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tv   Puerto Ricos Electric Grid  CSPAN  May 8, 2018 9:48pm-12:01am EDT

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citizenry and the national concern to a lot of people i think it's important to remind the citizens if you get an opportunity to talk to each other, more than likely you will find this significance to each of us and we should try to remember that when we see these divisions between ourselves and congress. >> [inaudible] the death penalty, and i want to abolish it. i think that we can put money into education and other resources that would be better suited. >> an important issue in my state is education for the
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children and that is one of the tough issues. >> voices from the state on the c-span 50 capitals tore. the senate energy and natural resources committee held a hearing to examine the condition of puerto rico electric grid damaged by hurricane maria last year. the witnesses included officials from the energy department and u.s. army corps of engineers and the ceo of the puerto rico electric power authority. this hearing is just under two and a half hours. >> good morning everyone. the committee will come to order. we are here today to learn more about the work that has been
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completed and the work that is still under way as we seek to restore electricity to the people of puerto rico and to two discussed this morning moving forward. so much remains to be accomplished. we also take a close look at the proposal to reform the island's energy sector such as the governor's proposal with regards to the puerto rico electric power authority prepa and the energy commission. the hearing that we held last november on the hurricane recovery efforts i suggested at the time essentially three different tenets and the reconstruction of the grid i suggested we needed to make it more resilient to future weather events and everybody agrees that makes sense. again been absolutely reasonab
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reasonable. it's to bring down the overall cost of electricity to the pre- storm prices moving forward i think that that is something again that we all agree must have been i'm not sure that any of them have been adequately addressed, although i would note some parts of the infrastructure are more resilient today but more resilient by default as they've been replaced with other materials. so the island by outage remained unstable. before we can get to the basic tenets, however, there remains a primary question that i think needs to be answered and that is going forward, who is in charge of the grid? who is providing for a profession and who showed outside parties be in contact with to help fulfill that vision? is at the governor's office is
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promoting legislation to sell off some of the prepa assets to operate the transition distribution lines, is the financial management oversight board certified a new fiscal plan for prepa "a process for the privatization or is it a prepa that has a new board of directors, new ceo that could be completely offended by these other plans or is it the perc that claims for setting the direction of the grid could be resolved under the reorganization plan? and then how did the department of energy and the corps of engineers fit into the hierarchy and what about the creditors? so there are many questions. there's also an opportunity to provide clarity to the questions that many in puerto rico are asking.
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why are we still seeing islandwide accounts, and they're asking where have the federal dollars gone and where have they been directed. and as we enter into a new season that you're asking whether or not it is more stable and resilient and asking what efforts are being made to incorporate alternative energy sources so that the island is not dependent on the global price of oil. and then they are also asking what the status of the prepa privatization proposal is, so there's a lot of questions to be answered. i woulanswered. i would add about the conservation of the regulatory agencies in puerto rico, particularly the perc. the issues attracting capital investment is a struggle. and without a stable regulatory environment bringing investors to upgrade to electric grid would be even tougher. i am hopeful the witnesses can help us sort through some of these issues and provide a little more clarity not only in
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the committee but to the people of puerto rico and the others that are following the situation on the ground. thank you for being here as we focus on this important issue and i will turn over to the senator heinrich for his opening statement. we appreciate taking the chair here. >> thank you for scheduling this timely hearing to examine the current status of the grid restoration proposal for the future application of the grid. senator cantwell asked me to fill in for the start and she will be here later. before proceeding, i would like to take a moment to recognize the surface of a benign national guardsmen that were tragically killed last wednesday when their c-130 crashed after taking off in georgia. our thoughts and prayers are with their families and this is an important reminder of the sacrifices of the citizens make for this nation each and every
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day. senator cantwell asked me to acknowledge senators nelson and ruby over a letter of group of colleagues requesting the hearing senator nelson has been such a forceful advocate for puerto rico, and i understand he was on the island just last friday. i would think that distinguish witnesses for sharing their expertise with us today. hurricane maria struck in 2017 causing the largest power outage in the nation's history command of the second largest outage the world has ever known. we are still not done with the restoration process over seven months after the storm. today 98% of the customers in puerto rico have power, but much more work remains. to put it in perspective, tens of thousands of americans of air are still in the dark and the threat to their health and well-being is real. as we approached the hurricane season we need to ensure that we've learned the lessons so
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that we don't repeat the same mistakes. congress would like to see this help incorporate the renewable distributed generation and dramatically increase resilience into the grid. i think we can also agree a starting point is a robust independent and transparent regulatory structure, something that puerto rico struggled with over the years. if we don't get this right we will be in the same place after the next hurricane. madam chair i understand senator cantwell will join us shortly but i would ask the statement be included in the record. >> thank you senator heinrich. with that, let us go to the panel and again i would thank you all for joining us this morning and for your contributions. the panel will be led by bruce walker, the assistant secretary
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at the office of electricity delivery and reliability. it's good to have you back before the committee. we are also joined by charles alexander junior, who is the director of contingency operations of homeland security at the u.s. army corps of engineers, so thank you for your work. mr. christian sobrino-vega is the president of the government development bank and the board of the fiscal agency financial advisory authority for the government of puerto rico. mr. walter higgins is also known to the committee. he's come before us before as a ceo of the electric power authority. we welcome you. mr. jose roman moraels is the commissioner -- you can tell my spanish -- but the commissioner of energy in puerto rico.
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welcome you and mr. rodrigo masses is the president of puerto rico manufacturers association. we welcome each of you to the committee here this morning. mr. walker, if you would like to begin, i would like to ask you to limit your comments to about five minutes and your statements will be incorporated as a part of the record once in each of you have completed we will have an opportunity to pose questions. welcome. >> chairman murkowski, senator heinrich and distinguished members of the committee, thank you for the opportunity to discuss the possibilities of the future operation of the grid in puerto rico. most importantly, i want to assure the committee that we are committed to providing technical assistance to prepa as they begin to task of rebuilding at redesigning the electric grid. during a significant event, services firm energy, critical infrastructure including water, telecommunications and transportation must be operational to support the
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safety and health of the residents in puerto rico. accordingly, the energy infrastructure must be designed, built, managed and maintained in such a way to an alley or he disruptions when they occur to facilitate the rapid recovery. this is a continual process of improvement on the one that will require prepa to adopt solutions and technologies to address changing and doe and the national will remain an active partner to provide technical expertise and deploy cutting-edge technology to assist prepa. doe has completed its report on the recently of operations and solutions for the grid. this provides recommendations to prepa and fema for the reselling and if they are intended to perform investments in the energy infrastructure. the recommendations address near-term and potential long track actions that will require further analysis to make optimal investment decisions. several long-term recommendations that require
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additional analysis included number one, power flow to assess the power system operations including generator dynamics and protected by the lake or -- relay and to perform dispatch strategies and long-term planning. number three, micro- grid energy storage and system segmentation to identify where the clusters of generation and bowed t wide maximum community benefit. number four, cross sector critical infrastructure interdependencies. these items are being addressed through the development of a sophisticated modeling effort, incorporating the efforts of five national labs. ..
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they are working to define the requirements for the network that is independent of the public internet utilizing what is called dark fiber. do you we will seek to prepare this as we work together to strengthen it, capitalizing on the significant amount of fiberoptics. just three weeks ago, my office issued a funding announcement to our industry partners to develop innovative
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approaches to advance energy delivery systems focused on designing our infrastructure for the oil and natural gas sectors. the goal is to reduce and potentially eliminate the risks presented by cyber attacks. this opportunity was done with and i toward accelerating efforts and incorporating new solutions. with the effects of the past hurricane season, though a disaster in the short term allows an opportunity for technology to improve the grid. in this case various forms of technology including micro- grids, cyber, modeling, energy resources and storage are a few of the capabilities we are undertaking to improve the resilience of puerto rico and u.s. virgin islands energy
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sector. thank you and i look forward to your questions. >> distinguish members of the committee, thank you for the opportunity to provide an update on the status of puerto rico's electric power grid. the emergency response activities are done under the stafford act. in response to hurricanes, they received 47 mission assignments at $181,000,000.44 maria related assignments at 3.4 billion to execute our public works missions. over 15 million in coastal emergency funds were expended under the authority. i now limit m remarks solely to the restoration of puerto rico's grid. in september 17 as assigned by fema they assumed leads for federal effort to repair the power grid. to date we have received 2.15 billion for that mission alone.
