Puerto Rico Governor Ricardo Rossello has called for the immediate cancellation of a $300 million contract with Montana-based Whitefish Energy Holdings, a tiny company based in the hometown of Interior Secretary Ryan Zinke. (Reuters)
The Puerto Rico electric power company said Sunday that it is canceling a controversial $300 million contract it had signed with a small Montana-based company and tasked with a central role in repairing the territory’s hurricane-ravaged electric grid.
The move came after Gov. Ricardo Rosselló said the contract was a distraction and should be canceled after critics in the electric power industry, Congress and the Federal Emergency Management Agency raised questions about whether the company, Whitefish Energy, was well equipped to respond to the hurricane damage.
Thirty-nine days after Hurricane Maria hit the territory — and only two days before a hearing of the Senate Homeland and Governmental Affairs Committee — Rosselló said that he would request assistance from Florida and New York under mutual aid arrangements that utilities traditionally activate to help other states during an emergency. About 80 percent of the people living on the commonwealth’s main island still have no electricity.
“As a result of the information that has been revealed and the need to protect the public interest, as governor I am asking the power authority to cancel the Whitefish contract immediately,” Rosselló said in an unusual Sunday morning news conference at La Fortaleza, the governor’s mansion. He did not cite particular new information beyond what has been in the press.
Hurricane Maria knocked out the electricity in Miram Carrasquillo's home in Canóvanas, Puerto Rico. Ten days after the storm, she was able to get a small generator to power her nebulizer. Authorities say it could be months before the electrical grid is up and running again. (Zoeann Murphy,Victoria Walker,Melissa Macaya,Adriana Usero/The Washington Post)
Ricardo Ramos, executive director of the Puerto Rico Electric Power Authority, or PREPA, said Whitefish would be paid to complete ongoing work on two transmission lines. He defended his agency and the deal, citing Puerto Rico’s emergency needs.
“The best thing that can happen is its cancellation,” Ramos said. “But the investigations will continue.”
In tweets Sunday morning, Rosselló also called for additional measures to scrutinize contracting by the territory’s power authority more carefully. He said there should be a “special outside coordinator” to monitor the utility’s purchases so we “can have more clarity in this process.”
The governor’s statements, however, added to the confusion about the oversight of the utility and the commonwealth, both of which are bankrupt. A financial oversight board that Congress created for Puerto Rico is planning to ask a federal court this week for clear authority to examine contracts as small as $10 million. The federal judge is overseeing the restructuring of Puerto Rico’s more than $70 billion in debts.
Just last week, the oversight board said it would use its existing authority to install its own emergency manager — dubbed chief transformation officer — to pay closer attention to the day-to-day operations of the utility. The governor is opposing the appointment and said he would name his own administrator for PREPA’s purchases.
Rosselló, who like many Puerto Ricans has complained that the federal government plays a colonial role in the territory, has been battling the influence of the oversight board, created under the Puerto Rico Oversight, Management and Economic Stability Act.
However, Congress sees the board’s role as crucial. “Transparent accountability at PREPA is necessary for an effective and sustained recovery in Puerto Rico,” Parish Braden, spokesman for the House Committee on Natural Resources, said in an email. He called for cooperation between the governor, the oversight board, the chief transformation officer and federal partners.
The governor did not say how the utility would disentangle itself from the contract with Whitefish Energy.
Whitefish Energy, which had just two employees the day Hurricane Maria hit Puerto Rico, now has about 325 people working on restringing transmission lines, clearing debris and erecting fallen poles. It has been working under contract with PREPA.
Whitefish, Mont., is the home of Interior Secretary Ryan Zinke, although the company said he played no role in securing the business. One of Zinke’s sons worked for Whitefish Energy over the summer.
The company’s chief executive, Andrew Techmanski, has extensive experience in the electric transmission business, but the company has focused mostly on unsuccessfully trying to set up a plant to manufacture transformers. It has also received small grants from the Energy Department. It is backed by HBC Investments’ partners fund, a Dallas-based private equity firm whose members have a long record of financial support for the Republican Party.
Many people in the utility business had said that PREPA would have been better off tapping into the well-established networks of utilities that have formed mutual aid groups expressly for the purpose of emergency relief.
In addition, many in the industry have suggested that Whitefish Energy’s pay scales — as high as $462 an hour — were much higher than is typical even in an emergency such as the one facing Puerto Rico. The contract rates included costs, administrative expenses and profits for Whitefish.
While the conditions in Puerto Rico are difficult and lineman work is dangerous, there are companies and agencies seeking to do the work for substantially less, according to people familiar with figures from four companies from the mainland.
The Army Corps is doing essentially the same work as Whitefish in Puerto Rico and has been offering to pay as much as $195.04 an hour for a journeyman lineman and $230.32 an hour for a general foreman, according to a document provided to The Post.
The average rate for a lineman who helped restore electric power to Florida residents after Hurricane Irma hit there was $165 per hour — and that included some high-priced crews from the Northeast. Five local firms charged $116 per hour, said a source familiar with the rates.
The Whitefish Energy contract also had a clause that said that the pay rates and other terms of the agreement could not be audited or reviewed by FEMA, the commonwealth, the comptroller general or PREPA. The contract also required that PREPA, before signing, had confirmed that FEMA had reviewed and approved the agreement to ensure that money spent would “qualify for funding from FEMA.”
FEMA said Friday that it had not approved the Whitefish Energy agreement.
“Based on initial review and information from Prepa, FEMA has significant concerns with how Prepa procured this contract and has not confirmed whether the contract prices are reasonable,” the agency said in a statement.
In a news conference Sunday, PREPA chief Ramos said he learned of those contract clauses from the media.
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