. Gonzalez-Colon. My time expires, Madam Chair.
Ms. Hageman. I am going to call on Mr. Stauber for 5
minutes of questions.
Mr. Stauber. Thank you very much, Chairwoman Hageman.
Access to affordable and reliable electricity is something
all Americans need, and something all Americans deserve. The
increasing challenges that the people of Puerto Rico have faced
in recent years are the result of mismanagement and lack of
investing, spanning several decades, which has only been
exacerbated by natural disasters of recent years.
I want to thank the Chairwoman for calling this hearing, as
well as commend the leadership of my friend and colleague
Representative Gonzalez-Colon for her steadfast commitment to
addressing these challenges on behalf of her constituents.
Accordingly, I want to yield the rest of my time to
Representative Gonzalez-Colon. Thank you.
Mrs. Gonzalez-Colon. Thank you, Mr. Stauber.
One of my questions PREB. We know that on prior occasions,
PREB has refused adjustments submitted by LUMA. Does the PREB
reaffirm that the capital expenditure budget should be $110
million instead of the $200 million?
No, I am talking to PREB.
Mr. Torres Miranda. Yes, can you repeat the question,
please?
Mrs. Gonzalez-Colon. Yes, you refused adjustments submitted
by LUMA on prior occasions. And do you reaffirm that the
capital expenditure budget should be $110 million instead of
$200 million?
Mr. Torres Miranda. Yes, we approved the budgets for all of
the three entities, PREPA, Genera, and LUMA. And we make an
evaluation of the projects and the line items and that is how
we approve those projects.
Mrs. Gonzalez-Colon. So, you believe it is $110 million
instead of $200 million?
Mr. Torres Miranda. Yes.
Mrs. Gonzalez-Colon. OK. Do you believe it is appropriate
that an operator who is not delivering on their end of the deal
should continue to ask for rate increases?
Mr. Torres Miranda. LUMA has not requested a rate increase.
What they have requested is reconciliation of the fuel cost
adjustment and the power purchase adjustment. That comes from
Genera, the request of the fuel cost. And what we do is we
analyze those requests and those documents and then we make a
determination if they apply or do not apply.
Mrs. Gonzalez-Colon. Do you or does your agency keep track
of a timeline of LUMA's compliance or lack thereof with the
Puerto Rico energy policy?
Mr. Torres Miranda. Yes, we do keep track of what their
compliance is with our orders that we issue.
Mrs. Gonzalez-Colon. In the case of Puerto Rico, just to
make the record clear, the Energy Information Agency statistics
show that the Puerto Rico system average interruption duration
index in 2020, under PREPA, because everybody is talking about
PREPA, 3 years after Maria, was 1,243 minutes, the average
interruption. And in 2023, under LUMA, another 3 years later,
it was 1,448 minutes. It is over four times the national index,
even for years with major disasters, and more than that before
you took the administration of the grid. The same study shows
that the system average interruption frequency index is about
7.8 minutes per customer per year, seven times the U.S. median.
Anybody in Puerto Rico will tell you their experience just
in August.
And this is a question to you, Mr. Saca. Do you really
believe that you are delivering the service that you were
contracted to deliver? Yes or no?
Mr. Saca. I think it is important to put into context
that----
Mrs. Gonzalez-Colon. The context is, do you believe that
you are delivering the service you were contracted for? Yes or
no?
Mr. Saca. Progress is being made every day. We continue to
address vegetation. We have installed automated devices.
Mrs. Gonzalez-Colon. I will take that as a no. Because at
least you are not meeting the consumers' expectation.
The question will be who are you accountable to? Who is
supposed to keep and follow the metrics of your contract
compliance?
Mr. Saca. LUMA is the most regulated utility that I know of
in the entire United States. We have a contract obligation
with----
Mrs. Gonzalez-Colon. Who are you accountable to?
Mr. Saca. With P3A for the contract obligation, with the
regulator, the PREB for any of the regulatory matters. In
addition to that, of course, there is the FOMB that is part of
that process, and----
Mrs. Gonzalez-Colon. So, those three are your bosses. They
are supposed to be the ones with the power to make you comply.
P3A, PREB, and FOMB.
Mr. Saca. Correct.
Mrs. Gonzalez-Colon. And I think my time has expired, Madam
Chair.
Ms. Hageman. Well, I am going to call on Ms. Gonzalez-Colon
for her 5 minutes of questioning.
Mrs. Gonzalez-Colon. Thank you.
Mr. Saca, the firm award price under FEMA or CDB that your
company has submitted for approval, what total amount do they
represent?
Mr. Saca. What we have submitted for approval?
Mrs. Gonzalez-Colon. Yes.
Mr. Saca. We have submitted $12.3 billion in projects. Out
of those, in execution or already completed is $2.3 billion, or
about 18 percent of the $12.3 billion.
Mrs. Gonzalez-Colon. How much has been approved by FEMA?
Mr. Saca. We have been reimbursed $173 million. We also
have received $418 million of working capital advances.
Mrs. Gonzalez-Colon. Yes, but that is another thing. So,
you just received $173 million?
Mr. Saca. Yes, $173 million have been reimbursed.
Mrs. Gonzalez-Colon. Reimbursed. And how much has been
approved?
Mr. Saca. We have in obligations of about 171 projects
obligated and approved.
Mrs. Gonzalez-Colon. How much money have you been approved?
If you do not have the data, please submit it----
Mr. Saca. $1.1 billion.
Mrs. Gonzalez-Colon. $1.1 billion?
Mr. Saca. $1.1 billion, correct.
Mrs. Gonzalez-Colon. So, you submitted $12.3 billion in
projects, and you have only been approved $1.1 billion. How
much has your company spent out of pocket?
Mr. Saca. We have spent $1.3 billion. We have $552 million
spent pending obligation, another $352 million submitted in
RFRs.
Mrs. Gonzalez-Colon. How much actual expenditure has your
company billed for you to obtain reimbursement?
Mr. Saca. We have incurred in costs $1.3 billion.
Mrs. Gonzalez-Colon. So, you have not billed for the rest
of the $11 billion that you asked for projects. How much has
been actually paid out, the $173 million and the $100 million
for capital expenditures?
Mr. Saca. I am sorry, what was the question?
Mrs. Gonzalez-Colon. How much has actually been paid out?
Mr. Saca. OK. Out of the $1.3 billion of costs incurred, we
have paid out to suppliers around a billion dollars.
Mrs. Gonzalez-Colon. Mr. Laboy from COR3, do your numbers
concede with their numbers?
Mr. Laboy Rivera. No, some of the numbers are not
necessarily the ones that we have.
Mrs. Gonzalez-Colon. Can you clarify?
Mr. Laboy Rivera. Yes. First, I need to recognize that
there have been some improvements on the----
Mrs. Gonzalez-Colon. That is not the question. I am asking
you about the numbers.
