CD170: Electrifying Puerto Rico

CD170: Electrifying Puerto Rico

Mar 25, 2018

Executive Producers (1): Ralph & Carol Lynn Rivera

On September 20, 2017, Hurricane Maria wiped out the electricity on the entire island of Puerto Rico. Six months later the lights are still off for too many people. In this episode, by hearing highlights of Congressional testimony from Puerto Rico’s government officials and through stories of Jen’s recent trip to the island, learn the good news and the bad news about life right now on Puerto Rico.

Executive Producer: Ralph and Carol Lynn Rivera

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Sound Clip Sources

Hearing: Hurricane Recovery Efforts in Puerto Rico and Virgin Islands, Power Utility Officials; Senate Energy and Natural Resources Committee, November 14, 2017.

– Natalie Jaresko – Executive Director of the Financial Oversight and Management Board for Puerto Rico
– Jose Roman Morales – Associate Commission and Interim President of the Puerto Rico Energy Commission
– Ricardo Ramos – Executive Director of Puerto Rico Electric Power Authority
– Julio Rhymer – Executive Director of the US Virgin Islands Water and Power Authority

  • 53:40 Ricardo Ramos: Many of the fallen poles fell because of the additional weight of infrastructure that originally was not supposed to be there, so the grid itself is old—are new. Design standards account for an amount of additional infrastructure for communications and other, but many of the poles were—they had communications because some local law of Puerto Rico permitted the common right-of-way usage, so we had to allow telecom companies to put the telecommunications cables there—but the pole itself not necessarily was designed to those standards.
  • 59:10 Natalie Jaresko: So, as you know, Madame Chairman, the board took an action and filed in the Title III court to name a chief transformation officer. The court ruled yesterday against us in that action, although we have not yet seen the written judgment, so I can’t comment on it in detail.
Hearing: Hurricane Recovery Efforts in Puerto Rico and Virgin Islands, Governors; Senate Energy and Natural Resources Committee

– Donald Jackson – Deputy Commanding General of the US Army Corps of Engineers, Civil and Emergency Operations
– Kenneth Mapp – Governor of US Virgin Islands
– Jose Roman Morales – Associate Commission and Interim President of the Puerto Rico Energy Commission
– Ricardo “Ricky” Rossello – Governor of Puerto Rico
– Bruce Walker – Assistant Secretary of the Department of Energy, Office of Electricity Delivery and Energy Reliability

