Animals are Terrible Weapons
It could be a silly gaffe piece but not serious. The damage caused by squirrels can be fixed within 45 minutes to an hour. The biggest issue with utilizing animals for any sort of clandestine operation is that they do not always do what you want them to. An excellent example was a CIA operation in the 50's to implant a spying device into a cat, which would then (in theory) cuddle up to some Russian spooks who liked to smoke and chat on the same park bench every day. On paper its a great idea, who in the 50's (an era when most "bugs" were the size of baseballs) would suspect the cat of being bugged? Unfortunately for the CIA the cat decided to make a B-line for traffic instead and was hit by a car and killed. Another incident was in WW2 when a man decided to attach tiny incendiary devices to bats that would be dropped over japan to cause fires. The idea was that the bats would be scared and want to hide, would roost in houses and buildings, then catch fire and cause massive damage and panic. The idea actually worked too, we know this because several hundred of them equipped with miniaturized napalm based fire-bomblets escaped their enclosure and burned the research and testing facility to the ground.
The idea of breeding squirrels would not work in real life because non domesticated animals do not do what you want them to reliably. A dog has had about 25,000 years of evolution and selective breeding to make his character and behavior predictable and programmable. Squirrels are wild animals, they have no such instinctive compunction to do anything you say or behave in any manner which is consistent or predictable. It is a funny and wacky idea that would make for great fiction, but relying on the squirrels to just chew up the right wire by random chance is a losing proposition.
Maybe replicate the WW2 Bat-Bomb experiment with squirrels. Set loose a thousand squirrels into a power plant, each with about 50 grams of explosive/incendiary attached to their tails. Utilize that unpredictability to cause wanton destruction and mayhem.