Power goes out again in Puerto Rico

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Ricardo Ramos, Executive Director of PREPA

SAN JUAN, Puerto Rico — The power went out again in Puerto Rico due to a failure of a major transmission line on Wednesday, shortly after Governor Ricardo Rossello had tweeted that the island had achieved his goal of restoring 50 percent of the power, after Hurricane Maria destroyed the electricity grid.

The director of generation of the Puerto Rico Electric Power Authority (PREPA), Justo González Torres, said that “a technical failure in unit 7 of the San Juan Central caused the exit of the 50100 line of 230,000 volts, which runs from the Cambalache Plant in Arecibo to the Manatí Transmission Center,” according to a news release on the PREPA website.

According to González Torres, the breakdown in the system caused the interruption of the electrical service in the metropolitan area that includes Bayamón, Guaynabo, San Juan, Carolina and surrounding municipalities.

The official indicated that PREPA technical staff was working to repair the system and restore service as soon as possible.

On Tuesday, PREPA reached 49.9 percent of generation and in the early hours of Wednesday morning it reached 50 percent of generation.

“In the next few hours we hope to start connecting customers who lost the service with the failure and continue with the customer connection plan to comply with the other goals established by the governor,” González Torres said.

Meanwhile, Ricardo Ramos, the executive director of PREPA, on Tuesday defended his decision to sign a $300 million contract with a small Montana firm, Whitefish Energy, portraying the move as the most realistic solution to respond to immediate energy needs after Hurricane Maria.

Ramos told members of the Senate Energy and Natural Resources Committee that Whitefish was one of a half-dozen companies to offer assistance to restore the island’s destroyed energy grid.

Two of those offers were to provide immediate assistance, Ramos said, but one required an upfront payment of $25 million.

He said Whitefish separated itself from the others by telling PREPA, which is bankrupt and $9 billion in debt, it could pay for work after it was completed, in addition to mobilization and demobilization costs.

“In retrospect, there are some steps in our contracting process with Whitefish that we could have done better,” Ramos said. “I chose to contract with Whitefish because my priority was securing the immediate assistance that we needed to begin restoring power as quickly as possible to our most critical customers. Taxpayer money was never at risk. There was never an expenditure of $300 million.”

Ramos, who took over PREPA in March, said he did not pursue the usual mutual aid agreements that utilities use after natural disasters because Puerto Rico had been so devastated by the hurricane that it could not provide the logistics such as housing and fuel to out-of-state utility workers.

Whitefish, which had two employees before Maria, promised it could immediately access more than 100 workers and provide its own large stocks of supplies.

“After the devastation of Maria, I believed that PREPA was unable to meet the requirements for mutual assistance through the members of the American Public Power Association, such as providing accommodations for workers and other logistics,” Ramos said. “The agreement requires that the host utility take care of all of the logistics. There were no logistics in Puerto Rico.”

“PREPA was suffering from a lack of fuel for trucks, food for employees, drinking water, and ice,” Ramos added. “How could I have counted on having even more people into that situation? I needed people that were self-contained, who could bring their diesel as first responders.”

After PREPA canceled the contract on October 29 following widespread public outrage, Puerto Rico eventually sought the mutual aid agreements.

On Monday, electrical workers from New York arrived to help with repairs and, also on Monday, Florida Power & Light Company (FPL) announced that it was transporting 1,000 power line poles to Puerto Rico to assist with the rebuilding of the electrical grid.

Senators were not satisfied with Ramos’ explanation, noting that PREPA approved higher rates of pay and costs than normal for the Whitefish contract, which is being investigated by the FBI.

“Whitefish is clearly an issue of concern for all of us,” said Senator Lisa Murkowski, R-Alaska, the committee’s chairwoman. “It’s one thing to be responsive in the immediate aftermath of a hurricane. It’s another thing to be engaged in something we would all call gouging in taxpayer money when you look at the terms that were agreed to.”

“Just because it’s hard to get there doesn’t mean you price gouge,” added Senator Maria Cantwell of Washington, the committee’s top Democrat.

Ramos replied that the companies who made offers to PREPA for power restoration gave similar rates.

“If there was price gouging, it involved six companies,” Ramos said.

The questioning of PREPA came after Rep. Rob Bishop, R-Utah, the chairman of the House Natural Resources Committee, released on Monday night 2,000 pages of documents related to the power utility’s handling of the Whitefish contract, which was agreed to on September 26 and expanded on October 17.

The utility approved the second contract despite objections from its own lawyers, who worried it offered few protections, according to a summary of the documents released by the committee Monday night.

The Federal Emergency Management Agency (FEMA) also expressed concern about provisions of the contract.

The committee said the standard hourly labour rates in both contracts were “exorbitant.”

Whitefish also unsuccessfully sought to obtain exemptions from Puerto Rican taxes and labor laws, the committee said, and offered to provide a generator for the family of one of PREPA’s executives.

Ramos acknowledged that PREPA was failing before Maria hit, and has been susceptible to political influence and corruption. It is responsible for $9 billion of Puerto Rico’s $73 billion debt load.

The power utility, heavily dependent on Venezuelan oil, has aging power plants and has not maintained its energy infrastructure. It has lost two-thirds of its workforce in the past three years, as residents migrate to the mainland US to escape the island’s financial woes and a stagnant economy.

“I can attest that historically certainly it’s very hard to manage PREPA being a big corporation that is a part of the government,” Ramos said. “Certainly [there has been] too much intervention by government officials. Subsidies have killed PREPA in its finances. PREPA has been a company where politicians, and parts of government, can get their family members to get work.”

Ramos said that political patronage is no longer a problem at PREPA, noting that he and the power utility’s board of directors are now in charge of approving staff.

Rossello told the Senate committee earlier on Tuesday that he is considering ways to overhaul PREPA, including privatizing it.

Last year, a US District Judge overseeing a class-action lawsuit against PREPA and the world’s largest fuel oil suppliers for perpetuating an extensive fuel oil fraud upheld claims that the defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and denied motions to dismiss the suit.

The suit claimed the defendants received kickbacks and payments for colluding to raise fuel oil prices that were directly passed to users of electricity, by agreeing to use non-complaint fuel oil and falsifying lab tests.

Attorneys alleged that PREPA – one of the largest public power agencies in the United States – fraudulently agreed to accept millions of barrels of fuel oil that did not meet specifications of contracts between PREPA and its oil suppliers, or specifications set by the EPA. PREPA accepted this non-compliant fuel oil and the laboratories certified the fuel oil as compliant in exchange for kickbacks and commissions from the fuel oil suppliers, according to the complaint. PREPA served approximately 1.5 million customers in 2012.

It has also been alleged that law enforcement authorities in Puerto Rico stood by and did nothing for a number of years.

Puerto Rico reportedly came to the attention of the Central Intelligence Agency (CIA) years ago because the head of the PREPA fuel purchase office started making direct calls to the then president of Venezuela, Hugo Chavez. They discovered that PREPA was buying sludge oil from Venezuela and billing the utility for high grade oil. The difference in value, hundreds of millions per year was allegedly kicked back to the fuel office manager and distributed to politicians and government officials on the island.

It became clear from the calls that family members of Puerto Rico FBI agents and family members in the Puerto Rico US Attorney’s office were receiving payments based on these “kickbacks”.

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