Puerto Rico to sever relationship with contractor after island-wide power outage

Controversy surrounds companies hired to restore island's power.

Workers have been struggling to restore power to Puerto Rico since Hurricane Maria hit the island in September 2017. CREDIT: RICARDO ARDUENGO/AFP/Getty Images
Workers have been struggling to restore power to Puerto Rico since Hurricane Maria hit the island in September 2017. CREDIT: RICARDO ARDUENGO/AFP/Getty Images

Puerto Rico’s governor has called on the government-owned electric utility to end its relationship with the company that caused a power outage on Wednesday that knocked out electricity to the entire island.

The same company, D. Grimm, was also responsible for last week’s outage that affected 870,000 customers after a tree fell on a major electric transmission line.

An excavator operated by D. Grimm, a subcontractor for Cobra Acquisitions LLC, caused this week’s blackout, according to the Puerto Rico Electric Power Authority (PREPA). Workers reportedly were removing a fallen tower when the excavating machine got too close to an energized line and an electrical ground fault led to the outage, according to Mammoth Energy, Cobra’s parent company.

“I have suggested to the PREPA Board of Directors that they cancel the contract with the Cobra subcontractor who is directly responsible for this power outage,” Puerto Rico Gov. Richard Rossello said in a statement Wednesday.

On Thursday morning, PREPA said electricity had been restored to more than 80 percent of the island, aside from the approximately 50,000 residents who were still waiting for power to return in the wake of Hurricane Maria. The U.S. Army Corps of Engineers, which is overseeing the federal power restoration efforts, said they hope to have the entire island fully energized by May.


Meanwhile, the remaining customers who lost power on Wednesday are expected to see their power restored later today, the utility company said.

Last October, PREPA signed an initial $200 million contract with Cobra Acquisitions to restore the main lines of electric transmission across the island. Cobra, a subsidiary of Mammoth Energy Services, is based in Oklahoma and was formed last spring.

Since then, Cobra Acquisitions has won new contracts in Puerto Rico, which have dramatically boosted its financial fortunes, along with those of its parent company.

Due to its contracts in Puerto Rico, Mammoth Energy Services, the parent company of Cobra Acquistions, saw the biggest gain in its stock price of any Oklahoma-based company during the first quarter of 2018. The company reported a 63 percent gain in its stock price after its contract in Puerto Rico had grown to a whopping $945 million to restore power to Puerto Rico, The Oklahoman newspaper reported.

Arty Straehla, Mammoth’s Chief Executive Officer, said in a February 28 statement, “Our team in Puerto Rico is executing at a high level.”


“Together with PREPA, we look forward to fully restoring power across the island and bringing a sense of normalcy back to the people of Puerto Rico,” Straehla said.

Almost two months after making that announcement, conditions are far from normal in Puerto Rico. Seven months after Hurricane Maria sparked the longest blackout in U.S. history in Puerto Rico, the island is still struggling with blackouts, water shortages, and insufficient aid. The next hurricane season is less than two months away.

“This is all very worrisome, obviously, as we approach another hurricane season,” said Cathy Kunkel, an energy analyst with the Institute for Energy Economics and Financial Analysis, told USA Today. “The grid is so fragile and they’re just barely able to get the lights back on.”

Last fall, when post-hurricane conditions were far worse, Cobra Acquisition won its initial contract in Puerto Rico when most attention was focused on how a tiny company based in Interior Secretary Ryan Zinke’s hometown of Whitefish, Montana was able to secure a major contract to restore power on the island.

Puerto Rico’s decision to award a no-bid $300 million contact to the two-person Whitefish Energy Holdings LLC to conduct repair work to the island’s electric grid set off alarm bells in Washington as calls for investigations into the deal intensified among both Democrats and Republicans.

In response to the controversy, the government of Puerto Rico canceled the contract with Whitefish Energy Holdings on October 29, 2017.


Given the criticism of the Whitefish Energy Holdings contract at the time, Mammoth Energy Services tried to highlight how the contract signed by its affiliate was negotiated much differently. Company executives noted that, unlike the Whitefish Energy Holdings contract, FEMA officials worked with PREPA and Cobra Acquisitions “every step of the way to make sure the contract complies with their reimbursement requirements.”

But there were also reasons to be concerned about Cobra Acquisitions winning the contract: The creation of Cobra Acquisitions was Mammoth Energy’s first foray into the utility sector, The Intercept reported last October.

On Wednesday, Mammoth Energy attempted to explain how the latest massive power outage occurred. In a statement, it said a 140-foot electric transmission tower in southern Puerto Rico collapsed on Tuesday and fell across support wires of an adjacent tower in “an extremely congested” electric transmission corridor. Mammoth’s subsidiary, Cobra Acquisitions, was tasked with removing the fallen tower to prevent interference with another transmission tower’s structural support wires.

In the process, the subcontractor, D. Grimm, used an excavator to remove the structure. While removing the fallen tower, the excavator got too close to the fallen tower that created a current between the energized transmission line and the excavator. This led to an electrical ground fault that caused the outage of the transmission circuit that caused the island-wide blackout.

Individual faults, such as the one that occurred in southern Puerto Rico, can have a ripple effect on the grid because the island lacks sufficient generation reserves to continue operation when one plant or transmission line goes offline, Jorge Camacho, a former District of Columbia regulatory staffer who is now working with the National Institute of Standards and Technology told Utility Dive.

In response to the criticism of its work, Cobra Acquisitions said it will continue to work “around the clock” with PREPA and residents of Puerto Rico to repair the entire infrastructure system that could “prevent outages such as this one from affecting the entire population on the island.”