MANAGEMENT CRISIS AT THE PUERTO RICO ELECTRIC POWER AUTHORITY AND IMPLICATIONS FOR RECOVERY OVERSIGHT HEARING BEFORE THE COMMITTEE ON NATURAL RESOURCES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION Wednesday, July 25, 2018 Serial No. 115–51 Printed for the use of the Committee on Natural Resources ( Available via the World Wide Web: http://www.govinfo.gov or Committee address: http://naturalresources.house.gov U.S. GOVERNMENT PUBLISHING OFFICE 30–886 PDF WASHINGTON : 2018 VerDate Mar 15 2010 10:23 Nov 29, 2018 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 J:\115TH CONGRESS\FULL COMMITTEE\07-25-18\30886.TXT DARLEN COMMITTEE ON NATURAL RESOURCES ROB BISHOP, UT, Chairman RAU´ L M. GRIJALVA, AZ, Ranking Democratic Member Don Young, AK Grace F. Napolitano, CA Chairman Emeritus Madeleine Z. Bordallo, GU Louie Gohmert, TX Jim Costa, CA Vice Chairman Gregorio Kilili Camacho Sablan, CNMI Doug Lamborn, CO Niki Tsongas, MA Robert J. Wittman, VA Jared Huffman, CA Tom McClintock, CA Vice Ranking Member Stevan Pearce, NM Alan S. Lowenthal, CA Glenn Thompson, PA Donald S. Beyer, Jr., VA Paul A. Gosar, AZ Ruben Gallego, AZ Rau´ l R. Labrador, ID Colleen Hanabusa, HI Scott R. Tipton, CO Nanette Diaz Barraga´n, CA Doug LaMalfa, CA Darren Soto, FL Jeff Denham, CA A. Donald McEachin, VA Paul Cook, CA Anthony G. Brown, MD Bruce Westerman, AR Wm. Lacy Clay, MO Garret Graves, LA Jimmy Gomez, CA Jody B. Hice, GA Nydia M. Vela´zquez, NY Aumua Amata Coleman Radewagen, AS Daniel Webster, FL Jack Bergman, MI Liz Cheney, WY Mike Johnson, LA Jenniffer Gonza´lez-Colo´n, PR Greg Gianforte, MT John R. Curtis, UT Cody Stewart, Chief of Staff Lisa Pittman, Chief Counsel David Watkins, Democratic Staff Director (II) VerDate Mar 15 2010 10:23 Nov 29, 2018 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 J:\115TH CONGRESS\FULL COMMITTEE\07-25-18\30886.TXT DARLEN CONTENTS Page Hearing held on Wednesday, July 25, 2018 .......................................................... 1 Statement of Members: Bishop, Hon. Rob, a Representative in Congress from the State of Utah ... 5 Prepared statement of ............................................................................... 6 Gonza´lez-Colo´n, Hon. Jenniffer, a Delegate in Congress from the Territory of Puerto Rico ................................................................................ 9 Grijalva, Hon. Rau´ l M., a Representative in Congress from the State of Arizona, prepared statement of ............................................................... 6 Soto, Hon. Darren, a Representative in Congress from the State of Florida ............................................................................................................ 9 Vela´zquez, Hon. Nydia M., a Representative in Congress from the State of New York ................................................................................................... 8 Statement of Witnesses: Bhatia, Eduardo, Minority Leader, Senate of Puerto Rico, San Juan, Puerto Rico .................................................................................................... 24 Prepared statement of ............................................................................... 26 Questions submitted for the record ......................................................... 30 Emmons, Thomas, Partner, Pegasus Capital Advisors, New York, New York ...................................................................................................... 45 Prepared statement of ............................................................................... 47 Questions submitted for the record ......................................................... 48 Spiotto, James, Managing Director, Chapman Strategic Advisors LLC, Chicago, Illinois ............................................................................................. 30 Prepared statement of ............................................................................... 32 Questions submitted for the record ......................................................... 39 Svanda, David, Principal, Svanda Consulting, Clarksville, Maryland ........ 17 Prepared statement of ............................................................................... 18 Walker, Hon. Bruce, Assistant Secretary, Office of Electricity, Department of Energy, Washington, DC .................................................... 11 Prepared statement of ............................................................................... 13 Questions submitted for the record ......................................................... 15 Additional Materials Submitted for the Record: List of documents submitted for the record retained in the Committee’s official files .................................................................................................... 