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No Oversight of $1.5 Billion Electric Project Raises Alarm over Privatization of Puerto Rico’s Power

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As hurricane season begins, we look at moves to privatize Puerto Rico’s electric grid and a new investigation that reveals the island’s government failed to follow proper oversight or examine the environmental impact when it issued a $1.5 billion contract to a company for the first large power generation project since Hurricane Maria, that will continue its reliance on fossil fuels. Former Puerto Rico Chief of Staff Ingrid Vila Biaggi co-authored the report and calls it “an ill-conceived project full of fiscally irresponsible practices.”

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: This is Democracy Now!, democracynow.org, The Quarantine Report. I’m Amy Goodman, with Juan González. As hurricane season begins, we turn to Puerto Rico, which was devastated in 2017 when Hurricane Maria killed at least 3,000 people, destroyed much of the island’s power grid, leaving many without electricity for months.

A new investigation reveals the Puerto Rican government issued a $1.5 billion contract to a company for the first large power generation project since the storm without the proper oversight. The report accuses Puerto Rico’s Electric Power Authority of giving an unfair advantage to New Fortress Energy when it contracted with the company to convert two major power stations from operating on diesel to natural gas. The report also accused the island’s power company of failing to consider the project’s environment, safety and health impacts, and alternative sources of power like renewable energy.

The report comes amidst ongoing moves to privatize Puerto Rico’s electric grid. It was co-authored by Ingrid Vila Biaggi, who joins us now from San Juan, Puerto Rico. She is president of CAMBIO, a Puerto Rico-based environmental nonprofit, former chief of staff for the commonwealth of Puerto Rico. She co-authored the new report with the Institute for Energy Economics and Financial Analysis.

Ingrid, welcome to Democracy Now! Just lay out what you found and the level of, really, vision corruption in this.

INGRID VILA BIAGGI: Yes. First of all, thank you for having me.

And like you just mentioned, this is an ill-conceived project full of fiscally irresponsible practices, full of irregularities, that start from the absence of a desirability and convenience study, that did not even was put forth in order to determine this was a project that was beneficial to Puerto Rico.

This is the conversion to natural gas of two units for the San Juan 5 and 6 generation facility for the power authority, PREPA, in Puerto Rico. This is a project that was started as an unsolicited proposal by New Fortress Energy, which it presented December 2017, scarcely two months after Hurricane Maria, when Puerto Ricans did not have power. We didn’t even have adequate communication. And we already had this company presenting to the power authority this unsolicited proposal, which provided them with access and continued communication to the authority and a confidentiality agreement, which granted them information about these two units. Then the authority moves into an RFP process without providing information to bidders of this ongoing communication with this company or the confidentiality agreement that it had set forth, as well as other information that was vital in terms of the properties that it had strategically acquired.

So, we’re calling for the cancellation of this project, which, as you mentioned, is a $1.5 billion project, that would continue to lock in fossil fuels on the island and would prevent the aggressive integration of renewable energy, which would be the sustainable transformation that Puerto Rico deserves right now.

JUAN GONZÁLEZ: And, Ingrid Vila Biaggi, how did New Fortress Energy get this sort of cozy relationship with the Puerto Rican — the electric power authority? It’s a company, as I understand it, that was formed by former executives of BlackRock, of Goldman Sachs and of UBS. What’s been its track record? Does it have a track record in this kind of liquid gas production for electricity anywhere else in the world?

INGRID VILA BIAGGI: It has — first of all, it doesn’t have a track record in Puerto Rico. And it has a very limited time experience in terms of natural gas. That’s one of the questions that we raised: How was this company selected versus other companies? And like I mentioned, this was presented as an unsolicited proposal to the authority. So, the project, as itself, was conceived by the private sector, which has been one of the great problems that PREPA has faced in the past in terms of lacking planning and then allowing for then private interests to push in these projects that do not serve the best interests of the people of Puerto Rico.

Our investigation is based on public documentation that we were able to obtain through litigation with PREPA. PREPA was not willing to provide us these documents, and we had to go to court to get them. So, what we found through that public documentation is all these irregularities in the process, prior to the RFP process and during the RFP process. We were able to identify, though, some law firms, for example, that were contracted by PREPA to negotiate this contract after it was awarded to New Fortress. And that same U.S. law firm represents entities for the parent company of New Fortress. We were not able to find a specific documentation regarding how they — who introduced them to Puerto Rico. And that’s, I think, part of the investigation that should be conducted by federal and local authorities, to find out and provide questions to many issues that we raise in the report.

JUAN GONZÁLEZ: And, Ingrid, I’d like to ask you also about a separate report that came out that Chris Christie, the former governor of New Jersey and also on the original transition team for President Trump, is now a lobbyist, at $30,000 a month, for the Puerto Rico electric company. What exactly is Chris Christie doing there? And what’s his expertise?

INGRID VILA BIAGGI: Yes, there is no information in terms of what he’s doing. PREPA announced last week, or it was disclosed, that this contract was set forth for the upcoming month, supposedly to help with federal funding and to get federal funding to actually arrive to Puerto Rico. However, this is another of those contracts that has no accountability and sums to the — and comes to add to over $270 million in contracts that have been awarded at PREPA for professional services and financial advisory in the past two, three years.

