Utility Crews Exit Puerto Rico With Restoration Job Half Done -- Update

By Andrew Scurria Features Dow Jones Newswires

The company hired to repair Puerto Rico's electrical grid stopped working Monday over $83 million in unpaid bills while some utility crews from the mainland U.S. quit the half-finished reconstruction job altogether.

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A Whitefish Energy Holdings LLC spokesman said the company suspended its work after Puerto Rico's public power company delayed making payments under a controversial $300 million contract to rebuild power lines damaged by Hurricane Maria.

Puerto Rico canceled the deal with Whitefish last month on orders from Gov. Ricardo Rosselló amid a political furor over how the contract was awarded and priced. But Whitefish had been scheduled to remain working until Nov. 30 when its contract terminated.

With invoices piling up, four Florida-based utilities working as Whitefish subcontractors have now elected to leave Puerto Rico rather than continue under new agreements with the public utility known as Prepa.

The work stoppages will likely set back the process of restoring power to the majority of Puerto Ricans who still lack reliable service on the two-month anniversary of Maria's landfall. The payment dispute also creates uncertainty around Whitefish's ongoing work on a critical transmission line running from Puerto Rico's energy-producing south to its populous, power-consuming north.

Prepa's decision to tap Whitefish for the hurricane response without a competitive bidding process drew sharp criticism from members of Congress and local politicians. The controversy has galvanized Congress to scrutinize the U.S. territory's management of federal disaster-assistance dollars and its safeguards against waste and corruption. Congressional committees, the Department of Homeland Security and the Federal Bureau of Investigation are conducting probes into the deal.

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Whitefish, a startup firm, said in a Sunday letter it has been fronting costs for its subcontractors to demobilize but could no longer do so without payment for past-due amounts and assurances of payments for future work, according to a copy reviewed by The Wall Street Journal

"There is no basis for Prepa to withhold payments from [Whitefish] and Prepa's refusal to make timely payments is a breach of the contract," the letter said.

A spokesman for Prepa and a spokeswoman for Gov. Rosselló didn't respond to requests for comment.

Hundreds of workers hired as Whitefish subcontractors from the Jacksonville Electric Authority, the Orlando Utilities Commission, the Kissimmee Utility Authority and Lakeland Electric Co. are now slated to leave this week. Talks were under way last week for crews from those utilities to remain on the island into December under new contracts with Prepa, according to a person familiar with the matter. But on Monday utility trucks could been seen lining up at the San Juan port to be transported from Puerto Rico, another person said. A Lakeland Electric spokeswoman said its workers were demobilizing "as we speak."

The subcontractors decided to leave over concerns that Prepa would be unable "to provide their crews with the necessary resources and management," the Whitefish spokesman said. If Prepa makes good on its past-due bills, Whitefish can resume work with other subcontractors, the spokesman said.

Prepa was generating 46.6% of its normal capacity on Monday, according to government data.

Utilities from Florida and New York have been flooding Puerto Rico with resources, sometimes at their own expense, in anticipation of Whitefish's departure. Two power restoration coordinators, or "storm bosses," from Consolidated Edison Inc. and Florida Power & Light Co. are now directing island-wide reconstruction efforts in conjunction with Prepa. Roughly 3,000 personnel are on the ground, according to utility officials.

Whitefish has defended its work, saying it mobilized quickly when lives were on the line and charged rates that took into account the risk of doing business with Prepa, which has been under bankruptcy protection since July. The firm brought more than 500 employees and subcontractors to the island who ran more than 200 miles of transmission and distribution lines.

But documents released by a House committee showed how Prepa disregarded the advice of its own attorneys by omitting terms and conditions designed to control costs and comply with federal requirements.

Other records showed that Whitefish ran into logistical problems moving equipment to Puerto Rico, raised hourly rates once its initial deal was signed and allowed workers to charge Prepa for 16-hour workdays. The company had to hire security protection for its workers when outraged island residents began throwing rocks and bottles at repair crews.

With millions of Puerto Ricans still without reliable power, unresolved questions around the contract could figure into a continuing struggle for control of the reconstruction efforts between local and federal officials. Prepa's former executive director, Ricardo Ramos, told a Senate committee last week he viewed Whitefish as a "first responder" and knew of no improper payments or kickbacks made in connection with the deal. Mr. Ramos resigned on Friday.

The federal oversight board supervising Puerto Rico's finances tried to wrest control of Prepa from Gov. Rosselló, but a federal judge blocked the maneuver last week. Natalie Jaresko, the board's executive director, has asked Congress to solidify its control over public corporations such as Prepa.

Prepa's power generation inched above 50% for several hours last week before a failure in a 230,000-volt line running from the northern municipality of Arecibo to the Manati transmission center. The resulting blackout affected the capital of San Juan and the municipalities Guaynabo and Bayamon.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

November 20, 2017 20:26 ET (01:26 GMT)