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The company hired to repair Puerto Rico’s electrical grid stopped working Monday over $83 million in unpaid bills while some utility crews from the mainland U.S. quit the half-finished reconstruction job altogether, the Wall Street Journal reported today. A Whitefish Energy Holdings LLC spokesman said that the company suspended its work after Puerto Rico’s public power company delayed making payments under a controversial $300 million contract to rebuild power lines damaged by Hurricane Maria. Puerto Rico canceled the deal with Whitefish last month on orders from Gov. Ricardo Rosselló amid a political furor over how the contract was awarded and priced. But Whitefish had been scheduled to remain working until Nov. 30 when its contract terminated. With invoices piling up, four Florida-based utilities working as Whitefish subcontractors have now elected to leave Puerto Rico rather than continue under new agreements with the public utility known as PREPA. Read more. (Subscription required.) 

In related news, Puerto Rico’s bankruptcy and the crippling blow of Hurricane Maria won’t deprive the government’s employees of their Christmas bonuses, Bloomberg News reported. Governor Ricardo Rosselló said yesterday that he would cover the payments, despite the financial strains that have been made even more severe since the September storm caused much of the economy to grind to a halt. Both the government and businesses are required to pay such bonuses under a decades-old Puerto Rican law, providing a year-end boost that workers have come to rely upon. “Our public employees have done an admirable job for the recovery of the island,” Rosselló said in a statement. "Without them the job would be impossible, and we should make good on their Christmas bonus on time.” The bonuses became a source of conflict between Rosselló and the island’s federal oversight board earlier this year, when the panel pressed the governor to end the practice if he couldn’t cut spending elsewhere to cover the cost. When the governor ignored the recommendation, the board sued, only to withdraw the suit after the hurricane so legal fighting wouldn’t distract from recovery efforts. Read more. 

The chief executive of Puerto Rico’s troubled public electric company stepped down on Friday amid a two-month island-wide blackout and weeks of bruising public outcry over a costly contract to restore service, the New York Times reported. The resignation of Ricardo L. Ramos, the chief executive of the Puerto Rico Electric Power Authority, known as PREPA, was effective immediately. The governor, Ricardo A. Rosselló, told reporters that he accepted the resignation because Ramos had become a “distraction.” “There is an investigation that we’ve called upon for the whole contracting situation,” Rosselló said. “The truth of the matter is that this decision was taken with the best interests of the people of Puerto Rico.” Ramos’s resignation caps a yearslong saga of dysfunction and mismanagement at PREPA, which filed for bankruptcy in July. Ramos, an engineer, had been at the helm of the company for six months when Hurricane Maria destroyed the island’s poorly maintained power grid on Sept. 20. He immediately came under withering criticism and congressional and federal review for awarding a $300 million contract to a small private company from Montana, Whitefish Energy Holdings, to help repair the grid. PREPA had agreed to pay $319 an hour for electrical linemen; the average salary in Puerto Rico for that work is $19 an hour. The authority later canceled the contract, even while defending it. Read more. 

In related news, the White House asked Congress for $44 billion in hurricane aid, including funds designated for Texas and Florida, while most of Puerto Rico’s needs would be addressed in a future request, Bloomberg News reported. By delaying its full request for Puerto Rico aid, the White House move on Friday may diminish the chances that Congress will supply that aid in a December funding bill. The White House said that damage assessments haven’t been completed for Puerto Rico and the U.S. Virgin Islands, and a further request is planned. Texas would get less funding than it says it needs. Texas Governor Greg Abbott, a Republican, asked for $61 billion to repair damage from Hurricane Harvey. Florida officials asked for billions in aid for the state’s citrus industry. Puerto Rico last week requested $94 billion in immediate aid to recover from hurricanes Irma and Maria, which left most of the 3.4 million residents without power. The biggest share of the funds, $31 billion, were to be used to rebuild homes, with another $18 billion requested for the electric utility, Governor Ricardo Rosselló said in a letter to President Donald Trump. Read more. 

As Puerto Rico faced a fiscal crisis last year after racking up $123 billion in debt and pension liabilities, Congress passed special legislation to give it relief from creditors and time to find its financial footing. Now, with Washington, D.C.’s help needed perhaps more urgently, a key piece of that legislation is hampering efforts to address the lingering effects of Hurricane Maria — and possibly threatening Puerto Rico’s broader economic comeback as well, the New York Times reported. Two contentious events this week — a court ruling and a day of hearings on Capitol Hill — have brought the fundamental challenge into sharp focus: Even in an emergency, federal officials have limited say over how Puerto Rico conducts its affairs. The special legislation, known as PROMESA, placed Puerto Rico under the oversight of a federal board and subjected its debt to a court-supervised restructuring. The law patched together provisions reflecting the island’s status as a self-governing United States territory and parts of chapter 9, the federal bankruptcy code covering local governments. Among other things, chapter 9 greatly limits the authority that bankruptcy court judges and other federal officials can exert over insolvent local governments. Despite that aspect of chapter 9, which prevents the imposition of tax increases or pension freezes in bankruptcies involving cities like Detroit and Stockton, Calif., Congress chose to incorporate it into PROMESA. The implications of that move are becoming clearer as relief efforts in Puerto Rico sputter along compared with the smoother federal responses this year to hurricanes in Florida and Texas. Read more. 