Mr. Laboy Rivera. Yes. So, far, FEMA has allocated $5.8
billion, total, for the electrical grid. Of those, the majority
are for transmission and distribution, for engineering and
architectural services, and also to purchase equipment in
advance. Of that, like Mr. Saca said, 171 are related to LUMA,
of which the majority have requested an advance of money
related to the working capital advance.
Of the $300-plus million that LUMA has mentioned about
requests for reimbursements, the vast majority are related to
reconcile advances. So, it is only about $10 million actual
numbers for new money to be reimbursed.
Mrs. Gonzalez-Colon. Thank you.
Mr. Saca, we keep talking about vegetation clearing and we
have had these discussions before. And LUMA repeatedly speaks
about their $1.2 billion set aside for that from FEMA. But the
reality is only $18 million has been approved, has it not?
Mr. Saca. We have one project obligated, which is around
$18 million. There should be another five projects that will be
obligated between now and the end of the year.
Mrs. Gonzalez-Colon. But right now, today, just $18 million
has been approved, has it not?
Mr. Saca. That is correct, for the first project, which is
San Juan.
Mrs. Gonzalez-Colon. So, from $1.2 billion that you are
claiming FEMA approved, just $18 million has been approved.
Has LUMA obligated the $1.2 billion for clearing
vegetation?
Mr. Saca. We only have one project obligated. We estimate
that the total cost will be $1.2 billion. And just to remind
everyone that the way it works is nothing is really approved by
FEMA until you submit the documentation in order to be
reimbursed.
Mrs. Gonzalez-Colon. Before my time expires, when you
contracted with Puerto Rico, you knew that we are a tropical
island, I assume, and that on a tropical island, it rains
almost every day. So, the vegetation will grow. And when you
are saying you are going to be doing a clearing of the
vegetation for 3 years, we are not taking into account the
maintenance the system and the lines need to have in order not
to have vegetation crossing the lines. $1.2 billion clearing
vegetation, it is like once you cut the tree it is not going to
grow again in a few weeks? On the island, that is not real.
So, again, I think the people of Puerto Rico have had it
with you, your company. I have had it, too. I think LUMA should
go.
Madam Chair.
Ms. Hageman. Thank you. And the Chair now calls on Mr.
Valadao for 5 minutes of questioning.
Mr. Valadao. I would like to yield my time to
Representative Gonzalez-Colon to continue her line of
questioning. Thank you.
Mrs. Gonzalez-Colon. Thank you, Mr. Valadao.
A few minutes ago, my interpretation was that people from
Genera were saying that we are having 50 percent oil and 50
percent LNG as production, and I need to correct the record.
The Energy Information Agency for 2022 said that 63 percent of
the island generation is oil, 23 percent is gas, 8 percent is
coal, and 6 percent renewables. That is the data of 2022. So, I
just need to correct the record in terms of it is not 50
percent LNG and not 50 percent oil. Is that correct?
Mr. McElmurray. Thank you for your question. I am very
familiar with the stats that you are giving, so let's go with
that. Just to clarify what I was speaking about was as to the
60 percent----
Mrs. Gonzalez-Colon. Are those the numbers of 2022? The
ones that I gave.
Mr. McElmurray. Yes, that is correct.
Mrs. Gonzalez-Colon. And in that, renewables 6 percent of
the time, I believe 7 percent at this time, 2.8 percent are
from photovoltaic power, 2.1 percent for hydro, and 1.75
percent wind. Is that correct? That is the composition of the
renewables right now?
Mr. McElmurray. Yes.
Mrs. Gonzalez-Colon. OK. And you understand as well that
the law in Puerto Rico, the 1919 Act, places some percentage of
energy renewables goals for the year 2025, 2040, and 2050. For
2025, it says renewables should be 40 percent.
My question will be, with the current statistics on
renewables, with 7 percent, is Puerto Rico going to meet the 40
percent goal for the next year, yes or no?
Mr. McElmurray. Thank you for your question. I do not
believe it will.
Mrs. Gonzalez-Colon. OK. The law says as well that 60
percent of renewables should be reached to 2040. At the current
percentage of 7 percent of renewables, do you believe that we
are going to achieve the goal in 2040 of having 60 percent of
renewables?
Mr. McElmurray. I do not believe you will.
Mrs. Gonzalez-Colon. My same question will be in the 2050,
100 percent of renewables, no. The answer is no.
I believe everybody here wants renewables. I want
renewables as well. Everybody should move to cleaner energy for
the sake of the island.
Most of the people who actually go to that goal of
renewables transition with LNG to get there; is that correct?
Mr. McElmurray. That is correct.
Mrs. Gonzalez-Colon. How much can the people of Puerto Rico
and Genera move to LNG in the next 3 to 4 years to get the
maximum capacity of generation going from oil, from burning
bunker sea oil to LNG? How much is really achievable in your
perspective?
Mr. McElmurray. Thank you for your question. I think in a
situation where people are aligned and working together on sort
of a common plan, in a 4-year period I believe that you can get
rid of the diesel and the HFO that is being burned currently
and that you will move to a situation where you can power the
dispatchable generation on natural gas.
Mrs. Gonzalez-Colon. How much will it take to construct a
new plant, a new LNG plant in Puerto Rico? How long would it
take, getting all the permitting, the filing? Let me rephrase
my question. Have you submitted any permitting requests to any
Federal or local agency for the construction of a new plant in
Puerto Rico?
Mr. McElmurray. Thank you for your question. We have
submitted permit requests for the conversion of existing----
Mrs. Gonzalez-Colon. Which one?
Mr. McElmurray. Absolutely. What people would refer to as
the megagens in Palo Seco, Mayaguez, and then Cambalache as
well.
Mrs. Gonzalez-Colon. Three. So, you submitted three:
Cambalache, Mayaguez, and Palo Seco?
Mr. McElmurray. That is correct. To the various
authorities, PREB included, as well as the local permitting
agencies.
Mrs. Gonzalez-Colon. And the Federal agencies as well. When
did you submit those requests?
Mr. McElmurray. I do not have the exact dates in front of
me, but I can get them to you. But in the past 4 months.
Mrs. Gonzalez-Colon. In the past 4 months?
Mr. McElmurray. That is correct.
Mrs. Gonzalez-Colon. And how much is the average of
construction, saying those permits were granted and approved,
how much will it take the actual construction or conversion of
those plants from burning sea oil to LNG?
Mr. McElmurray. Thank you for your question.
With respect to the megagens, zero. So, if there were a
piece of paper today from the regulatory authorities saying
that it was OK to operate on natural gas, then tomorrow, you
could have the megagens operate on natural gas and no longer
burn diesel at approximately a $17 million savings per year.
Mrs. Gonzalez-Colon. You are talking about the three
plants, Cambalache, Mayaguez, and Palo Seco. So, if you are
approved tomorrow, tomorrow those plants can be converted?
