Armed Federal Agents Enter Warehouse in Puerto Rico to Seize Hoarded Electric Equipment

The Puerto Rico Electric Power Authority had an uninvited guest come by and seize thousands of pieces of badly needed parts.

Noviembre 30, 2017 - San Juan PR. --llegada de postes para el sistema eléctrico (de la AEE) en el muelle 16 de San Juan. enla foto empleados de la crowley y fema reciben los postes. Foto xavier araujo / (GDA via AP Images)
Employees of Crowley and FEMA revise electrical posts from Puerto Rico Electric Power Authority at dock 16 in San Juan , Puerto Rico on Nov. 30, 2017. Photo: Xavier Araujo/GDA/AP

On Saturday, a day after becoming aware of a massive store of rebuilding materials being held by the Puerto Rico Electric Power Authority, the U.S. federal government — the Federal Emergency Management Agency, the U.S. Army Corps of Engineers, along with their security detail — entered a Palo Seco warehouse owned by the public utility to claim and distribute the equipment, according to a spokesperson for the Corps.

Rumors of a tense standoff had been circulating on the island, but the encounter was confirmed to The Intercept in a statement from the U.S. Army Corps of Engineers. Asked if the federal officers were armed when they entered the warehouse, USACE spokesperson Luciano Vera said they were indeed accompanied by security detail and quickly began distributing the material after seizing it. Vera declined to say whether there was a confrontation at the entrance, saying only that PREPA officials ultimately toured the warehouse along with the feds:

Leadership responsible for restoring the Puerto Rico power grid and their security detail toured the warehouse in cooperation with PREPA. USACE conducted a full inventory and immediately sent out critical materials to contractors at work sites. USACE will continue to distribute critical materials from the site to contractors. The hope is to strengthen the partnership between PREPA and its restoration partners, while increasing visibility of the inventory of all materials on the island. PREPA has invited FEMA and the Corps to visit its warehouses anytime and to distribute material as needed.

The federal government “began distributing [supplies] to contractors,” Vera said, including hard-to-find full-tension steel sleeves, critical to rebuilding. “We obtained several hundred of these sleeves on Saturday,” Vera added.

The armed encounter comes as around half of Puerto Ricans still remain without electricity well over 100 days after Hurricane Maria. As PREPA hoards crucial resources that could help remedy the island’s dire situation, the Puerto Rican government is attempting to annihilate the power provider’s only regulator.

“Warehouse 5” — the one which USACE and FEMA entered Saturday — “falls under the control of the [PREPA] transmission division and has lacked transparency in inventory and accountability,” the email from Vera continued. Carlos Torres, appointed by Puerto Rico Gov. Ricardo Rosselló to oversee power restoration, was on site as well. 

“Due to the size of the warehouse,” Vera said, accounting for everything contained therein is still underway days later. Among the materials recovered so far are “2,875 pieces of critical material to contractors” along with the sleeves of full-tension steel, a component of Puerto Rican electrical infrastructure required to erect new power lines. PREPA did not respond to The Intercept’s request for comment, though in a statement to the Associated Press, it rejected allegations that it had failed to distribute the warehouse’s contents. The AP only reported that “officials over the weekend also discovered some needed materials in a previously overlooked warehouse owned by Puerto Rico’s Electric Power Authority.” How they discovered them and how they were obtained is a story that has not been fully told.

People pass over a downed power line concrete post in the aftermath of Hurricane Maria in Luquillo, Puerto Rico, Thursday, September 21, 2017.Puerto Rico braced for potentially calamitous flash flooding after being pummeled by Hurricane Maria which devastated the island and knocked out the entire electricity grid. The hurricane, which Puerto Rico Governor Ricardo Rossello called "the most devastating storm in a century," had battered the island of 3.4 million people after roaring ashore early Wednesday with deadly winds and heavy rain. / AFP PHOTO / Ricardo ARDUENGO (Photo credit should read RICARDO ARDUENGO/AFP/Getty Images)

People pass over a downed power line concrete post in the aftermath of Hurricane Maria in Luquillo, Puerto Rico, Sept. 21, 2017.

