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Fiscal board nominee to transform Puerto Rico power utility intends to depoliticize it

By on November 7, 2017

SAN JUAN – The Financial Oversight and Management Board’s revitalization coordinator testified Tuesday to the U.S. Congress about his plans for the Puerto Rico Electric Power Authority (Prepa), were he to be appointed its chief transformation officer. They include appointing specific positions and having a board of advisers.

Zamot’s prepared testimony for the House Natural Resources Committee’s oversight hearing strongly suggests he plans to strip Prepa’s governing board of its powers.

He said the decision to name a CTO was the board’s, not his. “Suffice it to say that from my perspective of months on the ground in Puerto Rico, and regardless of who fills the role, it is absolutely essential. Both to deal with the short-term crisis and the long-term transformation of Prepa, we need dramatic action that creates a fast-moving, depoliticized entity driven by a compelling vision of an efficient, durable, sustainable and affordable power sector for the island,” he said.

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He spoke about his objectives for Prepa. First, he said he would bring all available resources to bear to restore power to Puerto Rico as quickly as possible. Second, he would develop and implement the transformation plan for Prepa, ensuring that near-term recovery activity is consistent with the long-term vision. And, third, he wants to ensure that 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.

During this first phase, the organizational structure will be of critical importance, he stressed. “I will employ an approach that I have used with success in previous times when we had to transform organizations in the middle of chaotic and uncertain environments. I have found success by establishing a straightforward, clear chain of authority, with well-defined roles and responsibilities that track with the overall objective and with strategic priorities,” he said.

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Zamot’s plans include having five key people on his staff to act fast and effectively in the first phase and integrate actions with his long-term transformation plan. These are chief operations officer, ‘Storm Boss,’ vice president  for transition, chief financial officer and general counsel.

The COO would be responsible for day-to-day operations of the utility. This role would initially be served by a senior leader at Prepa, but will be augmented by an industry executive, identified in conjunction with input from the Edison Electric Institute, he said.

The Storm Boss will be responsible for identifying, onboarding and integrating all help needed, as well as acting as the primary stakeholder to ensure that short-term recovery actions under the Stafford Act’s Category B subdivision on federal funds are consistent with the long-term plan for the island. “I expect to coordinate with the Storm Boss frequently—likely several times per day,” he said.

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The vice president for transition would lead the development of the transformation plan, as embodied in Prepa’s revised fiscal plan, ensuring the utility remains on a specified timeline and that all stakeholders are represented and contribute appropriately.

The CFO would have traditional financial responsibilities and “develop an improved, open and transparent procurement process, fully compliant with all federal requirements, such as FEMA’s. In my experience, much of the challenge with problematic contracts has less to do with the substance of the contract—which can be reviewed and amended—than with the RFP [request for proposals] process and selection criteria. Without sound controls and protocols for those two, you could end up with a perfectly executed contract that was awarded inappropriately,” he said.

Finally, he said he would have a general counsel to help ensure those objectives are accomplished in an ethical and legal manner.

“I have been engaging in informal conversations with potential candidates for all these positions so that they can be hired and join the team as soon as I am confirmed to the role by the court,” he said.

Outside of the public corporation, he said he has already identified key executives to serve on a board of advisers. “These are chief executive officers from public and private utilities, who have generously volunteered to bring their considerable expertise to help with the task,” he said.

He said he would also rely on professional, engineering and sector “insights” from “seasoned experts” such as from McKinsey & Co. and Ernst & Young, who currently serve as outside consultants to the board, as well as economists from the Massachusetts Institute of Technology’s (MIT) Sloan School of Management.

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