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Puerto Rico Cancels Whitefish Energy Contract to Rebuild Power Grid Puerto Rico Cancels Whitefish Energy Contract to Rebuild Power Lines
(about 2 hours later)
More than a month after Hurricane Maria struck Puerto Rico and ravaged its electrical grid, most of the island remains without power. Candles and flashlights serve as lighting, and for many, canned food has become a staple. 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.
Residents want to know when power will be restored, but progress has been slow. 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.
As the recovery plods forward, a small company from Montana that was awarded a contract of up to $300 million to rebuild part of the island’s electrical infrastructure has come under intense scrutiny. 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 Federal Emergency Management Agency on Friday expressed “significant concerns” about how the company, Whitefish Energy, won the contract. 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.
On Sunday, the future of the contract took yet another twist when Gov. Ricardo Rosselló said he was asking the board of the island’s power authority to “immediately” cancel its contract with Whitefish, which is based in the hometown of Interior Secretary Ryan Zinke. Later in the day, the power authority said it had done so. 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.
Critics have raised questions about why the power authority opted not to request aid from mainland utilities after Hurricane Maria struck the territory. After natural disasters, power companies on the mainland often get help from other companies under mutual-aid agreements. 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.
“There can be no distraction that alters the commitment to repair the power grid as quickly as possible,” Mr. Rosselló said in a statement on Sunday. “I have given instructions to immediately proceed with the necessary coordination with the states of Florida and New York, in order for brigades and equipment to arrive on the island.” “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 governor said the decision to ask New York and Florida for help was being made because the Army Corps of Engineers had not managed to get the job done in the time frame initially outlined. 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.
Representatives of Whitefish and the Army Corps of Engineers were not immediately available to comment on Sunday. 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.
On Thursday, the House Committee on Natural Resources, which oversees Puerto Rican affairs, sent a letter to the Puerto Rico Electric Power Authority, known as Prepa, demanding all records connected to the contract. 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.
That same day, the inspector general’s office at the Department of Homeland Security said it was also investigating, and Mr. Rosselló ordered an audit of the contract. “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.
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. 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.”
In a copy of a contract circulating online, whose authenticity has not been verified, the power authority “represents and warrants that FEMA” approved the deal. But in its statement, FEMA said, “Any language in any contract between Prepa and Whitefish that states FEMA approved that contract is inaccurate.” Both the Department of the Interior and Mr. Techmanski denied any impropriety in connection with the contract.
That contract cites the rates to be paid to Whitefish, including $188.07 to $440 an hour for the labor of its workers. 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.
Whitefish said in a statement on Friday that it planned to cooperate with any information requests from lawmakers, federal officials “or other appropriate governmental bodies” and that it looked forward “to the facts coming to light.” 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 this month, Ricardo Ramos, the chief executive of Prepa, said he had agreed to a contract with Whitefish because the company did not insist on a down payment. 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.”
Other companies, wary of Prepa’s bankruptcy, had demanded hefty sums, he said. Prepa had also been in talks with another company, Power Secure. 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.
Asked how a company as small as Whitefish, which had just two full-time employees, could take on such a big job, Mr. Ramos said, “Every company is small at some point in time.” 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 added that the company had sent a proposal after Hurricane Irma and before Maria, as had other companies. He studied its brochure and was interested in its work in mountainous terrain. 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.
“They told us about the assets, how many helicopters, how many crews,” he said. “They told us about their capability and we can increase — double, triple, quadruple — the size of the crews and we went ahead and mobilized them.” 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.
Power companies traditionally engage power companies from other states for help immediately after emergencies. Mr. Ramos said he did not do so in this case because the companies were hesitant to commit until they were sure where Maria would make landfall. He didn’t do so afterward, he said, because by then the Army Corps of Engineers had been tasked with the job. 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.”
In an interview on Thursday, Mr. Ramos said he had not heard of Whitefish before. 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.
“I heard of them once we received the proposal,” he said. “We checked them out on the internet. 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.” 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.
He added: “Tomorrow they start failing? Then I just remove them.” 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.”
The chief executive of Whitefish Energy, Andy Techmanski, said in an interview this month that the company got the contract because he was able to stay in communication with Prepa when other companies could not. 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.
He flew to Puerto Rico before the deal was signed on a “leap of faith,” he said. “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.”
“It was more of a scenario we were able to maintain limited communication with Prepa throughout the hurricane where perhaps others were having difficulties,” he added. “We made a commitment to come here. We stand behind that commitment.” 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.”