The FBI is examining the $300 million contract that was recently signed and then canceled between the Puerto Rico Electric Power Authority (PREPA) and Whitefish Energy Holdings to repair Puerto Rico’s power grid, the Wall Street Journal reports.
The FBI is investigating Whitefish Energy’s contract to rebuild Puerto Rico’s grid
The $300 million deal was canceled over the weekend after overwhelming criticism.
Umair Irfan was a correspondent at Vox writing about climate change, energy policy, and science. He is a regular contributor to the radio program Science Friday. Prior to Vox, he was a reporter for ClimateWire at E&E News.
The San Juan FBI field office is looking into possible wrongdoing around the deal, but specifics of the investigation are unknown. Questions raised by reporters and others about the contract have also triggered investigations from the House, the Senate, Puerto Rican officials, and the Department of Homeland Security.
The contract, which was signed September 26 and canceled Sunday by Puerto Rico Gov. Ricardo Rosselló, was the single largest contract to date to rebuild the island in the wake of the Hurricane Maria disaster.
But the arrangement drew scrutiny and criticism from the outset after it became clear that the Montana company had just two full-time employees and little experience with big rebuilding projects. PREPA also signed the contract in lieu of invoking mutual aid agreements with other US utilities, which was what power companies in Florida did after Hurricane Irma and helped speed up the restoration of power there.
Why PREPA decided to forgo mutual aid and wait until six days after the storm to ink a deal with a little-known contractor from Interior Secretary Ryan Zinke’s hometown funded by a donor to President Trump remains unclear.
But the speed at which the Whitefish contract unraveled raises the additional question of whether Puerto Rico can handle the unprecedented rebuilding effort. Some 40 days after the storm, the island and the US Virgin Islands are still deeply affected by what is now the longest blackout in American history. Only about 30 percent of utility customers in Puerto Rico have had their power restored. Though the multibillion-dollar reconstruction push is underway, lives are still at stake and millions of Puerto Ricans may be waiting several more months for the lights to come on.
Whitefish was politically well-positioned to get the contract
As with many problems in Puerto Rico after Hurricane Maria, the groundwork for the Whitefish fiasco was laid before storm, as Blake Sobczak at E&E News showed in a timeline of the contract on Twitter.
Most notably, Whitefish was already on PREPA’s radar over the summer when the company’s CEO vacationed on the island and met with utility officials. Utility officials worked to coordinate reconstruction with Whitefish after the storm, but didn’t make efforts to reach out to other utilities for help.
The company is headquartered in Interior Secretary Zinke’s hometown of Whitefish, Montana, a town of 7,200, and is financed by a private equity firm run by a major donor to President Trump.
One of Zinke’s sons worked for a summer on a construction site for Andy Techmanski, Whitefish’s CEO. Zinke said Friday in a statement that he “had absolutely nothing to do with Whitefish Energy receiving a contract in Puerto Rico.”
But the company was largely unknown, even to energy experts like the former National Association of Regulatory Utility Commissioners chair.
Prior to the deal with Puerto Rico, Whitefish’s largest federal contract was a $1.3 million deal to build 4.8 miles of transmission lines in Arizona. Puerto Rico, meanwhile, has more than 2,400 miles of transmission lines and 30,000 miles of distribution lines, the vast majority of which were knocked down after Maria.
It’s not just the scale of the contract; the way it was written seems to shield Whitefish from oversight and recourse, as Daily Beast reporter Ken Klippenstein first pointed out on Twitter:
It didn’t help that Whitefish then became mired in a social media spat with the mayor of San Juan.
Even before the FBI got involved, Senate Democrats on Thursday sent a letter to the Government Accountability Office requesting an investigation.
Since then, the federal government has been distancing itself from PREPA and its Whitefish contract. The Federal Emergency Management Agency denied any involvement with the contract, despite the agreement stating it had approval from the agency.
Meanwhile, there is growing confusion over who is in charge of the reconstruction effort and who is on the hook for the bill. In addition to FEMA and the Army Corps of Engineers, the US Department of Energy and the Environmental Protection Agency have stakes in getting power back online in Puerto Rico.
On Capitol Hill, there was heated discussion last week about the scope of the repair work and whether the government’s mandate was to restore the energy grid to pre-storm condition or to take steps to harden infrastructure against future disasters.
At the same time, the government of Puerto Rico is $70 billion in debt, while PREPA owes $9 billion to its creditors.
PREPA has said the reason it went with Whitefish instead of other, more experienced companies is because the firm didn’t demand a large upfront payment, buying the utility time to scrounge up the cash. PREPA also said that it didn’t ask for mutual aid because it expected that reconstruction help the federal government wouldn’t cost it anything. But now utility crews are en route from Florida and New York, which means PREPA may have to come up with money to pay for relief sooner than expected.
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