We have to remember, $270 million perhaps doesn’t sound like a big amount of money in the U.S., but this is a bankrupt corporation. Two hundred and seventy million dollars in public services, public professional services, amounts to a whole lot of money that could be used for the maintenance of the infrastructure, for adopting renewables, for rooftop solar projects. So, we definitely question this professional service contract, as well as the other ones that have been awarded in the authority.

AMY GOODMAN: So, finally, as you are in hurricane season, Ingrid — began on June 1st — and you have this sun-soaked island, to have poured this much money, let alone the reason that they have given it to this company — José Ortiz, the head of the power company, said that your report “showed complete ignorance” around the contract, that it was approved by the federal control board that oversees Puerto Rico’s finances. If you could respond and say what you’re demanding right now?

INGRID VILA BIAGGI: Well, I mean, José Ortiz’s reaction does not address any of the irregularities that we’ve raised in the report, and he tries to dismiss our report by questioning the professional experience of the authors — in this case, Tom Sanzillo and myself. We’re both former public officials with vast experience in contract supervision. And like I mentioned, he’s just trying to distract the attention from the report.

And in terms of your statement regarding the beginning of hurricane season, definitely, it is quite — it creates quite a bit of anxiety to know that the forecast for this hurricane season is going to be quite an active one and that Puerto Rico is not better poised to address an extreme weather event than it was when we faced Hurricane Maria, precisely because PREPA has not implemented and has not addressed renewable energy and other more sustainable alternatives to make the grid more resilient and reduce vulnerabilities for the population of Puerto Rico.

Regarding approvals during the process, those are some of the things that we question in the report. I mean, the fiscal control board approved this, yet acknowledging in their own write-up that the project was 30 to 40% above industry benchmark costs. So, I mean, we do want — that’s why we’re asking for an independent, outside investigation of this whole process, to see how a project with and a contractor with so many issues and a process with so many irregularities was able to conclude and a contract was able to be signed, and now we have this project that we have to deal with on the island.

AMY GOODMAN: Well, Ingrid Vila Biaggi, we thank you so much for being with us, president of CAMBIO, speaking to us from San Juan, Puerto Rico. And before we go to break in the next, oh, 30 seconds, Juan, if you could talk about the Supreme Court decision that just came down around Puerto Rico’s debt?

JUAN GONZÁLEZ: Yes, Amy. Well, a couple of weeks ago, the Supreme Court ruled, but it was in the midst of all of the protests, the national protests around police abuse, so it didn’t get much attention in the U.S. It basically ruled that the appointment of the PROMESA board, which basically is running Puerto Rico’s economy, and it really supersedes the local government, that the appointment of those officials by Congress and the president was legal. There had been a series of lawsuits in the courts trying to challenge the legality, under the Appointments Clause of the Constitution, that the members of the board were not appointed with the advice and consent of the Senate, as is required of federal officers.

And the court ruled — and it’s a strange opinion. It was a unanimous opinion, but there was a seven-vote majority opinion written by Justice Breyer, and then there were two other concurring opinions but separate opinions, one by Justice Thomas and one by Justice Sotomayor. And Justice Sotomayor’s opinion was actually a dissent, even though she agreed with the majority opinion. She went into perhaps her most detailed legal brief on the status of Puerto Rico.

And the important thing, I think, that Justice Sotomayor said in this decision — in her opinion was that, really, she questioned the entire legitimacy of the PROMESA board itself. And she said — and I want to quote this, because — and people should read this opinion. It was a 24-page opinion. It says, “These cases raise serious questions about when, if ever, the Federal Government may constitutionally exercise authority to establish territorial officers in a Territory like Puerto Rico, where Congress seemingly ceded that authority long ago to Puerto Rico itself.”

And she went on to say that the PROMESA “Board members, tasked with determining the financial fate of a self-governing Territory, exist in a twilight zone of accountability, neither selected by Puerto Rico itself nor subject to the strictures of the Appointments Clause.”

And she goes on to say, “I am skeptical that the Constitution countenances this freewheeling exercise of control over a population that the Federal Government has explicitly agreed to recognize as operating under a government of their own choosing.”

She basically says you are not taking into effect — into account, the rest of the court, that back in the 1950s the United States granted self-governance to Puerto Rico. And now, by the imposition of the control board, that’s taken that away. And so, she basically says, “I’m going along with this Appointments Clause decision, but the basic question here has not been settled.”

And I think it’s the most — she’s had several opinions now, dissenting opinions to the court, on the issue of Puerto Rico — Sánchez Valle, Franklin Templeton and now this one, where she basically says, “You’ve got to deal with the colonial relationship of Puerto Rico.”

AMY GOODMAN: Well, and, of course, we’ll continue to look at that. But up next, we’re going to look at an insurgent campaign to unseat 16-term congressmember and House Foreign Affairs Committee Chair Eliot Engel. We’re going to speak with his challenger, Jamaal Bowman, who has just been endorsed by The New York Times, AOC, Senators Warren and Bernie Sanders. Stay with us.

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