Increased Operating Costs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	4451
Applicant	Ste. Genevieve Levee District #3
Appeal Type	Second
PA ID#	186-U5S1F-00
PW ID#	PW 117
Date Signed	2022-08-04T16:00:00

Summary Paragraph

Severe storms between April 29 and July 5, 2019 generated heavy rains, floodwaters, and tornadoes in Missouri.  The Ste. Genevieve Levee District #3 (Applicant) is responsible for a levee and operates fixed levee pumps at a pump station.  FEMA wrote Project Worksheet (PW) 117 to document the Applicant’s request for emergency protective measures including emergency flood water pumping, levee monitoring, and sand boil containment.  FEMA awarded $125,813.82 for levee monitoring and for operation of the pumps, but denied $52,701.16 in increased power costs because the awarded amount already included costs calculated using FEMA equipment rates which include costs for fuel.  The Applicant appealed with documentation from the Utility and noted that in prior events, PWs that included electricity costs with the excess demand charge were fully reimbursed.  FEMA requested information including the provisions of FEMA policy and regulation the Applicant believed made the surcharges eligible despite the fact that the equipment rates were paid.  The Applicant responded, quoting FEMA policy and provided a breakdown summary table of the surcharges, urging FEMA to acknowledge that it did not consider surcharges when it created the equipment rate schedule.  FEMA denied the appeal.  FEMA determined that, while the Applicant incurred additional demand charges for power consumption, FEMA reimbursed the Applicant using FEMA equipment rates which are based on all costs including power charges.  In its second appeal, the Applicant expands on first appeal arguments and requests reimbursement for $37,734.24 in demand charges.

Authorities and Second Appeals

• Stafford Act § 403.
• 44 C.F.R. § 206.223(a)(3), 206.225(a).
• PAPPG, at 42, 60-61.

Headnotes

• Increased costs of operating a facility are ineligible, even if directly related to the incident, but certain short-term emergency measures that are directly related to accomplishing specific emergency health and safety tasks may be eligible.  Fuel for increased use of a pumping station is potentially an eligible increased operating expense.
  • The Applicant took short-term emergency protective measures that were directly related to accomplishing specific emergency health and safety tasks.  The Applicant incurred additional costs for electricity for increased use of stormwater pump stations because of increased demand as a result of the incident.  The cost for the electricity is an eligible increased operating expense.

Conclusion

The Applicant demonstrated that the increased costs of operating its pumps for a limited period of time were specifically related to eligible emergency measures and the Applicant tracked the costs.  Therefore, the appeal is granted in the amount of $37,734.24.

Appeal Letter

Appeal Analysis

Background

Severe storms between April 29 and July 5, 2019 generated heavy rains, floodwaters, and tornadoes in Missouri.  Ste. Genevieve Levee District #3 (Applicant) is responsible for a levee and operates fixed levee pumps at a pump station.  FEMA wrote Project Worksheet (PW) 117 to document the Applicant’s request for emergency protective measures including emergency flood water pumping, levee monitoring, and sand boil containment.  FEMA awarded $125,813.82 for levee monitoring and for operation of the pumps, but denied $52,701.16 in increased power costs because the awarded amount already included costs calculated using FEMA equipment rates, which include costs for fuel.  FEMA informed the Applicant by certified mail on April 6, 2021.  

First Appeal

The Applicant appealed on May 20, 2021, for an unspecified amount.  The Applicant provided documentation from Citizens Electric Corporation (Utility) that described how electricity costs are established and how they were calculated.  The documentation also included an energy and demand analysis that identified three peak demands established for the March, April, and May 2019 billing periods, and a second exhibit that showed the daily energy usages from May 1 to June 1, 2019.  The Utility explained that due to the electrical wiring configuration for the Applicant’s two pumps, during the flood event both pumps were necessary to prevent the City of Ste. Genevieve from flooding.  The Utility stated the electricity demand charges from running the generators during the flood resulted in excess costs of $50,000.00.  The Applicant noted that in prior events, PWs that included electricity costs with the excess demand charge were fully reimbursed.  The Missouri Department of Public Safety, State Emergency Management Agency’s (Grantee) July 15, 2021 transmittal letter recommended that FEMA deny the appeal. 

