Dispute between Puerto Rico utility, Whitefish Energy jeopardizes goals to restore power
SAN JUAN – The stability of the San Juan metropolitan area’s electricity service could be at risk of being achieved before Dec. 1, as promised by Gov. Ricardo Rosselló, due to a payment dispute between the Puerto Rico Electric Power Authority (Prepa) and Whitefish Energy Holdings, which was contracted to repair the island’s main transmission lines.
The agreement with Whitefish Energy was canceled at the end of October, but the company was to remain on the island until it delivered transmission line 50900–which runs from Central Aguirre, in Salinas, to Aguas Buenas–completing the cycle needed to supply the island’s north with the generation produced in the south. The work was expected to be finished this week.
However, in a letter dated Nov. 19, from Whitefish CEO Andy Techmanski to Prepa interim Director Justo González, the Montana-based company warned that if it did not receive evidence that the payments owed were in process, it would stop its work, further delaying the restoration of electric service needed for thousands of families and businesses to return to normality after the powerful Hurricane María hit the island two months ago.
To date, the letter says, Whitefish has invoiced Prepa for $65 million for work performed and $39 million for its upcoming demobilization, the cost of which the contract stipulates the utility has to pay in advance, for a total $104 million. Of that amount, according to Techmanski, $83 million have not been paid, $26 million of which had already been audited and approved by Prepa.
“If Whitefish Energy does not receive evidence that wires for all past due invoices have been initiated by 11:00 am local time on Monday, November 20, 2017 (including those that have already been audited and the amounts owed under the demobilization invoice), Whitefish Energy will have no choice but to immediately suspend all work under the contract as of 12:00 pm local time on Monday, November 20, 2017, due to PREPA’s material breach of the contract and to mitigate Whitefish Energy’s damages resulting from PREPA’s breach,” the letter reads.
However, a Monday evening statement by Prepa spokesman Carlos Monroig indicates the suspension of payment was due to a request from one of the companies Whitefish hired “because the subcontractor was owed.”
“With this claim, PREPA had to stop the pending payments to Whitefish until the situation with the Whitefish subcontractor is clarified,” the utility’s release reads.
According to the Wall Street Journal, four Florida companies subcontracted by Whitefish to bring grid-repair crews to the island decided to leave after not being paid by Prepa. The companies are Jacksonville Electric Authority, Orlando Utilities Commission, Kissimmee Utility Authority and Lakeland Electric Co.
Prepa, which is in under bankruptcy-like proceedings in court, with $9 billion owed to its creditors, contracted Whitefish right after Hurricane María hit, leaving in its wake much of the island’s grid in shambles.
The small Montana firm subcontracted the majority of the employees it brought to the island after one of the worst devastations caused by a hurricane in the United States.
The Whitefish hire drew criticism locally, but more so stateside because the island’s bankrupt utility decided to contract a private company before requesting help from the American Public Power Association’s mutual aid program as well as alleged links with donors of President Trump’s election campaign.
The original contract with Whitefish was signed for $300 million on Sept. 26, but was amended two weeks later to comply with Federal Emergency Management Agency (FEMA) requirements and for the agency to reimburse Prepa for the costs of the grid’s repair.
It is uncertain FEMA will reimburse the costs since, as has been shown, the contract did not comply with agency requirements despite FEMA and government lawyers who worked on the document having warned of its deficiencies.
In his letter, Techmanski notes that Prepa assured Whitefish it had the authority to enter into the contract, “including but not limited to with respect to the Government Oversight Board,” as well as implying that the contract complied with FEMA requirements.
“Specifically, as part of PREPA’s request to amend the contract to make it FEMA‐compliant, PREPA insisted that Whitefish Energy provide fixed rates for all types of work, including labor, equipment, lodging and per diems,” the letter reads.
It further argues that “PREPA did not want to take on the risk of increased costs, and instead put that risk on Whitefish Energy, which Whitefish Energy accepted,” including obtaining supplies and lodging for its brigades on a hurricane-devastated island.
Techmanski wrote that 516 workers subcontracted by Whitefish “have been working around the clock to restore 50% of the power generation transmission on the island,” but that the company has not been able to fully compensate them due to Prepa’s failure to pay its bills.
The electric utility’s outgoing director, Ricardo Ramos, had said he was evaluating hiring some of the companies subcontracted by Whitefish so that, after the contract with the Montana company ended, they would continue working on the island, but under a direct contract with Prepa. The Wall Street Journal’s article suggests the talks did not progress and those workers are in the process of returning home.
Prepa said Monday evening that it is in dialogue “with Whitefish and the subcontractor [which was not identified] to clarify the situation and reach a satisfactory agreement for all parties.”