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our task was to scope, coordinate and execute an arm repairs to grid segments until comprehensive restoration of the overall system could be implemented. the grid consists of 2400 miles of transmission lines, 30,000 miles of distributional lines, over 300 substations, 16 power generation plants. an estimated 80% of the grid was damaged. you safe is part of the group comprised of fema and the islands restoration court nader. the ucg makes decisions guided by restoration master plan priorities. these priorities and decisions are carried out by prep a number score and our contractors. the road of repairing the grid leads to forming lines of effort. spot generation for critical facilities, ensure adequate
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generation of the power plants, reinstall and repair transmission lines and restore and repair distribution lines ultimately providing power to the customer. for temporary emergency power, the core and its contract has installed 2180 generators and as of may 7, 812 remain in operation. we anticipate the temporary admission will be extended until 31 july. we have also installed nine micro grids to provide temporary power to communities well grid power is being restored. currently, we are operational in several locations. they installed mega generators at the plants. the core will continue to operate and maintain both throughout mid-july. as of may 279% of transmission line segments, 69% of the sub transmission line segments and 88% of the distribution lines have been repaired and energized.
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they report that 98.44% or approximately 1.45 million out of 1,473,000,000 pre-storm customers who are able to receive electric power have their service restored leaving approximately 22900 customers without power. due to the shortage of materials to affect repairs they authorized to procure, transport and store material leveraging the purchase power and they procured over $229 million in material and to date have received over 33 million items. included in these quantities over 52000 telephone poles or parables, 5500 miles of conductor wire. based on fema's guidance in the design of the grid we've purchased a mix of wood, concrete and galvanized steel poles. the standard for distribution prior to maria with galvanized
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steel and these poles were used to repair the grid to the greatest extent possible to benefit supplies available of time. concrete poles were used to replace existing, broken concrete poles. all lattice structures used to support transitio transmission lines were aluminum. the mission assignment from fema will and effective midnight may 18. our power restoration contractor will continue to work until that time.we currently have over 540 personnel and over a thousand contractors supporting this mission. has the mission assignment ends, there will be an orderly transfer of responsibilities and material. in the days remaining, we are committed to maximizing contributions toward restoratio restoration. the u.s. army corps of engineers is proud to have the
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opportunity to serve the citizens of puerto rico. this concludes my testimony. i look forward to your questions. >> thank you committee chair. thank you to the distinguish members of this committee. our statement will focus on addressing our strategy for transforming the energy sector on january 23 the governor announced a vision for the electric system. the transformation is based on private transformation of the system through private ownership and or operation of the generating capacity. the transformation is desperately needed. while hurricanes irma and maria left the electric system in shia moles and millions without electricity for months, the fragile nature of the electricity infrastructure was painfully evident before the september devastation. the transformation is intended to bring to puerto rico a consumer centered model that provides people with options
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and is sustainable and open to advanced technology and resilient to future adversary events. it needs a regulatory structure that creates customer confidence. the transformation is intended to be innovative energy model with a commitment to the use of renewable and environmentally friendly resources and the goal of achieving 30% noble energy generation. energy cost of approximately 20 cents. kilowatt hour. it will provide a springboard for the modernization of puerto rico, attract new business and create jobs. the government intends the transformation process to be achieved through a proven model. the p3 act as well understood by potential investors and has been used in recent concessions. the framework is one that promotes a competitive process and ensures transparency and fairness while providing flexibility necessary to
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achieve the best results for puerto rico. we also expect the transaction will be approved having jurisdiction over the insolvency proceedings. in any structure federal funding provided for system improvements will be necessary to achieve the appropriate levels of resiliency and hardening of the system consistent with federal law. the structure of the transformation will be designed to ensure benefits of federal funding flow to the citizens just as it with any natural disaster. to make it transparent, effective and efficient, the governor created the reconstruction office for puerto rico. the recovery office is responsible for the development and implementation of the strategic plan and the restrictio reconstruction of the island in the short, medium and long term. they will provide financial accountability during the transformation process.
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one thing needs to be clear for the u.s. citizens of puerto rico should and must be the principal agents in our recovery. mechanisms are being instituted to show and provide confidence that we will be good stewards of taxpayer funds. during the transformation process we anticipate a new or modified, adequately funded and effective regulator will be comprised of hig five members with six-year terms that are staggered. they may only be removed for just cause consistent with a puerto rico case law developed in that process. this regulator will be free from regulatory conflicts and structure to support the steps leading to the transformation. we expect the commission to be supported by a staff with utility regulation expertise and the ratepayer advocate will exist separately from the regulator to provide an independent voice for consumers. after transformation has been complete with a successful transaction, the new regulatory structure protect
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consumers and implement the energy sector policy. it must attract private capital and protect investors. it's a critical part of the economic recovery. the government accounts inform us that analysis from argentina and other countries indicate that a 1% increase in investment will increase gdp. capita by .3%. consistent investment results and increase in gdp levels over time. in the recent certified plan they believe this will increase growth by .30% starting in fiscal year 2020. the electric sector reform is a linchpin for the future of puerto rico. i submit our testimony look forward to answering your questions. >> mr. higgins, welcome. >> thank you very much for inviting me today.
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i am now in my sixth week in puerto rico, i'm delighted to be there. i want to thank the congress, the federal government, especially fema and the u.s. doe and the corps of engineers and more recently hud for all the things that are going on that are helping puerto ricans and puerto rico's electric utility to become better and to become restored. there are many initiatives that are underway or soon to be underway and we look forward to how those will help shape the grid in the future. i would also like to recognize the many public and private utilities that came to puerto rico after the storm and helped us, hundreds and hundreds of people, to get as many people as possible restored to power. you heard mr. alexander say that as of last night, 98.44% of the people of puerto rico have power available to their
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premise. that's good but it's not nearly good enough because there are still 23000 people that do not have power available to their premise and we have about 1900 field workers in the field working on resolving that problem. in addition, we also know there are some places that may be too hard to get to in any reasonable time. we have activities to find alternate solutions for those people. perhaps they might be micro grids, minimum a solar generator and an emergency generator. those activities are underway actively trying to figure out who will not be able to get to. one thing we are sensitive to at this moment is the impending hurricane season that starts in less than three weeks. we are updating our emergency plans islandwide as well as
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inside the organization. we will hold an emergency drill a few weeks from now and right after that there will be an islandwide emergency drill to make sure the island is ready. whatever lessons we learn we will hold another drill in june so we will have practiced and practiced in practice to be ready as possible for the next season. we are now moving from the planning and execution of restoration to what's called recovery. we have lots of things to do thanks to the federal dollars that will be made available and the idea that we can do better than we have done in the past. yesterday we announced the adoption of the national standard, the role utility service standard for all future construction in puerto rico of the grid. that's an important step for us. the system was designed to the standards in the past, but
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this national standard will help facilitate bringing people into the island, getting parts on a faster basis, making things familiar to everybody everywhere, making it easier to model easier to restore and adopt new technology because everything we do knew from now on and eventually to be rebuilt will be done to an accepted standard. two things really stand out as needing to be fixed, they have been alluded to in one way or another. the grid did not withstand the hiss the hurricane. the grid has to be able to do better and restorable faster. the grid was designed many years ago, more than 20 years ago emma and sadly it has not been maintained the way it needed to be maintained. you don't just build a transmission tower and walk away and hope everything's fine. you have to go back on a regular basis, make sure the wires that hold the towers up,
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that everything is still there and still intact. that needs to be done. secondly our generation does not perform as well as possible. that has certainly been hurting us recently. most of the generation that's active and capable in puerto rico is on the south side of the island. most of the load is on the north side of the island. sadly the interconnection is what got damaged so badly during the hurricane. anytime, like happened recently, there's an incident that affects the grid, generation can quickly get out of balance in a blackout can and unfortunately did in sue. we believe with the right technology such as secretary walker talked about, with the right amount of maintenance, with a new view of how to build the grid back using resilient, renewable, distributed and more efficient resources puerto rico's grid can be the grid that the customers need. thank you for your attention today. i appreciate being invited.
