Puerto Rico Cancels Whitefish Energy Contract to Rebuild Power Lines – New York Times
Facing withering criticism from members of Congress and the Federal Emergency Management Agency, the governor of Puerto Rico moved on Sunday to cancel a $300 million contract awarded to a small Montana company to rebuild part of the island’s battered power grid.
While government officials in Washington and San Juan have argued over how a company from Whitefish, Mont., with connections to the secretary of the interior but only two full-time employees secured an emergency contract that requires the work of thousands of people, the majority of Puerto Rico is still without electricity, nearly six weeks after Hurricane Maria knocked down thousands of poles and lines.
Some stores, medical centers, restaurants and a fortunate few private residences are running on generators, but most of the island’s 3.4 million people are plunged into darkness after sunset.
The Puerto Rico Electric Power Authority, known as Prepa, is generating just 30 percent of its normal output, the government said. The power grid is in such bad shape that the power authority is not able to say exactly how many of its customers are without power. The authority has estimated that repairs will cost at least $1 billion.
Gov. Ricardo A. Rosselló announced on Sunday that he had decided to ask the power authority’s board — which he appoints — to cancel the contract with Whitefish Energy Holdings, two days after FEMA issued a strongly worded statement criticizing the deal. FEMA said it had “significant concerns” and warned that it might refuse to cover the costs of the contract if it was found to be improper.
Mr. Rosselló said he had asked for a federal investigation of the contract award process, and for the power authority to appoint a trustee to review contract bidding. He stressed that no wrongdoing had been discovered, but he said that the contract had become a “distraction” and that attention had to be refocused on restoring service.
“I am making this determination because it is in the best interest of the people of Puerto Rico,” Mr. Rosselló said at a news conference.
The contract had been attracting intense scrutiny in Washington. The House Committee on Natural Resources, which oversees Puerto Rican affairs, sent a letter on Thursday to the power authority demanding all records connected to the contract. That same day, the inspector general’s office at the Department of Homeland Security said it was investigating. Mr. Rosselló also ordered an audit of the contract, and the board that Congress created to oversee Puerto Rico’s financial affairs asked a federal court to appoint a new manager to supervise the utility.
The chief executive of the power authority, Ricardo Ramos, defended the contract, which he awarded. But he said on Sunday that he understood the governor’s decision to cancel it because negative publicity and politics on the mainland had made the situation untenable.
Mr. Ramos said Whitefish had recently requested security protection because people had started throwing rocks and bottles at the company’s crews on the island, in the belief that the contract had been awarded corruptly.
“If you are in your house without power, and there’s a sense that the energy authority gave away $300 million to a company that had or did not have experience, the reaction is not positive, and we’re seeing that,” Mr. Ramos said.
Democrats on the mainland and opposition politicians in Puerto Rico questioned the deal and were alarmed to see that the company’s chief executive, Andy Techmanski, came from the same small town in Montana as Interior Secretary Ryan Zinke. In an interview shortly after securing the contract, Mr. Techmanski told a local news station that he had been in touch with Mr. Zinke, whose son worked for Whitefish last summer, for “more resources.”
Both the Department of the Interior and Mr. Techmanski denied any impropriety in connection with the contract.
When the mayor of San Juan, Carmen Yulín Cruz, raised questions about the contract, the company fired back on Twitter, suggesting that it could withdraw its crews from her city. The company later apologized.
In a statement on Friday, FEMA said it had not confirmed whether prices listed in the contract between Whitefish and the power authority were reasonable. Mr. Ramos said the prices were in line with what other companies had requested.
In an interview on Thursday, Mr. Ramos said he had not heard of Whitefish before September. “We checked them out on the internet,” he said. “There was a list of projects that they had done in the past, including with the Department of Energy. They showed a lot of experience in using helicopters to build transmission lines. On paper, they did have the experience necessary.”
Mr. Ramos had earlier said that Whitefish got the deal because it did not ask for a large payment up front. Other companies, wary of Prepa’s bankruptcy, had demanded hefty sums, he said. The power authority had also been in talks with another company, PowerSecure.
Mr. Ramos said on Sunday that the contract was being canceled because attention had shifted from managing a humanitarian crisis to “managing reputations.” “That’s risky,” he said. “I want to clarify that the cancellation of this contract does not mean there was anything outside the law, or out of the ordinary.”
He said the power authority had already paid Whitefish almost $10 million and would have to reimburse the company for the cost of moving helicopters, trucks and other equipment to Puerto Rico, and now for returning them to the United States. He said that work that was already in progress would be completed.
Mr. Ramos said he would send a letter to the electric company board asking for a resolution formally ending the contract, and that the board would meet Monday or Tuesday to address the matter. The cancellation would take effect 30 days after a resolution is adopted.
Whitefish said in a statement on Sunday that it was “very disappointed” at the cancellation. “The decision will only delay what the people of Puerto Rico want and deserve — to have the power restored quickly in the same manner their fellow citizens on the mainland experience after a natural disaster,” the statement said. “We will certainly finish any work that Prepa wants us to complete, and stand by our commitments, knowing that we made an important contribution to the restoration of the power grid since our arrival on the island on Oct. 2.”
The company said it had already finished work on two major transmission lines, significantly speeding up the restoration of power to the city of Manatí and to parts of San Juan.
In interviews this month, Mr. Techmanski said he had flown to Puerto Rico before the contract was signed with Prepa on a “leap of faith,” and that his company’s ability to mobilize quickly was vital to winning the contract.
Asked this month how such a small company could manage such a big job, Mr. Ramos of Prepa said, “Every company is small at some point in time.”
Criticism was also targeted at the Army Corps of Engineers, which was given responsibility by the Trump administration for restoring power in Puerto Rico and had no involvement in the Whitefish deal. Governor Rosselló said he was led to believe that the Corps would restore power throughout the island within 40 days, but that it has just seven engineering crews on the island.
“Everyone has their role here, and the Corps of Engineers, honestly, has not played its role,” Mr. Rosselló said. “The Corps contracted two companies, and those companies are in the process of subcontracting. This does not have the sense of urgency that it should have.”
Mr. Rosselló said the governors of New York and Florida had now agreed to send utility crews to Puerto Rico. Such mutual aid arrangements are common after emergencies, and are usually invoked immediately. But the power authority has said it did not seek that kind of aid after the hurricane because having the Army Corps of Engineers do the restoration work would have spared it from paying anything.
José E. Sánchez, the head of the Corps’s energy restoration task force, defended its work in a statement. “We understand the frustration by the governor of Puerto Rico, and realize the importance of restoring power as quickly as possible,” Mr. Sánchez said. “We continue to expedite the delivery of crews, material and equipment to the island in support of this urgent effort. We will not be satisfied until the people of Puerto Rico have safe and reliable power.”
Christina Caron and Waldemar Serrano Burgos contributed reporting.
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