Puerto Rico’s decision to cancel its contract with Whitefish Energy Holdings LLC, a small Montana-based company with ties to the Trump administration, has thrown the island’s electricity restoration efforts into disarray.
Puerto Rico Electric Power Authority (PREPA) CEO Ricardo Ramos said Sunday he would move to cancel the $300 million contract with Whitefish Energy, which has drawn intense scrutiny. The cancellation comes on the heels of revelations that the contract was awarded to a company with deep ties to Trump donors and Interior Secretary Ryan Zinke. The contract included a clause that barred the government from reviewing the company’s profits related to its electric grid work.
While Puerto Rico Gov. Ricardo A. Rosselló contends power restoration efforts will remain on schedule, PREPA Executive Director Ricardo Ramos warned that cancellation of the contract could cause up to 12-week delay in getting electricity turned on for residents across the island. Hurricane Maria devastated Puerto Rico more than 40 days ago, yet only about 30 percent of utility customers on the island have had their power restored.
New York Gov. Andrew Cuomo (D) said Sunday he plans to deploy additional utility crews and equipment to help Puerto Rico jump-start the repairs. “It’s very hard to get the society up and running until you have the power restored. And there’s been very little progress on the power,” Cuomo told CNN. New York previously deployed resources to Puerto Rico immediately following Hurricane Maria.
New York is deploying additional utility crews and equipment to help restore power in Puerto Rico.
— Andrew Cuomo (@NYGovCuomo) October 29, 2017
Rosselló said in a press conference on Sunday that the island would coordinate with New York and Florida to reinforce electric power brigades. To further help with relief efforts, Cuomo has organized a 28-person power restoration team consisting of engineers and supervisors that specialize in the supervision of transmission and distribution system recovery. The workers, pulled from various utility companies across New York State, reportedly will be deployed in early November.
Sen. Maria Cantwell (D-WA), the ranking member of the Senate Energy and Natural Resources Committee, welcomed the decision to cancel the Whitefish Energy contract and stressed that an investigation into how the contract came about should continue. “Taxpayers should pay a fair rate for the emergency repairs Puerto Rico desperately needs — not be gouged by Whitefish Energy or anyone else,” Cantwell said in a statement.
PREPA’s contract with Whitefish Energy raised red flags soon after it was signed. The company, based in Whitefish, Montana, was was tiny two-person operation with annual revenues of only $1 million.
The company also appeared to have close ties to Zinke, who lives in Whitefish. Zinke and Whitefish Energy CEO Andy Techmanski have denied any wrongdoing, but both acknowledged that they have known each other for years. One of Zinke’s sons worked as a flagger at construction sites where Whitefish Energy was operating.
Among Whitefish Energy’s investors is the Dallas-based HBC Investments LLC. Joseph Colonnetta, founding and general partner of HBC, donated $5,400 to Donald Trump’s presidential campaign and $14,600 to the Republican National Committee through the Trump Victory fund, set up to raise money from big donors.
On Monday, the Wall Street Journal reported that the FBI is investigating PREPA’s contract with Whitefish Energy. FBI agents from the San Juan field office are looking into the deal, the newspaper said, citing three people familiar with the matter.
PREPA also has signed a $200 million contract with Cobra Acquisitions LLC to support the work on the island by Whitefish Energy to restore the main lines of transmission. Cobra, a subsidiary of Mammoth Energy Services, is based in Oklahoma.
Mammoth executives said officials with FEMA were “involved every step of the way to make sure the contract complies with their reimbursement requirements.” Prior to beginning any work, Mammoth received a $15 million up-front payment, and billing will occur twice weekly.
Mammoth spokesman Matt Wagner said the company is confident its contract with PREPA will withstand scrutiny. The subsidiary was formed last spring and currently has 275 employees.
Arty Straehla, Mammoth’s CEO, said on a October 20 conference call that Cobra’s primary clients are electric utilities and that prior to winning the Puerto Rico contract, the subsidiary had sent crews to help with recovery efforts in Texas following Hurricane Harvey and in Florida following Hurricane Irma.
The contract was completed on October 20, and within days Cobra had a 60-person advance crew on the island starting to set up a base of operation. Over the coming weeks, more than 500 workers will be mobilized to the island to help restore the electric utility infrastructure, Cobra said in a statement.
Last week, Whitefish Energy reportedly hired a former House member to lobby on its behalf as lawmakers called for investigations into its contract with PREPA. Former Rep. Dennis Cardoza (D-CA) told Politico that he would “meet people on the Hill” to make the case that Whitefish Energy won the contract fairly.
The Sierra Club described the Whitefish Energy contract as “only the latest scandal” for the Trump administration. “Puerto Ricans need someone capable of turning on the lights which obtains its contract through an open and transparent process in order to transform the electric grid, not one mired in controversy,” Ramón Cruz, a member of the Sierra Club’s national board and former member of the Puerto Rico Energy Commission, said in a statement.
With power still out across three-quarters of Puerto Rico, the need for electricity remains urgent. https://t.co/gA8Lp3PFcK pic.twitter.com/QFSjtnycYq
— Mark Hand (@MarkFHand) October 26, 2017
Like Cantwell, Cruz said Congress must continue to investigate how a company with close ties to Zinke and Trump donors obtained the contract in the first place. “The ongoing devastation in Puerto Rico should never have been used to profit friends of this administration, and we the people deserve answers,” he said.
Rosselló had said the Whitefish Energy contract had become a “distraction” when the real focus should be restoring power to the island.
In a statement Sunday, Whitefish Energy said the decision to cancel the contract 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.”
Nonetheless, Whitefish Energy said it plans to finish any work that PREPA wants the company to complete. The company said its ability to mobilize immediately “exceeded all other efforts by other parties.” In less than a month, the company brought 350 workers and was on track to have more than 500 workers on the island by this week, it said.
Whitefish Energy said it completed “significant work” on two major transmission lines that crossed over mountains and conducted “critical work” on remote parts of southern Puerto Rico, which are accessible only by helicopter and heavy equipment.
Despite the cancellation of the contract, PREPA said it remains “on track” to reach the target of 95 percent of power restoration by December, according to María Soledad, a reporter with Caribbean Business. In mid-October, Rosselló said his goal was to have 30 percent of the island’s power restored by the end of the month. After that, the target would be to restore 50 percent by November 15, 80 percent by December 1, and 95 percent by December 15.
"We are on track" to reach the target of 95% of energy generation by Dec. said Power Authority Dir @CaribBusiness
— María Soledad (@Maria_Soledad7) October 29, 2017
Why the government of Puerto Rico decided to forgo mutual aid agreements and instead signed the agreement with Whitefish Energy remains an unanswered question. “No one in Puerto Rico, not Rosselló nor PREPA Executive Director Ricardo Ramos, has satisfactorily explained the decision to put off bringing in external crews and equipment and forego mutual aid agreements, which raises suspicions that the job had been set aside from the outset for mainland private interests,” Armando Valdés Prieto, former director of Puerto Rico’s Office of Management and Budget, wrote in an op-ed published Monday in the Washington Post.
The cancellation of the contract raises many questions, Valdés Prieto wrote. How much more will Puerto Rico have to pay on top of the $8 million to $10 million PREPA said it has already been disbursed to demobilize work crews under the contract’s cancellation clause? How will PREPA make up for 10- to 12-week delay that Ramos predicted could result from the termination of the contract?