December 16, 2025
The Honorable Sarah Nelson
Acting Inspector General
U.S. Department of Energy, Office of Inspector General
Washington, DC 20585
Dear Acting Inspector General Nelson:
On behalf of National Taxpayers Union, the nation’s oldest taxpayer advocacy organization, I write to raise concerns about a recent allocation of federal funds from the Department of Energy (DOE) to support the Commonwealth of Puerto Rico’s electric grid. We share your mission in safeguarding taxpayer dollars from waste, mismanagement, or diversion, which is why we urge you to review this latest tranche of funding given recent efforts by Puerto Rican localities to use these funds as a piggybank.
As you are aware, DOE announced in October the disbursement of $365 million in federal funding to address Puerto Rico’s ongoing electric grid crisis. Secretary Chris Wright has also renewed two emergency orders intended to stabilize and strengthen the island’s energy system. These actions reflect your department’s continued commitment to delivering reliable and secure energy to all Americans, specifically the 3.2 million U.S. citizens living in Puerto Rico.
However, we are troubled that these federal taxpayer monies are being subjected to “illegal taxation” and other legally questionable fiscal practices. Reports indicate that several Puerto Rican municipalities are seeking to impose improper taxes on federal contracts, an issue we’ve previously raised in a letter to Homeland Security Secretary Kristi Noem. From that letter, we wrote, the application of local taxes on federal infrastructure dollars creates a precedent allowing “states to turn disaster recovery funding into a slush fund with taxpayers footing the bill.”
One prominent example involves Cobra Acquisitions, a subsidiary of Mammoth Energy Services, a large publicly traded company. Cobra successfully restored Puerto Rico’s electric grid to 98% functionality under a federally funded contract with the Puerto Rico Electric Power Authority (PREPA) following Hurricanes Irma and Maria. Despite PREPA’s tax-exempt contracting authority, more than a dozen municipalities have attempted to levy over $100 million in combined taxes on Cobra’s work.
If the proposed 5% tax scheme is applied to the DOE’s recent $365 million allocation to Puerto Rico, it could potentially divert $14 million away from grid modernization and inflate costs for future projects, forcing the federal government to either increase funding to foot the tax bill or scale back a project’s scope. Such a plot harms every stakeholder—federal taxpayers and Puerto Ricans in need of reliability improvements. The only beneficiaries are municipal bureaucrats.
Such an unusual taxation effort has also garnered the attention of Congress. Last month, Representative Greg Steube (R-FL) of the House Ways and Means Committee noted in a letter to the Office of Management and Budget (OMB) that these retroactive claims represent “an attempt by these municipalities to take federal funds to bail out their broke local governments,” and urged OMB to investigate DOE’s funding to the Commonwealth.
Meanwhile, several other companies conducting FEMA-funded grid repair work are still waiting to be paid tens of millions of dollars due to the ongoing billing dispute following claims made against them by the Commonwealth government and PREPA. And, recently, FEMA rescinded $1 billion in funding previously slated for Puerto Rico due to its clear risk of waste, fraud, and abuse.
The Legislative Assembly of Puerto Rico is doubling down by considering a bill that would statutorily enshrine this tax scheme at a territorial level.
We strongly urge that your office conduct a rigorous review of DOE’s recent and forthcoming funding for Puerto Rico’s energy grid and determine whether such a tax would undermine DOE’s recovery efforts. We also urge you to take steps to ensure future allocations to Puerto Rico maximize every taxpayer dollar for its intended purpose.
Protecting the value of taxpayer investments must be a priority when allocating funds to Puerto Rico's grid modernization. Any and all efforts to whittle away at these vitally important energy recovery funds should be paused. Thank you for your attention to this matter and your continued protection of the American taxpayer.
If there is anything NTU can do to assist, we are at your disposal.
Sincerely,
Thomas Aiello
Senior Director of Government Affairs