  • 38:20 Assistant Secretary of the Department of Energy Bruce Walker: PREPA, with the limited crews that it had—I will point to this map over here—made an early decision to have to tie the southern portion, where the generation is, to the northern portion, where the load is. And in doing so, they made a key decision to construct the 230 kV line from the south, bringing it up to the San Juan area, the Bayamon substation. On the map, you can see here, from down here, wrapping up through here, that that align is going to appear all the way over to here. What was important about that was that one decision and the efforts made by PREPA, with limited staffing, enabled the power to be distributed to where the load was and in conjunction with the other big decision, which is the next slide, Jennifer, the Army Corps, working with PREPA, installed two 25-megawatt generators at the Palo Seco generation plant, and that, in conjunction with the rebuild of the 230 line, enabled power to be distributed to the northern portion to start picking up commercial and residential customers. Those two efforts were monumental, given the facts and circumstances. The installation of this generator was, with the letting of the contract and the install—and I was at Palo Seco when this was being put in—and the work that had to be done was really incredible—we had fantastic support from PREPA in coordinating it particularly with the re-laying and the coordination with the Army Corps.
  • 1:10:00 Governor Ricardo Rossello: We have several flaws in terms of the design, aside from having antiquated power plants. Most of our generation was done in the south, yet most of the people and most of the consumption is done in the north, so you lose about 12 to 15% in the transmission, going northward. It is time, it is an opportunity, to rethink that, where do we have that generation and make it better? Piggybacking on Senator Cassidy’s comments, I think it is an opportunity also to leapfrog in renewables. I’ve envisioned us leapfrogging to 25% renewables in Puerto Rico and recognizing that there are some mitigation strategies that we need to put in place. That is why we have worked with the PREPA governing board to have a group of thought leaders that can actually help us in the design, looking forward, and specifically looking where this could happen. Last-mile events in Puerto Rico are very important. It’s important to consider the terrain. Puerto Rico’s not flat; it’s got a mountainous region. And so we will be very aggressively pursuing that we get to 90, 95% of energy consumption and energy generation, but that last mile always takes more time because there are sort of remote areas of the island. This is an opportunity to make microgrids in Puerto Rico so that they can be sustained in different areas. And, lastly, adding to this whole component of renewables, I think it is an opportunity to look at this from a bottom-up-and-a-top-down approach. With the collaboration of FEMA, we were able to, for the first time in the STEP program, allow that either a power plant generator be added to the house or a renewable battery-pack solar combo be added to those homes in the STEP program. Now, we expect that there will be about 80,000 homes that will be introduced in the STEP program. Think about what that means if half of them decide to go with the renewable battery-pack route. It means that now you have the starting conditions to actually think about things like a virtual power plant in Puerto Rico, where you can have smart distribution of the energy; and where some days it might be cloudy in some areas in Puerto Rico—it’ll be sunny, certainly, in others as well—and that energy can be distributed alongside, of course, a complement of utility-size and industrial-size generation, which I envision, Senator, should start transitioning from petroleum-based generation, which is costly and, of course, more harmful, to liquid-gas and so forth generation. So, those are, in a nutshell, what we envision the sort of future grid of Puerto Rico looking like.
  • 1:34:15 Senator Catherine Cortez Masto: It’s my understanding under the Stafford Act, it’s Section 406(e), that limits the use of federal disaster-relief funds for repairing, restoring, reconstructing, or replacing a public facility or private nonprofit facility on the basis of the design of the facility as the facility existed immediately before the major disaster. Now, my understanding of that, then, is that all of the talk that I’ve heard today, which is important talk about new infrastructure—burying lines, looking at how we add renewable capacity—that is something that is not going to be addressed through the funding, through the relief, that comes from the federal government. Is that correct? And I guess I’m asking Mr. Walker and General Jackson, is that your understanding? Assistant Secretary of the Department of Energy Bruce Walker: That is my understanding. As I mentioned earlier, we’re doing emergency restoration work now. A number of the things that have been mentioned here, if the Congress approves additional appropriations, those would be opportunities that we could further, you know, build into— Masto: And that’s—are you asking today, then? That’s what you’re asking Congress today, additional appropriations outside of the Stafford Act be able to set up new infrastructure and do just what we’ve heard today, because we know another hurricane’s going to come through, or some other disaster. I think it’s just the way the climate is today. Is that the ask today from the governors? Governor Ricardo Rossello: To amend that, could you repeat the question, Senator? Masto: Sure. So, the Stafford Act limits the amount of— Rossello: Yeah. Masto: —money that you’re getting from the federal government for disaster relief to repair and reconstruct. Rossello: Yeah. Masto: It is not for new construction or new types of renewable energy or burying lines. So, are you coming today for additional funds outside of the Stafford Act, outside of disaster relief? Is that what I’m hearing today? Governor Kenneth Mapp: Yes. Yes, because under Stafford, if a system connected to the power generation isn’t damaged, it can’t be touched. If it’s cost effective, it can be mitigated, but the whole power system is all connected, and so if we want to change to more-efficient renewables—wind, solar—if the generation system hasn’t been damaged, then we can have an exclusion. So we will need changes in the language to permit that. Rossello: Yes. We are, we recognize what the limitations of FEMA funding are within this, so we’re asking for additional funding so that we can get that flexibility as well and actually rebuild better. I mean, again, you can discuss whether it’s a good idea or not on the context of the merit of the energy and the structure, but it is really just a bad idea to rebuild a system that is frail over again, spend good taxpayer money in that, because you’re going to have to do it once over again.
  • 1:44:34 Senator Mazie Hirono (HI): Based on your estimates, how much are you asking Congress to fund in terms of the kind of modernization, resilience, etc. that you would like to see in Puerto Rico? Governor Ricardo Rossello: Yeah. It’s about $17 billion in damage estimates. Hirono: One year? Rossello: No. For the bulk of the process. Hirono: Seventeen billion dollars? Rossello: Yes, that’s right. Hirono: And is it your—well, I know that you hope that Congress will authorize that, and do you think that authorization or the funding to occur in one year, or is it over a period of time? Rossello: No, it would be over a period of time, of course.
  • 1:53:28 Senator Bernie Sanders (VT): Puerto Rico is struggling with an unsustainable 75-billion-dollar debt and $49 billion in pension obligations. More than one-third of that debt is held by Wall Street vulture funds that are getting interest rates of up to 34% on tax-exempt bonds they purchased for as little as 29 cents on the dollar. Is that correct, Governor? Governor Ricardo Rossello: Yep.
Hearing: Puerto Rico Recovery Challenges; House Natural Resources Committee, November 7, 2017.