Mr. McElmurray. Specifically, I was referring to the one at
Palo Seco. With respect to Mayaguez and Cambalache, between the
two, it is a 6-month process. For example, if you received the
paper that you needed today, then in a 6-month period, all
three would be done and the annual savings for that would be
approximately $72 million a year to the ratepayers of Puerto
Rico forever.
Ms. Hageman. The Chair now recognizes Mr. Moylan for 5
minutes of questioning.
Mrs. Gonzalez-Colon. Thank you, Madam Chair.
Mr. Moylan. Thank you, Madam Chair, Ranking Member. And I
would also like to thank the Subcommittee for holding this
important hearing. It is obvious and imperative that reliable,
affordable energy is delivered to residents and territories.
The territories, as I have heard many times now today,
often have a high cost of fuel, right? And the territories
often face high cost and low reliability. And load shedding is
an all-too-common experience both in Puerto Rico and in Guam as
a territory. I want to also thank the panel for their questions
that were answered for us.
But I think it is clear that, first off, we have to get rid
of this red tape. Cut down the vegetation right away. Second,
we have to go back to increasing the generation as soon as
possible. And it is obvious we have to gasify as part of that
of the electric grid through new LNG terminals and gas-fired
generations, get that done as quickly as possible. And why?
Because we are praying that the next storm does not come. And
unless we get this done right away, I do not know what is going
to happen.
But I think it is important that we continue this
conversation. And I would like to yield the balance of my
time----
Ms. Hageman. Would you yield just a minute or so to me?
Mr. Moylan. Yes, Madam Chair.
Ms. Hageman. Thank you, Mr. Moylan.
I just have a question. Has the Biden-Harris moratorium on
LNG exports had an impact on Puerto Rico? Were you aware that
the Biden-Harris administration has imposed a moratorium on LNG
exports from the United States? Were you aware of that?
Mrs. Gonzalez-Colon. Madam Chair, if I may, Puerto Rico
does not export LNG. We import.
Ms. Hageman. We have talked about that. I am just asking if
that moratorium has had an impact on Puerto Rico? No?
Mr. McElmurray. Thank you for your question. I am happy to
field that.
I think two important distinctions. One, I think any
restriction of LNG exports from the United States, sort of by
definition, increases the price of LNG in the market because
there is less supply. So, in that respect, I think there is a
negative impact.
I think the other impact that is sort of worth calling out
is the Jones Act restriction that prevents U.S. LNG from ending
up in Puerto Rico. At the current moment, there is no U.S. LNG
that ends up in Puerto Rico, which I think also has a negative
price impact to the ratepayers of Puerto Rico.
Ms. Hageman. OK. But the price of LNG has gone up with this
moratorium?
Mr. McElmurray. I think it is fair to say that with less
supply in the market, that the worldwide prices would be higher
otherwise.
Ms. Hageman. Thank you. I yield back to Mr. Moylan.
Mr. Moylan. And I yield to my colleague, Mrs. Gonzalez-
Colon.
Mrs. Gonzalez-Colon. Thank you, Mr. Moylan.
We have been talking here, PREB and Genera, about the
capacity of the generation on the island. Puerto Rico may face
18 to 24 months of being short of peak capacity reserve until
the new installations are completed. Therefore, the island
needs fast development of reliable generation capacity to meet
the full demand now.
I know that additional mobile LNG units would be the
fastest for short term. However, it is true they will have a
lesser economy of scale. And this alternative also means to
fast track the removal of one or more existing obsolete units
and installing new technology units, integrated with batteries
for stabilization and backup in the same footprint of the old
units. And even when Puerto Rico may fast track its own
permitting, this will require a Federal champion to clear
hurdles from Federal regulations.
There are other options that are being explored. The P3A's
authorities are evaluating a 300 megawatt project for LNG and
hydrogen and flex fuel plant. And the Department of Energy's
loan projects office has also supported an initiative for
private sector utility scale storage and renewables for one of
the 16 private generator sites.
How is this need being addressed and how do we not make the
people of Puerto Rico wait for 2 years to have stable
electricity? And this question is for Genera. Are there any
plans that can be put into motion now, so we do not lack
generation in the next months?
Mr. McElmurray. Thank you for your question. I will start
by saying the No. 1 issue that we talk about in Genera every
day is how to increase reliable generation today. I think it is
very clear how to do it long term, but how do you do it today?
So, I would say specifically, there is a tool available.
The Army Corps has a $5 billion contract that they put in place
specifically targeted at Puerto Rico, under which they are able
to deploy fast power. The Army Corps also successfully did it
in 2022 and 2023, 350 megawatts in a 120-day period.
I would note that one of the biggest reasons that it was so
fast is because there was a high degree of coordination with
the Federal agencies, in particular EPA and some of the other
issues that we have been talking about today, to have a very
streamlined process.
So, as a strategy matter, you can replicate the exact
project that was done earlier, using an existing vehicle and
existing mechanism with the same team, and you can potentially
deploy 565 megawatts, which would cover the gap in capacity for
a 24-month period until new resources were available.
Ms. Hageman. The Chair now recognizes Representative
Gimenez for 5 minutes of questioning.
Mr. Gimenez. Thank you, Madam Chair. My name is Carlos
Gimenez. I represent Florida's 28th Congressional District,
which is part of Miami and the Keys. And it is the closest
congressional district on the continental United States to the
island of Puerto Rico. I also represent about 70 percent
Hispanics in my district, many of which come from the island.
And I am here to support my dear friend Jenniffer Gonzalez-
Colon of Puerto Rico.
Puerto Rico is an essential part of the United States of
America, and we are so proud of the countless contributions of
the Puerto Rican people to our nation, and the island's
strategic role as a gateway to the Caribbean and the region.
The over 3 million U.S. citizens in Puerto Rico deserve
reliable energy. It is why I support Congresswoman Gonzalez-
Colon's push for more Federal support and oversight of the
island's electrical grid.
Disruptions in service cause harm to businesses, increase
operating costs, and are costly for the thousands of families
who have to rely on generators as a source of power.
We have allocated hundreds of millions of dollars to
modernize and rebuild Puerto Rico's power grid in the aftermath
of hurricanes, earthquakes, and natural disasters that have
devastated the island in recent years.
The people of Puerto Rico are proud Americans, and America
must be fully invested and committed to the successful economic
development of the island. A reliable, modern, and sustainable
power grid is a crucial part of it.
[Speaking Spanish.]
Thank you. And I yield the balance of my time to Mrs.
Gonzalez-Colon.
Mrs. Gonzalez-Colon. Thank you, Mr. Gimenez, and thank you
for always supporting Puerto Rico in all legislations.
I have a question for Mr. Saca. LUMA as a transmission and
distribution operator must be a lead in developing any updates
to the Integrated Resources Plan, which must be revised every 3
years. And this was due on June 28 of this year. But your
company requested an extension to May 2025, and PREB conceded
that extension to November 28, 2024 for the preliminary
submission and February 28 of next year to complete the IRP.
