LegiStorm

Summary:

On September 20, 2017, Hurricane Maria made landfall in Puerto Rico as a Category 4 storm with sustained wind speeds of over 155 miles per hour. The hurricane also brought torrential rainfall with a range of 15 to 40 inches or more in some places, resulting in widespread flooding across the island. Puerto Rico’s office of emergency management reported that the storm had incapacitated the central electric power system, leaving the entire island without power as the island’s grid was essentially destroyed. Even before the 2017 hurricane season, Puerto Rico’s electric power infrastructure was known to be in poor condition, due largely to underinvestment and the perceived poor maintenance practices of the Puerto Rico Electric Power Authority (PREPA). As of the date of this report, the most urgent need in Puerto Rico remains the restoration of power to the island, where the greatest challenge will likely be access by repair crews to rural areas due to storm-damaged roads and bridges. The government of Puerto Rico was in a fiscal, economic, and social crisis before Hurricane Maria destroyed the electric grid on the island. PREPA’s massive $9 billion debt (incurred before the damage from Hurricanes Irma and Maria) was a particular problem. To address the lack of federal bankruptcy options (due to the island’s special status), Congress established two processes for debt adjustment in the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187), enacted at the end of June 2016. Title VI set out a process for voluntary collective action agreements, similar to those PREPA had been negotiating with creditors since 2014. Title III set out a process that draws on procedures from the U.S. Bankruptcy Code. PROMESA also established a Financial Oversight and Management Board for Puerto Rico (OB) that required PREPA to draw up a fiscal plan. While PROMESA endowed the OB with wide authorities, the governor and legislature of Puerto Rico retained substantial control over public priorities, within constraints of fiscal plans and other provisions of PROMESA. The OB decided to put PREPA into the bankruptcy-like process of Title III on July 2, 2017. While the Federal Emergency Management Agency (FEMA) and the U.S. Army Corps of Engineers (USACE) are focused on simply restoring power, the potential arguably exists under current law for FEMA and USACE to restore the grid meeting existing, modern standards. Longer term, hurricanes and extreme weather will continue to threaten the Caribbean, necessitating consideration of infrastructure hardening and improvements to make the system more resilient. Building a modernized, flexible electric grid, capable of incorporating more renewable sources of electricity, underpinned by more efficient natural gas combined-cycle power plants and energy storage, may help Puerto Rico accomplish these goals. Questions are now being raised as to possible options for rebuilding the electricity grid on the island, given PREPA’s debt problem. The perceived failures of PREPA in managing the existing system, and an apparent lack of transparency with regard to decisions (both before and since Hurricane Maria), have led to calls for a new electricity system regime to lead the rebuilding and modernization effort. Should Congress decide that alternatives to PREPA be considered for this endeavor, the question of what entities could replace PREPA will likely arise. This report explores several alternative electric power structures to PREPA for meeting the electricity services and needs of Puerto Rico. The ability of Puerto Rico and its citizens to assume the burden of paying for a rebuilt (and possibly restructured) electricity system is doubtful. Modernizing Puerto Rico’s grid, and taking the next steps to incorporate resiliency, could be expensive. None of the options discussed provides a silver bullet solution to the issues of the grid in Puerto Rico. Congress may consider whether the efforts to restore electric power in Puerto Rico need to progress beyond simple restoration of electricity, and require new investment and oversight by the federal government.