Workers restore high tension power lines damaged by Hurricane Maria in Guayama, Puerto Rico. Photo: AFP
The head of the Puerto Rico Electric Power Authority has confirmed he has asked the board to cancel the contract with Montana-based Whitefish Energy Holdings
Just hours earlier the governor had urged the power company head to scrap the deal.
It follows official questions over how Whitefish Energy Holdings - which is from the hometown of the US Interior Secretary Ryan Zinke - was awarded the deal.
The company is just two years old.
It had just two full time workers when the hurricane hit, but now has hired more than 300.
Governor Ricardo Rossello also said he wanted to see repair teams brought from New York and Florida to aid with reconstruction efforts in the wake of Storm Maria.
More than 70 percent of people on the US-controlled island were still without power as of Sunday morning - more than five weeks after the powerful hurricane devastated the power grid.
Concerns were raised about why Puerto Rican authorities had not requested "mutual aid" from other public power authorities, as is typical during disasters in the US.
The White House and the Federal Emergency Management Agency (Fema) distanced themselves from the deal last week.
The company has its headquarters in the town of Whitefish, the hometown of US Interior Secretary Ryan Zinke. Mr Zinke has denied any involvement or wrongdoing.
Whitefish has said that it secured the $300m deal in a legitimate manner.
Fema has denied allegations by Prepa, the US territory's main utility, that it reviewed the deal.
The contract states that "Prepa hereby represents and warrants that Fema has reviewed and approved of this Contract".
In a statement on Thursday, Fema said: "Any language in any contract between Prepa and Whitefish that states Fema approved that contract is inaccurate."
Fema also said it had "significant concerns" with how Prepa had procured the contract and had "not confirmed whether the contract prices [were] reasonable".
Critics have queried why Puerto Rican authorities did not seek aid from other public utility companies - as is customary during disasters.
It is unclear what will happen if Fema refuses to pay.
Walt Green, a former director of the US National Center for Disaster Fraud, told BBC News it was "impossible" to say at this stage who was responsible for costs.
"Any dispute may result in appeals, administrative hearings and lawsuits," he added.
Puerto Rican authorities initially said Fema would pay for the deal.
They are now seeking to assure the public there is "nothing illegal" about the contract.
Prepa and the Puerto Rican government are saddled with massive debts. The power authority declared bankruptcy in July.
The US House of Representatives Natural Resources Committee, which has jurisdiction over the Caribbean island, is also scrutinising the contract.
On Friday, top Democrats from that panel and the Transportation and Infrastructure Committee sent a letter asking the Department of Homeland Security's inspector general to launch an investigation.
The correspondence follows similar requests from other members of Congress to the interior department's inspector general.
- BBC