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House Natural Resources Committee Examines Challenges in Puerto Rico’s Recovery

On November 7, the House Natural Resources Committee held an oversight hearing “Examining Challenges in Puerto Rico’s Recovery and the Role of the Financial Oversight and Management Board

The witness panel was composed by Natalie Jaresko, Executive Director Financial Oversight and Management Board for Puerto Rico, Noel Zamot, Revitalization Coordinator Financial Oversight and Management Board for Puerto Rico, the Honorable Angel Perez Otero, Mayor of Guaynabo City. There were two witnesses that declined the invitation to appear at the hearing at the last minute: Ricardo Ramos, Executive Director of the Puerto Rico Energy and Power Authority (PREPA), and the Honorable Carmen Yulin Cruz Mayor of San Juan.

The hearing was attended by almost every member of the Committee as well as all of the Members of Congress of Puerto Rican heritage (Rep. Serrano (D-NY), Rep. Velazquez (D-NY) and Rep. Gutierrez (D-IL) and Rep. Raul Ruiz (D-CA) who flew to Haiti after the 2010 earthquake.

In her opening statement, Ms. Jaresko mentioned the pending issues that the Board and the federal government will address:

  1. Disciplined liquidity assistant processes
  2. Revision of the fiscal plans
  3. Appointment of a Chief Transformation Officer (CTO) of PREPA, all the powers of a CEO and reporting to the board. Congress should affirm the authority that Oversight board has in PR.
  4. Contract Review Policy

Noel Zamot’s opening statement included his priorities as the Chief Transformation Officer, as he explained: “First, bring all available resources to bear to restore power to Puerto Rico as quickly as possible. Second, develop and implement the transformation plan for PREPA, ensuring that the near-term recovery activity is consistent with the long-term vision. And, third, ensure the utility exits PROMESA’s Title III via the implementation of a plan of adjustment as a system that can provide stable, reliable, and cost-effective power to Puerto Rico’s inhabitants and institutions.”

Mayor Perez noted in his opening statement the damages that Guaynabo has suffered. He explained that three bridges were washed out and another four compromised, resulting in over 15 families having no vehicular access to their homes; there have been several partial road collapses; most rural areas lacking water service due to pumps being off line; three thousand families have lost their homes or had severe damage.

During the course of the hearing, the witness panel was asked several key questions regarding the restoration of Puerto Rico.

One of the main issues that several representatives asked the panel was regarding the Board’s authority. Jaresko and Zamot expressed the need for Congress to clarify the Board’s authority due to timely and costly court proceedings after disagreements with the government. “Any clarification by Congress of the powers the board holds would be appreciated”, stated Zamot, adding that tying government funding to providing adequate power for the Board would be helpful.

There were several questions about the responsibility the island has towards the creditors and how the Hurricane changed this outlook. Ms. Jaresko emphasized that in the short-term it will be difficult to address those payments; in the long-term, it depends on the actions of Congress to continue negotiations. In order to develop a concrete plan of repayment of the debt, Jaresko noted that a 30 year debt sustainability analysis will be needed to analyze the government’s ability to make those payments post Maria.

Several members questioned the panel on the efforts, short-term and long-term, to restore the electrical grid and the leadership at PREPA. As the pending CTO of PREPA, Mr. Zamot stated that the transformation plan includes asset restoration and organization restructuring. Zamot stated that the future of PREPA includes renewable energy integrated to the current system to provide a resilient mix for the island. Also, Zamot added that he current proposals include private funds to restore the grid, and that privatization of the utility is being considered. Jaresko did emphasize that the appointment of the CTO will help restoration efforts of the grid and bring unified leadership in PREPA.

Rep. Graves used his time to talk about the Jones Act and some inaccuracies in analyzing the Act. Graves mentioned that the GAO did a study that could not determine the Jones Act increased costs to Puerto Rico. Additionally, Graves stated that in Miami the prices are 23% higher than in Puerto Rico, and the single vessel that took advantage of the recent Jones Act waiver took more time to arrive than the other vessels.  He admonished the committee to focus on the actual problems facing Puerto Rico and not on a Jones Act distraction.

Mayor Perez was mostly asked about the federal aid response on the island and its effectiveness. Perez mentioned that at the beginning, the response was not well organized. After three weeks, FEMA posted an officer for each municipality and made communication more effective and efficient. Perez mentioned that as a whole, municipalities were not happy with the aid response and the efforts need to take into account sustainable solutions to prevent going through this process every year. When the panel was asked of who was in charge of the federal response, the panel answered that it was not clear.

Rep. Raul Ruiz (D-CA), a Harvard-trained doctor who was on the ground providing aid after the 2010 earthquake in Haiti compared the two disasters.  He asked the panel who was in charge in Puerto Rico, and when he did not get an answer he said that was a problem that needs to be solved.  Rep. Ruiz, who is a former member of the Natural Resources but has since left the committee, attended the hearing out of a personal interest and passion that was readily apparent.

There were several members that expressed their disappointment of the absence of Ricardo Ramos and that in the future there needs to be a hearing addressing the Whitefish situation. Next week, the Committee will hold a hearing with Puerto Rico government officials to further address the situation on the island.

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