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>> thank you mr. higgins. mr. morales. >> thank you chairman mccroskey. thank you for inviting me too appear and your interest in puerto rico's plan to transform its grid. the commission has continued to carry out the standard duties. the need to restore service fast and effectively and through sustainable development. they promulgated rules for the development of micro- grids. the commission has also issued new resource planning rules and is preparing to guide the program. the commonwealth is at a decisive moment for the development of puerto rico's electrical system. it becomes more important today than ever. it is of utmost important that
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these decisions are made based on the rigorous analysis of the needs of the country with an orderly and objective planning process. the commission ordered them to file by october 2018. we have initiated a proceeding to set new rates for fiscal year 2019. they will reflect the new cost structure. the hurricanes have drastically affected the cost, revenues and expectations of future sales. it makes it unlikely that the rates in effect today satisfy the reasonable standard. there are many decision makers involved in the industry. among all of these players, there should be just one common goal and that is performance for the consumer. in order for the term private
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size asian to be useful, it needs more clarity otherwise people will confuse ideology with solutions. there are four distinct concepts that sometimes get confused and combined. they are market structure, asset ownership, operational responsibility and business ownership. when someone speaks it is not clear what it is they propose to privatize. it is not clear whether they want puerto rico's historically realistic market to be converted into competitive market. instead of privatization i will better describe it as a restructuring. there is more to transformation than just a change of ownership. too often people talk about privatization and market structures when what they really want to do is escape past, address only their own
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needs and leave the resulting problems to others. that approach will not solve puerto rico's problems. to produce the performance they need we must follow a logical sequence of steps. first describe the mix of products and services that customers need and the quantities of those products and services in terms of reliability and innovation. identify the market structures that will provide those products and services most cost-effectively. identify the companies that can provide those cost-effectively. for those services that will remain on the monopoly market structure, develop the necessary regulatory procedures for them to proceed and principles and for those products and services to be provided on the competitive market structure.
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there are many decision-makers and stakeholders involved in puerto rico electric industries. they all have ideas, plans and proposals to address rico situation. all ideas, all paths to performance should be on the table they should compete in a merit-based, fact-based transparent process. the integrated research plan approved the process will determine the correct resources most cost-effective from centralized in the impact of the program in energy efficiency. to address the consumption that occurs in order to allow highest penetration of renewables. the commission is ready and able to assist the commonwealth and congress to
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define the new regulatory frameworks and market structures for the benefit of the people of puerto rico. members of the community, thank you very much for this opportunity to testify and i look forward to your questions. >> thank you very much. >> good morning. thank you for having us here. if you don't mind i will discuss our points. first of all you asked who's in charge. who's in control? the governor, the oversight board, the commission. maybe i could answer who could be in control. the manufacturers association represent 50% of the gdp in
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puerto rico. no other sector gets close to seven or 8%. in the past two or three decades we have been very much affected by expensive energy. as a matter of fact, when they mention 98.8% going back, that should be. corrected. it is expensive energy subject to blackouts and brownouts costing millions of dollars in terms of time lost and equipment and damages. we are going to hear and listen to many statements. we will receive a lot of data. you're right, we need stable and robust framework.
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yes, it's very important to have an independent entity and we need to complete the integrated resource plan that was approved by the commission in 2016. that is needed to have a good map of what to do. we also need, badly, without the productive sector, to generate our own demand, to own the energy we need by allowing us to code generate or generate by using distributed energy. and yes transparency. those are matters, we have a beautiful irp in a beautiful framework. if we go through the typical
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process of rfp to contract and procure, we may get back into expensive energy again at the end of all this. the process of public option which is basically the way that everything is presented, the way that the agency announces the opportunities that allow you and me, if we are competing against each other, to review and audit our proposals, allow the press to follow up in all this. that is the only way we will finish with a good product at the end of all of this. we have been accumulating a lot of intelligence. we have to go and execute on what we should do. the only way we are going to be silent is when we own the generation that were going to use. thank you chairman.
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>> thank you each for your statements this morning. there is a lot to discuss this morning. let's get right into it. let me ask mr. alexander, on the timeline that you have, may 18 is the end date for the army corps power restoration mission. it concludes at that point in time, 98.44%. the folks having power there is good but for the people without they probably look at that date and say wait, you can't leave us. is there any consideration of an extension of this mission, any need for it to be extended? >> ma'am, i believe all options were looked at.
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the unified command group, they deliberated and the gentleman to the left sits on that body. the authority to be there and with fema rests with our resources. we will do whatever the mission is but we have been told midnight on the 18th we will transition with fema the lines that were working on and the material we have and replenish their inventory as well bmac let me ask about the orderly transition and this may be directed to either mr. alexander or mr. higgins, big story, not too many weeks ago about the raid. i guess it was in january, where has the power sector or the power station, where the
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rebuilding materials were seized. we've had a lot of discussion. you mention the inventory of the material purchases, but recognizing that was one of the limiting factors in restoring the electric grid because you had supplies that were being requested in other parts of the country for other hurricanes. you had a supply issue at the time. we've obviously worked to address that. then you have a very serious incident there in january where the material are secured so now you're saying you're going to be doing an orderly transition. can you give us that assurance that we really do have the materials that are needed, and what that will entail when you move on and the work remains.
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>> ma'am, i will start off. we will conduct an audit, an inventory of the material that will be turned over to replenish stocks that were consumed during the response and the material they still need to complete the mission. >> , javad a standing? to have a sense in terms of what is needed to complete. >> we are down to 1% until we hit 100%. i don't have the actual count for number of poles, transformers, conduit, et cetera. >> a guess where i'm going for this question is whether or not were still in a situation where we have a shortage of the material for the completion of your suggesting no. >> material is no longer a limiting factor. it wasn't initially because
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there literally, in many cases the material wasn't there. it have been consumed in the previous storms and was coming straight off the manufacturing lines and there is some unique specifications into puerto rico. >> mr. higgins, did you want to add anything to that. >> you think mr. alexander has correctly stated that material acquisition is no longer a big picture problem. all the materials are either on the way or on the island or have already been deployed. there could occasionally be a localized problem where material isn't available to accrue at a particular time, but that's more of a matter of getting it to them, getting it from central to regional warehouses and out to accrue. the important thing going on with the army's mission ending is the assumption of the logistics operation that the army has capably and admirably performed over the past month
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spread now we are in the process of the material acquisition people taking over the inventories, all the material that the army has acquired for this, taking over the replenishment of future materials, receiving the materials that the army borrowed from proper, and in addition, being fully prepared to operate the logistics and material activities in a way that supports continuing restoration and the ongoing and soon to be undertaken recovery. >> and you're prepared to take that up. >> it's going to be a challenge and we are probably going to get some help from fema but our people feel they are ready and fema will give us some additional augmentation as we go through that transition. >> i guess recognizing that may 18 is coming up like next week, we sure want to know that you really are ready and that you're not still kind of working through things.
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that is next week. if there are steps, if there's anything that needs to be done on the outside looking in to help facilitate that, we would certainly hope you would make sure that is known. >> we feel we are ready to take this task on and the help will make sure we are ready. i don't doubt we will have some growing pains. this is a massive effort, but we are ready to take the task. >> i understand that certain i appreciate it, but i also think for those that have been living with great uncertainty since these hurricanes, these 22900 that are still without, when they hear you say there are going to be continuing growing pains, that must be really hard on them. >> i agree with you completely. >> senator heinrich.
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>> i'm having a hard time wrapping my head around this. senator alexander, if there are over 20000 american citizens still without power, is your mission really accomplished? >> our mission as assigned by fema is. >> i don't think that's acceptable. i cannot imagine a scenario where 20000 texans or 20000 floridians were without power and fema would make that decision. i think that's reprehensible. i want to get to the bottom of something you raised that is a bit of a game changer. puerto ricans pay painfully high retail electric rates both individual citizens and manufacturers. i can imagine a world where you try to make manufacturing work at 20 cents. kilowatt hour.