In related news, investors have unloaded the Puerto Rico’s bonds at the fastest pace in three years, pushing prices to one new low after another, Bloomberg News reported. The selloff caused at least a fifth of the government’s $12 billion of general-obligation bonds to change hands, a shift that could help hasten Puerto Rico’s emergence from its record-setting bankruptcy. That’s because those who bought near now record lows may be willing to settle for far less than hedge funds and others that rushed in before the financial collapse. “The market’s resetting for the potential for a resolution,” said Rob Amodeo, who manages $25 billion as head of municipals at Western Asset Management. “That’s where the trade is headed and you needed to get there because there’s not enough capital to repay bondholders.” Read more. 

Puerto Rico is considering suspending debt-service payments for five years, a lead lawyer for the territory’s federal oversight board said, in the first indication of how the devastation caused by Hurricane Maria will affect the restructuring of the island’s debt, Bloomberg News reported. A moratorium may be included as part of Puerto Rico’s plan to reduce what it owes through bankruptcy, Martin Bienenstock, a partner at Proskauer Rose LLP, who represents the panel, said at a court hearing yesterday in Manhattan. It wasn’t immediately clear whether such a step would apply to all of government’s $74 billion of debt. The government’s most actively traded bonds fell yesterday to an average of 25 cents on the dollar, the lowest since they were issued in 2014 and less than half what they were worth before the storm. The September hurricane worsened the financial pressure that had already pushed the Caribbean island of 3.4 million residents into a record-setting bankruptcy. Puerto Rico this year initially said it could allocate $8 billion for debt payments through 2026, far less than the $33.4 billion that’s owed. Those plans have since been upended by the fallout from the hurricane, which Puerto Rico’s federal oversight board estimates may leave a budget shortfall of as much as $21 billion over the next two years. Puerto Rico is currently revising the fiscal plan.

Puerto Rico’s power company didn’t follow its lawyers’ advice when it agreed to a $300 million grid-construction contract with Whitefish Energy Holdings LLC, according to documents released by a House committee probing the now-canceled deal, WSJ Pro Bankruptcy reported. Email communications show at least seven types of contractual protections for the public power monopoly known as PREPA that were recommended by its lawyers at Greenberg Traurig LLP or included in draft documents but omitted from an Oct. 17 agreement with Whitefish, according to records released on Monday by the House Committee on Natural Resources. The emails raise new questions about a disaster-recovery contract that is under review by federal criminal investigators and multiple congressional panels. PREPA selected Whitefish — a startup firm based in rural Montana that had two employees when Hurricane Maria hit — as the general contractor for repairing the storm’s damage without a competitive bidding process. Gov. Ricardo Rosselló canceled the deal last month under criticism from members of Congress and local politicians over how it was awarded and priced. The controversy has galvanized Congress to examine the U.S. territory’s management of federal disaster-assistance dollars and its safeguards against waste and corruption. With Whitefish’s help, PREPA has restored 48.7 percent of its generation capacity, according to government data. The Natural Resources Committee and the Senate Committee on Energy and Natural Resources held separate hearings yesterday on financial transparency in the recovery process.

Puerto Rico’s governor won a decisive court victory that could boost his role in shaping the island’s financial recovery as he seeks $94 billion in federal aid to pay for the devastating damage dealt by the September hurricane, Bloomberg News reported. A federal judge struck down a request by the U.S. board that oversees the island’s finances to appoint its own manager to turn around Puerto Rico’s bankrupt electric utility. Governor Ricardo Rosselló had opposed the move, saying that it encroached upon the authority of elected officials and was beyond the scope of the power given to the panel in an emergency rescue law enacted last year. U.S. District Court Judge Laura Taylor Swain said yesterday that the federally appointed overseers must share control with local officials. While the law allowed it to put Puerto Rico’s various public agencies into bankruptcy, it doesn’t allow it to manage those institutions, she ruled. Read more. 

In related news, the House Natural Resources Committee will hold a hearing today at 2 p.m. ET titled “The Need for Transparent Financial Accountability in Territories' Disaster Recovery Efforts.” To view the witness list, please click here. 

Hundreds of Puerto Rican students have resettled on college campuses across the mainland U.S. in recent weeks — and many more are considering leaving the island territory in the spring — grateful for the opportunity to resume their studies in the wake of Hurricane Maria, the Wall Street Journal reported today. But some worry the students won’t return to an island that is already suffering an exodus of young people and their talents. The University of Puerto Rico, like the commonwealth government that provides roughly two-thirds of its annual operating budget, was in financial crisis when Hurricane Maria hit seven weeks ago. Last spring, student-led budget protests shut down some campuses for months, and eight campuses were placed on probation by the university’s accreditor in part because of financial concerns. The system is digesting an 18.8% cut to appropriations for the current school year. Enrollment was down by about 4 percent to 59,450 this fall before the storm hit. The last of the system’s 11 campuses reopened on Monday, despite damaged buildings and spotty electricity. Early tallies show that about 95 percent of students returned to class. But hundreds have withdrawn from the largest campuses and concern about the loss of talent is growing as more schools join the likes of Brown University, Tulane University and the State University of New York in bringing Puerto Rican students to their campuses free of charge or at in-state tuition rates.

The House Natural Resources Committee will be holding an oversight hearing today at 10 a.m. ET titled "Examining Challenges in Puerto Rico's Recovery and the Role of the Financial Oversight and Management Board." Click here for the witness list and prepared testimony.