Photo: Ricardo Arduengo/ AFP/Getty Images

Together, FEMA and the USACE are the main federal agencies responsible for getting Puerto Rico’s grid up and running after it was leveled by Hurricane Maria. Under the Stafford Act, utilities can receive reimbursement from FEMA for reconstruction efforts in the wake of a major disaster. Another standard practice is for utilities to enter into mutual aid agreements with public and private utilities. For reasons that remain unclear, PREPA chose not to do so in Maria’s immediate aftermath, instead signing a series of controversial deals with private contractors. The most dubious of those — with the novice Montana-based firm Whitefish Energy — was withdrawn amid public outrage on the mainland and the island alike.

Still, the Whitefish contract was far from the only issue plaguing PREPA’s recovery efforts and keeping Puerto Ricans from getting their lights turned back on. Even now that PREPA is finally pursuing mutual aid agreements with mainland power companies, supply problems — the kind the unified command’s warehouse raid might help alleviate — have kept linemen on the island from being able to do their jobs.

A security contractor who recently returned from Puerto Rico told The Intercept that crews of linemen brought down from the U.S. were frustrated about the lack of rebuilding materials, which made it virtually impossible for them to fix downed infrastructure. Paraphrasing conversations with the electric crews he accompanied, the source said one worker told him that “we just sat in the truck and watched a movie because we have nothing to do today. … Around Christmas, a lot of the power workers were saying, ‘We’re going on vacation because we couldn’t do our job because PREPA was making it so difficult.’” The source’s job involved escorting contractors tasked with reconstructing downed power lines; he was deployed on the island for over a month by a subcontractor of Cobra Acquisitions LLC, which in the fall received a $200 million contract with PREPA to repair its grid.

“They didn’t have anything to do or to work on,” he said of many of the linemen he interacted with. “They had had a bunch of poles but no lines, or any of the stuff that goes on the poles. They were just setting bare poles, getting as far as they could go.”

“We were in a town for two weeks and barely got anything done because they didn’t have the supplies,” the source noted of one crew they accompanied on the island’s southeast. UTIER — the utility workers’ union — has leveled similar complaints against their employer.

Frustrated by the slow pace of recovery, a number of mayors around the island have begun taking matters into their own hands, reportedly buying grid restoration supplies out of municipal budgets. Javier Jiménez Pérez, mayor of San Sebastián, compiled a team of electricians, retired PREPA employees, and volunteers to form the Pepino Power Authority, referring to a longer version of the town’s name in Spanish. As of December 28, the makeshift recovery crew had restored power to 2,000 homes, with smaller teams splitting up to return electricity to different neighborhoods. Residents in some areas of San Sebastián told El Nuevo Dia they never saw PREPA post-Maria.

Mismanagement is not a new phenomenon for PREPA, which for decades has been Puerto Rico’s sole power provider. For most of that time, it had been self-regulated, with a board comprised largely of political appointees with little to no background in the electricity sector. The lack of oversight created conditions for corruption and disinvestment, with its generation and transmission capacity falling into severe disrepair over many years.

In 2014, Puerto Rico’s legislature undertook a reform effort. That involved moving the board selection process away from its reliance on political appointments, as well as the establishment of the Electric Commission, a three-member body tasked with regulating PREPA and setting rates.

Ramón Luis Nieves served in Puerto Rico’s State Senate from 2013 to 2016 and was part of the push to get PREPA’s house in order. During his tenure in the legislature, he chaired the Senate Energy Committee, responsible for creating the Energy Commission in 2014 through Act 57. “For the first time in seven decades of existence,” he told The Intercept of the board reforms, “PREPA had the benefit of having a governing board composed of non-partisan professionals.”  

