Friday, November 24, 2017

Whitefish Contract to Restore Puerto Rico Electricity - Update

This is an update to our posting of November 9 discussing the contract awarded to Whitefish Energy by PREPA (Puerto Rico Electric Power Authority) to help restore electricity on the island (see Whitefish Energy Contract to Restore Puerto Rico Electricity). PREPA awarded a $300 million sole-source contract to Whitefish Energy which, when it was exposed, became immediately controversial for several reasons. At the time of award, Whitefish had only two employees. The contract prices for linemen seemed exorbitant. The contract was was awarded without competition and contained unusual clauses such as the one preventing PREPA (or the Government) access to cost data.

The U.S. Government is interested in this contract because ultimately, it will probably end up paying for the restoration work. Congress is, of course, interested (one Senator called it price gouging) and the FBI has opened an investigation into the matter. Last week, the head of PREPA resigned his position (under pressure, no doubt).

PREPA terminated the Whitefish contract but according to the terms of the contract, there was a 30 day notice requirement which allowed Whitefish to continue working (and billing). However, last week, Whitefish walked off the job claiming that PREPA owed it 83 million and could no longer afford to pay its workers and subcontractors. Earlier this week, PREPA made a payment to Whitefish and the company resumed work.

The New York times reported that Whitefish was paying its senior power linemen $63 per hour and then billing PREPA $319 per hour for the worker. Whitefish claimed that the rate differential does not take into account Whitefish's overhead costs - but no one believes that such a differential is reasonable (more than 400%!).

Whitefish's contract ends on November 30th and PREPA does not appear to have a replacement ready to take over. Meanwhile, more than half of Puerto Rico's electrical customers are still without power.

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