White­fish

Doc­u­ments show en­ergy firm charged el­e­vated fees for restora­tion work

The Washington Post - - FRONT PAGE - BY AARON C. DAVIS AND STEVEN MUFSON

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.”

ALVIN BAEZ/REUTERS

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.

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