– Natalie Jaresko – Executive Director of the Financial Oversight and Management Board for Puerto Rico
– Angel Perez Otero – Mayor of Guanynabo, Puerto Rico
– Noel Zamot – Revitalization Coordinator of the Financial Oversight and Management Board for Puerto Rico

  • 22:30 Natalie Jaresko: As the committee is aware, the board has recently named Noel Zamot as chief transformation officer of PREPA, with all the powers of a CEO and reporting to the board. We believe this is absolutely essential both to restoring service as soon as possible and to creating a sustainable, efficient, resilient, and fiscally accountable power system for the island. While the board is confident, the PROMESA, coupled with fundamental aspects of bankruptcy law, gives us the power and responsibility to do as we have done. Some parties are vigorously contesting our authority in proceedings before the Title III judge. To avoid uncertainty and lengthy delays and litigation, congressional reaffirmation of our exercise of our authority is welcome.
  • 23:08 Natalie Jaresko: We have also implemented a contract-review policy as a tool to ensure transparency throughout the government, for the benefit of the people of Puerto Rico and all stakeholders. The policy applies to all contracts in which the commonwealth or any covered instrumentality is a counterparty, including those with the federal government, state governments, and private parties. The policy provides that all contracts of 10 million or more must be submitted to the board for its approval before execution. In addition, the board retains the authority to adopt other methods, such as random sampling of contracts below that 10-million-dollar threshold, to assure that they promote market competition and are not inconsistent with the approved fiscal plan.
  • 26:48 Noel Zamot: I will retain key leaders on my staff to enable speed and effectiveness in our decision-making. I’d like to highlight two key roles. The chief operations officer will be responsible for day-to-day operations of the utility. This will initially be a senior leader from within PREPA but will be augmented by an industry executive identified in conjunction with input that we are receiving from the Edison Electric Institute.
  • 27:41 Noel Zamot: I’ve also identified key executives to serve on a board of advisors. These are CEOs from public and private utilities who have generously volunteered to bring their considerable expertise to help with this task. I will also rely on an internal group of world-class experts from multi-national utilities, the energy sector, academia, and more.
  • 28:22 Noel Zamot: Puerto Rico’s energy strategy calls for 50% renewables by 2040, with a balance of natural and LP gas mix; regional grids, with generation close to demand; physical hardening and control systems to provide resiliency; and widespread distributed generation, all wrapped by an empowered and accountable energy regulator. PROMESA is clear in its guidance to attract private capital to achieve this end state. We need to do just that, not only for generation but to attract innovative capital solutions from the private sector for transmission and distribution as well.
  • 43:42 Representative Raul Grijalva (AZ): Do you or the board hold a view that, relative to Title V, waiving or eliminating additional federal environmental safeguards like NEPA or regulations will accelerate the recovery in Puerto Rico? Ms. Jaresko, you and then Mr. Zamot, if you don’t mind, as well, answering the question. Natalie Jaresko: I certainly believe that further expeditious permitting is a requirement. I’m not an expert on the individual sets of permitting, but I want to underline that it’s both federal, commonwealth, and municipality permitting at all levels. It needs to be expedited for any private-sector investment to become a quick recovery. Grijalva: Okay. Mr. Zamot, do you think that’s needed? Noel Zamot: Thank you, sir. My view is that economic growth and fast-tracking projects is not inconsistent with being good stewards of the environment, and we have a very robust process within Title V and within the working group that we have set with the government to ensure that we, the residents of Puerto Rico, are very respectful of that. Grijalva: If I may, sir, let me just follow up with you. You cite the proposed trash incinerators an example of a project Title V that could come to fruition, but I see an example of why Title V, in this instance, doesn’t work. Public comments