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US Senate questions Puerto Rico gov’t decision to contract Whitefish

By on November 14, 2017

SAN JUAN – The Senate Energy and Natural Resources Committee held hearings on the status of the rebuilding efforts on the U.S. Virgin Islands and Puerto Rico, which have yet to have electricity and water service fully restored nearly two months after hurricanes hit them.

At the forefront was a $300 million contract the bankrupt Puerto Rico Electric Power Authority (Prepa) awarded to Whitefish Energy, a small Montana firm that reportedly has connections to officials from the administration of President Trump, to repair the grid. Senators also chided island officials for having delayed seeking mutual aid from the states.

Sen. Lisa Murkowski (R-AK)

Committee Chairwoman Lisa Murkowski (R-AK) recalled the devastation she saw in Puerto Rico and the USVI when she recently visited. She said the hearing was to look at ways to make the electric grids on the islands more resilient to future storms.

She expressed support for amendments to Stafford Act funding that have been requested by Puerto Rican officials, arguing it made no sense to rebuild the grids to pre-storm conditions, which is what the law’s relief funding is for.

“Puerto Rico’s electric grid was already antiquated before the storms hit. So you really have to ask the question: Why, why would we rebuild it to that standard? I think there is broad agreement, I’ve talked to colleagues in the other body, and the other side of the aisle. Congress needs to provide greater flexibility in how Stafford Act funds can be used. I certainly am going to work with my colleagues and the administration to implement that change,” she said.

Gov. Ricardo Rosselló said the storm’s devastation had no parallel in modern American history. “During Hurricane Andrew, Tallahassee was up and running, Katrina left Baton Rouge functioning and Harvey left Austin unscathed. Unfortunately, María left all of Puerto Rico completely devastated. For the people of Puerto Rico, María was not a disaster, it was a catastrophe. A catastrophe whose origins can be traced not only to the storm’s horrible winds, waves and rains, but to the societal conditions that Puerto Rico has been subjected to for over a century,” he said.

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He said that even with all the help and recovery efforts, Puerto Rico will not be able to recover without federal aid. “Therefore, I call on Congress to approve by December an emergency supplemental legislation that provides equal treatment for Puerto Rico compared to what any state in the country should expect if they experienced a similar level of devastation. In doing this, I commit to you today that I will lead the most transparent disaster reconstruction in American history,” he said.

The governor said he already has issued an executive order creating the Central Recovery and Reconstruction Office of Puerto Rico, which has been tasked with ensuring full accountability and transparency for all state and federal funds directed toward the island’s reconstruction.

He described the government’s help as slow, not because of the responders but because of the Stafford Act, which authorizes the Federal Emergency Management Agency (FEMA) to work in conjunction with the state and local governments to respond to a disaster.

“Much of the bureaucratic red tape and arcane agency approval process of FEMA is driven by the assumption that the state level government dealing with a disaster will have functioning computers, telephones and workforce that can navigate the obstacles. Furthermore, FEMA is set up to purely assist the state level government, therefore when the state level employees become first responders themselves, it leaves FEMA paralyzed to jump into action,” the governor said.

Gov. Ricardo Rosselló

One example Rosselló gave was the backlog experienced at the ports due to a lack of available truck drivers. Under a more robust Stafford Act, he said FEMA and the federal government would have been able to better help deal with that situation.

Rosselló was asked several times why he delayed in seeking mutual assistance for the hurricane. He said that after Hurricane Irma hit the island, the energy service recuperated quickly, so he focused in helping people who were in flooded areas. Two weeks later, Hurricane María ravaged the island.

In response to a question from Sen. Mike Lee (R-Utah) about whether the island should be included in the in the False Claims Act, which is used to cite contractors for defrauding the government, Rosselló said he wants the island to be treated on an equal footing to other states and defended his actions related to the Whitefish contract, which included canceling it and naming an official to oversee all Prepa contracts.

Rosselló insisted it is the government and not the Financial Oversight and Management Board that should lead recovery efforts. Two months after the hurricane, the airports and ports are working, the reconstruction of the water supply is more than 85% complete, over 70% of the communications and cell towers are back in operation, and 49% of the power grid has been restored.

At loggerheads

“The Oversight Board can help Puerto Rico through revising the fiscal plan, lobbying, moving the Title III case forward, and offering helpful recommendations, as it is permitted to do under Section II of Promesa. The oversight board can also expedite the permitting process as it relates to Prepa and other critical infrastructure projects as provided for under Title V of Promesa. But disaster recovery remains within the sole purview of the government, which comprises elected officials responsible for coordination across the multiple entities and agencies that are rebuilding Puerto Rico,” he said.

While he said his government and the board have agreed the restructuring of the island’s debt should move forward despite the devastation left by the hurricane, he criticized the board’s lack of transparency.

