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Second Appeal Brief
PA ID# 000-U12QY-00; Cape Hatteras Electric Membership Corporation
PW ID# 1619; Increased Operating Costs
Citation: FEMA-4019-DR-NC, Cape Hatteras Electric Membership Corporation, Increased Operating Costs, Project Worksheet (PW) 1619
Cross-Reference: Increased Operating Costs
Summary: On August 2, 2011, high winds and ocean overwash from Pamlico Sound resulting from Hurricane Irene caused the failure of the incoming transmission line at Oregon Inlet Substation, the normal source of Cape Hatteras Electric Membership Corporation’s (Applicant) transmission and distribution system. During the power outages, the Applicant used five 3.2 megawatt generators and two 2.0 megawatt generators to supply power to Cape Hatteras Island. The North Carolina Electric Membership Corporation loaned the 3.2 megawatt generators to the Applicant and, the Applicant rented the 2.0 megawatt generators from an equipment supplier. FEMA prepared PW 1619 to fund the differential cost of the normally purchased power and the power obtained from the five loaned generators and the two rented generators. The total cost claimed by the Applicant was $587,188. FEMA determined the PW was ineligible, because the costs of using the generators amounted to increased operating costs. The Applicant submitted a first appeal arguing that the generator usage was essential to response and recovery efforts and explaining the difficulty of the repairs, which were addressed in another PW. The FEMA Region IV Regional Administrator denied the first appeal, explaining that the cost of obtaining power from an alternate source is generally not eligible, with very few exceptions. The Applicant submitted a second appeal, reiterating the emergency nature of the Applicant’s situation and stating that the purchase of power was not truly the cost of obtaining power from an alternate source since that Applicant does not own the facilities from which the power was purchased. The Applicant contends that the use of its generators limited the need for elaborate electrical logistics on the part of the island's first responders, thus mitigating emergency response costs.
Issues: Is the cost of obtaining power from an alternate source eligible?
Rationale: Public Assistance Guide (FEMA 322), pages 54-55, 85; Public Assistance Policy Digest (FEMA 321), page 135.