House committee: Puerto Rico ignored lawyers' advice on fix contract after hurricane

Western Area Power

On Sunday night, The New York Times reported that novice energy firm Whitefish Energy was wildly overcharging the Puerto Rico Electric Power Authority (PREPA) for the hourly rate it paid line workers.

Mammoth Energy has 250 linemen in Puerto Rico rebuilding the power lines at the rate of $4,000 each per day.

The NYT article also highlighted a second PREPA contract with an Oklahoma company called Cobra, which (unlike Whitefish) demanded a $15 million down-payment and (like Whitefish) forbade any audits. In addition, simply looking at the rate differential does not take into account Whitefish's overhead and costs for which there is no specified rate in the contract such as insurance, legal counsel (including local Puerto Rico counsel), tools, purchase of equipment, etc.

Whitefish's $300 million contract was canceled by Puerto Rico governor Ricardo Rosselló in late October after questions were raised about how the two-year-old firm from Interior Sec.

"We have to pay a premium to entice the labor to come to Puerto Rico to work", Chris Chiames said.

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According to the report, Whitefish, which doesn't have many employees of its own, hired electrical workers from Florida to do the work.

He also asserted that the Federal Emergency Management Agency (FEMA) helped PREPA prepare the Whitefish contract to be compliant with federal rules, something that FEMA has forcefully denied. The Times reports Whitefish Energy Holding's contract with the Puerto Rico Electric Power Authority (PREPA) allowed it to charge at a rate that was "almost 17 times the average salary of their counterparts in Puerto Rico" while paying electrical workers from Kissimmee $42 per hour plus overtime. But some energy experts disagreed that the rates were reasonable. This charge was also separate from what Prepa was being charged for food and lodging per employee.

That contract was cancelled after questions about how it received the contract when it emerged that it was based in the hometown of Interior Secretary Ryan Zinke, whose son once worked for Whitefish.

Prepa has defended its actions, saying that Whitefish handled its own logistics and did not demand a large up-front payment in a September 26 contract.

More than half of Puerto Rico's power grid remains offline, seven weeks after Hurricane Maria caused massive damage to the USA territory. Several congressional committees are investigating the contract, as is the Office of Inspector General for the Department of Homeland Security, and the F.B.I. The Army Corps of Engineers reportedly avoided hiring Whitefish because it charged twice as much as it should have. The island was left with only 18 percent power generation on Thursday.

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