Utilities that aided Puerto Rico face tax bills
In May, a worker from Cobra Energy Company, contracted by the Army Corps of Engineers, installed power lines in the Barrio Martorel area of Yabucoa, a town in Puerto Rico. So far, about eight Puerto Rican cities have forwarded tax notices to utilities who helped out after two hurricanes hit the island.
When nearly the entire power grid of Puerto Rico was knocked out by a pair of ferocious hurricanes last year, utility companies from across the United States sent crews and equipment to help.
It was a power emergency on a scale rarely seen and companies spent tens of millions of dollars to mobilize. The utility in Sacramento, California, sent 30 workers and a dozen trucks. Ameren, which serves over 2 million customers in Missouri and Illinois, sent 225 workers. New York dispatched workers on at least five deployments to repair power lines and assess damaged substations. Florida Power & Light sent more than 100 trucks, several tons of equipment and 800 employees, many of whom spent Thanksgiving and the winter holidays working 16-hour days.
Though their costs are expected to be reimbursed by the federal government, the companies were not earning a profit. So it was with astonishment that, over the summer, some of the utility companies that had sent aid crews opened letters from the towns where they had worked in Puerto Rico: bills demanding millions of dollars in license and construction taxes.
Florida Power & Light was given five days to pay the first $2 million and 30 days for $333,000 more in taxes, fees, penalties and interest. Ameren and the Sacramento Municipal Utility District received bills for nearly $3 million.
“The honor and humanity of your city’s people stands in striking contrast to the inappropriate monetary demands,” the Florida utility’s chief executive, Eric Silagy, wrote in a letter to the mayor of Bayamon.
They were not alone in their chagrin. The utilities “each fronted tens of millions of dollars for personnel, equipment and materials to help restore power in Puerto Rico on a not-for-profit basis,” said Emily Fisher, vice president for law at the Edison Electric Institute, which helped coordinate the mutual aid agreements. “And the thanks we got from some mayors came in the form of municipal tax bills and punitive fines.”
So far, about eight cities have forwarded tax notices, including the municipalities of Bayamon, Río Grande and Carolina, near the capital of San Juan. City officials said such assessments are a normal part of doing business in Puerto Rico. In most cases, however, they are charged to companies engaged in profit-making business activity, not utilities making emergency repairs after a natural disaster.
The Federal Emergency Management Agency is expected to reimburse mainland power companies for their work in Puerto Rico. Donald Caetano, a spokesman for the agency, said utilities that were “savvy enough” to include the taxes in their original contract language could also have the tax bills reimbursed by FEMA by submitting those expenses to the Puerto Rico Electric Power Authority, the public utility.
But that would leave federal taxpayers responsible for millions of dollars flowing into municipal coffers in Puerto Rico beyond the repair costs the federal government is already paying.
“The short answer is yes, FEMA could pay that municipal tax,” Caetano said.
Utilities that did not make provisions in their contracts could be “on the hook” for paying the taxes themselves, Caetano said.
PREPA’s chief financial officer, Nelson Morales, said further bills could be on the way from any of the 78 municipalities in Puerto Rico.
Randall Hakes, a senior lawyer at the Sacramento utility, whose crews were in Puerto Rico from January to March, said the work was intended to render aid to millions of Puerto Ricans who in many cases spent months without electricity after hurricanes Irma and Maria struck in September 2017. “We are happy we were able to help, and loved seeing their joy when power was restored,” he said. “It’s unbelievable how they now seek to take advantage of our willingness to lend a hand.”
Adding to their frustration with the taxes, a number of the utilities have not been reimbursed by FEMA for sending their workers and equipment to Puerto Rico in the first place. That will take place only after a careful review of the invoices, officials said. Caetano said that about $940 million of $1.8 billion invoiced for the electrical work has been reimbursed so far.