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CPI: Uncertainty over federal funding puts Puerto Rico’s flood-prone power substations at risk

COR3, the agency in charge of recovery in Puerto Rico, holds FEMA responsible for excluding that multimillion-dollar expense because of the methodology it used to estimate the damage to the electrical system after hurricanes Irma and María.

By Vanessa Colón Almenas | Centro de Periodismo Investigativo

It was not until April of this year that the Central Office of Recovery, Reconstruction and Resilience (COR3) formalized in a letter the request for more funds from the Federal Emergency Management Agency (FEMA) to finance the elevation in 87 substations and transmission centers of the electrical grid that are in flood-prone areas.

One of them is the Las Acacias substation in Cabo Rojo, which was underwater in August when Tropical Storm Ernesto passed near Puerto Rico. Thousands of customers were left without electricity in parts of Cabo Rojo and Hormigueros for up to two days last August after the interruption of the energy services supplied by this substation.

Another is the Cataño substation, whose elevation was estimated two years ago at nearly $7 million with mitigation funds.

Neither COR3 nor LUMA Energy, the company in charge of the transmission and distribution of electricity in Puerto Rico, told the Centro de Periodismo Investigativo (CPI) the total cost of the work to elevate the substations and transmission centers located in flood-prone areas. LUMA only ruled out that each could be estimated at around the $7 million invested in elevating the Cataño substation. Meanwhile, Manuel Laboy-Rivera, executive director of COR3, limited himself to saying that the cost would be in the millions.

COR3 claims that in the methodology used to calculate the expenses for damages to the electrical system after Hurricane María in 2017, FEMA excluded “associated costs” for elevating these substations. The associated costs of this omission include engineering services, disconnection and reconnection of electrical service, building foundations, and the physical elevation of the substations. However, FEMA assures that the available money can indeed cover those costs.

In the letter to FEMA, Laboy Rivera states that these costs could negatively affect the ability to complete the agreed-upon work. He told the CPI that the figure is “significant.”

COR3 did not explain why it was now, four years after the funds were obligated to repair these substations, that they noticed this flaw. The obligation of funds is money committed by FEMA that is transferred to COR3 for disbursement.

“It’s not just the [elevation of the] substations; there are also [mitigation works on] the dams and reservoirs of the [Electric Power] Authority,” said Laboy-Rivera, referring to the Guajataca dam in Isabela and Guayabal in Juana Díaz, the hydroelectric plants of Toro Negro in Villalba and Río Blanco in Naguabo, and the irrigation canal systems of Isabela, Lajas, and the south coast, located in parts of the municipalities of Patillas, Arroyo, Guayama, Villalba, Juana Díaz, Salinas, and Santa Isabel.

A substation is where energy is distributed at a lower voltage; it transforms from transmission or sub-transmission lines to distribution voltages. (Photo taken from Facebook).

When the CPI asked who is responsible for not including these costs, the executive director of COR3 did not respond directly and only acknowledged that “many things could have been done differently.” He referred to FAASt, which are the initials for what the federal agency called FEMA’s Accelerated Award Strategy, a “pilot initiative that began in Puerto Rico.”

“FAASt was implemented between 2019 and 2020. So, it was the first time it was implemented. I don’t want to throw anyone under the bus, to be honest. […] But to be as fair as possible, it was something that had never been implemented in FEMA’s history, much less in Puerto Rico. So, I think there were many lessons learned after that FAASt obligation was made,” said Laboy Rivera.

The FAASt strategy essentially consisted of calculating the reconstruction funds for the grid through a statistically representative sampling of the damage to structures. In summary, not all damaged structures were inspected after Hurricane María, but only a sample. The results of the damages and costs from the sample were averaged, and then a budget was calculated for all the grid reconstruction projects.

In the case of the substations, FEMA informed the CPI that only 81 substations were evaluated out of the 392 that the Puerto Rico Electric Power Authority (PREPA) claimed were damaged after the hurricane. “According to reports, 17 of the 81 sampled facilities suffered severe flood-related damage,” FEMA added.

The federal agency has not yet responded to this request for more funds for the substations. COR3 told the CPI that the request “is under evaluation by FEMA.” This issue was part of the agenda between senior FEMA officials and COR3 during a two-day meeting at the end of August at the FEMA Region 2 headquarters in New York, which covers Puerto Rico.

Dispute over whether available funds are enough for substations
While FEMA’s top officials evaluate COR3’s request, Andrés García-Martinó, FEMA’s alternate federal coordinator for Recovery in Puerto Rico, told the CPI that no money will be added to the $9.457 billion (FAASt).

“It’s a fixed fund,” said the official who participated in the meeting in New York along with David Warrington, administrator of FEMA Region 2.

Manuel Laboy Rivera, executive director of COR3, discussed the issue of substations in a meeting in New York, where Deputy Administrator Andrew D’Amora and Administrator David Warrington, both from FEMA Region 2, participated. (Credit: Gina K. Callagan/FEMA)

Puerto Rico has two central budgets totaling $17 billion from FEMA to reconstruct the electrical grid. The first is $9.4 billion (FAASt). These funds were obligated on Sept. 23, 2020. The second budget is about $7.6 billion for hazard mitigation. These funds, according to the federal agency, “can be added to projects to restore disaster-damaged facilities and prevent future damages similar to those caused by the declared event.” FEMA informed COR3 about the availability of these funds in January 2023.

“We are arguing that neither of those two budgets, which total $17.057 billion, include [the costs of] elevating the substations in flood-prone areas and the mitigation of the dams and reservoirs of the [Electric Power] Authority,” Laboy-Rivera said.