My question, Mr. Saca, will be, when the last IRP was
approved in 2021, it was known that it needed to be renewed in
2024. What is the excuse not to be ready for it?
Mr. Saca. Thank you for your question. The IRP is a process
that requires quite a bit of data gathering, quite a bit of
interaction with multiple stakeholders. And quite a bit of
technology in order to be able to address a very complex
situation, whether it is the generation aspect of it, the
transmission and distribution system and how to make it more
effective.
Along the way, we have found that it has been quite
difficult to get all of the data to make sense and requires a
bit more study.
Mrs. Gonzalez-Colon. Even with the billions of dollars in
contract to the PREB. So, what will be the consequences to LUMA
if the deadline is not met?
Mr. Torres Miranda. Last week, we had a technical
conference to discuss the reasons why they cannot comply with
that November 29 deadline. I cannot answer that question
because right now we are deliberating our response to that.
Mrs. Gonzalez-Colon. But what are the consequences of not
complying with the deadline?
Mr. Torres Miranda. It could be either fines for not
complying with our order, and that would be the main
consequence. And delaying, of course, the IRP process.
Mrs. Gonzalez-Colon. Mr. Laboy, how much has PREPA and COR3
fronted from LUMA prior that must be recovered by FEMA?
Mr. Laboy Rivera. So, far, we have disbursed about $1.3
billion of authorized money based on FEMA obligations.
Mrs. Gonzalez-Colon. How much more is still pending to be
recovered?
Mr. Laboy Rivera. We can disburse based on two things. No.
1, FEMA obligating scopes of work that are submitted by LUMA
and Genera. Once that happens, we have authorization to
actually disburse.
Mrs. Gonzalez-Colon. How much is still pending? You do not
have numbers here? You can submit it to the Committee.
How much is left in terms of reserves?
Ms. Hageman. I will allow the witness to answer, but then
we need to wrap up.
Mr. Laboy Rivera. OK, so for the things that we manage, we
manage the Federal funds, right? FEMA has obligated $9.5
billion but duly authorized for construction and disbursements
is $5.8 billion. Of that, we have advanced pretty much 26
percent, based on the requests from LUMA and Genera.
Mrs. Gonzalez-Colon. Thank you.
Madam Chair, I will submit questions for the record.
Ms. Velazquez. Madam Chair, a unanimous consent request,
please, to submit for the record the Department of Energy's
Puerto Rico 100 Study that found that Puerto Rico can reach 100
percent renewable by 2050.
Ms. Hageman. Without objection.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T6911.016
The full document is available for viewing at:
https://docs.house.gov/meetings/II/II24/20240926/117665/HHRG-
118-II24-20240926-SD006.pdf
------
Ms. Hageman. I want to thank the witnesses for the valuable
testimony and also to all of the Members for their questions
today.
The members of the Committee may have some additional
questions for the witnesses, and we will ask for you to respond
to those in writing. Under Committee Rule 3, members of the
Committee must submit those questions to the Subcommittee Clerk
by 5 p.m. on Tuesday, October 1, 2024. The hearing record will
be held open for 10 business days for these responses.
If there is no further business, without objection, the
Committee stands adjourned.
[Whereupon, at 11:59 a.m., the Subcommittee was adjourned.]
[ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]
Questions Submitted for the Record to Hon. Deanne Criswell,
Administrator, Federal Emergency Management Agency
The Honorable Deanne Criswell did not submit responses to the Committee
by the appropriate deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. The U.S. federal government has obligated over $21
billion in assistance to help restore and rebuild the electrical grid
for Puerto Rico post-hurricanes. Of the $21 billion, there are $9.5
billion in public assistance funds and $7.8 billion in hazard
mitigation from FEMA. This totals to approximately $16.3 billion in
FEMA funds obligated for rebuilding Puerto Rico's electrical grid.
However, it has become clear that much of the obligated FEMA funds have
yet to be disbursed.
1a) How much of the approximately $16.3 billion in FEMA funds
obligated for rebuilding Puerto Rico's electrical grid have been
disbursed?
1b) Why have these funds not been fully disbursed despite the fact
that it has been seven years since Hurricane Irma and Hurricane Maria?
1c) What will FEMA do to expedite the disbursement of these funds?
1d) Can you commit to us today that you will ensure that these
funds will be disbursed in a timely manner?
1e) Can you commit to us today that you will ensure to clear out
federal red tape, particularly when it comes to environmental
regulation compliance, for processes relating to or affecting the
rebuilding of Puerto Rico's electrical grid? And can you commit to
ensuring that your counterparts across the other federal agencies will
do the same?
Question 2. LUMA Energy is undergoing vegetation overgrowth
clearing projects, particularly for right of way areas. LUMA Energy has
stated that completion of these projects will help reduce the frequency
of outages. During the hearing, the LUMA witness stated that there have
been significant delays from the FEMA review process, particularly
environmental regulation compliance reviews, such as NEPA compliance.
These reviews can often take one to five years. Furthermore, LUMA has
pointed out that FEMA does not provide LUMA with a timeline on when the
projects can be expected to finish FEMA review. This has thus led to
even further delays to rebuilding Puerto Rico's energy grid and
ensuring Puerto Rico has access to reliable and resilient energy. It
has become clear that cumbersome environmental regulation by the
federal government is a major barrier to substantive progress in
rebuilding Puerto Rico's electrical grid. In fact, these regulations
are further risking the likelihood of blackouts and are creating
dangerous conditions in high voltage areas. The priority should be to
ensure that vegetation is cleared in the right of the way areas, per
industry safety standards.
2a) Do you and your agency agree that our fellow Americans in
Puerto Rico deserves to have access to reliable and resilient energy?
2b) If you agree that our fellow Americans in Puerto Rico deserves
to have access to reliable and resilient energy, then can you commit to
us today that you will work to ensure that the FEMA review process is
expedited, and that FEMA will prioritize the safety and livelihood of
Puerto Rico's communities?
Question 3. When declining the invitation to testify, FEMA
representatives responded to this Committee by saying that FEMA will
not participate in the hearing if the Department of Energy is not
participating as well. FEMA representatives expressed the view that the
Department of Energy holds a more primary role in this topic. This
assessment comes at add with that fact that approximately $16.3 billion
of the $21 billion in obligated funds for rebuilding Puerto Rico's
electrical grid are FEMA funds. This hearing has made clear that FEMA
has a more active role in the rebuilding process as the funding for
LUMA Energy and Genera PR projects are primarily funded through FEMA
funds. The role of the Central Office for Recovery, Reconstruction, and
Resiliency (COR3) in Puerto Rico is to ensure that FEMA funds are used
for their intended purpose.
3a) Why do you and the agency believe that it is appropriate for
FEMA to sideline themselves from this hearing topic?
3b) Do you agree that FEMA plays an integral role in rebuilding
Puerto Rico's electrical grid?