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a lot of that is because of an antiquated overreliance on diesel generation which is incredibly expensive so the time when we see new generation from wind and solar and natural gas, all parke priced in the market at 2 - five cents. kilowatt hour, it seems to me that even on the retail price we ought to be able to build new generation cheaper than operating the existing diesel generation. am i missing something? >> by all means. let's get back to the material question. >> why can't you. >> they talked about the inventory is not a problem anymore. what about in three or four months if we are hit again. is the inventory there? they fixed what was broken the
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last two or three months, but what about if we get hit again. are we going to go through this again? of course, if we own our generation, we will have the inventory available to fix our problems. >> what are the barriers to your members being able to own their own generation, their own storage, their own behind the meter distributed resources that ben cannot only support your members but in an emergency prefer potentially provide services back to the grid. >> not just in an emergency because we could decide that in order to share our success with the community and other components. we could decide all of this in a proper way to help everybody in puerto rico. >> why can't you do that today. >> we have not been able to do that in the past because typically they protect their invoice we are the biggest invoice of the company. they may be become concerned.
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solar, wind, there's many others that are available and could make things very nice. >> mr. higgins, what is the proper legal stance with regard to behind the immediate resources with solar and storage for individual retail customers as well as with regard to large commercial customers being able to have behind the meter generation. >> senator heinrich, i think the question needs to be answered in two ways. number one, puerto rico needs to change the way the grid is supplied by power today. it is not being adequately and properly supplied with the current generation mix, that generation is troubled by a maintenance issue and being reliant on oil which is both environmentally and cost wise
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a difficult commodity and in addition there's not enough generation where it needs to be and in some cases there's too much were we don't need it. the grid needs to be rebuilt not just the wires but the generation needs to be rebuilt. as we change it out, and i agree with mr. moss in that regard, we should be relying on customers to generate themselves, we should allow customers who want to self generate do so, we need to interconnect with them safely such that the grid is still safe, the workers can still work without danger and the customer is able to supply what they want to and in the new world they will supply what they are capable of supplying. >> do you have a current policy for retail or large commercial users? >> as i understand the retail policy, i've not spent a lot of time looking into it in my short time, a customer, in order to be a retail solar
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customer and still be connected to the grid must have a system that supplies their own needs and have storage. therefore, they are going to subtly rely on the grid when their system doesn't work. that i believe, is our current way with dealing with behind the meter solar. >> thank you. >> senator cassidy. >> i agree with what the chair said. there are a lot of things to talk about here. let me go to you, mr. walker, and also you mr. [inaudible] you mention the desire for resilience and for 30% renewables. when we took our tour of puerto rico there was lots of smashed windows and our tour of u.s. virgin islands a lot of smashed solar panels.
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if you're going to be resilient there has to be some redundancy but there has to be an amount of backup generation as either baseload and or reserve generation. is that correct? >> senator, when i spoke earlier, i spoke about the integration of renewables as part of the strategy, i did not indicate any percentage, but with that being said, the question you ask is a good one. i also saw the havoc that was wrought during hurricane maria and the impact it had on renewables to that end, part of the modeling effort we are undertaking is the utilization of our expertise with weather data, particularly wind to identify where there are opportunities strategically to place things like solar and wind that we saw damaged in puerto rico, utilizing the topography of the island to
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facilitate its ability to withstand hurricanes. >> presumably it will always be more vulnerable than other assets. sir, you were going to comment. >> yes. >> resiliency requires resiliency and capacity in the island. that's a given, but the renewable energy sources, the way it structured in our renewable portfolio standard, it was legislated back in 2010 and amended and it was designed to provide cheaper energy. producing it is lower if we only depend on diesel and petroleum methods. >> i understand that. the goal is a lower price. >> that is correct.
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>> mr. higgins put it very nicely, generation is not co- located with your consumption so i recall that coal powered power plant on one side of the island but it's the opposite side in san juan. that seems as if you're going to address that, you have to put some of this redundant, necessary for resilient capacity on the northern, i'm sorry on the opposite side of the island from the coal-fired plant. i assume that plant is in the works? >> yes, sir. one of the important initiatives that we are undertaking is to look at possibly, and hopefully repowering some of the northern generation both bringing the maintenance up to standard and repowering it with hopefully a liquefied natural gas imported and then burned in the generator.
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>> we saw that. going back to the former regime, i remember being struck at the plant outside san juan, it was rusted. it was just amazing how lousy the might engine maintenance had been of that plants. there were two ge jet engines sitting there, generating electricity. do you anticipate this sort of lng associated with these engines on multiple places around the island so i can back up these micro- grids and the 30% renewables? >> senator, for the first round we are thinking of perhaps a small, not a massive lng solution for the two jet engine installations you talked about, so instead of being fired by oil they be fired by natural gas. >> i thought they were being fired by natural gas. >> they are not today.
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the one at the san juan generating station that you allude to. it's also very fair to say that we are not proud of the maintenance condition of our fleet. whether it's the generating fleet or our transmission grid , it needs to be maintained better in our future budget calls for that. >> lastly, but to my point, it seems when we flew there, it seems as if you have this island way over here that was one of the last places to have the island restored, it was dark and other things were lit and you have the mountains separating three or four different places. you know exactly what i'm trying to describe. would you put that sort of two jet engine pack in each of those places or are we again going to have all these lines stretching over the mountains being vulnerable to a big storm. >> senator, what we are going to try to do through the resource planning process that the chair has addressed and mr. sobrino has also addressed
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and mr. walker has addressed, it's a modern, highly developed methodology for determining what the right mix of resources and grid improvements and technology should be to best meet the island's energy needs. it's clear we are not meeting them very well today. therefore the integrated resource plan should identify the very kind of things you're identifying where does the generation need to be? what kind of generation would make the most sense? we need to meet all the goals whether environmental or cost. >> let me stop you because i'm out of time, but i will say, one more question i would've asked, we just spent all this money rebuilding but it looks as if going forward we may redistribute. knowing that maybe that's how it had to be done, it does seem as if there is an inefficiency in resource allocation. maybe it had to be done that way but it does seem as if
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you're going to relocate from your testimony. i yield back. >> said thank you. senator smith. >> thank you madam chair. and very happy to be here today. thank you all very much for being here. i am new to the committee but i am so struck by the reality with hurricane maria we lived, american citizens lived through the second-largest blackout in the history of the world. it's incredible to think about. and yet, we are still working to recover from this. i'm thinking about what would happen if this had happened in my state of minnesota and we were still waiting to recover. i appreciate the complexities of trying to respond to this amazing disaster, but i would like to first go to mr. walker and mr. alexander and just tried to get at what you think our responsibility is in puerto rico. we have this committee which
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has to be the voice for puerto rico because there are no representatives for puerto rico on this committee. what is our responsibility to make sure we recover quickly from this? it feels like it's up to us. >> our responsibilities are tied to the stafford act and its to provide temporary interim repairs, not permanent repairs. the court has a long history in working with puerto rico. we have an area office there. we work on the project and we continue to be on projects. the jacksonville district is focused on puerto rico. our responsibility is to turn the lights on as quickly as possible and other missions as assigned. we are doing that to the best of our abilities. >> i appreciate this is complicated, as i said, but i'm glad to have this opportunity to figure out what we all can do to do better.