“When the current administration was in the opposition,” Nieves says of Rosselló’s New Progressive Party, “they opposed all the energy reform bills. Now that they are in power, they have been trying to eliminate the energy regulator and the reforms that were passed.”

When Rosselló moved into the governor’s mansion early last year, his administration quickly reverted back to the previous board selection process and replaced much of the utility’s leadership. Among those ousted in the process were the board’s three elected consumer advocates, who — as a former member told me in September — had to be removed via special legislation.

Since that time, the governor has been outspoken about his support for privatizing PREPA and other government services, a position he shared with the Washington-appointed Fiscal Oversight Board now overseeing the island’s finances.

Puerto Rico Gov. Ricardo Rossello, center, takes his seat next to U.S. Virgin Islands Gov. Kenneth Mapp, right, as they arrive for a Senate Committee on Energy and Natural Resources hearing on hurricane recovery, Tuesday, Nov. 14, 2017, on Capitol Hill in Washington. (AP Photo/Jacquelyn Martin)

Puerto Rico Gov. Ricardo Rossello, center, takes his seat next to U.S. Virgin Islands Gov. Kenneth Mapp, right, as they arrive for a Senate Committee on Energy and Natural Resources hearing on hurricane recovery, Nov. 14, 2017, on Capitol Hill in Washington.

Photo: Jacquelyn Martin/AP

On Wednesday, Rosselló is set to present a new fiscal plan to the board that may well move in that direction. Already, though, his office has unveiled a number of sweeping, board-friendly policies under the auspices of the New Government Law, approved by the legislature just before Christmas. On Monday, Puerto Rico’s Secretary of Public Affairs and Public Policy Ramón Rosario Cortés announced five proposals to dramatically reorganize the island’s government in pursuance with the new law — including what would amount to a liquidation of the Energy Commission.

The plan would consolidate five separate regulatory agencies into a single, three-member commission, eliminating the Telecommunications Regulatory Board, Public Service Commission, Energy Commission, Energy Administration, and the Independent Office for Consumer Protection as independent entities. In their place would stand the Public Service Regulatory Board, which officials argue would operate along the lines of state-level Public Utility Commissions in the U.S. It’s unclear which functions of the previous agencies would continue in the new body.

Rosselló’s proposal is billed as a cost-saving measure, although neither the Telecommunications Regulatory Board nor the Energy Commission, at least, receive funding from the state or federal governments. The former is funded via a fee on telecommunications’ customers monthly bills, and the latter by PREPA via its ratepayers, who furnish the independent commission with its annual $5 million budget.

While Nieves — like many — favors some level of private investment in PREPA, which is $9 billion in debt, he’s weary of attracting corporations to the utility without a competent regulator. “If you do away with an independent and strong regulator, you’ll have Whitefish all over again,” he said. “If they remove the Energy Commission, they should rename PREPA the Whitefish Energy Company of Puerto Rico.”

Since its establishment, the Energy Commission has taken a number of steps to help bring the island’s electricity sector into the 21st century, including an Integrated Resource Plan that laid out a path for transitioning the island off expensive imported oil and toward renewables. It helped defend ratepayers against the island’s bondholders, too; when the National Public Finance Guarantee Corporation pushed for a 4.2 cent per kilowatt hour rate hike in September, the commission denied the request.

The commission also just recently unveiled the country’s first-ever regulatory rulebook for microgrids, a form of decentralized power generation that allows small geographic areas — neighborhoods or hospitals, for instance — to generate power locally and bring electricity back online quickly after major natural disasters and outages. Included in the suite of regulations was a mandate that any microgrids developed on the island use renewable fuel sources, although the rule would not apply to microgrids developed by PREPA itself.

Those regulations were opened for public comment this week, yet the future of that and other Energy Commission-created rules will be up in the air if the governor’s proposal is eventually approved by the legislature and fiscal control board.