80 Nevares, Ricardo Rossello´, Governor of Puerto Rico, prepared statement .. 1 (III) VerDate Mar 15 2010 10:23 Nov 29, 2018 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 J:\115TH CONGRESS\FULL COMMITTEE\07-25-18\30886.TXT DARLEN VerDate Mar 15 2010 10:23 Nov 29, 2018 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 J:\115TH CONGRESS\FULL COMMITTEE\07-25-18\30886.TXT DARLEN OVERSIGHT HEARING ON MANAGEMENT CRI- SIS AT THE PUERTO RICO ELECTRIC POWER AUTHORITY AND IMPLICATIONS FOR RECOVERY Wednesday, July 25, 2018 U.S. House of Representatives Committee on Natural Resources Washington, DC The Committee met, pursuant to notice, at 2:41 p.m., in room 1324, Longworth House Office Building, Hon. Rob Bishop [Chairman of the Committee] presiding. Present: Representatives Bishop, Young, Gohmert, Lamborn, McClintock, Thompson, Labrador, Tipton, LaMalfa, Denham, Westerman, Graves, Radewagen, Gonza´lez-Colo´n; Grijalva, Napolitano, Bordallo, Sablan, Tsongas, Lowenthal, Beyer, Gallego, Barraga´n, Soto, Clay, and Vela´zquez. The CHAIRMAN. We welcome you all here today to our Natural Resources Committee hearing. We call this to order. The Committee today is meeting on what is titled, ‘‘Management Crisis at the Puerto Rico Electric Power Authority and Implications for Recovery.’’ I want to emphasize our goal is that last phrase, the implications for recovery. I ask unanimous consent that Mr. DeSantis, Mr. Gutie´rrez, and Mr. Serrano, if and when they show, be allowed to sit with the Committee and participate in the hearing. Without objection, that will be so ordered. Under Committee Rule 4(f), any oral opening statements in the hearing are limited to the Chairman, the Ranking Minority Member, and the Vice Chairman. This will allow us to hear from our witnesses sooner and help Members keep to their schedules. I ask unanimous consent that any other Members’ opening state- ments be made part of the hearing record if they submit them to the Committee Clerk by 5:00 p.m. today. Once again, without objection, so ordered. Or without pausing, so ordered. I would also like to submit for the record the statement from the Governor of Puerto Rico, who sent it last night and is unable to attend today’s hearing. Without objection, so ordered. [The information follows:] PREPARED STATEMENT OF THE HON. RICARDO ROSSELLO´ NEVARES, GOVERNOR OF PUERTO RICO Governor Ricardo Rossello´ Nevares of Puerto Rico submits this written statement for the record in connection with the U.S. House of Representatives Committee on Natural Resources oversight hearing entitled Management Crisis at the Puerto Rico Electric Power Authority and Implications for Recovery, scheduled for July 25, 2018. This statement covers (1) Puerto Rico’s vision and the ongoing transformation process of the island’s energy sector, (2) certain recent events that have stabilized (1) VerDate Mar 15 2010 10:23 Nov 29, 2018 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6621 J:\115TH CONGRESS\FULL COMMITTEE\07-25-18\30886.TXT DARLEN 2 the management of the Puerto Rico Electric Power Authority (‘‘PREPA’’), and (3) the proper role of the Federal Government in facilitating the transformation and future of PREPA and the Puerto Rico energy sector. As the Committee is well aware, I took office during an unprecedented fiscal and economic crisis that jeopardized the very future of Puerto Rico. The first 18 months of my Administration brought both expected and unexpected challenges, including two catastrophic hurricanes that left the island without power, water or communica- tion. Puerto Rico’s efforts to recover from the hurricanes and address our financial issues have been, at times, complicated by the many layers of bureaucracy that come with an oversight board and emergency management personnel. Despite these challenges, my Administration has worked diligently to address the myriad issues facing Puerto Rico. The results of those efforts are evident. For exam- ple, recent figures show an increase in the level of employment and a reduction in the level of unemployment for June 2018 when compared with May 2018, recent sales tax revenues appear to exceed pre-hurricane levels and the Federal Govern- ment, through FEMA recently signed the agreement to grant Puerto Rico access to Community Disaster Loans. With regard to the electric sector, we have moved aggressively to be in a position to attract private investment for the island, modernize the island’s energy grid and create a system that is more resilient and reliable. Through the transformation process, Puerto Rico has the opportunity to leapfrog into energy 2.0 and to create an energy grid that can serve as a model for the world. I was encouraged by the recognition of our efforts in