about the project are overwhelming in opposition. It’s opposed by both mayors’ groups, representing all the mayors in the island. It was stalled in part because it couldn’t get a permit to drain 2.1 million gallons from a protected wetland. Farmers and residents concerned about the effects on their health, that it could undermine recycling programs that are in place. It flooded during the hurricane. We have a before-and-after situation, that’s up on the screen. It flooded during and released some of the hundreds of tons of toxic ash that could release, in the future, toxic ash into surrounding neighborhoods. And it requires a major loan from the federal government to go forward even though it’s fully privately funded for 67 megawatts of power. Is that what we can expect in terms of Title V critical projects? Zamot: Sir, there are many voices that, obviously, in a democratic process, voice their concern with such a project, but there are equal number of voices on the positive side. We don’t look at this project in Arecibo necessarily as even a power project. It is really a waste-management project. Puerto Rico has a critical, essentially a crisis, in waste management and landfill use that has been identified by the EPA, and that is why the EPA has actually been supportive of this program.
  • 47:30 Representative Doug Lamborn (CO): Is it safe in assuming that pretty much 100% of the electricity generated in Puerto Rico today is from burning fuel oil? Noel Zamot: Sir, I would say it’s 96%. There is approximately 4% that is renewables in Puerto Rico right now. Lamborn: And as we know, fuel oil is very expensive and very dirty. Zamot: That is correct, sir. Lamborn: So, I like the plan. I think you said by 2040, 50% renewables, 50% natural gas through liquefied form. Zamot: That’s correct. Lamborn: Have you identified investors who are willing to make that huge investment in a LNG terminal? Zamot: Sir, there are a number of investors that are actually very bullish on Puerto Rico’s long-term prospects, and we and the board and specifically in my role as revitalization coordinator, we receive a lot of proposals, a lot of questions about how people can bring innovative capital solutions using private capital to bear, to benefit, the reconstruction of the grid and the people of Puerto Rico. Lamborn: Well, I would really urge you to keep pushing in that direction because I don’t think nuclear or coal is going to be a solution. Renewables are great, but to provide that much electricity in that short of time is unrealistic. So I welcome the discussion about LNG.
  • 50:30 Representative Doug Lamborn (CO): And the last thing I want to ask you about is that 800-million-dollar project, and the ranking member referred to it: burning waste to create electricity. Is my understanding that that would be privately funded and would not need government subsidies of any kind? Noel Zamot: That is correct, sir. It’s entirely privately funded. Some of the capital structure includes some federal loans, but there is no money from Puerto Rico, and it relies on relatively new technology that is respectful of emissions.
  • 51:53 Representative Grace Napolitano (CA): The incinerator would be built in an area in Arecibo previously contaminated by a battery recycling plant, and it was flooded during the hurricanes. Has the area been tested for lead, arsenic, and other contaminants? Noel Zamot: Ma’am, I do not have the specific details on what work has been accomplished to date, but we do know that the company that is planning that work has done extensive mitigation pre-work— Napolitano: How long has the plant been there, that it hasn’t been tested? Zamot: Ma’am, I do not have that information. Napolitano: Would you mind sending the answers to this committee— Zamot: Yes, ma’am. Napolitano: —so we can understand that. And how does the Energy Answers Arecibo, LLC plan to prevent their landfill from being flooded by future hurricanes? Zamot: Ma’am, could you repeat the question? Napolitano: How do you prevent landfill from being flooded by hurricanes? Zamot: That is an engineering question that I’m not prepared to answer right now. I would imagine that that has been looked at in the permitting that the company has received to date. Napolitano: Okay. When and—how and when does the company plan to bury the toxic ashes generated by the incinerator? Zamot: That is being currently discussed with the current Puerto Rico administration. Napolitano: Is, let’s see, how many Puerto Rico municipalities refuse to send trash to the plant incinerator? Zamot: I think the answer to that is many, because that represents a threat to current waste management in Puerto Rico, which the EPA has identified as a critical need to address.
