Documents show energy firm charged elevated fees for restoration work
Energy pocketed millions from Puerto Rico’s electric utility in a contract for restoration work, documents show.
After Hurricane Maria knocked out electricity to millions of residents of Puerto Rico in September, the head of a small electric transmission company from Montana boasted that his firm could best manage the logistics of getting needed repairmen to the island.
“Please reply to this email with your approval, and we’ll start flooding you with resources,” Andy Techmanski, chief executive of Whitefish Energy Holdings, wrote to officials at Puerto Rico’s state-run utility on Sept. 28, seeking permission to send subcontractors to the island.
But three days later, Techmanski wrote of “problems with logistics.” Soon, he was pleading for approval of costly airlifts of trucks that he said were stuck at ports in Florida.
“We have over 100 pieces of equipment staged in Jacksonville, that has backed up to the maximum threshold,” Techmanski wrote on Oct. 10, saying that shipping companies were “creating hurdles” by requiring information on cargo — insurance, registration and driver information — and it was taking days for Whitefish to get each truck cleared for shipping.
The emails were contained in more than 2,000 pages of internal company documents turned over to congressional investigators that capture the troubled relationship between the island’s bankrupt state-run utility and Whitefish Energy as they confronted a staggering electricity crisis that is now in its 56th day. The documents show how the tiny firm that won — and then lost — the largest contract to restore power in Puerto Rico struggled from Day One. Even so, the Puerto Rico Electric Power Authority, or PREPA, agreed repeatedly to requests for higher and higher prices for restoration work.
The island utility appears likely to continue paying the firm millions of dollars a week into December, according to documents and interviews. Crews arrived in Puerto Rico last week on contracts with the firm lasting into next month, despite an announcement by PREPA on Oct. 29 that it was ending Whitefish’s contract.
A spokeswoman for PREPA, Odalys de Jesus Colon, said she would refer questions to “the office that worked with the recruitment of Whitefish.” There was no further response.
Ken Luce, a spokesman for Whitefish, said in an email that focusing alone on Whitefish’s struggles “ignores the fact that every aspect of disaster assistance was hampered by logistical issues getting water, food, medicine and other supplies to the island because the air and sea ports were either closed or had severe capacity constraints.”
Luce stressed that in less than a month, Whitefish brought more than 600 pieces of equipment to the island and mobilized before many others, including federal government contractors. “At no time did the Whitefish team let the logistical challenges become an excuse. We found solutions and continued our ramp-up and work.”
According to the emails, PREPA’s outside attorneys warned against the terms of an expanded agreement with Whitefish. PREPA signed that contract on Oct. 17 without making many of the recommended changes. That contract built on an earlier agreement PREPA and Whitefish signed on Sept. 26.
The contract raised the ceiling amount for payments to Whitefish to $300 million. Much of that money was for linemen that Whitefish was bringing to the island, billing at a rate of over $300 per hour, per person.
The documents show those rates were in some cases more than twice what its subcontractors were charging, allowing Whitefish to pocket as much as one of every two dollars it billed PREPA for the work.
Luce said it was too early to determine the final profit margin, but he said that Whitefish Energy “needed to make sure the fixed subcontractor rates in the contract were sufficient to cover the costs of such subcontractors, as well as Whitefish Energy’s overhead and other costs . . . Simply looking at the rate differential does not take into account Whitefish’s overhead.”
Luce said that “at least one potential subcontractor provided Whitefish Energy with a proposal that had rates that were equal to Whitefish Energy’s own rates in the contract.”
It is unusual for a government or utility to pay a third-party contractor when bringing in additional repair crews after major disasters. Typically, under mutual-aid agreements with other utilities, workers are guaranteed time-and-a-half or doubletime for the work.
Jacksonville Electric Authority, one of the first to send workers to Puerto Rico as a subcontractor to Whitefish, calculated that it would have to charge 20 percent more than it would under mutual-aid agreements in the continental United States to cover costs associated with carrying out restoration work 1,000 miles off the U.S. mainland, a representative said. Even so, JEA’s rates to Whitefish worked out to an average of $170 per hour for linemen, invoices show and the company confirmed.