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i just can't help but think what would happen if we were in minnesota and we were coping with this. i would like to ask you about something related to your testimony which i thought was very helpful. we know with climate change we are going to be seeing more storms, more frequent storms, more intense storms in your testimony gets at really laying out the problem that we have in puerto rico with long-term failure to invest and modernize the electricity system. also we have the need for transformation. so that it's more sustainable, and as you say, more customer centered in the way that we do this. i always like to think about how we can have more affordable, resilient, and clean energy as a solution to that problem. could you talk to us a little bit about what you see as the federal policy changes that we should be considering from
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this committees level to help you to achieve that goal? >> the main driver in the recovery effort in puerto rico is really funding. the issue with maintaining the infrastructure, the truth of the matter is it was succumbed to a fiscal crisis. you have any minutes of pouty or entity that's involved in a fiscal crisis, typically what you will see is that the first budget item that goes down is capital expenditure and then maintenance cost. that explains why the san juan plant had rested infrastructure, why you had transmission lines that hadn't been replaced. the mere effort of reestablishing electricity was in and of itself an improvement of what we have before. something that we would appreciate, and the federal agencies like doe, fema, army
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corps of engineers or have been helping us out on this is to ensure that the infrastructure funds that are provided to the island reflect what is the best assessment not only from a conceptual stage appear in washington, but what we know puerto rico to be best for the island. >> thank you. do you see, i just want to ask a quick follow-up question, as we think about the goal of getting more resilience in the system, as well as more affordability, do we think having more renewables takes away from the resilience of the system? >> know, there are inherent difficulties with producing and providing energy and fuel to an island. that is part of the reality that puerto rico faces. we do need to make sure his while we strive to have cleaner renewable energy sources, we do provide for redundancy so that in the case that there's a catastrophic
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event. >> that's not the conflict. it strikes me that my colleague may have comments about this given the similar situation that hawaii has and a huge emphasis on renewables. madam chair, i realize i'm out of time. i appreciate this, and i'm also really interested in a follow-up as we go forward about who's in charge and how do we make sure the coronation happens that needs to happen so we can be successful. >> thank you, senator. senator gardner. >> thank you madam chair for your time and testimony. thank you for allowing this testimony to be held in thank you for the testimony of the witnesses. a few questions. mr. walker you talked briefly about one of these questions are ready. you describe how the doe provided technica technical assistance. i think you answered yes of a
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question as to whether these were used to identify micro- grid opportunities on the long-term role they can play. the model that you used on the micro grid modeling, will they be made available to future owners and operators of the grid. >> absolutely. my team is working with mr. higgins team. we have people in puerto rico today, both from the technical expertise as well as personnel from within my r&d organizations are needing with the national labs, providing those models. >> 's of modeling techniques, can they be used for regional or other national models within the continental u.s. >> absolutely. >> will be regulatory models that we can transfer to the 50 states? >> yes. we are building the model bigger and more sophisticated
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that will be both a planning tool and an operational tool with the idea that we will be able to transport the lessons learned while were building that model into the broader model for north america. >> if you mentioned doe is working with southern states energy board to develop a policy and legal framework to provide a legal legal framework for restoration efforts. what role is doe playing trustmark what's the timeline to deliver recommendations. >> mainly their role, the secretary and i met with the governor from mississippi, recognizing that our expertise within doe is on the technical side of the energy systems. we hired the southern states energy board to work with puerto rico mainly because both are already members and they have the expertise with regard to regulatory policy, working with municipal
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utilities. >> mr. higgins, as you oversee the rebuilding of the grid, you talk about resiliency. how broader the definition is that. you have the ability to not only withstand storms but man made physical and cyber threats as well with this new resiliency? >> senator, as the grid is redeveloped and much along the lines of what the secretary talked about, we will build in to some of these new systems, more resistance, more resiliency to a cyber attack. as we rebuild and redesign it grid to the newly adopted standards, and with the help of the federal government, which we appreciate, we will be up to build some of the structures so they are more resistant to the next storm that might come. >> you have the ability or authority to manage and high the team? what authorities does the government maintain. >> i was asked to come to puerto rico with the full knowledge that i could replace
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anybody in management that i felt i should replace. i have received no interference on that. the governor has made clear that i am an independent ceo have the ability to replace management as i see fit. >> so the legislature, what if any do they retain. >> the chief executive of the island sets policies for the island. my job is the head of a major state agency, albeit under an independent board is to carry out the policies. >> in terms of assigning or proving the management team, you have that full authority. >> completely. >> very good. go ahead. >> i would like to clarify that walt is the first ceo that was appointed to non- politically influenced process. he was selected through a headhunting mechanism and evaluated by committee of directors that was comprised of the independent and he was selected and compensation was established through that
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governing structure. we are very proud that we have this first non- politically appointed. >> thank you. you expressed frustration for both the governor's office and the impeding ability to push them toward the responsibility. could you talk more about that. >> yes sir. thank you. >> i have expressed my frustrations. what we see has been an overreach of the delegated powers of congress. i will ask congress to specify that they should operate within the commonwealth law and not against commonwealth law. as we see in congress, the delegated the management board duties, but not policy responsibility within the island. that remains completely within
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the commonwealth of puerto rico and where they saw the commission they would carry out their duties. for fiscal problems, the commission isn't self sustainable. our funding is constant rates. we have not been able to fully utilize our funding through the hiring of either external counsel or consultants or hiring personnel because of the law that requires the approval of the office of the governor. that has taken a long time to acquire. it has actually impeded the performance of the commission. >> thank you. >> senator cortez mastro. >> thank you. let me start with you. during our last hearing on this subject, it was made
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clear to the committee that the stafford act can restore damage only to the previous state which made no sense to puerto rico given the disrepair the electrical system within prior to the hurricane. in the budget deal we passed a provision was made without regard to the pre-disaster condition of a facility and allow flexibility to allow a larger system to be brought up to industry standards. the question is does this provision go far enough in enabling profit to rebuild? >> senator, i think the way it's written and subject to funding, it does go far enough. these are serial activities. you can't redesign or rebuild the system from scratch and completely upgrade it to the new standards. you have to get the power back on first.
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that has been a priority. as i understand the funding, as it's been explained to me and as i read it, provided it is funded, there is enough authorization, activity, and hopefully funding to rebuild the system so it meets modern standards. >> me ask you the same question. you think we need to take any further action in regard to the stafford act in order to receive resilience in puerto rico? >> thank you for the question. yes they do. when testifying in front of the house, i spoke to this a couple weeks ago and my point was there is an opportunity for us to allow engineering to be done to modify and make corrections with regard to design, particularly to add the resiliency. so, rather than to be held to what a standard may be, there are opportunities and i think puerto rico has presented many of those where we could have replaced and made decisions early in the restoration
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process to increase the capabilities. i can build that with double up poles with opposed to what the industry standard might be. i think the capability to allow those who are on the ground, making decisions with regard to the emergency restoration, to incorporate the ability to modify the system and to add capability whether it's through redesign or stronger equipment, even if it exceeds industry or the industry-standard. >> and that's true not just for puerto rico but some of the other islands. >> that's right. >> thank you. >> would you be willing to work with my staff as we address these issues. >> yes, ma'am. >> thank you mr. higgins, let me go back to a question that came up. i believe it was the chair who talked about this and the concern with the core leaving
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and my understanding with proper taking over. you mentioned in your response to the chair that as you take over these logistics, that there will be challenges to take over the logistics to engage in the continuing recovery. what challenges were you talking about? >> senator, thank you for the question. there is a massive amount of material both still coming in and that needs to be reintegrated into the warehouse system from the army's warehouse system that they very capably developed in order to fight the battle, so to speak. our people are now in the process of receiving all of that material and all of the paperwork that goes along with it so that everything is properly accounted for, along with getting all the material in the army warehouses, getting out of the army warehouses, that's a lot more things than the company was
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normally doing. in order to do that efficiently, we have asked for some temporary help, but our people feel they're capable of and i agree with them, of managing the ongoing material requirements that this transition period, where we are getting a lot more stuff and we have a lot more things to do, and we have to comply with fema to picture its reimbursable. >> so you say you will be getting help. who is providing the help. >> fema will fund some temporary help, i don't know exactly the source. >> would you prefer that the court extend its mission and stay and continue? >> we been delighted the wor with the work the core has done. at the end of the day it's not really their decision. were interested in how the work got done and the core engage contractors to do that work may have done a good job. they also took over the logistics operation which was very helpful. we just wanted done. we are not indifferent, we want the job done well, we
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have more contractors coming to the island to replace the core soon to depart contractors. we don't choose this is fema's choice but i think fema is making a choice that is dictated by what their guidelines are as well. >> thank you. >> senator lee. >> thank you madam chair. thank you for being here. i would like to start with mr. alexander. are you concerned about mismanagement? >> no, sir. i am not. we have been a partner, we been in collaboration since day one and we been working out of their headquarters. i believe it has been a partnership that has led to our ability to get as far as we have. >> are you aware of any ongoing investigations regarding the missing inventory information for warehouse five, located near puerto rico's generating
