Puerto Rico’s grid rebuilding efforts are swirling in controversy, while three quarters of Puerto Rico, and its 3.4 million American citizens, are still without power more than a month after Hurricane Maria made landfall.
The biggest controversy is surrounding a tiny, two-year-old Montana company called Whitefish Energy, which happens to be based in the hometown of Interior Secretary Ryan Zinke. The company secured a $300 million contract to build out transmission lines — the largest doled out by the Puerto Rico Electric Power Authority (PREPA) so far — despite having only two employees on the day the storm hit.
Details of the Whitefish deal have now been made public. Most notably, a leaked copy of the contract obtained by Daily Beast reporter Ken Klippenstein includes a clause that the government is prohibited from reviewing the company’s profits related to is relief efforts.
“In no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA Administrator, the Comptroller General of the United States, or any of their authorized representatives have the right to audit or review the cost and profit elements,” the contract states.
The contract also states that the Puerto Rican government “waives any claim against Contractor related to delayed completion of work.”
The leaked document confirms earlier reports of wages for subcontractors, who make up the majority of Whitefish’s workforce, at $462 per hour for a supervisor and $319 per hour for a lineman. In addition, Whitefish subcontractors deployed to Puerto Rico are permitted to spend $332 per day on accommodations and nearly $80 per day on food.
UTIER, the electrical workers' union of Puerto Rico, expressed alarm at those rates, tweeting: “We need support and help, but under these conditions it is impossible and questionable. Who allowed this?”
“The more we learn about the contracting process between PREPA and Whitefish Energy, and the more details emerge regarding the agreement itself, the more concerning it becomes,” said Shayle Kann, vice president of GTM Research. “What we know, at a minimum, is that PREPA awarded an enormous contract with major humanitarian implications to a very small, unproven firm through abnormal, often alarming contract terms. The recovery in Puerto Rico is far too important to allow for this kind of ineptitude, let alone the more salacious accusations of cronyism that have entered the conversation.”
Whitefish says it now has close to 300 mostly subcontract workers in the region working on the rebuilding effort for the island’s 2,400 miles of transmission lines, 30,000 miles of distribution lines and 300 substations. Amid the contract controversy, the company has been actively tweeting videos and other updates on its progress.
— Whitefish Energy (@WhitefishEnergy) October 26, 2017
But as the rebuilding process continues, scrutiny of the plumb contract for such a small company is intensifying.
In response to the leak, Congressman Raja Krishnamoorthi of Illinois called on the House Oversight Committee launch an investigation into Whitefish, warning of “sweetheart contracts and backroom deals” erode budgets and people’s confidence in government.
House Democratic leader Nancy Pelosi had previously called for a probe into the contract. Puerto Rico Governor Ricardo Rossello also requested an audit of Whitefish in a letter to the Homeland Security inspector general’s office this week.
In addition, eight congressional Democrats have asked the Interior Department inspector general for a separate investigation, citing concerns over possible ties to the Trump administration.
“Whitefish is primarily financed by a private equity firm that is run by a contributor to the presidential campaign of Donald Trump. We're concerned that Whitefish might have overstated its connections with the Trump administration to obtain the contract,” they wrote in a letter sent Wednesday.
The contributor referenced in the letter is Joe Colonnetta, a partner at HBC Investments and an investor in Whitefish Energy. A spokesman for Whitefish and Colonnetta told ABC News that his donations had “no influence whatsoever to impact the contract.”
Secretary Zinke, meanwhile, is under scrutiny for potential ties to Whitefish founder Andy Techmanski — both hailing from the same small town. However, both parties have denied any wrongdoing.
As allegations swirl, Whitefish didn’t gain any favors when it got into a bizarre Twitter spat with the Mayor of San Juan, Carmen Yulin Cruz, who has also called for an inquiry into the contract. Whitefish tweeted back to her: “We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?”
The company later apologized for that tweet and erased it. But still called the Mayor’s comments “misplaced.”
While the scrutiny mounts around Whitefish, many others in the the private sector see opportunity and dollar signs as they look for contracts to both rebuild and reinvent Puerto Rico’s demolished power grid.
Before the storm, PREPA’s grid was crumbling with much of it run on dirty, expensive oil and the utility declared bankruptcy in July with $9 billion in debt. The storm wiped out much of the transmission and distribution grid connecting the power generation to the cities.
Meanwhile, government agencies are sparring over who’s at fault for the slow rebuilding effort, which has led to dire situations like surgeons using cell phones as flashlights in surgery. At the same time some are using the disaster to argue that privatizing the government-owned utility is the answer.
The federal board that oversees PREPA said this week that it plans to appoint an outside manager, Noel Zamot, as chief transformation officer to lead the rebuilding efforts. Zamot, a retired Air Force colonel, worked with the board over the summer on attracting private companies to Puerto Rican infrastructure projects and has reportedly been supportive of the idea to privatize the power company.
Weeks after the storm, Zamot wrote a Medium post praising the offer by Tesla CEO Elon Musk to help rebuild Puerto Rico’s power grid. Zamot wrote:
“[T]he mere fact that Gov. Roselló [sic] has enthusiastically supported Musk’s offer is in itself a very positive development. It clearly signals to private investors that the island is seriously considering innovative solutions to its energy challenge. Investors are correct in interpreting this as a signal that everything is on the table, and that those with truly innovative solutions (backed by smart capital) will be warmly considered by the government.”
He added, though, that “Tesla’s solutions will be necessary, but insufficient on their own to truly transform PR’s energy sector.”
While Zamot appears eager to bring in the private sector, not everyone is eager to have him in charge. Governor Rossello reportedly plans to appeal the board’s decision to appoint Zamot and will seek to retain authority over PREPA.
Tesla’s Musk, a brilliant opportunist and media strategizer, has managed to emerge as an inspiring figure in the face of all the controversy. This week Tesla tweeted out photos of a solar and battery project it built at a hospital in Puerto Rico, which it says is the first of many projects “going live.”
Puerto Rico’s Department of Economic Development and Commerce Secretary, Manuel Laboy, told Bloomberg that the government is considering a series of microgrids that could use solar and batteries along with other renewables. Battery-connected microgrids are emerging as an important technology in a world with increasingly extreme storms.
Laboy said he’s talked with Tesla and other companies and that there could be a competitive bidding process over a clean energy rebuilding effort.
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