Federal Financial Assistance for Utilities following Hurricanes or Other Disasters may be Limited
As has been widely reported, Hurricane Sandy recently passed through much of the East Coast this week, wreaking havoc and damaging or destroying property throughout its path. The New York Times reported that the winds of Hurricane Sandy caused power losses affecting approximately eight million electric service customers. The costs of repairing the damage caused by Sandy and restoring electric service is not insignificant. A press release issued by the Edison Electric Institute on October 31, 2012 stated that:
An army of more than 53,000 utility workers from around the country, and as far away as Canada, California and Washington state, is joining forces to begin the arduous task of restoring electricity to millions of Americans whose power was interrupted by Hurricane Sandy’s massive wake.
The New York Times reported that a declaration by President Obama that parts of New York, New Jersey and Connecticut are major disaster areas “opens the door for billions of dollars in aid from the Federal Emergency Management Agency, both to state and local governments and to individual families hit by the storm.” However, such assistance may be of little help to the nation’s investor-owned utilities. Instead, utilities and their customers will bear the brunt of the cost of restoration activities needed to recover from damages sustained in the hurricane.
The two major sources of federal financial assistance available to support recovery from disasters like Hurricane Sandy involve the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 93-288, which is administered by the Federal Emergency Management Agency (FEMA), and the Community Development Block Grant program (CDBG), which is administered by the Department of Housing and Urban Development (HUD). Under the Stafford Act, public financial assistance may be available for repair, restoration and replacement of damaged facilities of state or local governments (including public utilities), but is not available to private enterprises. As a result, investor-owned utilities are ineligible to receive financial assistance under this program. A report prepared by the Congressional Research Service discusses availability of financial assistance under the Stafford Act.
The CDBG program may be another source of federal funds to assist state and local governments with disaster-related needs. Such funds may be used by states and local communities affected by disasters to undertake short-term disaster relief efforts such as emergency restoration of electricity and other essential services, to mitigate the effect of a disaster, or to support long-term recovery and reconstruction efforts. Funds through the CDBG program are generally made available by Congress through supplemental appropriations. For example, after the terrorist attack of September 11, 2001, Consolidated Edison Company of New York and Verizon were the beneficiaries of a supplemental appropriation under the CDBG program for a portion of the costs of restoring utility and telecommunications services to Lower Manhattan. More information on the CDBG program is available from the Congressional Research Service in a report entitled “Community Development Block Grant Funds in Disaster Relief and Recovery”. Ultimately, the availability of funds to electric utilities through the CDBG program may require close coordination with state governors and other senior state officials.
Additional information on various types of federal financial assistance that may be available to victims of disasters, including state and local governments, and non-governmental entities, is available from a report on “Federal Disaster Recovery Programs: Brief Summaries”, which is also available from the Congressional Research Service.