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station? >> sir, i am not aware of any. >> can you tell us why the raid was conducted january 6? >> i don't know if i would characterize that as a raid. i believe it was just some of our personnel were there and they happen and noticed there were supplies in a warehouse that had not been previously identified when we were working to inventory the stock on hand. that would ultimately help inform what we needed to procur procure. >> since that operation, whether you call it a raid or otherwise, do you have reason to believe there are other gaps in the inventory? >> no, i think the joint inventory was done and that's what resulted in the material we procured about 90% of the
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36 million items that we ordered and that's been delivered. i think we will find inventory will be suffice and allow them to not only have replenish stock but to finish the restoration. >> okay. mr. higgins, i like to talk to you for a moment. in november, before this committee, i asked governor about some of the serious issues with the management and operation. i would like to follow up on that by asking you directly, do you think there is mismanagement and corruption within the group? in puerto rico generally, and in particular we within the organization. >> i have no idea about puerto rico, i just am i don't know enough about it yet to know that. i can tell you this, with respect to the group, there
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are always going to be, in an organization of 6000 people, something that's going on that shouldn't be and we are going to vigorously investigate and go after anything that's not done the right way. similarly, i've told all the senior managers that were there when i came, it's time for you to decide if you want to be a part of the solution or you don't. if you don't want to be part of the solution, tell me now because if you don't tell me and i have to make a change it's not going to be nice. some may make it, some may not. i'm optimistic that some get it and it will be different in the future, but i have made quite clear you have got to be different, you have to be a different kind of leader and run the company differently than it used to be run. >> to the extent you are suggesting that they are no more susceptible or vulnerable to or the victim of mismanagement and corruption, than any other business organization or any other
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utility company, state owned or otherwise, i don't think you're suggesting that, are you? >> no, sir, i'm not. i'm simply saying within a group of 6000 people there's likely to be somebody that's not doing the job the way they ought to. hopefully it's just not doing the job as opposed to something corrupt, but anything we find that even suggests corruption will be seriously and thoroughly investigated and out with strongly. >> some of the things that have concerned me involve reports of staffing hired without experience or expertise required for the job that has sometimes resulted in the failure of big multiyear projects. widespread theft of power and building failures, outdated infrastructure systems that cause an unusually high rate of forced outages and generation units that are often technologically outdated, requiring reliance
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on very expensive fuel. are you aware of some of those problems and have you taken steps to address them? >> senator, several of the last few you mentioned were covered in my remarks. we do have maintenance issues with our generators, we do have environmental compliance issues with our generators and if they are not able to be run from their mental reasons, they have to be shut down. if our generators are not up to snuff maintenance wise but we do have to run a less efficient, more expensive generator. there's no question that's going on. that needs to be fixed and that's part of my mandate. >> thank you. i time has expired. >> thank you. >> thank you madam chair. a question for mr. alexander. in a may 6 article in the new york times, commanding general in the army corps of engineers was quoted as saying prior to puerto rico, the core had
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never repaired an electrical power grid of this magnitude as part of a domestic disaster response and could not predict the assignment from fema to restore the grid. do you believe the core should be tasked with good repairs in future natural disasters because there will be more. beyond its more routine task of bringing in generators, as you said, your immediate mission was to turn on the lights. so, should the core be able to do more than just turn on the lights in a situation like what happened in porter rico? >> thank you senator. the core is traditionally just on the temporary emergency power generators. we have done some great work in iraq and afghanistan but certainly nothing to this extent. it is not a core competency of hours. the decision on whether this should be incorporated in our
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portfolio services is not ours to make, but if it is made, then we would have to train our personnel and be resourced adequately to be up to execute that mission. a lot of this was done on the fly, we were able to get contracts in place quickly under federal acquisition regulations due to large contract vehicles that we had in place. >> so you say the decision to expand the mission of the core is not yours. whose decision is it? >> the determination for the grid restoration mission to end at midnight on the 18th, that decision is by fema. we are there under the stafford act authority and under the associated resources. if we run out a money on the 18h that we run out of authority. i would tell you, based on a statement made earlier, i would be remiss if i didn't say that thousands of corps of engineer employees that have
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deployed to serve the citizens of puerto rico, it's not in our culture to walk away from the mission when it hasn't been fully accomplished. we follow orders. >> i know they are on the big island right now so this is not denigrating anything that fema is doing. to ask whether or not we should, and this is such a very unique island, just as why is, whether there should be some greater flexibility under the stafford act to allow you to do more and to have more training, and of course, resources provided. >> senator, if i may answer this question, i do not believe the core should be focused on emergency restoration for power grids as an expansion of their duties. the core was assigned a mission by fema because proper did not qualify for mutual
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aid. the standard within the industry is any utility called for mutual aid and command resources across the entire united states and canada to restore events. but for that failure to call for mutual aid, that is what resulted in fema asking the court take the restoration project. in my nearly 30 years working in the industry, it's the first time i've never seen mutual aid called for. >> services responsibility for them to call for mutual aid? mr. higgins, has somebody rectified this mission? >> we did eventually call for mutual aid. at the time when hurricane maria hit puerto rico, all of
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the utilities and the company that would be providing usual work were essentially busy in florida and texas. before that, after irma they had hired contractors to help in the restoration process and the mission for the core as i remember, because i was there, was dying because they asked the governor to sign it so we can have energy in 40 days. it's a little more compensated than as narrated before. >> and not sure that's accurate. >> i was there. >> as was i. >> obviously there needs to be more coronation because we can expect various weather conditions to be hitting simultaneously in all parts of the country and our territory. i think this is something that needs to be resolved. mr. walker. >> just for the record, the request for mutual aid came on october 31. >> and the hurricane hit when?
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>> late september. >> september 20 for the contractors were there in five days. >> does that sound like an area for rectification? i have run out of time. i will submit further questions relating to the flexibility that we provided under the stafford act. >> thank you senator geraldo. i will just share that one of the impressions i had one we visited less than a month after the hurricane hit was the difference between u.s. virgin islands and puerto rico. one had teed things up so the mutual aid assistance was going to be there in anticipation of the disaster. literally, on the day after, there were crews coming from the continental united states into usvi to help with the debris cleanup. the decision not to act for
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four months "after words" was one of those decisions where you look back and say we could have seen aid, we could have seen a different effort in terms of what could have come to puerto rico more readily. a lot of money morning quarterbacking goes on but i do think that clear example of one place being prepared in anticipation of the disaster and another hoping to get lucky and they didn't get lucky. >> thank you madam chair. i want to thank you and senator cantwell for arranging this hearing on this important topic and acknowledge the role that senator nelson played in trying to encourage us to work on this problem.
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i know he has exerted a great deal of leadership on this issue. i'm a little unclear. we now have 90% restored. does that mean the system is rebuilt and have we rebuilt the old vulnerable system? >> mr. alexander. >> have we gone beyond building a new system? in other words, are we patched up to work for now or have we precluded the opportunity to build an entirely new and modern system? >> our mission wasn't to build a modern resilient system. our mission was to do the measures to get power restored. in that, the department of energy has been supporting us. i think the longer-term resilience plays a heavy hand in that as well as. [inaudible] the notion that our chief engineers would say puerto
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rico would have had power in 40 days is the first time i've ever heard this. they've made it very clear on expectations on when it would be established, different dates and different percentages and it was not consistent with what i believe the governor unilaterally declared. >> so with got the system back up and running, and again my question is whether we have sort of gone by the moment when we might have built a different kind of system. who is in charge? who makes the next decision about what the system will look like? >> i asked that question the last time and i'm still not sure i know. >> who will make the decision to go to a more distributed system as opposed to the current baseload diesel plan and wire across the aisle. >> regarding the structure for generation and how that is done in perrigo, that is a
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policy choice handled through the legislative process. regarding infrastructure funding and investment, especially. >> and was concerned, before we even get the funding, i want to know who is going to decide do we maintain the current baseload long wire system, or do we go to a different kind of system? is that -- >> as in any state, it is the government through its legislative process. >> no it's not true in my state. the utilities make proposals. legislature doesn't design grid. >> in perrigo there is a public corporation that is subject to certain legislation. that's why we want to transform it to have private operators so it's completely depoliticize and disconnected from the legislative process and it can look like a utility
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in the mainland. >> mr. higgins, do you have the authority to redesign the system? i have a very limited amount of time. >> through the resource planning process into the offices of the various initiatives that have been undertaken, providing longer-term funds and opportunities to make the grid more resilient, we can do exactly what you say we can do. we can figure out a better way to do it. >> what's the price of electricity today. >> around 20 cents a kilowatt hour. >> so were building a project in the state of maine and our costs are way below 20 cents in its competitive. i just read brashear we were down to six cents. kilowatt hour for solar. why isn't this the natural response in puerto rico? why are we doing 47% diesel, 70% coal, 34% gas, 2%
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renewables in a state with one of the greatest solar resources and history of the world? >> senator, i believe it's fair to say that that's probably where things are going to go, but that has to be taken through a process that everybody buys into, properly funded, plan made for how we get rid of the old generation, where to locate the solar, how to put individual and distributive solar projects around, how to bring liquefied natural gas to the island so we can be cleaner. >> i get back to my initial question. will that be a political decision, who is going to decide what this new grid will look like? >> i believe it will be my decision subject to the oversight and through the oversight board which has to approve my integrated resource. >> understand this discussion of divesting generation from transmission which has happened lots of places in the u.s. including in my state.
