Washington - Former Revitalization Coordinator, Noel Zamot, will recommend today in Congress the appointment of a federal coordinator to control contracts related to disaster relief funds after Hurricane María, due to "the lack of transparency and effectiveness" of the Puerto Rican government in doing business processes.\
Although a few weeks ago, during an investors panel in San Juan, Zamot denounced that the Board´s revitalization efforts failed because the Puerto Rican government wanted to control critical projects, in his presentation to the U.S. House Committee on Natural Resources he makes no specific comments against anyone.
However, he notes that "there is a perception in the private sector - supported by general reports - that granting contracts to political allies has historically been an effective way for the territorial government to retain political power and increase funding to the party.
Zamot said he stepped down as the Board´s Revitalization Coordinator - he resigned on February 15- due to "the impossibility of working in an environment where difficulties in doing business cause the loss of private capital that U.S. citizens in Puerto Rico desperately deserve."
However, he said that problems in Puerto Rico are structural and procedural and have long preceded the current territorial government.
"Lack of effectiveness or transparency is not something that the current administration invented. It´s an inherited decades-long slow degradation and mismanagement of federal and local resources," he added while indicating that he did not mean to replace elected officials in public policy decisions. However, he said that as a former military officer and executive, he could not ignore mismanagement situations.
For Zamot, academic performance and teachers salaries are low despite the fact that the local government invests $1800 more per student than other states. He also refers to the island´s high crime rate and says that the Puerto Rico Electric Public Authority (PREPA) has six times more employees per megawatt generated than other comparable U.S. public corporations.
After his allegations, Zamot seems to be the focus on today´s hearing on the status of the ‘Rebuilding and Privatization of the Puerto Rico Electric Power Authority’ that the Natural Resources Committee is holding today.
Zamot states that while he held the role of Revitalization Coordinator, the Board accepted proposals to invest $9.1 billion in private capital, but they could only move one, which represents 0.2 percent of the proposals they received.
"Unfortunately, we were able to approve only one of those proposals, a $25 million public housing project that targeted both urban transportation and emerging housing needs in the aftermath of Hurricane María," he added.
A few weeks ago, during an investment event in San Juan, Zamot indicated that an investor submitted a proposal and later discovered that people linked to the Rossello Nevares administration shared his idea with third parties.
Today at House Natural Resources Committee hearing, he will recommend the appointment of a "recovery coordinator" who can be present "in any contracting activity involving federal disaster relief funds.
For Zamot, the federal recovery coordinator can be appointed through the Executive Branch - as a few months ago, El Nuevo Día reported that the Donald Trump administration was considering - and said that such a position would help the Puerto Rican government to keep federal agencies informed in order to take the necessary steps to release emergency funds. He thinks that once "the territorial government has the contracting process under control" that position would no longer be necessary.
Zamot's recommendations, although not new to the Washington debate, come at a time of growing White House's distrust of the island's government. President Trump called Puerto Rican politicians "incompetent or corrupt," and admitted attempts to stop new funds for the island.
They also come at a time when the local government is seeking at least $17 billion in federal funds to rebuild the energy system.
Although Zamot already spoke with the Democratic leadership of the Natural Resources Committee about his accusations that the island´s government blocked critical infrastructure projects, this time the Committee Republican minority -including Commissioner Jenniffer González- invited him to the hearing today.
Although governor Rosselló Nevares was invited, he will not attend the hearing.
There has been a previous debate over the possibility of greater federal intervention on federal emergency funds, specifically in PREPA. During the last Congress, Republican Rob Bishop (Utah), now a minority spokesman, ordered a study on the possibility of some federal intervention in Prepa.
Meanwhile, the committee's current chairman, Democrat Raúl Grijalva (Arizona), said that he is considering the appointment of an Inspector General to oversee Prepa's transformation process, which may require over $17 billion in federal funds.
For his part, José Ortiz, PREPA executive director will ask for support to finance the rebuilding of the transmission and distribution system, and to get a partial administrative waiver from federal cabotage rules.
According to his presentation, Ortiz will highlight that they now PREPA has an "independent" Governing Board and he will include proposals to transform San Juan Units 5 and 6 into natural gas facilities, to strengthen the transmission and distribution network, to build microgrids and to have an energy system that resists up to a category 4 hurricane.
He said that they requested $2.5 billion from the Federal Emergency Management Agency (FEMA) to strengthen the transmission and distribution system. Up to April 1, FEMA has assigned $1.88 billion to PREPA in reimbursements for emergency measures, of that total, $1.34 billion have been delivered, according to Ortiz.
As for the request they made in December for a partial waiver from federal cabotage rules to transport natural gas from the U.S. on non-U.S. ships, Ortiz said it would represent "hundreds of millions of dollars in savings."
Meanwhile, the Irrigation and Electrical Workers Union (UTIER) and the Institute for Energy Economics and Financial Analysis (IEEFA) will speak against the privatization of PREPA and in favor of the bankruptcy court, created PROMESA, to appoint an Independent Private Sector Inspector General (IPSIG).
UTIER asked for the appointment of an inspector general, when Assured Guaranty, National Public Finance Guarantee, Syncora Guarantee, and certain PREPA bondholders asked Judge Laura Taylor Swain to lift the stay on litigation provided in PROMESA, and the appointment of a trustee for the public corporation.
Ángel Figueroa Jaramillo, president of UTIER, said they ask for an IPSIG that has "limited, specific powers," and not for a trustee to handle PREPA daily operations, as creditors want.
"PREPA does not have a problem of lack of rules or regulations, it has a compliance problem," said Figueroa Jaramillo. According to UTIER, the IPSIG should be in charge of detecting violations of the law, PREPA rules, appointment practices, collective bargaining, and unethical conduct.
"The IPSIG would not replace PREPA current leadership but would review implementation, rules, and regulations in PREPA operation," UTIER attorneys Rolando Emanuelli Jiménez and Jessica Méndez Colberg said in court.
IEEFA's Finance Director, Tom Sanzillo, agrees with UTIER and will testify against the privatization of PREPA.
For IEEFA, “Congress should take note that the privatization plans currently under consideration are not likely to achieve the island’s declared policy of affordable, resilient and 100 percent renewable energy by 2050.”
"Our research at Institute for Energy Economics and Financial Analysis shows that — by overbuilding natural gas infrastructure, crowding out low-cost renewable energy and relying on expensive private capital — privatization is likely to raise rates, not lower them," Sanzillo said in an opinion piece he published over the weekend in The Hill.
According to IEFFA estimates “rates will rise to 27 cents/kWh, 35 percent higher than the 20 cents/kWh goal articulated in PREPA’s financial plan.”
"By locking Puerto Rico into long-term contracts (largely for natural gas), privatization will create incentives to maintain those expensive contracts while setting up barriers to residents generating their own power through rooftop solar or other local options," Sanzillo said.