Puerto Rico utility ignored advice on deal
Lawyers advised against $300M contract.
WASHINGTON — Puerto Rico’s bankrupt electric utility ignored advice from its own lawyers before signing an expanded contract worth $300 million with a tiny Montana company to repair its damaged power grid, newly released documents show.
The law firm, Greenberg Traurig, recommended that the state-run power authority be allowed to terminate the deal within 10 days for any breach by the company, Whitefish Energy Holdings. The firm also recommended that the utility be allowed to seek damages from Whitefish and that the company be required to hold a bond for such a large contract, the documents show.
Those recommendations and others were ignored as the power authority expanded a no-bid deal with Whitefish, which is based in Interior Secretary Ryan Zinke’s hometown and had just two employees when Hurricane Maria hit in September.
The Puerto Rico Electric Power Authority, also known as PREPA, signed an expanded contract with Whitefish on Oct. 17 without making changes recommended by the law firm. The contract built on an earlier agreement PREPA and Whitefish signed days after the hurricane hit on Sept. 20.
The authority moved to cancel the contract Oct. 29 at the urging of Puerto Rico Gov. Ricardo Rossello, although Whitefish remains in Puerto Rico and is expected to continue work through Nov. 30. The company has been paid more than $10 million so far.
The Oct. 17 contract raised the total payments allowed to Whitefish to $300 million, including linemen hired at a rate of more than $300 per hour.
The documents were released by the House Natural Resources Committee ahead of a hearing Tuesday.
Rep. Rob Bishop, R-Utah, the panel’s chairman, said “a legacy of dysfunction” at PREPA has created “a competence deficit” that threatens Puerto Rico’s ability to improve conditions for its 3.4 million citizens.
“Confidence in the utility’s ability to manage contracts and time-sensitive disaster related infrastructure work is long gone,” Bishop said.
The utility’s executive director acknowledged mistakes Tuesday as the utility sought immediate help in the aftermath of the storm, which destroyed the island’s power grid. More than 50 percent of the island remains without power nearly two months later.