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Second Appeal Letter
PA ID# 069-45614-00; City of Malden
PW ID# 414; Increased Operating Costs
March 22, 2012
Paul D. Parmenter
State of Missouri Emergency Management Agency
Department of Public Safety
P.O. Box 116
Jefferson City, MO 65102
Re: Second Appeal – City of Malden, PA ID 069-45614-00, Increased Operating Costs, FEMA-1822-DR-MO, Project Worksheet (PW) 414
Dear Mr. Parmenter:
This is in response to your letter dated July 13, 2010, which transmitted the referenced second appeal for the City of Malden (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding in the amount of $320,818 for the cost of force account labor, equipment use, and mutual aid agreements to power its backup power substation.
In January 2009, severe winter storms in the State of Missouri caused icing on power lines and trees. Heavy ice accumulation caused trees and power poles to break. The Applicant lost commercial power from January 27, 2009, to February 25, 2009, and requested assistance from FEMA for the cost of force account labor and equipment use to supply power from its backup electrical substation. The Applicant had mutual aid agreements with the cities of Higginsville and Farmington for personnel to operate generators in this substation. FEMA prepared PW 414 for $545,528 in May 2009. The project costs were reduced to $320,818 to reflect credit from the Southwestern Power Administration and sales revenue from customers. Upon review, the expenses in PW 414 were found ineligible because the Applicant obtained power from an alternate source, and such costs are ineligible as indicated in the Public Assistance Guide (FEMA 322), pages 54-55, dated June 2007. The State informed the Applicant that the costs in PW 414 were ineligible on May 28, 2009.
The Applicant submitted its first appeal to the State on July 22, 2009, which the State forwarded to FEMA Region VII on August 21, 2009, requesting reimbursement for $320,818 as outlined in PW 414. The Regional Administrator denied the request in a letter dated March 10, 2010, because the increased cost of obtaining power from an alternate source was not an eligible expense.
The Applicant submitted a second appeal on May 10, 2010, which the State forwarded to FEMA Region VII on July 13, 2010. The second appeal requests $320,818 for costs incurred from equipment use, force account labor, and mutual aid agreements to power its backup power substation. The Applicant claims that these costs are eligible as emergency protective measures and is requesting reimbursement for these expenses.
The Applicant’s second appeal is seeking reimbursement for operating costs associated with obtaining power from an alternate source. These costs include force account labor and generator usage at its idle backup power substation. The force account labor includes regular and overtime hours for set up, repair, and operation of the substation. The equipment costs are for generator use at the substation and repair of idle equipment. The Applicant also had two mutual aid agreements with neighboring communities for additional personnel to operate the substation generators, and is seeking reimbursement for these costs. The Applicant claims that all project expenses fall under Category B, Emergency Work, as outlined in the Public Assistance Guide and that restoring electricity ensured the continuation of essential public services and reduced an immediate threat to life, public health, and safety.
The Public Assistance Guide (FEMA 322), Chapter 2, Eligibility, states that, “The costs of operating a facility or providing service may increase during a disaster. With few exceptions, these costs are not eligible. Some examples of ineligible costs are…obtaining electrical power from an alternate source.” The Applicant was not powering generators specifically at hospitals or other health and safety facilities, but instead turned on power for citywide service at a backup electrical substation. The Applicant did not provide any documentation differentiating power costs for critical facilities versus citywide service. This substation also produces electricity far above the standard rate set by Southwestern Power Administration, the area’s regular electric utility service. The costs for operating the backup generators and force account labor for this work are not eligible as an emergency protective measure. Therefore, the cost of obtaining electrical power from an alternate source, the Applicant’s backup power substation, is considered an increased operating expense and ineligible for Public Assistance Program funding.
I have reviewed all information the Applicant submitted with the appeal and determined that the Regional Administrator’s decision in the first appeal is consistent with Public Assistance Program regulations and policy. Accordingly, I am denying the second appeal.
Please inform the Applicant of my decision. This determination constitutes the final decision on this matter as set forth in 44 CFR §206.206, Appeals.
cc: Beth Freeman
FEMA Region VII