However, according to García-Martinó, the elevation of the substations can be covered with the available $7.6 billion of mitigation funds. He even said that this fund could increase for cost-effective substation elevation projects. From this fund, 8.6%, that is, $660,120,596, has already been obligated, which was distributed among 148 electrical grid projects, FEMA reported in early September.

The electrical grid mitigation fund currently has a limit. The PREPA is requesting at least $630 million just for the Guajataca and Guayabal dams, explained Ezequiel Nieves-Ayala, administrator of the Office of Federal Funds at the PREPA. In addition to LUMA, the PREPA can apply to this fund for some dams, reservoirs, and irrigation canals, and Genera PR for the generating plants.

Ezequiel Nieves Ayala, administrator of the Office of Federal Funds at the PREPA. (Credit: Ana María Abruña Reyes | CPI).

This year, FEMA projected a budget deficit of nearly $7 billion. In August, the federal agency implemented restrictions when committing money, “which will delay the obligation of funds for long-term recovery and mitigation projects,” according to the Congressional Research Service.

Given this scenario — and considering that 310 grid-related projects are still under FEMA’s evaluation — the CPI asked LUMA if the funds would fall short for the elevation of the substations.

“It’s not that we’re running out of money; it’s that we can do more work,” said Juan Rodríguez, vice president of Capital Programs at LUMA Energy.

Executives from LUMA and COR3 had to appear recently before the U.S. House Subcommittee on Indian and Insular Affairs under the Committee on Natural Resources to account for the state of the electrical grid in Puerto Rico amid the system’s instability and constant complaints from residential, commercial, and industrial customers.

Officials from Genera, the company in charge of the electric generation systems, and from the Puerto Rico Energy Bureau also appeared.

He added that the grid will be modernized with the FEMA funds already obligated, “but there is so much need that extra allocations never hurt to be able to do other types of work.” The executive stressed that these funds do not directly impact LUMA customers’ rates.

“We have more than 20 substations currently under construction or that have already been worked on [with] a combination of federal funds and operational funds,” said Rodríguez.

None of those substation projects have been elevated. One of the first to be elevated will be the one in Cataño, Rodríguez explained. He said that to begin the work, they are waiting for equipment that has already been ordered, but “is taking two or even three years for this equipment to arrive.” In total, for this substation, FEMA obligated almost $21 million, which includes almost $7 million in mitigation funds to build it.

According to FEMA data, up to early September, 27 projects related to substations had $553,220,534 in obligated funds for repairs, equipment replacements, and other work.

The work to elevate substations can involve different solutions. The most cost-effective, when there is no severe flooding in the area where the structure is located, could be earth removal and movement, explained Robert Vargas, manager of LUMA’s substation design engineering group.

Another option could be the construction of a concrete platform, which requires more labor and effort, Vargas added. Likewise, LUMA is evaluating solutions with prefabricated equipment such as steel platforms or blocks that minimize the use of concrete.

If the repair and elevation costs are not cost-effective, then a substation could be relocated to another area, added Rodríguez.

Flooding at the substation prompted rescue
For nearly seven hours, nine employees from the municipalities of Hormigueros and Cabo Rojo and two from LUMA Energy were stranded on Highway 114, which runs between both towns, amid flooding and winds caused by Tropical Storm Ernesto.

To reach the Las Acacias substation to assess the damage, LUMA personnel tried to get there in a truck from the Municipality of Hormigueros but became stranded amid the flooding since the Guanajibo River had overflowed its banks. A second truck left from Cabo Rojo to assist them but had the same bad luck. Around 9:45 p.m., rescuers from Sabana Grande and National Guard personnel finally rescued them.

“I am 5 feet 2 inches tall, and if I stood completely upright, the water reached my neck,” explained Sidmarie González-Valentín, director of the Municipal Office for Emergency Management and Disaster Administration of Hormigueros.

When an atmospheric event brings a lot of rain, it affects the Las Acacias substation, which is in a flood zone, Cabo Rojo Mayor Jorge Morales-Wiscovitch said. The structure is near the Viejo and Guanajibo rivers, which collect water from Cabo Rojo and Hormigueros, as well as Sabana Grande and other places, he said.

The mayor emphasized the urgency of working on this substation because “many people depend on electricity to live because they are connected to oxygen tanks, have adjustable beds, and respiratory therapy machines.”

Las Acacias will be relocated to higher ground in the Sabana Alta neighborhood in Cabo Rojo, with new equipment and backup alternatives when the system fails, Morales Wiscovitch said based on information provided by LUMA. “They say this project takes two or three years to build,” he said.

FEMA denied other requests to adjust estimated costs
Last December, FEMA denied a request from COR3, on behalf of the Puerto Rico Mayors Federation and the Puerto Rico Aqueduct and Sewer Authority (PRASA), to adjust permanent work projects with fixed cost estimates and to the execution schedule.

COR3 has asked FEMA on several occasions to update the fixed cost estimates given the current economic situation, not only for the PRASA and municipalities but also for all reconstruction projects.

FEMA’s response is always the same: “It cannot be changed,” said Laboy Rivera.

And that’s despite the inflation, supply chain problems, and staffing shortages that reconstruction in Puerto Rico has faced.

FEMA refers to the agreements already signed, the Stafford Act for Disaster Relief and Emergency Assistance, the regulations, and the public policy established, especially for Puerto Rico, to subsidize large permanent work projects.

This public policy states that no further adjustments will be made, except for insurance adjustments, once agreements are reached on the fixed cost estimate for the allocations.

If the final actual costs exceed those anticipated in the approved fixed cost sub-award, FEMA will not authorize or disburse additional funds.

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This story was written by our staff based on a press release.
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