3c) Do you agree that FEMA, as a federal agency, has the obligation
to provide Congress with the information it needs to exercise its
oversight responsibilities and that it has a duty to explain to the
American people how their hard-earned taxpayer dollars are being spent?
3d) Do you agree that it is not in the best interest for FEMA and
the Administration to convey a lack of interest or commitment to our
fellow Americans in Puerto Rico by refusing to testify on this
important hearing topic?
3e) Can you commit that you will do everything in your power as the
FEMA Administrator to ensure that Congress has all the information it
needs from FEMA for carrying out its oversight responsibilities on this
hearing topic and all matters relating to Puerto Rico?
Question 4. The current cost for the vegetation clearing projects
from LUMA Energy is approximately $12,000 per acre. This is
outrageously expensive, especially when compared to average costs for
carrying out similar projects in the continental U.S. According to
LUMA, FEMA makes the decision on the overall price. LUMA sends out
request for projects (RFPs) and sends bids to FEMA.
4a) How does FEMA make its decision on the overall price for these
vegetation clearing projects?
4b) Does FEMA agree that these exorbitant costs are a barrier to
ensuring that Puerto Rico's electrical grid is rebuilt in a timely
manner?
4c) Will FEMA commit to working with the private utility operators
in reducing these costs to a fairer market price?
Questions Submitted by Representative Grijalva
Question 1. Since Hurricanes Irma and Maria in 2017, Congress has
provided tens of billions of dollars to Puerto Rico to assist with
reconstruction and resiliency building. However, only a fraction of
these funds has been accessed and assigned to long-term recovery
projects thus far. Please explain FEMA's assessment of why most federal
recovery funds have yet to be obligated and the adjustments FEMA has
made and plans to make to facilitate greater access to these funds for
Puerto Rico.
Question 2. During the hearing, Mr. Juan Saca, CEO of LUMA Energy,
LLC, testified that the project to eliminate a major cause of Puerto
Rico's current outages by clearing up vegetation around 16,000 miles of
powerlines could take three years or more. How is FEMA working with
LUMA and other agencies to ensure compliance requirements are met
without delay and that this important work is completed as soon as
possible?
Question 3. FEMA recently announced it will fund net-zero energy
projects, including solar, heat pumps, and efficient appliances,
through its Public Assistance program, in addition to its Hazard
Mitigation Grant Program and Building Resilient Infrastructure and
Communities (BRIC) annual grant program. However, Mr. Manuel Laboy from
Puerto Rico's Central Office for Recovery, Reconstruction and
Resiliency (COR3) testified that this funding only applies to disasters
declared after August 16, 2022, and requested that Congress look into
FEMA's authority to retroactively apply this funding to earlier
disasters like Hurricane Maria and to renewable energy technologies
like offshore wind, ocean thermal energy conversion and hydro power.
What is FEMA's assessment of its current authorities to meet this
request? Would additional funding be needed to accommodate this
request?
Questions Submitted by Representative Gonzalez-Colon
Question 1. Background: We keep repeatedly hearing from LUMA of the
project for vegetation clearing and how that will reduce outages. And
repeatedly LUMA speaks about how there are $1.2 Billion set aside for
that.
1a) But the reality is only $18 million have really been submitted
approved for just one project, hasn't it?
1b) Has FEMA actually obligated $1.2 Billion for vegetation
clearing?
Question 2. LUMA has stated they have expended nearly $1.3 billion
in federally funded capital expenditures, and the total disbursements
obtained are only $588 million of which in turn only $173 million are
actual reimbursement and $425 million are capital advances.
2a) What requests for reimbursement or invoices has LUMA presented
before FEMA (how many and for how much)?
2b) Has LUMA documented fully and correctly everything it has to
present to FEMA and COR3 to secure such reimbursement?
2c) Does FEMA believe LUMA has provided the necessary given the
nature of these funds being federal and local public funds?
Question 3. Background: As discussed, Puerto Rico may face 18 to 24
months of being short of peak capacity reserves until new installations
are completed. Therefore, the Island needs fast deployment of reliable
generation capacity to meet full demand now.
Additional mobile LNG units would be fastest for the short-term.
However, it is true they would have lesser economy of scale. So this
alternative should also include fast-tracking the removal of one or
more existing obsolete or unusable unit or units, and installing new
technology units integrated with batteries for stabilization and
backup, in the same footprint of the old units. Puerto Rico can fast-
track its own permitting, but this would require a federal champion to
clear hurdles from federal regulators.
Genera PR brought up in the hearing a proposal for meeting the
short/medium term need:
Fast conversion of the Palo Seco, Cambalache and Mayaguez
oil-fired units to LNG
Deployment of 550MW of supplementary energy through Corps
of Engineers support generators for the short/medium term
need until the more permanent development happens energy.
3a) Does anything prevent fast approval and implementation of all
or parts of such a strategy?
3b) To your knowledge does the Corps of Engineers deployment
require a FEMA tasking or a declaration of federal emergency?
3c) Would these actions come under the aegis of the recovery plans
already approved for Puerto Rico or would they require substantial
modifications to it?
3d) Is the electricity situation in Puerto Rico an Emergency?
Question 4. It is understood that regulatory agencies will not just
say that LUMA or Genera can go ahead and act without regard to
environmental or other requirements. However, a repeated complaint has
been about the agencies taking the full length of allowed time to
respond (say, a term is 60 days and agencies take 58). Another issue
raised is how different agencies insist on de-novo reviews of
regulatory requirements when work is performed in an area already
impacted or where a permit should have already existed, for instance
with land under the right-of-way of a transmission line which should
just be authorized one time to be kept clear, and the permit should
stay standing as long as the line exists, regardless of who operates
it.
4a) Does FEMA in its Environmental and Historic Review process take
this into consideration in order to speed up approvals?
In the case of new generation plants, the NEPA Environmental Impact
Process can take at least 3 years to only then be able to obtain the
NPDS Water Permit and the Clean Air Act Title V Operating permits.
4b) However if the replacement happens in the same footprint as the
existing power plant or in brownfield space adjacent to it, is that
necessary? Would FEMA support streamlining federal permits for this
purpose?
______
Questions Submitted for the Record to Hon. Jennifer Granholm,
Secretary, U.S. Department of Energy
The Honorable Jennifer Granholm did not submit responses to the
Committee by the appropriate deadline for inclusion in the printed
record.
Questions Submitted by Representative Westerman
Question 1. The Department of Energy has been obligated $1 billion
in Energy Resilience Funds to help reconstruct Puerto Rico's electrical
grid.
1a) Of the obligated funds, how much has been disbursed?
1b) What projects/activities has the spent funds gone towards?
1c) Given that energy costs in Puerto Rico are higher than most of
the United States, will you commit to broadening your project scope
toward an all-of-the-above energy approach given the unique situation
of the island? Specifically, explain how you will do so?