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who will regulate the remaining wires? i understand that will still be a public company or publicly owned company. will there be a regulator of the wires company. >> the energy commission will continue to be the regulator. >> in the wholesale production of energy will be unregulated up to competition? >> no, sir, that would also be subject to regulation and subject to the concession or the contract signed by the party. >> i appreciate the constraints but i really appreciate you being here, but i hope we don't lose either the big picture that puerto rico could go from a challenge to a world leader given the natural assets of the island has and the plunging solar prices since 2010. it's an enormous opportunity. i look forward to working with
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you. >> thank you medicare. >> senator daines. >> thank you chair makowski and ranking member cantwell for holding this hearing to reevaluate progress made and certainly the lessons learned in addressing the energy needs and others nearly six months following financial disaster. like other, i was troubled to learn they had contracted with an energy company, although based in my home state, with minimal experience. though i understand the need to move quickly, given the island's financial state, it's equally as important that these decisions are made with the best interest of ratepayers and taxpayers. what kind of oversight is in place with respect to the finances? the other part of that question, in your view, do they have sufficient internal controls in contracting
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expertise? >> following the contracting issue that you alluded to there is limited receivership over the contract process called the oc pc, the office of contract and procurement. it has conducted its oversight of the procurement process. we have to submit those contracts to the fiscal oversight board. the contracts, when they are to be reimbursed by fema are not subject to preaudit and that has also been conducted successfully. regarding the organization itself, it is subject to fiscal oversight by the government.
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>> when were those additional controls put in place. >> i remember the exact date but they were following, i believe they were in october and november. november. >> had they been in place before, do you think it would approve vented this issue. >> learning from what we've seen in the usvi and hawaii and other islands, we would implement best practices like conducting rfp and activating mutually needed agreements before hurricane season. we had limited resources from the mainland. the usvi is much smaller than puerto rico. bringing in resources to the island was difficult. we do have to work on our emergency planning.
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>> they have had serious problem with debt and mismanagement. given the disaster situation, will customers be able to pay for the service? >> senator, i'm not sure exactly understand your question. is the question about the rates that customers pay? >> yes. >> we are some distance from a final decision on how it will be restructured and taken to the bankruptcy judge, if you will, and how all the different contracts and all the different activities, we now have a certified budget and that will guide us in that certified budget will imply some rates that will have to be submitted to the organization for approval so we are in the process. the goal of many of the activities that are being undertaken inside the entity are to reduce the cost pressures and reduce the cost so there's less upward
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pressure on the rate. the bottom line is, with the federal help that we are getting, and with cost control measures underway, and with an adequate set of solutions to the many contractual problems we have, the rates are going to end up being fair and acceptable to the customers, given that there are ready to high. they will need to come down over time. >> in your written testimony you mention your concern about having only two months of operating expense and liquidity. how can this be addressed? >> in the short-term, we need to start doing a better job, which we are trying to do, of collecting from our customers in real time. we are only able to get about 80% of the customers build because the automated meter reading system depends on substation devices that have not been replaced, and the substations, in many cases,
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are still not repaired. getting that cash flowing in, which is now about $50 million a week will help a lot. the continuing support of the bankruptcy court for loans that would come from the commonwealth of perrigo. they are actually who we borrow from. they will help us bridge through. we will be back asking for more of we need it in the next few months and the new fiscal year. >> thank you. senator cantwell. >> thank you madam chair. i apologize for not being here earlier. this is an important hearing. i appreciate all the witnesses being here and the attention to detail. it's good to see you. i know we fought another battle together to make sure ratepayers and taxpayers got a fair deal after a lot of market manipulation. it gives me some degree of comfort to know you're helping in this, although i have to
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say this recent run up in that security is with hedge funds are profiting off this is some of the frustration that we were concerned about before. to me, it's really shameful. we are trying to get something done at taxpayer expense. we will save, will save this to a different oversight hearing. i did want too, i did put out a larger statement that i won't go into now, but mr. walker, i wanted to go back, some of my colleagues were asking about the blackout condition. what was the main cause of that? >> based on the information we know when that happened, working with mr. higgins, the thing that i think people neglect is that the system is not in its normal state.
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there are two main transmission lines that go from the south to the north on the 230 kv system. one line is out and being worked on, which places all of these, or the majority of the north-south corridor, basically relying on one line. : >> it think you've done more than have been working with folks, relay experts to look at the details. looks like there's an over trip mechanism based on the abnormal state of the grid. >> i think your comment is very
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appropriate. the grid is very weak right now because the number of lines. notably, one of the main transport lines to take powerful self to the north. when the incident occurred the cost of protective action to start on an adjacent line the way they were set caused an entire set of lines to trip off of the new had a mismatch. electric system cannot handle a mismatch for long. then, things start stripping. we didn't have enough generation to hold the load. therefore everything started to trip. it protects the system by turning things up before it's damaged. >> was the something originally fixed or reset? >> no. >> so it didn't have anything to do with whitefish?
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>> no. the issue starts with not enough generation in the north and too much in the south. the second thing, when the grid is in a back condition which it is, until the second line is built you are vulnerable to any incident. third, we have to look at -- and this is what the department of energy is helping us with is where the workers, are there things we could do to better operate in these abnormal conditions that exist? we are getting help on all three fronts. >> to this proposal in the energy commission and changes, to me it would put the reforms, i don't know that any utility operates like this in the united states. basically considering what is
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recommended as far as the energy commission. mr. alexander, do you think this will make us less or more independent? >> that is not an area that we delve into. i do not have an informed opinion. >> okay, to have any comments? >> as the recipient of regulatory activity in many places i have lived, believe nothing is better for a customer in the long run than a fair, firm, strong, well manage entity. at the end of the day customers get better rates, better reliability and utility knows what the rules are the operate piatt. >> that's why am concerned about having all of the appointees and
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then by one entity and being able to ignore it. again, that is something we will keep our island and watch carefully for the future. my colleagues were discussing distributed generation, to think we have enough in place to focus on that given this load issue? >> to you mean enough distributed generation? enough in the framework of discussion, my colleagues were asking, i think it's a viable question we have it all the time as it relates to the oversight. during some of the changes recommended to think there is a framework that exists in puerto rico to properly vet? >> more work will need to be
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done make it work well. regulatory and legislative work. but we do need distributed generation. it will be adopted as part of that process. >> can you get back to us what legislative ideas you think we might need to make that a reality? to me, i know her colleagues come i don't know what they'll think. but, i hear them and they think this tragedy happens and will build this most resilient grid. we basically got it up and running to the best of our ability. we know hurricane season is about to hit again. people come back and said without we had the most resilient grid. we put some money toward that. but we know that distributed generation could help in the reliability.
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we want to rebuild their own grid and make it smarter. the key thing for us in puerto rico is to make sure the regulatory process allows from distributive generation that will help us with resiliency. if there are various to that i want to know. my colleagues would as well. >> i do not mean to imply any federal action is. we talked about several initiatives and policies and that's what might be needed to make this work. >> okay, great. thank you. >> thank you senator. a few more follow-up questions. in your testimony, you mention the report on the potential options and solutions for the grid. he said it is nearly complete. when might see that report?
