Dive Brief:

• The head of the federal control board that oversees Puerto Rico's finances asked Congress to clarify her agency's authority over the rebuild of the island's power grid, particularly its ability to appoint a "Chief Transformation Officer" (CTO) to lead the Puerto Rico Electric Power Authority (PREPA). 
• Natalie Jaresko, executive director of the Financial Oversight and Management Board (FOMC) for Puerto Rico, told House lawmakers power restoration efforts and reforms to PREPA could get tied up in litigation due to local opposition. "We would welcome clarification and ratification of that [FOMC] power," she said.
• Leaders of the House Natural Resources Committee said they would investigate how to clarify the FOMC's powers, but action is unlikely to come before a court date set for Nov. 13 to consider the board's appointment of Noel Zamont, a retired Air Force Colonel, as CTO.

Dive Insight:

The simmering jurisdictional battle over Puerto Rico's grid rebuild bubbled up in Congress on Tuesday, as Jaresko and Zamont sought to make an end-run around utility officials who object to federal oversight for PREPA. 

Last month, the FOMC appointed Zamont CTO to oversee grid rebuild, giving him “all the powers of a chief executive officer."

A week later, Puerto Rico Gov. Ricardo Rosselló and PREPA's governing board rejected not just Zamont's appointment, but the FOMC's ability to make any final decisions at all, saying they "do not recognize the authority [of the fiscal board to] impose their decisions, only to recommend."

PREPA's rejection sets up a court showdown next week over the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), the 2016 federal law that created the FOMB and authorized it to appoint officials to manage the island's public agencies. Judge Laura Taylor Swain, who oversees the government's bankruptcy process under PROMESA, will hear the case Nov. 13 at a federal court in New York.

Disagreements like that could lead to "time-consuming and costly litigation" that the island's population can ill afford during disaster recovery, Jaresko said. Instead, she asked Congress to consider taking action to affirm the FOMC's authority under PROMESA to guide the grid rebuild and appoint Zamont as the CTO.

"We would appreciate a legislative affirmation and/or a conditioning of fiscal relief on those powers," she told the House Natural Resources Committee during a Tuesday hearing. 

Speeding up power restoration to Puerto Rico will require a "unified management and leadership structure" that is lacking today, Zamont and Jaresko told lawmakers.

"For decades, PREPA has not served the people of Puerto Rico well," Jaresko said. "Our goal today with the appointment of Mr. Zamont is to ensure that these short-term efforts to immediately and quickly restore electricity are united with the long-term requirements of making electricity not the achilles heel of a damaged economy, but instead a solution to a new and revitalized Puerto Rico."

If his appointment is approved in federal court, Zamont said he would focus on three areas as PREPA's CTO: immediate restoration of power service, implementation of a long-term transformation plan, and devising fiscal practices to exit bankruptcy protection.

The details of that long-term plan for PREPA were of particular interest for lawmakers on Tuesday. Critics say the public utility had long neglected grid modernization and hardening before the storm, and PROMESA required the FOMC to draw up a plan to privatize the island's generation. 

Now, with most of PREPA's grid destroyed by Hurricane Maria, a bipartisan group of lawmakers called for Zamont to go further and consider complete privatization of PREPA. 

"PREPA is to electricity what the [Department of Veterans Affairs] is to quick and efficient healthcare for veterans," Rep. Louie Gohmert (R-LA) said. "I can’t imagine it being worse if it was privatized."

"I encourage Gov. Rosselló to work along with PROMESA to break up PREPA's failing monoploy," Rep. Darren Soto (D-FL) said. "I encourage you all to set up regions to be bid out and allow utilities — our cities, rural cooperatives and investor-owned utilities — to bid. And if they bid, they should pay for the rebuild, or at least part of it."

Zamont has previously indicated he is open to privatizing PREPA, and said he and the FOMC will consider private ownership for all or part of the utility. But the final solution, he and Jaresko said, could also involve leaving public ownership for part of PREPA while opening up the generation market to private players. 

"The board certainly considers privatization as one of the options going forward," Jaresko said. "There’s a question of whether it’s privatization of the entire power sector or some select part, meaning generation transmission or distribution, or whether it just means brining in the private sector to compete."

Statements from the FOMC will be watched closely by Puerto Rico regulators, who last week petitioned Judge Swain to clarify their authority alongside the board and Zamont. Any order affirming Zamont as the CTO, the Puerto Rico Energy Commission argued, should stipulate that he cannot overrule decisions by the regulators. 

After the hearing, Committee Chair Rob Bishop (R-UT) said he is interested in legislation to affirm the FOMC's role in Puerto Rico, but couldn't yet say what it would look like. 

"She asked for a reaffirmation. How that reaffirmation takes place, we'll figure out," Bishop told reporters. "I want to do that, which I can do quickly and effectively to give them the clarification so they can go forward."

Whatever the action, Bishop said it's unlikely his colleagues in the Senate will be able to finalize anything before the court date next week. 

"Have you ever seen them do anything in a timely fashion? I think that answers your question," he said.