The leader of Puerto Rico’s power utility on Tuesday defended his decision to sign a $300 million contract with small Montana firm Whitefish Energy, portraying the move as the most realistic solution to respond to immediate energy needs after Hurricane Maria.
Ricardo Ramos, the executive director of the Puerto Rico Electric Power Authority, or PREPA, told members of the Senate Energy and Natural Resources Committee that Whitefish was one of a half-dozen companies to offer assistance to restore the island’s destroyed energy grid.
Two of those offers were to provide immediate assistance, Ramos said, but one required an upfront $25 million payment.
He said Whitefish separated itself from the others by telling PREPA, which is bankrupt and $9 billion in debt, it could pay for work after it was completed, in addition to mobilization and demobilization costs.
“In retrospect, there are some steps in our contracting process with Whitefish that we could have done better,” Ramos said. “I chose to contract with Whitefish because my priority was securing the immediate assistance that we needed to begin restoring power as quickly as possible to our most critical customers.
"Taxpayer money was never at risk. There was never an expenditure of $300 million."
Ramos, who took over PREPA in March, said he did not pursue the usual mutual aid agreements that utilities use after natural disasters because Puerto Rico had been so devastated by the hurricane that it could not provide the logistics such as housing and fuel to out-of-state utility workers.
Whitefish, which had two employees before Maria, promised it could immediately access more than 100 workers and provide its own large stocks of supplies.
“After the devastation of Maria, I believed that PREPA was unable to meet the requirements for mutual assistance through the members of the American Public Power Association, such as providing accommodations for workers and other logistics,” Ramos said. "The agreement requires that the host utility take care of all of the logistics. There were no logistics in Puerto Rico.”
“PREPA was suffering from a lack of fuel for trucks, food for employees, drinking water, and ice,” Ramos added. “How could I have counted on having even more people into that situation? I needed people that were self-contained, who could bring their diesel as first responders.”
After PREPA canceled the contract Oct. 29, Puerto Rico eventually sought the mutual aid agreements.
On Monday, electrical workers from New York arrived to help with repairs. Ramos said half of the island’s power generation will be restored by Wednesday, although he did not say how many households and businesses remain without power.
Senators were not satisfied with Ramos’ explanation, noting that PREPA approved higher rates of pay and costs than normal for the Whitefish contract, which is being investigated by the FBI.
“Whitefish is clearly an issue of concern for all of us,” said Sen. Lisa Murkowski, R-Alaska, the committee’s chairwoman. “It’s one thing to be responsive in the immediate aftermath of a hurricane. It's another thing to be engaged in something we would all call gouging in taxpayer money when you look at the terms that were agreed to.”
“Just because it's hard to get there doesn’t mean you price gouge,” added Sen. Maria Cantwell of Washington, the committee’s top Democrat.
Ramos replied that the companies who made offers to PREPA for power restoration gave similar rates.
“If there was price gouging, it involved six companies,” Ramos said.
The questioning of PREPA comes after Rep. Rob Bishop, R-Utah, the chairman of the House Natural Resources Committee, released on Monday night 2,000 pages of documents related to the power utility’s handling of the Whitefish contract, which was agreed to on Sept. 26 and expanded Oct. 17.
The utility approved the second contract despite objections from its own lawyers, who worried it offered few protections, according to a summary of the documents released by the committee Monday night.
The Federal Emergency Management Agency also expressed concern about provisions of the contract.
The committee said the standard hourly labor rates in both contracts were “exorbitant.”
Whitefish also unsuccessfully sought to obtain exemptions from Puerto Rican taxes and labor laws, the committee said, and offered to provide a generator for the family of one of PREPA’s executives.
Whitefish was not at the hearing, but it defended its work to the Washington Examiner.
“Whitefish Energy continues to make progress on our assigned work to restore electrical transmission infrastructure on Puerto Rico and our team of more than 500 workers remains fully committed to this mission,” said a spokesman for the company, which will continue repairing power lines until Nov. 30. “We also remain committed to addressing any questions from Congress and are confident that the work we’ve accomplished to date and will complete over the coming weeks has made a difference and provided PREPA and the Army Corps [of Engineers] a solid foundation as they move forward.”
Ramos acknowledged that PREPA was failing before Maria hit, and has been susceptible to political influence and corruption. It is responsible for $9 billion of Puerto Rico’s $73 billion debt load.
The power utility, heavily dependent on Venezuelan oil, has aging power plants and has not maintained its energy infrastructure. It has lost two-thirds of its workforce in the past three years, as residents migrate to the mainland U.S. to escape the island's financial woes and a stagnant economy.
“I can attest that historically certainly it's very hard to manage PREPA being a big corporation that is a part of the government,” Ramos said. “Certainly [there has been] too much intervention by government officials. Subsidies have killed PREPA in its finances. PREPA has been a company where politicians, and parts of government, can get their family members to get work.”
Ramos said that political patronage is no longer a problem at PREPA, noting that he and the power utility's board of directors are now in charge of approving staff.
Puerto Rico Gov. Ricardo Rossello told the Senate committee earlier Tuesday that he is considering ways to overhaul PREPA, including privatizing it.