The Federal Emergency Management Agency contradicted Puerto Rico's governor, saying it has concerns about the awarding of a contract to Whitefish Energy to restore electrical service.

“Based on initial review and information from [the Puerto Rico Electric Power Authority], FEMA has significant concerns with how PREPA procured this contract and has not confirmed whether the contract prices are reasonable.” It went on to say that the agency was continuing to seek more information about the contract and how it was arrived at.

FEMA also said, “The decision to award a contract to Whitefish Energy was made exclusively by Puerto Rico Electric Power Authority. FEMA was not involved in the selection.”

PREPA's Costa Sur power plant in Guayanilla, Puerto Rico.
The Oversight Board filed court papers to have Noel Zamot to take over running the Puerto Rico Electric Power Authority.

Members of U.S. Congress and Puerto Rico’s House and Senate have questioned the hiring of the Montana company, saying it was too small and inexperienced for the $300 million contract. Some questioned the integrity of the hiring process, pointed to reports in the Washington Post and other publications connecting Whitefish’s owners with president Trump's campaign and Interior Secretary Ryan Zinke.

FEMA’s statement contrasted with a statement on Wednesday from staff at the office of Puerto Rico’s governor. That statement said there had been a three hour conference call with representatives of FEMA and PREPA’s law firm, Greenberg Traurig, about the contract.

“According to FEMA staff," the statement said, "at the conclusion of the telephone meeting, they had no comments to make on the Whitefish contract because it appeared to be 100% compliant with FEMA regulations. However, they expressed that they may require more information.”

As of Friday, 37 days after Hurricane Maria hit the island, the governor’s office reported that electrical service had been restored to 28% of customers.

On Oct. 19 the New York Times reported that PREPA was providing 900 people and Whitefish 300 people to restore service. This compared to the 5,300 people who worked to restore electrical service to coastal Texas in the days after Harvey to an outage about one tenth as large as Puerto Rico’s. Service was restored to nearly everyone within two weeks.

In Florida after Irma 18,000 people worked to restore service, the New York Times reported.

In other PREPA news on Friday, the Oversight Board filed an “Urgent motion … for entry of order confirming appointment and authority of chief transformation officer” Noel Zamot over PREPA. The motion was filed in PREPA’s Title III bankruptcy case being heard by Judge Laura Taylor Swain.

“Subject to the direction of the Oversight Board, the CTO shall have the responsibility for overseeing management and the business and affairs of PREPA and shall perform all duties and have all powers that are commonly incident to the chief executive officer,” the board stated.

In its filing the board primarily cited the Puerto Rico Oversight, Management and Economic Stability Act as legal justification.

In the filing the board clarified that Zamot would be the authority’s new leader, something that Gov. Ricardo Rosselló and Secretary of Public Affairs and Public Policy Ramón Rosario Cortés have both rejected. They said the board doesn’t have the legal right to make the appointment and said their government would challenge the motion.

In another PREPA development, the Rhodium Group on Thursday said the Hurricane Maria had created the biggest electrical outage in U.S. history. It has led to 1.25 billion hours of lost service so far in Puerto Rico and the U.S. Virgin Islands. The second biggest blackout in U.S. history was Hurricane Georges in 1998, which also hammered Puerto Rico. PREPA executive director Ricardo Ramos has said that it took six months for Puerto Rico to fully restore service after Georges.

"The fact that 3 of the top ten biggest blackouts in U.S. history have all been hurricane-driven outages in Puerto Rico (Maria, Georges, and Hugo) also underscores the need to rebuild the island's grid... to be more resilient to storms in the future," Trevor Houser and Peter Marsters wrote for the Rhodium Group. "Warmer sea surface temperatures due to climate change increase potential hurricane intensity."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.