FEMA requested information on October 7, 2021, regarding: (1) provisions of FEMA policy and regulation the Applicant believed made the surcharges eligible despite the fact that the standard equipment rates were paid; (2) the rationale for considering all the electric charges for the month eligible and not just the demand charges; (3) the basis in law, policy, or regulation that would make charges for the entire month of July eligible when the incident period ended July 5, 2019; and (4) support for any adjusted amount that the Applicant might request, in the alternative.^[1]  In its November 6, 2021, response, the Applicant quoted FEMA policy that supports paying for emergency protective measures that result in temporary increases in operating costs.  The Applicant also provided a breakdown summary table of the surcharges, urging FEMA to recognize the demand charges were a surcharge FEMA did not consider when it created the equipment rate schedule.  The Applicant stated for the first time that surcharges for April should also be eligible because the disaster began in April, and stated that the July charges should be eligible because the power spike that resulted in the charges was due to July pump operations within the incident period. 

FEMA denied the appeal on January 25, 2022.  FEMA determined that, while the Applicant incurred additional demand charges for power consumption in May, June, and July 2019, FEMA reimbursed the Applicant using FEMA equipment rates which are based on all costs including power charges.  FEMA also determined that any demand charge for April resulted from a demand spike that happened outside the incident period and the charge was not timely identified and reported.

Second Appeal

In its March 24, 2022, second appeal, the Applicant requests reimbursement for $37,734.24 in demand charges.^[2]  The Applicant notes demand charges are unrelated to operating time, are imposed to recover costs by penalizing users with short but excessive power needs, and are unrelated to the equipment, operations, and maintenance expenses on which FEMA bases equipment rates.  The Applicant notes short-term increased costs directly related to accomplishing emergency health and safety tasks as part of emergency protective measures may be eligible, and that the reimbursement sought is limited to the excessive electricity usage of the pump station due to the exigency created by the disaster.  The Applicant equates electricity with fuel and points to FEMA policy describing fuel for increased use of a pumping station as an eligible increased operating cost.  The Grantee supports the Applicant in its May 5, 2022, transmittal, stating that the requested costs are eligible based on the FEMA Public Assistance Program and Policy Guide (PAPPG), and states that the pumping activity was necessary based on the severity of the flooding near the city of Ste. Genevieve and was a limited time measure based on the exigency of the circumstances.

 

Discussion

FEMA is authorized to provide assistance for emergency protective measures required due to an immediate threat resulting from the declared incident.[3]  An applicant may incur additional costs related to operating a facility as a result of a disaster because of an increased demand for the services the facility provides.  Generally, increased costs of operating a facility are ineligible, unless they are for services specifically related to eligible emergency measures to save lives or protect public health and safety or improved property, the costs are for a limited period of time based on the exigency of the circumstances, and the applicant has tracked and documented the additional costs.[4]   Potentially eligible increased operating costs include, but are not limited to, fuel for increased use of a pumping station.[5] 

FEMA calculated the original award by applying its equipment rates to emergency operation of the water pumps and noted that the rates were based on all costs associated with ownership and operation of equipment, including power consumption.  The Applicant argues that demand charges are unrelated to the equipment, operations, and maintenance expenses on which FEMA bases equipment rates, and instead, the PAPPG provides for funding for emergency protective measures that result in temporary increases in operating costs.  Here, the Applicant provided documentation to demonstrate that it was charged additional fees beyond the routine billing rate for the fuel for the increased use of its pumping station for a limited time as emergency protective measures to prevent flooding in the City of Ste. Genevieve.  Therefore, the additional costs for electricity for increased use of stormwater pump stations are eligible increased operating expenses. 

 

Conclusion

The Applicant demonstrated that the increased costs of operating its pumps for a limited period of time were specifically related to eligible emergency measures and the Applicant tracked the costs.  Therefore, the appeal is granted in the amount of $37,734.24.

 

 

[1] FEMA also raised a new issue regarding potentially ineligible costs based on a prior second appeal denial for the same Applicant.  Based on the Applicant’s response, FEMA determined that the rationale from the prior second appeal decision did not prevent the agency from awarding costs for disaster-related operations here.

[2] In the first appeal decision, FEMA reviewed invoices and noted that the larger amount the Applicant initially requested included both demand charges and ordinary power consumption, while the actual demand charge was $37,734.24; the Applicant then amended its request for costs to that amount in its second appeal.

[3] Robert T. Stafford Disaster Relief and Emergency Assistance Act § 403, Title 42, United States Code § 5170b (2018); Title 44 Code of Federal Regulations (44 C.F.R.) §§ 206.223(a)(3), 206.225(a) (2019).

[4] 44 C.F.R. § 206.225(a); Public Assistance Program and Policy Guide, FP-104-009-2, at 42, 60-61 (Apr. 1, 2018) [hereinafter PAPPG].

[5] PAPPG, at 61.