- The head of the Puerto Rico Electric Power Authority (PREPA) said Sunday that the public utility would cancel a power restoration contract with Whitefish Energy after widespread criticism over the agreement's terms and the utility's contracting process.
- PREPA CEO Ricardo Ramos made the announcement following a Sunday morning statement from Puerto Rico Gov. Ricardo Rosselló calling for the utility to cancel the $300 million contract. Termination of the contract will take 30 days, and Puerto Rico will request mutual aid agreements with New York and Florida to replace workers under contract with Whitefish, Rosselló said.
- The Federal Emergency Management Agency and federal lawmakers from both parties last week called for further inquiry into the no-bid contract, reportedly awarded to the Montana-based company on before Hurricane Maria struck Puerto Rico. About 70% of the U.S. territory still does not have power 40 days after Maria made landfall.
Virtually unknown before Hurricane Maria made devastated Puerto Rico's power grid last month, Montana-based Whitefish Energy was thrust into the national spotlight last week as details over its no-bid contract with PREPA emerged.
After the storm cleared, it took officials from the American Public Power Association, a municipal utility trade group, more than a week to get into contact with PREPA executives. Unbeknownst to them and federal officials, PREPA executives said they already had an agreement in place with the Montana-based contractor.
"Once they had called in they briefed out that they had signed an agreement with Whitefish," said Michael Hyland, APPA vice president for engineering, who coordinated muni response efforts. "That was a company that no one in the room was familiar with."
According to Caribbean Business, PREPA had quietly selected Whitefish to spearhead power restoration before Maria hit the island on Sept. 20.
The contract, which went largely unnoticed until last week, includes an employee per-diem in excess of $400, as well as a passage ensuring that, "In no event shall [government bodies] have the right to audit or review the cost and profit elements."
Signed by PREPA Executive Director Ricardo Rodriguez and Whitefish Energy Holding CEO Andy Techmanski, the contract also specified that Puerto Rico cannot make a claim against Whitefish for work delays or completion.
Those contract terms and lingering questions over why Whitefish was selected prompted federal officials to act last week. FEMA, the lead federal agency for hurricane response in Puerto Rico, said it would probe the contract, stressing that it had nothing to do with the selection.
"FEMA has significant concerns with how PREPA procured this contract and has not confirmed whether the contract prices are reasonable," the agency said in its statement.
Whitefish, which had only two full-time employees before the PREPA contract, hails from the same Montana town as Interior Secretary Ryan Zinke. That potential connection to the Trump administration added fuel to the controversy, with a bipartisan group of lawmakers from both houses of Congress calling for further investigation last week.
By Sunday, Rosselló said the controversy had become too much of a distraction, calling for PREPA to "immediately" terminate the contract in a morning press conference. The decision was a reversal for the governor, who previously defended the Whitefish deal.
“There’s a perception risk, a reputation risk and a delay risk in continuing the contract,” Rosselló said, calling for a “special outside coordinator” to oversee PREPA's contracting process.
"PREPA said there was a mistake in that process,” he added, acknowledging that the utility did not require significant assurance that Whitefish would complete work promised in the contract.
To replace Whitefish workers, Puerto Rico will request mutual aid agreements with Florida and New York. The company defended its performance in a statement, saying it had mobilized 350 workers to the island so far.
“The original decision by PREPA to have Whitefish Energy come to the Puerto Rico only sped up the repairs, and if it were not for that action, crews would just now be getting to the island to begin the process of rebuilding the system and restoring power,” Whitefish said.
Under the contract terms, PREPA must notify Whitefish 30 days in advance of terminating the deal. The Montana company will cease work after it reaches an agreement with PREPA to hand over control of two transmission lines it is currently repairing, Caribbean Business reports.
That could still leave Puerto Rico short of the number of power workers needed to hit Rosselló's goal of having 95% power restoration by mid-December, the regional news outlet notes. While an estimated 1,200 utility crews are needed to hit the goal, PREPA said fewer than 330 crews were on the island last week.
Those numbers could be buoyed by the expected arrival of workers from Fluor and Cobra Acquisitions, which recently signed contracts with the U.S. Army Corps. of Engineers. In total, more than 900 crews could soon hit the island, according to Caribbean Business.
In contrast to the Whitefish contract, the Washington Post notes that the Army wrote performance stipulations into its recent $240 million contract with Texas-based Fluor, requiring the company to produce a $150 million performance bond within five days.
Questions over the Whitefish contract could have implications beyond immediate power restoration. Critics of the utility in Puerto Rico and beyond have said they want to use the disaster as an opportunity to reform the long-mismanaged public utility, and the Whitefish contract could add impetus to that push.
Last week, the federal board that controls Puerto Rico's finances appointed a "chief transformation officer" to oversee power restoration on the island with “all the powers of a chief executive officer." Noel Zamot, the retired Air Force colonel tapped for the role, had indicated he was open to proposals to privatize the utility.
PREPA and Rosselló balked at the move, with the utility's governing board rejecting Zamot on Friday. Rosselló said he would challenge the appointment in court, likely leading to a legal battle over PROMESA, the 2016 federal law that created the financial control board that oversee's Puerto Rico's public agencies, including PREPA.
"The people of Puerto Rico have entrusted to their elected government the sound administration of their funds and governmental entities," Rosselló said in a statement, "and the government of Puerto Rico will be zealous in defending the people of any action that seeks to undermine this process, whence it comes."
Judge Laura Taylor Swain, the New York-based judge that oversees Puerto Rico's recovery under PROMESA, will hear oral arguments in the Zamont case on Nov. 13.