Judge Swain rules limiting Oversight Board’s powers over PREPA

by Nov 20, 2017Courts0 comments

Federal judge Laura Taylor Swain rejected a request to install a former military officer to oversee Puerto Rico’s electric utility, the Puerto Rico Electric Power Authority. The motion was filed on October 16, 2017, by the federally appointed Financial Oversight and Management Board for Puerto Rico. The Oversight Board was established under PROMESA to help Puerto Rico recover from over $120 billion in debt and pension liabilities. The board had hoped to install retired US Air Force Colonel Noel Zamot as PREPA’s chief transformation officer. Colonel Zamot’s name was put forward as an emergency manager after PREPA was denounced for signing a $300 million contract with Whitefish Energy Holdings to restore power to the islands. There was a lot of criticism surrounding the Whitefish contract because the Montana firm is only two years old, until recently has only had just two full time employees, and the contract was no-bid.

PREPA agreed on October 29 to cancel the contract after Governor Ricardo Rosselló urged that the contract be terminated. In the aforementioned motion, the board was seeking the court’s approval of confirming Noel Zamot as PREPA’s “‘Chief Transformation Officer’ with all the powers of a chief executive officer reporting to the Oversight Board.” The Puerto Rican government believed that the move was an overreach of the board’s authority and they opposed the move in a meeting on October 31. The liaison to the board from the Puerto Rican government said that the appointment would set the precedent of allowing the board to replace any government official, if they wished to do so.

On November 13, Representative Rob Bishop (R) of Utah, the Chairman of the House Committee on Natural Resources, said the following ahead of the hearing where Rosselló offered his testimony, “A legacy of dysfunction (at PREPA) has created a competence deficit that threatens the island’s ability to improve conditions for its citizens. Confidence in the utility’s ability to manage contracts and time sensitive disaster related infrastructure work is long gone.”

Representative Bruce Westerman (R), chairman of the subcommittee on Oversight and Investigations issued the following statement through Bishop’s office saying: “It is obvious PREPA did not know how to draft a FEMA-compliant contract, nor did PREPA officials adhere to the advice of their own counsel on how to comply. I believe this is precisely why the Oversight  Board should be granted more authority. While we understand the sense of urgency for the people of Puerto Rico, oversight and transparency are vital to this recovery process.”

It is yet to be confirmed whether the Oversight Board attempts to appeal the ruling.