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Puerto Rico governor challenges U.S. Senate to cut red tape

By on February 27, 2019

Editor’s note: The following originally appeared in the Feb. 28 – March 6, 2019, issue of Caribbean Business.

SAN JUAN – Gov. Ricardo Rosselló appeared before the U.S. Senate Energy & Natural Resources Committee where he not only requested equality in federal regulations, programs and funding to transform Puerto Rico’s energy system but also complained that the Federal Emergency Management Agency’s (FEMA) red tape is threatening the island’s recovery.

Following the recent U.S. Court of Appeals ruling that declared the Financial Oversight & Management Board unconstitutional because the appointment of its members violated the Appointments Clause of the U.S. Constitution, Rosselló called for clarifications of the law to stop the Oversight Board from intervening in the government’s day-to-day operations, a move he called undemocratic.

Rosselló participated in the hearing with governors from the other U.S. territories, all of whom complained about delays in federal funding to help them rebuild, as well as a lack of federal healthcare funds.

The governor’s testimony focused on Puerto Rico’s ongoing fiscal and debt restructuring under the Puerto Rico Oversight, Management & Economic Stability Act (Promesa); the process of economic and disaster recovery and reconstruction, including the reconstruction of the island’s entire energy sector; the need for equality under federal laws and programs; and the need for new tools to spur economic development and competitiveness.

“However, although all of these are necessary; none will be sufficient in unlocking Puerto Rico’s full potential unless Congress works with us to end the current unequal and undemocratic territorial status and places Puerto Rico on the definitive path to full equality through statehood,” he said.

In his remarks, the governor listed his administration’s achievements in restructuring the debts of the Government Development Bank, Sales Tax Financing Corp. (known as Cofina) and reducing the budget, but said it was critical for the government to retain its democratically elected powers. He expressed concerns about possible conflicts within the Oversight Board.

“We are reviewing the Oversight Board’s report to the U.S. District Court about how it intends to deal with these issues and hope a meaningful resolution can be brought to bear in that venue. However, our government also supports efforts to apply basic transparency principles to the Oversight Board through federal legislation as well,” he said.

Regarding the Court of Appeals ruling, Rosselló said the government was still evaluating options for how to manage the practical impacts of this decision. But we anticipate needing further engagement with both Congress and the executive branch to ensure the corresponding actions do not imperil the progress we have made to date.

The lion’s share of Rosselló’s testimony centered on the need for parity in federal funding, as the island is approaching a healthcare cliff; on the need for $600 million in nutritional assistance funds; and on the roadblocks hurting the island’s reconstruction. Among these areas, he cited inconsistencies in FEMA guidance with respect to the implementation of Section 428 of the Robert T. Stafford Disaster Relief & Emergency Assistance Act, the alternative procedures for permanent work public assistance; “significant delays” in fixed-cost estimate approvals by FEMA; “unnecessary requirement of duplication” in damage description and dimension analysis by FEMA; and a “lack of willingness” by FEMA to end the form 270 manual drawdown process. “Our reconstruction depends on us completing these processes as diligently and quickly as possible, and we rely on FEMA to get the job done. Puerto Rico has only had about 45 ‘permanent work’ projects approved in the 17 months that have followed the hurricanes. In stark contrast, in the same timeframe, over 13,000 projects were approved for Louisiana and Mississippi in the wake of Hurricane Katrina. The discrepancy is startling,” the governor said.

Additionally, Rosselló said he was concerned about the federal administration’s departure from the New Orleans precedent in FEMA’s denial of Puerto Rico’s request for an extension of the 100 percent federal cost share for Categories A and B for debris removal and emergency protective measures. He also criticized FEMA for insisting the island rebuild facilities damaged by the hurricane to their original condition.

“To do otherwise would be shortsighted and would not only waste the many billions of dollars in taxpayer funds that would be invested in Puerto Rico and the U.S. Virgin Islands, but also put the taxpayer at extraordinary risk the next time a hurricane or other natural disaster causes widespread impacts to the islands,” he said.

In response to a question from the senators, Rosselló highlighted the impact that climate change is having on Puerto Rico, noting that the island of Palominito, on the east coast, no longer exists, as well as the erosion of the beaches. For those reasons, he said he wants to build an energy grid focused on renewables.

However, he acknowledged that wind turbines and solar panels were destroyed by the hurricanes, too. Besides completing the lease of the transmission and distribution system by December through a concession and the transformation of San Juan powerplant’s Units 5 & 6 to use natural gas, Rosselló said there are plans to convert the Palo Seco powerplant and another one on the southeast coast to use natural gas.

“We have an RFP [request for proposals] out for a peak unit substitution with a solar and battery component,” he said.

He also said there were 25 renewable projects in the pipeline, most notably a virtual powerline for which solar panels on the rooftops of public housing projects will be used to provide energy to areas in need.

“We have a commitment to incorporate nanogrids and microgrids that would be independent and run on natural gas…so consumers have choice. What we need is clarity on the resources. We have a plan and we have a strategy,” Rosselló told the Senate panel.

See the hearing here.

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