Question 2. Puerto Rican residents pay among the highest in utility
costs in the United States, and the average median income of Puerto
Ricans on the island is the lowest in the United States. The Department
of Energy has a Grid Resilience Formula Grant (GRFG), which is a grant
program that looks to ``help modernize Puerto Rico's energy grid''.
2a) List the grant projects the GRFG has accepted.
2b) Given that the cost of energy in Puerto Rico is higher than
most of the United States, will you commit to broadening this grant to
encompass an-all-of-the-above approach to truly give Puerto Rico
resilient energy?
2c) Considering that the upfront cost of solar panel installation
is greater than the median household income of Puerto Ricans on the
island, how will The Department of Energy ensure that Puerto Ricans
have access to LNG and Coal as energy sources as well?
Question 3. The Department of Energy is focusing most of their
efforts on solar energy projects in Puerto Rico. This is
counterintuitive to supplying the island with reliable and affordable
energy. This is especially so considering that the upfront cost of
installing a solar panel is more than the median household income in
Puerto Rico.
3a) Considering the lack of reliability residential solar energy
provides during severe weather incidents, how is the Department of
Energy's strategy of focusing mostly on solar panels providing
disadvantaged Puerto Ricans on the island secure energy?
3b) Considering the economic situation mentioned above, how is the
Department of Energy's strategy of focusing mostly on solar panels
providing disadvantaged Puerto Ricans on the island affordable energy?
3c) Will you commit to shifting your guiding principle to be that
of an all-of-the-above energy approach to ensure all of Puerto Rico has
access to reliable and affordable energy?
Question 4. The Department of Energy is responsible for national
energy policy in the United States. The Environmental Protection Agency
(EPA) held up two critical temporary LNG-operators for Genera to use,
even though FEMA used them prior. These operators are crucial for
providing energy resiliency in Puerto Rico during hurricane season.
4a) Given that The Department of Energy holds responsibility for
federal policy in Puerto Rico, which includes ensuring that Puerto Rico
has rebuilt its' electrical grid, can you commit to working with the
EPA to remove any delays they impose on new LNG generators being
operated on the island?
Questions Submitted by Representative Grijalva
Question 1. Genera PR, the company responsible for generating power
in Puerto Rico, is a subsidiary of the company that supplies Puerto
Rico with most of its natural gas. It therefore seems that Genera
stands to make more money from less renewables in Puerto Rico. Mr.
Brannen McElmurray, the CEO of Genera, testified that he does not think
that Puerto Rico will be able to meet its renewable energy goals
established by Act 17-2019. There is concern that this unevidenced
assertion, if believed by the people of Puerto Rico, could deter the
growth of renewables in Puerto Rico and that this delay will become an
excuse for encouraging additional investments in fossil fuels. However,
DOE's PR100 study, which spanned two years and included extensive input
from local and federal stakeholders and six national laboratories,
found that Puerto Rico can reach its goal of 100% renewables generation
by 2050 with quick action and significant investments. Please explain
how PR100 came to this conclusion and how Congress can support Puerto
Rico's energy goals.
Question 2. House Republicans claim that the Biden-Harris
administration has ``pushed an energy agenda'' focused on renewables on
Puerto Rico. Is any of the work that DOE is conducting in Puerto Rico
contrary to the territory's self-established energy goals? Why is it
important for the federal government to invest in the modernization of
Puerto Rico's energy system toward renewables?
Question 3. In 2022, Congress provided DOE $1 billion to create the
``Puerto Rico Energy Resilience Fund'' (PR-ERF) to invest in renewables
and improve the resilience of Puerto Rico's energy infrastructure. In
February 2023, DOE announced its Programa Acceso Solar through the PR-
ERF to connect residents who are low-income or who have an energy-
dependent disability with residential rooftop solar and battery storage
systems with zero upfront costs. In August 2024, DOE announced its
Programa de Comunidades Resilientes to provide solar and battery
storage installations for community centers, community healthcare
facilities, and common areas within subsidized multi-family housing
properties. How did the systems installed through the PR-ERF help
residents during recent blackouts due to grid failures and natural
disasters like Tropical Storm Ernesto? How are these programs helping
Puerto Rico achieve energy justice and resilience?
Question 4. If net metering were to become unavailable in Puerto
Rico, how would it affect the total amount of homes that could receive
solar and battery systems through the Puerto Rico Energy Resilience
Fund programs?
Question 5. Is it true that the single biggest reason for high
energy costs in Puerto Rico is because the fossil fuels must be
imported?
Questions Submitted by Representative Gonzalez-Colon
Question 1. Background: Madam Secretary, as discussed, Puerto Rico
may face 18 to 24 months of being short of peak capacity reserves until
new installations are completed. Therefore, the Island needs fast
deployment of reliable generation capacity to meet full demand now.
Additional mobile LNG units would be fastest for the short-term.
However, it is true they would have lesser economy of scale. So this
alternative should also include fast-tracking the removal of one or
more existing obsolete or unusable unit or units, and installing new
technology units integrated with batteries for stabilization and
backup, in the same footprint of the old units. Puerto Rico can fast-
track its own permitting, but this would require a federal champion to
clear hurdles from federal regulators.
Other options are being explored:
The Puerto Rico Public-Private Partnerships Authority is
evaluating a 300MW project for a LNG/Hydrogen flex-fuel
plant.
The Department of Energy Loan Projects Office has also
supported private central-utility-scale storage and
renewables for one of the existing private generators (AES)
Genera PR brought up in the hearing a proposal for meeting the
short/medium term need:
Fast conversion of the Palo Seco, Cambalache and Mayaguez
oil-fired units to LNG
Deployment of 550MW of supplementary energy through Corps
of Engineers support generators for the short/medium term
need until the more permanent development happens energy.
1a) Does anything prevent fast approval and implementation of all
or parts of such a strategy?
1b) To your knowledge does the Corps of Engineers deployment
require a FEMA or DOE tasking or a declaration of federal emergency?
1c) Is the electricity situation in Puerto Rico an Emergency?
1d) In the case of new generation plants, the NEPA Environmental
Impact Process can take at least 3 years to only then be able to obtain
the NPDS Water Permit and the Clean Air Act Title V Operating permits.
However if the replacement happens in the same footprint as the
existing power plant or in brownfield space adjacent to it, is that
necessary? Would DOE support streamlining federal permits for this
purpose and taking lead in creating an expedited process?
1e) Does DOE as a matter of policy discourage use of LNG fuels as a
short-medium term way to address the crisis?
1f) Does DOE as a matter of policy intend to continue primary focus
on community renewables announcements?
Question 2. Puerto Rico's cheapest fuel-using power source, the AES
power plant in Guayama, provides up to 454 MW of generation when
running at capacity and is by law required to stop burning coal after
2027. That has been known since 2019.
2a) Have any plans been presented to DOE for replacement of this
base load?