  • 1:19:36 Representative Steve Pearce (NM): Now, one of the problems that I see, just as a former business owner taking a look at it, one of the reasons that residents had to pay such a high rate is that certain entities didn’t have to pay for the electrical power. One of those would be the hotels. So are they still exempt from paying their power? Natalie Jaresko: Each of the economic development plans that Puerto Rico implemented over the years had individual tax agreements— Pearce: I’m just asking about the hotels. Jaresko: —between businesses and energy. Pearce: Are they still exempt? Are they not exempt? Jaresko: Some of them are, yes. Pearce: Some of them are exempt. Jaresko: That’s correct. Pearce: Now, also, cities were also exempt, and so city governments were exempt prior, according to what I’ve read. Noel Zamot: That’s correct, sir.
  • 1:38:50 Natalie Jaresko: The board certainly considers privatization as one of the options going forward. There’s a question that remains open to see whether it’s privatization of the entire power sector, meaning generation transmission and distribution or some select part, or whether it just means bringing in private sector to compete and bring down the cost and bring up the efficiency of electricity. We’re looking at all of those as we define this fiscal plan for PREPA.
  • 1:49:50 Representative Raul Labrador (ID): You stated that prior to the hurricane that the board possessed the authority to execute its mission and deliver on the underlying mandate Congress set with PROMESA, but with the devastation, you allude that those tools may be inadequate. So please tell us why does the board currently have—does the board currently have the tools necessary to facilitate efficient and effective recovery? Natalie Jaresko: I will try to be clear. I believe the board has the tools, that PROMESA gives us the tools. That said, when there are disagreements, the use of those tools ends up in costly and time-consuming litigation. Today more than ever that time and that cost is not helping Puerto Rico, so we asked for clarity of the tools that we have—whether it is in the appointment of a CTO through Title III, whether it is the implementation of our contract-policy review, or whether or not it is the implementation of the fiscal plans in full when certified. Labrador: So, what else do you need to be successful? Is there anything else that we need to give you to be successful? Jaresko: I think we would appreciate a legislative affirmation of those and/or conditioning of appropriations on those powers as you see fit.
  • 2:11:11 Representative Garret Graves (LA): The governor recently proposed a law to address emergencies and disasters. Part of that law would allow, basically, eliminating or waiving sales tax in Puerto Rico. Are you aware—is that proposal on your radar screen? Were you consulted? Natalie Jaresko: No, we were not consulted. And I am aware that there has been a problem because of the lack of electricity and the collections of the sales-and-use tax. However, as electricity comes back, the collection process should also return. Graves: So you were not consulted. You were not aware on the front end. If ultimately the governor certifies that this is in compliance with the fiscal plan and you determine otherwise, what happens then? How does that play out? Jaresko: Well, I would hope that they would consult prior to putting that policy in place because it is something that can have a direct adverse fiscal effect, and it could be not in compliance with the fiscal plan. If they certify that it is, as you described, then we have a situation which could potentially, again, lead to difference of opinion in terms of what our role is in PROMESA. And it is very difficult for us, once it is certified by the government as being in compliance, if we disagree, to reverse that. Graves: I’m sorry. Say that last part again. Jaresko: If the government certifies that the executive order or law is in compliance with the fiscal plan, it is difficult for us to reverse that. Graves: Your hands are effectively tied. Do you think Congress should revisit that in terms of something that you believe causes economic harm or undermines the objectives of the fiscal plan but you don’t have the ability to actually help reset that? Jaresko: I think it should be very clear that the intent of PROMESA was for us to be able to stop things that were having an adverse effect on the fiscal plan, yes.
