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The Contract Scandal In Puerto Rico May Say More About The Utility Than It Says About Trump

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The executive director of Puerto Rico’s public electric utility stepped down Friday in the wake of a contract scandal that connected the embattled utility to wider reports of conflicts of interest within the Trump administration — and the Interior Department in particular.

In September, the utility had signed a $300 million contract with Whitefish Energy, a 2-year-old company that has done only a handful of grid construction jobs, failed in an effort to start up a transformer manufacturing plant in Montana and lists only two full-time employees. Whitefish was hired to rebuild the Puerto Rico electric grid following the devastation of Hurricane Maria, but observers questioned its experience, its fees and its connections to Interior Secretary Ryan Zinke. The contract was canceled on Oct. 29, but because such cancellation requires 30 days’ notice, it doesn’t run out until Dec. 1.

In the mainland U.S., this story has primarily been framed as the result of conflicts of interest between the administration and corporate entities. But there’s another context worth considering: Puerto Rico’s public electric utility has a long history of sloppy management. Ricardo Ramos had been executive director of the Autoridad de Energía Eléctrica (also known as the Puerto Rico Electric Power Authority, or PREPA) only since March. Few of his predecessors lasted very long in the job, either. Since 2009, there have been seven executive directors of AEE, Ramos included, and he’s not the only one who lost the job under a cloud of scandal. One, Alberto Escudero, left after four days.

From that perspective, the contract with Whitefish — arranged hastily with little evidence of a bidding process and in disregard for normal channels of arranging emergency-response labor contracts — isn’t an aberration at all. Basically, even if this case does demonstrate conflict of interest on the part of the Trump administration, that issue is unlikely to be the only factor that drove Puerto Rico’s utility to agree to a poorly documented contract with a little-known company.

Consider the AEE’s history of problematic contracts. Between 2008 and 2012, the utility signed 68 contracts to buy renewable energy from private developers. Only 11 of those projects were built. That’s because the utility signed on for far more renewable power than it could use from companies that didn’t all have the expertise or track record to get the job done, said Jose Maeso, who was the executive director of the Puerto Rico State Office of Energy Policy from 2013 to 2016 and is now the director of a Department of Energy-funded research consortium. “It wasn’t a bidding process,” he told me. “There wasn’t a qualification of technical expertise of developers. None of that.”

Then there’s the Aguirre Offshore GasPort, a natural gas infrastructure project on the island’s southern coast that was supposed to be completed in 2014. A 2016 independent regulatory review found that Puerto Rico’s utility had multiple contracts with three major vendors and none was professionally executed. AEE “failed to provide many of its contracts, and in some significant cases could provide little evidence that a formal bid or contracting process had been executed,” the review stated.

At the same time, there are good reasons why Puerto Rico might want the speciality contractor Whitefish. For instance, the company had helicopters and other equipment necessary for repairing electric lines on remote, forested mountaintops. Another thing that made Whitefish stand out from competitors: The willingness to do work for AEE without payment guarantees. (That might have been a mistake. Whitefish recently announced that AEE owes it more than $83 million for work already completed.) And, despite Whitefish’s sparse resume — when asked by Yanira Hernandez Cabiya of Caribbean Business about similar work it had done, the CEO cited a $500,000 distribution-line replacement in Washington state, a project of much smaller scale than what it took on in Puerto Rico — Maeso told me in October that “the work on the transmission lines has gone as fast as possible, in my opinion.”

Maggie Koerth-Baker is a senior science writer for FiveThirtyEight.

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