Question 3. Background: There has been a steady march through our
doors of proponents of other ideas about how to address the Puerto Rico
Energy Recovery that are not incorporated into the existing action
plans, including proposals for inter-island submarine power cables
around the Caribbean, from both American-Based (starting with PR-USVI--
Bob Garcia Interconnection) and Dominican Republic-Based (starting with
PR-DR--Hostos project) proponents--that requires FERC and the
governments of other jurisdictions, including foreign, to be aboard.
3a) Have these proposals been presented to the Department, and how
viable and suitable for addition have you seen them?
______
Questions Submitted for the Record to Hon. Adrianne Todman, Acting
Secretary, U.S. Department of Housing and Urban Development
The Honorable Adrianne Todman did not submit responses to the Committee
by the appropriate deadline for inclusion in the printed record.
Questions Submitted by Representative Westerman
Question 1. Why did the Department of Housing and Urban Development
not send a witness to this hearing? Given your role, the advanced heads
up you received, and the gravitas of Puerto Rico's electricity
situation, the committee is profoundly disappointed with your decision
to decline our invitation.
Question 2. What is the Department of Housing and Urban
Development's specific role in helping Puerto Rico rebuild its
electrical grid?
Question 3. The Department of Housing and Urban Development has
been obligated $1 billion in Community Development Block Grants to help
reconstruct Puerto Rico's electrical grid.
3a) Of the obligated funds, how much has been spent?
3b) Describe the projects/activities the spent funds have gone
towards?
3c) Given that energy costs in Puerto Rico are higher than most of
the United States, will you commit to broadening your project scope to
include an all-of-the-above energy approach given the unique situation
of the island? Specifically, explain how you will do so?
Question 4. The Department of Housing and Urban Development
provides approximately $1.93 billion in funds for improving Puerto
Rico's electrical grid through climate resilience and green energy
initiatives in Puerto Rico.
4a) How much of these funds has been spent?
4b) List in detail what these green energy initiatives and climate
resilience initiatives are.
4c) Given that the cost of energy in Puerto Rico is higher than
most of the United States, will you commit to broadening this
initiative to encompass an-all-of-the-above approach to truly give
Puerto Rico resilient energy?
4d) Considering that the upfront cost of solar panel installation
is greater than the median household income of Puerto Ricans on the
island, how will the Department of Housing and Urban Development ensure
that Puerto Ricans have access to LNG and Coal as energy sources as
well?
Question 5. The Department of Housing and Urban Development is
focusing most of their efforts on solar energy projects in Puerto Rico.
This is counterintuitive to supplying the island with reliable and
affordable energy. This is especially so considering that the upfront
cost of installing a solar panel is more than the median household
income in Puerto Rico.
5a) Considering the lack of reliability residential solar energy
provides during severe weather incidents, how is the Department of
Housing and Urban Development's strategy of focusing mostly on solar
panels providing disadvantaged Puerto Ricans on the island secure
energy?
5b) Considering the economic situation mentioned above, how is the
Department of Housing and Urban Development's strategy of focusing
mostly on solar panels providing disadvantaged Puerto Ricans on the
island affordable energy?
5c) Will you commit to shifting your guiding principle to be that
of an all-of-the-above energy approach to ensure all of Puerto Rico has
access to reliable and affordable energy?
______
Submissions for the Record by Rep. Westerman
Statement for the Record
Luis E. Pizarro-Otero
President & Chairman of the Board
Puerto Rico Chamber of Commerce
In response to the US House of Representatives Committee on Natural
Resources Subcommittee on Indian and Insular Affairs hearing on
``Examining Puerto Rico's Electrical Grid and the Need for Reliable and
Resilient Energy'', on September 26, 2024, I am pleased to offer the
following testimony.
Thank you, Chairwoman Radewagen, Vice Chairwoman Gonzalez Colon,
Ranking Member Raul M. Grijalva, and the other members of the Committee
for inviting the Puerto Rico Chamber of Commerce (PRCC) to discuss the
energy challenges affecting Puerto Rico's electric grid and the need
for reliable and resilient energy.
We note the Resident Commissioner's leadership in convening this
important hearing, and we appreciate her efforts and those of the
Committee's leadership in working on behalf of the 3.2 million U.S.
citizens in Puerto Rico.
Founded 111 years ago, the PRCC is the leading private sector
organization on our island, with members representing every sector of
our local economy. As Puerto Rican consumers and business owners, we
depend on affordable and reliable energy to operate and grow, creating
jobs and opportunities for the people of the island.
Seven years after Hurricane Maria, Puerto Rico is facing an energy
and recovery crisis. This crisis is not just the result of technical
failures or external challenges but is fundamentally a crisis of
management and accountability.
Despite the significant allocation of billions of dollars in
federal funds by both the Biden and Trump administrations, as
authorized by Congress, and then followed by a series of plans and
initiatives; unfortunately, we have little to show in terms of results.
There has been a lack of full ownership, coordination, and decisiveness
in the energy transformation, rebuilding efforts, and process. Frankly,
there is only one word that can be used to describe these efforts, and
that word is ``failure''.
All stakeholders have been making excuses and ``passing the buck'',
pointing fingers at others for failing to meet their obligations and
responsibilities to restore Puerto Rico's electric grid and provide
affordable and reliable energy. The consequences of this failure are
being borne by the people of Puerto Rico. They continue to suffer from
unreliable power service, prolonged blackouts, and escalating
electricity costs.
Businesses, schools, hospitals, and homes have all been affected.
This has stifled economic growth and affected the quality of life for
all residents. It is inexcusable that seven years after Hurricane
Maria, and with substantial federal aid and funding, we are still
facing the same problems of a fragile power grid and inadequate
recovery. All while those responsible point fingers.
The PRCC and other key business associations strongly believe that
this status quo cannot continue and that our federal government must
take a more aggressive role to ensure accountability from all key local
and federal stakeholders.
We will soon elect a new POTUS, and we strongly urge the next POTUS
to issue an executive order creating a cabinet-level federal task force
to lead the energy transition and recovery for Puerto Rico. This task
force should be modeled after the successful Hurricane Sandy initiative
led by the White House, which helped streamline and prioritize recovery
efforts to deliver results in impacted areas.
This proposed task force must have the following key components:
1. Federal Cabinet Leadership: A senior, empowered Cabinet member
must be appointed to lead the Task Force, ensuring the
authority, sense of urgency, and resources necessary to cut
through bureaucratic inertia and deliver results that work
directly with the Governor-elect of Puerto Rico, beyond the
existing Department of Energy Task Force on Puerto Rico
Energy.
2. Executive Director and Staff: The Task Force should include an
Executive Director and a dedicated staff with the expertise
and mandate to enforce deadlines, coordinate actions across
federal agencies, and hold all stakeholders accountable,
with delegated powers and authority as well as direct
support from the Office of the President and the Governor.
3. Strong Private Sector Participation: To achieve tangible and
timely results, the Task Force must include significant
private sector participation. Puerto Rico's business
community has both the expertise and the commitment to
contribute to the successful transformation of our energy
system and recovery efforts.