Another likely casualty of the reorganization proposal would be the Independent Office for Consumer Protection, which helps customers bring complaints against PREPA and seek remuneration for any utility wrongdoing. The agency’s 2014 establishment was heavily pushed for by the AARP, which received complaints from elderly Puerto Ricans about their electricity service. A survey conducted that same year by the group found that 82 percent of Puerto Ricans ages 25 and older “do not believe their interests are fairly represented and taken into consideration when electric rates are set by PREPA”; 86 percent supported the establishment of a consumer advocate office.

A Puerto Rico Electric and Power Authority lineman attaches an electrical insulator to a new utility pole in a residential area in Gurabo, Puerto Rico on November 29, 2017. / AFP PHOTO / Ricardo ARDUENGO / TO GO WITH AFP STORY By Leila MACOR, US-PuertoRico-power-weather-reconstruction-hurricane        (Photo credit should read RICARDO ARDUENGO/AFP/Getty Images)

A Puerto Rico Electric and Power Authority lineman attaches an electrical insulator to a new utility pole in a residential area in Gurabo, Puerto Rico, on Nov. 29, 2017.

Photo: Ricardo Arduengo/ AFP/Getty Images

The push to upend popular regulation over PREPA, of course, comes after several decades of austerity, jumpstarted after the PROMESA bill — passed by Congress in 2016 — that tasks the Fiscal Oversight Board with getting the island’s fiscal house in order and handling its at least $74 billion in municipal debt. Other recently announced cost-cutting measures include the governor’s Voluntary Transition program aimed at incentivizing public employees to quit their jobs and seek work with non-profits or the private sector, and the privatization of the Puerto Rico Institute of Statistics.

As American Statistical Association President Lisa LaVange pointed out in a recent letter, such a move would be darkly ironic considering the government’s gross miscounting of the number of deaths that have occurred since Maria. LaVange chided the governor for not allowing experts to help revise the death count and his proposal to disband PRIS. “Government statistics play a powerful role in any democracy. They empower the economy, serve the health and welfare of its citizens, improve governance, and inform decisions and policies in the public and private sector, among many other vital functions,” she wrote.

And though media attention has largely cycled away from Puerto Rico, conservative think tanks are continuing to outline plans for still more massive blows to the island’s public sphere. In a December statement before the Fiscal Oversight Board, American Enterprise Institute Resident Fellow Desmond Lachman argued that “what is desperately needed” in Puerto Rico “is a comprehensive IMF-style structural adjustment program,” including a deep cut to the island’s minimum wage. Oversight Board member Andrew Biggs has been a resident scholar at AEI since 2008.

The path to any economic recovery from Puerto Rico will ultimately run through its ability to rebuild a functional energy grid — a future all too unlikely amid austerity and deregulation. Combined with other kinds of storm damage, the loss of power has fueled a rapid uptick in migration from the island, as people struggle to attain jobs and basic services; an estimated 300,000 people have moved to Florida alone, a scale of migration that could further downsize the island’s already shrinking tax base. Nieves calls those who’ve left “energy refugees,” for whom “the lack of energy was the last straw.”

“Most of them,” he predicts, “will not return.”

Update: Jan. 10, 2018, 7 p.m.

Sen. Eduardo Bhatia, minority leader of the Senate of Puerto Rico, provided a statement to The Intercept on the hoarded electrical equipment:

The news that has come out today about the discovery made by armed federal agents of thousands of electrical spare parts hidden in an PREPA warehouse borders on a criminal act by its managers. It is time for people to stand up and demand answers. Hundreds of thousands of families have been in the dark for more than 125 days, people keep dying, and businesses continue to close due to the lack of energy while the necessary spare parts were in the possession of PREPA. Lying about not having the parts to cover the inefficiency of PREPA is outrageous and those responsible must be taken before state and federal authorities to be criminally processed immediately.

Top photo: Employees of Crowley and FEMA revise electrical posts from Puerto Rico Electric Power Authority at dock 16 in San Juan , Puerto Rico on Nov. 30, 2017.

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