U.S. judge denies request for outsider to oversee Puerto Rico's PREPA

By Daniel Bases

NEW YORK (Reuters) - A U.S. federal judge on Monday rejected a request to install a former military officer to oversee Puerto Rico's beleaguered electric utility, PREPA, a victory for Governor Ricardo Rossello, whose government opposed the appointment.

U.S. District Judge Laura Taylor Swain, ruling from the bench in New York, denied a motion filed Oct. 26 by the federally appointed Financial Oversight and Management Board for Puerto Rico, according to a court official. The board wanted to install retired U.S. Air Force Colonel Noel Zamot as PREPA's chief transformation officer.

The oversight board was created under the 2016 Puerto Rico rescue law known as PROMESA, which is charged with helping the island recover from a financial disaster that left it with $120 billion in unpayable debt and pension liabilities.

Zamot's name was put forward as an emergency manager after PREPA was criticized for signing a $300 million, no-bid contract with tiny Whitefish Energy Holdings to lead power restoration efforts. The deal sparked an uproar over its provisions and the Montana company's lack of experience with projects that big.

PREPA on Oct. 29 agreed to cancel the contract after Rossello urged that it be scrapped.

In its motion, the board sought the court's approval "confirming Noel Zamot as PREPA's Chief Transformation Officer (the "CTO") with all the powers of a chief executive officer reporting to the Oversight Board."

However, Puerto Rico's government believed the move was an overreach of the oversight board's authority and forcefully opposed the move in a public meeting on Oct. 31.

The government's liaison to the board, Christian Sobrino, said the appointment would essentially mean the board could replace any Puerto Rican government official, "maybe even the governor."

Late on Monday and well after the judge’s ruling, Chairman of the House Committee on Natural Resources, Rob Bishop, a Republican from Utah lashed out at PREPA ahead of a hearing on Tuesday where Rossello will offer 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,” Bishop said. His committee drafted the rescue law known as PROMESA.

Earlier on Monday, Rossello released a letter sent to President Donald Trump saying Puerto Rico's government was requesting $94.4 billion from Congress to rebuild island infrastructure, housing, schools and hospitals devastated by Hurricane Maria in September.

Rossello made a show of stating that Puerto Rico’s rebuilding process would be the most transparent in history.

However, Bruce Westerman, the chairman of the subcommittee on Oversight and Investigations from Arkansas, who also issued a 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.”

(Reporting by Daniel Bases; editing by Jonathan Oatis)