  • 2:26:37 Representative Luis Gutierrez (IL): Arecibo incinerator, Mr. Zamot, I would hope you would talk to Secretary Vilsack because you seem to have a different perspective than he does, since the loan from the USDA is through the Rural Utilities Services. In other words, the money is not in order to do something with waste management; the money is to create energy. But you said to us earlier—and correct me if I’m wrong, if I misunderstood—that the purpose is one of for garbage, basically, disposal, and not for energy. How do you see it? Is it garbage disposal or energy? What is the primary purpose of it? Noel Zamot: Sir, the government of Puerto Rico has a letter out, and they consider that plan in Arecibo to be both a provider of energy— Gutierrez: But when you said primarily, you said primarily. Zamot: The plan at Arecibo, where about 2% of the aggregate electrical demand— Gutierrez: Okay. So primarily, I heard you—and we can go back to the record—you said that it was primarily; yet, they are asking for a loan between half a million and 750 million dollars. And let me just assure you and everybody here: Given the fact that the government of Puerto Rico already owes over $2 billion, unless Mrs. Jaresko’s going to use some of her skills to eliminate that debt, I don’t see how we’re going to do that. And in the last 25 seconds, because I want to focus on this issue with you, do you believe that the control board has such power that you do not have to take into consideration the concerns of the duly elected mayors of the cities that will be affected by the incinerator? Or do you feel you need to consult with them before you make a decision going forward? Zamot: Sir, in 9 seconds, the statute provides for a public comment period that in conclusion— Gutierrez: So, you don’t believe. You do believe that you’re supreme. You’re kind of a dictator over everything.
  • 2:32:05 Resident Commissioner Jenniffer Gonzalez (PR): You say that the board has the power to name a chief transformation officer to take over the management of PREPA, and at the same time, I know the state government, state legislator, the governor is against that. And you filed a motion in the court to allow that to happen. Do you have the power or you don’t have the power to actually name the coordinator board? Natalie Jaresko: Thank you. We believe we do have that power, and that’s why we filed that petition in court. We believe we have that power under Title III as any representative of a debtor, and the board is named the representative of the debtor, in the law in PROMESA, to name a chief restructuring officer, a receiver, a chief transformation officer, as we call it. Gonzalez: So, sorry to interrupt you, but then you don’t need any change in the PROMESA law? You don’t need any power to make that happen, because that’s the question this committee is doing. What do you need in terms of helping the people of Puerto Rico to recover power? I think that’s the main question. If we were a state, we will not have you. If we were a state, we will have full funding in all federal programs, and now that’s a problem all territories got. Jaresko: The board believes that in appointing this CTO will help us move more quickly to restoration of power. That is the only reason the board took this position, and they took it at this time.
  • 2:43:30 Representative Luis Gutierrez (IL): Mayor, thank you very much for being here with us. Could you tell us your annual salary? Mayor Angel Perez Otero: My? Gutierrez: Yes. *Otero: 96,000. Gutierrez: $96,000. Mr. Zamot? What’s your annual salary? Noel Zamot: That’s a matter of— Gutierrez: I’m sorry? Zamot: Sir, that’s a matter of public record. Gutierrez: How much is it? Zamot: I think it’s in the record, sir. Gutierrez: Just—can’t you tell us how much it is? You know how much you’re getting paid. Why are you so reluctant to give us—this is a committee. Just want to know how much you’re getting paid. The mayor was very forthcoming. Zamot: The board found a competition competitive compensation of $315,000.
  • 2:55:30 Representative Luis Gutierrez (IL): So, I’ll ask Mrs. Jaresko—I didn’t get to ask you—what’s your annual salary? Natalie Jaresko: $625,000. Gutierrez: $625,000.

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