4. Accountability and Transparency: Time-driven clear performance
metrics, regular reporting, and transparency are essential
to regain the trust of the Puerto Rican people and ensure
that every dollar spent directly contributes to sustainable
improvements.
Puerto Rico is at a tipping point, and our local and federal
leaders have a choice to make. We can either take bold and decisive
action to address the systemic issues that have plagued our recovery
and energy transition, or we can continue down the current path of
fragmented and ineffective efforts that have created a humanitarian and
economic crisis. The PRCC, with the support of our member business
organizations that represent the interests of the private sector and
the economic well-being of our people, strongly advocates for the
latter.
We ask this Committee and Congressional leadership to support our
request for the creation of a Puerto Rico Energy Revitalization Cabinet
Working Group. Immediately upon taking office, we urge the next
President to prioritize this request with the urgency it deserves. It
is time to move forward with determination and purpose to deliver the
future the people of Puerto Rico deserve.
Thank you again for your time and consideration. We look forward to
providing feedback and working together to build a strong and resilient
Puerto Rico through affordable and reliable energy.
______
Submissions for the Record by Rep. Velazquez
Statement for the Record
Assured Guaranty, GoldenTree Asset Management, National Public Finance
Guarantee Corp. and Syncora Guarantee as Holders and Insurers
of PREPA Revenue Bonds
Madam Chairman, Ranking Member and other members of the
Subcommittee, thank you for hosting this hearing today and for letting
us make a statement regarding PREPA's operational deficiencies, which
continue to plague the people of Puerto Rico, disrupting their lives,
families and businesses, and undermine growth island wide.
We believe that the mismanagement of PREPA's now-prolonged Title
III bankruptcy case by the Financial Oversight & Management Board
(``FOMB'') is a significant contributor to PREPA's plight.
PREPA revenue bondholders stand ready to do their part to bring
PREPA's Title III bankruptcy case to a prompt end, to conclude FOMB
oversight and put PREPA back under local control, and to provide fresh
capital to jump-start the process of doing what needs to be done to
improve PREPA's operations and bring reliable electricity to the people
of Puerto Rico.
We believe that this can be achieved using electricity rates that
are below the FOMB's target affordability metrics for the people of
Puerto Rico and provide them with 50 years of rate protection.
1. PREPA's well-documented failure to reliably deliver
electricity to the people of Puerto Rico is a direct
consequence of the inability or unwillingness of the FOMB to
bring PREPA's Title III bankruptcy case, which now stands at
seven years and counting, to a reasonable consensual
conclusion, as intended by Congress when it passed PROMESA.
Rather than focusing on what needs to be done to reliably
provide electricity to the people of Puerto Rico, the FOMB
has instead caused PREPA to waste hundreds of millions of
dollars on lawyer and advisor fees fighting an ill-
conceived and unsuccessful war of attrition against the
very lenders who have already invested over $8 billion of
capital into PREPA and who are the most likely source of
essential future funding.
Unable to access the capital markets because of PREPA's
prolonged bankruptcy or the billions of allocated FEMA and
HUD funding, the FOMB recently announced that PREPA must
now embark on an unprecedented search for alternative
sources of financing to fund its pressing, immediate
capital requirements.
However, like all other utilities in the United States,
access to the capital markets is vital to PREPA's ability
to operate reliably and to fulfill consumer needs. We are
convinced that, without such access, PREPA's performance
will only continue to deteriorate, endangering Puerto
Rico's economic recovery. Recent history supports this
view.
The longer this bankruptcy drags on and PREPA cannot
access capital markets, the more the people of Puerto Rico
will suffer from blackouts and unreliable electricity
service.
The FOMB seems impervious to this reality, focusing
instead on extending its own existence and trying to punish
the very investors who have already contributed more than
$8 billion of capital to PREPA.
The sad truth is that the people most harmed by the FOMB's
actions are the residents of Puerto Rico.
Refusing to bring the PREPA bankruptcy to a reasonable
conclusion by agreeing to pay existing investors amounts
that PREPA can reasonably afford (not more and not less),
is a sure-fire way for the FOMB to prevent PREPA from being
able to attract the new capital necessary for a turnaround.
It will also jeopardize the future prosperity of Puerto
Rico and its people.
The FOMB's actions are at odds with the objectives of
PROMESA, and are needlessly delaying the day when--
-- PREPA will be able to provide more reliable and
resilient electricity to the people of Puerto Rico,
-- PREPA's access to capital markets can be fully restored,
and
-- Puerto Rico can be freed of FOMB oversight.
2. PREPA's Title III bankruptcy case has dragged on due to the
FOMB's insistence on relying on stale financial projections
that paint an unrealistically bleak picture of Puerto Rico's
future.
Over the past eight years, the FOMB has consistently
produced fiscal projections that understated the economic
reality in Puerto Rico. In doing so, the FOMB has
undermined its own credibility with PREPA's stakeholders,
crippling its efforts to end the bankruptcy.
Perhaps that is why, as of today, the FOMB has refused to
authorize the release of a 2024 fiscal plan for PREPA; one
which everyone knows should reflect the material
improvements that have continued to occur in the Puerto
Rican economy overall and in electricity consumption over
the outdated 2023 fiscal plan that lacked credibility.
By simply updating the FOMB's financial projections, and
working cooperatively with the PREPA revenue bondholders,
PROMESA's goals for PREPA can be achieved without burdening
ratepayers.
3. There is a better path forward.
Certain PREPA revenue bondholders are prepared to lead a
significant investment of new capital into PREPA to assist
it in taking immediate measures to create a more reliable
and durable power grid for the people of Puerto Rico.
Such PREPA revenue bondholder funding would be used to
bring about an immediate end to PREPA's Title III
bankruptcy case, to fund urgent capital projects required
to improve grid reliability and to accelerate PREPA's use
of already allocated FEMA and HUD funds.
To facilitate this outcome, PREPA would only make payments
in respect of its existing $8.5 billion of bonds at a level
that PREPA can reasonably afford--not more and not less--
and would have virtually no risk of default for at least 50
years.
In other words, certain PREPA revenue bondholders are
prepared to invest significant amounts of fresh capital in
PREPA on terms that will ensure that PREPA never again
defaults on its obligations to its creditors or, more
importantly, to its customers, the residents of Puerto
Rico.
And these PREPA revenue bondholders are committed to
getting this done on an affordable basis for the people of
Puerto Rico, using electricity rates that are below the
FOMB's own targets and providing 50 years of rate
protection.
What is the FOMB waiting for?
Thank you. We stand ready to answer any questions the committee may
have.
______
Submissions for the Record by Rep. Grijalva
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The full document is available for viewing at:
https://docs.house.gov/meetings/II/II24/20240926/117665/HHRG-
118-II24-20240926-SD008.pdf
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Submissions for the Record by Rep. Ocasio-Cortez
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