Under the deal PREPA signed with Whitefish, the Montana firm charged PREPA $319 to $462 an hour for linemen and supervisors, a sharp increase from the initial arrangement. More than two weeks after the storm, some subcontractors were billing at those rates for 18-hour days, according to daily log sheets turned over to the congressional panel.
Rep. Rob Bishop (R-Utah), chairman of the House Committee on Natural Resources, said in a statement to The Washington Post that the documents turned over to his committee show a “competence deficit” on the part of PREPA that necessitates the federal oversight. “Confidence in the utility’s ability to manage contracts and time-sensitive disaster-related infrastructure work is long gone,” Bishop said.
The documents show Whitefish’s chief executive disparaged the mutual-aid process that successfully sent thousands of workers to Florida and Texas to restore electricity after hurricanes this year.
On Sept. 28, eight days after Hurricane Maria struck the island, Techmanski told PREPA that the “mutual-aid agreement is very vague and would require a more structured framework agreement for them to recoup costs.” Instead, he told PREPA, the process would work better if those workers and utilities were treated as subcontractors to Whitefish.
PREPA agreed. Three days later, Techmanski contacted Mike Hyland, chief engineer at the American Public Power Association and coordinator of the mutual-aid network, for help in arranging military ships, transports and an Army “tent city” for workers.
On Oct. 12, 22 days after the hurricane hit, an attorney for the Federal Emergency Management Agency in Puerto Rico, Graciela Zavala-Garcia, wrote to one of PREPA’s outside lawyers at Greenberg Traurig, saying the Whitefish contract “does not contain some necessary provisions.” There were 15 missing components, from environmental regulations to anti-lobbying provisions, according to a FEMA official who spoke anonymously because he was not authorized to represent the agency.
On Oct. 15, as Techmanski and PREPA were still negotiating the expanded contract, Nancy Mitchell of Greenberg Traurig warned that the terms didn’t comply with provisions required by FEMA.
In the final contract, signed two days later, PREPA disregarded several recommendations by Greenberg Traurig, including terms for canceling the contract, ceiling prices and breach of contract, documents show.
In a memo to Bishop, the House Natural Resources Committee staff noted other issues with the contract. It said that “some subcontractors appear to have billed PREPA for nearly every waking hour they spent in Puerto Rico,” 16 hours a day, 7 days a week, including overtime with “little supporting documentation.”
In an op-ed published Tuesday on the website Morning Consult, Techmanski said Whitefish had rebuilt 200 miles of transmission and distribution lines, restoring power to more than a half-million people. “Our team is working tirelessly toward the completion of this project so that we can do our part to bring a sense of normalcy back to the people of Puerto Rico,” he wrote.
Under mounting political pressure, PREPA announced on Oct. 29 that it was moving to cancel the contract with Whitefish. It remains unclear how or why the Puerto Rico utility first chose Whitefish.
Two days before the storm, Techmanski wrote to senior PREPA official Ramon Caldas Pagan, saying that he was responding to a message the utility official had sent over LinkedIn, inquiring about Whitefish’s resources to respond after the storm. Techmanski wrote that he had 125 men, 35 bucket trucks and other equipment, including “rubber gloves, sleeves and hot sticks to match any need you may have.”
On Sept. 23, three days after the storm, Caldas Pagan wrote that PREPA was ready to move forward and would prepare a contract. Techmanski wrote back to him and six others at the company that he would fly to the island within 24 to 36 hours and asked, “Do you or your families need anything (generators, water, food, etc.) for us to bring to help them?”
Ken Luce, the Whitefish spokesman, said the company never delivered any equipment to PREPA officials for personal use. “On Andy’s first trip to PR to meet with PREPA to discuss ways to work together he did what any decent human being would do in offering to bring water and other supplies given the situation to the island,” Luce said. “To be clear, while he made the offer, nothing was provided.”
Workers from Montana-based Whitefish Energy repair the power grid in Manati, Puerto Rico, which was damaged during Hurricane Maria in September. Whitefish charged the island’s electric utility over $300 an hour for linemen and paid workers only half that amount.