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>> the final draft is due on the 30th and will be presented the report at the next meeting of the undersecretary's which i believe is next wednesday. then we will distribute the report. >> we look for its that. you also mentioned talking about micro grids, the national labs work through the microbe grid design tool. you indicated in your testimony that you had identified some key locations. share with us what you're looking probably is important, is where they are, is whether or not micro grids have the support
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to use the lands and is basically signed on to the fact to have this opportunity, as opposed to obtaining it from central. >> the focus on micro grids is diverse. the initial work was with a puerto rican development corporation who owns 200 pieces of property throughout the island. we were working with them to help facilitate providing better quality for a number of the customers, particularly those out of power to ensure the vitality of the and remains intact. in addition to that work being done were working to identify the last mile isolated communities where we can do
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that. also with fema and the core of the locations where we continue to have critical infrastructure locations. by providing those micro good capabilities the next time an event like hurricane maria is presented to us, there'll be some level of normalcy that will be established to help facilitate the health and safety of those on the island. >> there has been discussion about the smaller islands offer puerto rico which, you look at them and say it makes total sense that these would be perfect opportunities for the
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microbe grid pilot project. can you give me an update? >> so those areas are being designed to be a microbe grid where it will be separated from the mainland initially. there's two undersea cables that presently it. there was an rfp that one out for localize generation that is presently there with work being done to develop the best micro grid strategy. >> we don't have that strategy identified, weathers wind or solar agen generation. >> there is an rfp going out seeking the best information from providers for those strategies. will be working to evaluate the
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rfp submittals once they come in and utilizing that expertise. >> mr. higgins would like an update on restoring power to some of the more remote and mountainous areas when several of us on the committee went to puerto rico in october, we went out to an area that was isolated in the sense of where it was. you are left with the impression conversations you have with people in certain places. the conversation we had with the young woman who is five months pregnant and looking across this cut through the earth, this
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ravine that separated us. the road was taken to issue separated from the home she had just bought. she had not been able to move into it because of the damage done not to her home, but in order to access her home. i was thinking about her a few days ago and the fact that she's had had that baby by now, hopefully all is well there. i'd wondered if she was ever able to get back to her house and if her home has been restored to power. can you tell me how things are looking there and the central mountain areas? and what the plan is? >> thank you for the question. you have identified the hardest part of this restoration.
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were down to where were getting less than one tenth of a percent additional customers restored on any given day. that's not very many. i use as as an example because it is about 1500 people in the field working everyday to restore these customers. that's in addition to the three or 400 working on the transmission line. there are many situations like the one you described. no question that is going on. many of our employees still don't have power because they live in similar places. in addition to continuing to work down the line and that's what they do, were trying to identify the ones that are too hard to get to in any reasonable amount of time. quite literally your crossing a
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canyon where you're going through almost a jungle or rain forest trying to refinish a line or put back up a line that is 1000 feet long and down. were making progress, not as fast as anyone would like. were doing about as good as you can do in these areas we can barely drive to trucks past each other. a lot of people are working on it. we try hard to get there as fast as we can. it will never be satisfactory for the person his power has been a for seven or seven and half months. >> host: in these areas for the have been without power for seven months, the schools have
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been taken care of, they have generators. so kids are in schools, are they? >> yes, school started and the schedule changed,. >> jumping around here, mr. sobrino, you have talked about the sale of the asset from proper. given the age and the condition of the electric power plant, who is going to buy them.
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>> that's a great question. will conduct is a market process. what we see is a lot of the preppa is to continue to operate them as new generations are constructed. so were having intermediate agreements in this process. >> if i'm looking at this as an opportunity having seen some senator cassidy pension the conditions it wasn't exactly enticing. understand there's an opportunity because of location, is this something that decisions on this would be delayed as
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potential purchasers look to see what is going to be stood up. there's just so much a play right now. you have fema, and the core who have been in place for eight months. you have so much moving around. a great to of uncertainty. were talking dimension part of your responsibility is to make sure you have a grid that is resilient. you're preparing for the next hurricane season. the assistant secretary said we
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are not in a normal state and that's why we saw the most recent blackout. hurricane season is a month aw away, the chorus leaving you have a transition going on and it may be uncomfortable or painful in the process. i have a hard time that anyone will be this is a real opportunity to commit to purchase these assets. >> the process to sell an asset what were working on is getting legislative authority in puerto rico so we can market with parsable investors. whatever happens, there will be
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the transmission distribution system. what we have found in the past is these if we contract the private operator or provide a long-term concession. were trying to find ways to following two traps from the past. there are challenges. we are not shying away. we have asked for help and we need that help. we invite that help to the island. but you have to juggle what people have to do in the energy commission or in the private sector. we all have to continue our operations. that's what we are working on that to make sure that what happened in the past will not
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happen again. >> your comment to depoliticize to the extent possible. we recognize you have difficult history with the politicization of your power grid. that has been a real drag on your ability to move beyond it. and the roots of many of the questions presented. as far as the coordination and working together, how well or the governor, the board, and proper coordinating with each other with the other. it is one thing to sit here and
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share a table, but to believe all of the necessary entities that must be coordinating to allow for a better energy future for puerto rico, to believe that is happening? i will ask each of you. >> part of what we did two months after the hurricane we had that in the p3 authority. we were following best practices trying to centralize the coordination effort. the coordination with fema and the u.s. army corps of engineers has been improving substantially. we can discuss differences of what happened in the past. what the truth of the matters
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federal officials in puerto rico officials have been working together for months and have done great work. with the oversight board in preppa, we have to conduct fiscal and budgetary planning. and from the regulatory point of view we have been working hard on improving relationships with the regulator. there was confusion because of what are the authorities between the regulator now that it is entitled three. were working together to figure them out. that working together is happening today today and will lead to a more successful, stronger, and better puerto rico in the future.
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>> my job is not to figure out what the policy should be, but to implement it. when the legislature and the governor working with the oversight decide that the bright future for the electric utility is to go a certain way, my job is to get ready. >> to feel you have clear direction now? >> i have a good general direction at this point. that is what is being debated in the legislature. >> from the private side, was the observation? >> the importance and value of the preppa it's a huge market. as we speak, we are having an international energy event with dozens of companies interested
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in competing for this market. so there's going to be a huge appetite to be part of this. on the energy committee that pursuant of the report in order to keep you informed and assist you in helping. we will present every two weeks and how they are progressing. in terms of the relationship between the government and the agencies, no pain, no gain. i believe there is some difficulty. but they will be fine. so, i hope the conclusion will be great.
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>> thank you. i am encouraged with what i am hearing. there is still work to be done to delineate responsibilities between the different agencies. there are many agencies that have interaction with decision-making and overlap. we have issues i included as part of the attachment so that we can work and measure responsibilities so we do not step on each other's jurisdictions. we had conversations and the policy starts within the government and the commonwealth legislature. and they rely on the energy
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policies. but there implemented and relies on the commission in preference to carry a close policies or whatever future transformation takes place. i'm encouraged with what i am currently hope the conversation keeps have been so we get where we can all operate for the benefit of the people of puerto rico. >> i had one more question about this national standard that you mentioned for construction going forward. is a standard what is being utilized now as we are operating under these new provisions within the stafford act that would just authorize recently?
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or how does this fit in? >> what we did in restoring the system so people have power was to put it back the way it was. it was designed standards that evolved over many years. they were not generally adopted throughout the united states. they were professionally competent standards. what we have said based in part on the findings and difficulties during the aftermath of hurricane maria, having issues with lineman who came from the other state to know what they were encountering, we are now going to reconstruct the system and all new construction would be to the new national standard which exists already.
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it is called the rule utility standard. that will identify the practices that need to be met as we reconstruct things. as we rebuild the system to be more resilient and able to withstand. >> i understand that. but where you are rebuilding twice. we rebuild the first time to get things up and running, and now, were going to improve the system. he was my hope with changes to the stafford act that we would do it once. i understand logistically the immediate need after an emergency is to get power back to the people. with this going forward the
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standards, does this meet what you thought we needed to do with the dressing the stafford act limitation? >> no, senator. the components of the stafford act get into redesign in a short time and make those decisions to install. and having spoken to them about the standards this is an establishment with standard that will be incorporated with new projects going forward. the resiliency needed comes from a number of different things. standards is one component but the design and how certain components are integrated.
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so what type of construction is used on certain poles the ability for the system to disconnect itself and re- aggregated, things like that are not components that will be impacted. there was simply defined all things like standard pull size, i know one thing we struggled with going through the emergency restoration component was how we didn't match up in the mainland so that when those crews moved from the mainland to puerto rico or other areas they can bring their own stock with them and re


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