“I must express disappointment that in the face of the great lengths the government has gone to cooperate with the board, my ex officio designee to the board has been routinely excluded from executive sessions and not given the benefit of gaining insight into the board’s deliberative thinking as well as the board hearing my positions and views on issues vital to Puerto Rico,” the governor said.

U.S. Department of Energy Assistant Secretary Bruce Walker said the hurricane season of 2017 serves to highlight the need for a continued and adaptive focus on energy system resilience. As part of a comprehensive effort to reduce the impact of severe weather events, utilities in three hurricane-prone regions invested hundreds of millions of dollars over the last several years to improve their systems.

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During Hurricane Wilma in 2005, more than 11,000 Florida Power & Light Co. utility poles fell or snapped, 241 substations experienced major damage, while close to 100 transmission structures were damaged. However, grid hardening since Wilma limited the damage to less than 1,500 toppled poles, no major damage to substations, and no damage to transmission structures during Hurricane Irma. In Houston, at the peak of outages, 800,000 were without power from Hurricane Harvey, whereas when Hurricane Ike hit Houston in 2008, 2.1 million customers were knocked offline, he said.

U.S. Corps of Engineers (USACE) Maj. Gen. Ed Jackson said FEMA has identified $1.7 billion in mission assignments for the corps to assist in hurricanes Irma and María response and recovery. Currently, the corps, he said, has more than 1,500 personnel deployed in various locations supporting recovery missions.

As of Nov. 7, USACE and its contractors have completed 955 of 1,100 requested pre-installation inspections for temporary generators and 470 generator installations in Puerto Rico. They have completed 6,948 blue roof installations and collected more than 34,500 rights of entry. It has removed 165,400 cubic yards of the estimated 6 million cubic yards of debris amassed in Puerto Rico.

Whitefish in the room

In his prepared statement, Prepa Executive Director Ricardo Ramos discussed the controversy surrounding the $300 million he signed with Whitefish Energy and assured senators that the public utility has a hurricane preparation plan. He was asked several times why he chose to contract Whitefish when other entities would have done the job at lower rates. The contracting scandal ensued amid reports that officials from the Trump administration may have influenced its awarding.

Ramos said Prepa received an outpouring of offers of assistance and support after the hurricane. Whitefish indicated it had access to more than 100 accredited linemen, equipment operators and apprentices; about 100 trucks, diggers and other pieces of equipment; and a large stock of materials, poles, transformers and other equipment.

Prepa Executive Director Ricardo Ramos

After the devastation of Maria, he believed that Prepa was unable to meet the requirements for mutual assistance through the members of the American Public Power Association (APPA), such as providing lodging for workers and other logistics.

After reviewing about a half-dozen proposals from potential first responders, he said only two offered the immediate services Prepa needed. One proposal required a guaranteed payment of $25 million, the other one, from Whitefish, offered Prepa the ability to pay only for work that was completed. “I therefore authorized our contracting staff to execute a contract with Whitefish while we continued to seek additional assistance from others for the complete, multibillion-dollar restoration effort still to come,” he said.

In retrospect, he said there were some steps in the contracting process that could have done better. “I chose to contract with Whitefish because my priority was securing the immediate assistance that we needed to begin restoring power as quickly as possible to our most critical customers,” he said.

But one committee member, Sen. Maria Cantwell (D-WA), said the rates negotiated by Prepa with Whitefish were unacceptable for the federal government and that “we do not like price gouging.”

She asked Ramos point blank if anyone had taken any kickbacks, which he denied having taken place. Ramos said he authorized the contract, which was reviewed by the utility’s emergency procurement staff. However, he said other companies have rates similar to those of Whitefish.

Ramos also said he did not know Whitefish officials had contacted Interior Secretary Ryan Zynke.

Relative work

In response to questions about the number of political appointees at the utility, Ramos complained that Prepa is the “jewel in the crown” and that it has traditionally been the place where politicians place relatives. “Parts of government can get families to work at Prepa,” he said.

Fiscal oversight board Executive Director Natalie Jaresko made it clear that her panel will continue efforts to gain more power over the public utility and indicated it could be done through the Prepa’s fiscal plan, which will have to be redone. She noted that the board learned about the Whitefish contract through the press.

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José Román, acting chairman of the Puerto Rico Energy Commission, noted the importance of having Prepa under the commission’s control to make it politics-free and focused on competitiveness and cost-effectiveness.


José Román, acting chairman of the Puerto Rico Energy Commission

Besides noting that the Whitefish contract has been cancelled by his administration, Rosselló said all he seeks is for the island to be treated the same as states.  

Regarding a question about whether he trusted the Trump administration would grant the island the estimated $94 billion it needs to rebuild the island, Rosselló again stressed that all he wanted was for the administration to give the island equal treatment.

He and U.S. Virgin Islands Gov. Kenneth Mapp requested amendments to the Stafford Act for funds to rebuild infrastructure in a more resilient fashion instead of its original state, as provided by the law.

“I want for us to be treated equally,” Rosselló reiterated “This event was catastrophic.”

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