Central Maine Power Co.’s corporate parent is being sued by a former subcontractor who alleges the company engaged in bid-rigging, racketeering and buying unnecessary equipment knowing that the costs could be recovered through higher electricity rates for customers in Maine and elsewhere.
The federal lawsuit against Avangrid subsidiary Avangrid Networks was filed Monday by Paulo Silva, a cybersecurity expert and CEO of Pennsylvania-based Security Limits Inc., in U.S. District Court for the Southern District of New York. Avangrid, which also is embroiled in controversy over its $1 billion transmission corridor from Quebec to Lewiston, is incorporated in New York, although its headquarters are in Orange, Connecticut, and it is owned by Iberdrola, a multinational company based in Spain.
In response, Avangrid described the plaintiff as a disgruntled ex-contractor who is bitter because the company chose not to continue working with him. It categorically denied his allegations.
The lawsuit asks for damages of more than $600 million, including some punitive damages, which are triple the actual damages.
The plaintiff’s company provides technology, engineering, architecture and consulting services. The lawsuit alleges that Avangrid took part in “a brazen racketeering scheme, replete with bid-rigging, accounting manipulation, warehouses built solely to house mountains of unused equipment procured under bogus pretenses” and stealing proprietary business secrets.
Maine is mentioned in the legal complaint in an allegation that in late 2018 and 2019 Avangrid bought “tens of millions of dollars” of equipment from a competitor of the plaintiff “at premium prices and with no competition.” As of January, the suit alleges, much of the equipment remained unused in warehouses in Maine and New York.
The complaint does not provide any other information on the alleged Maine warehouse, and neither CMP nor any of its executives is named in the lawsuit.
In a statement Friday, Gov. Janet Mills called the allegations “alarming and deeply troubling.”
“Maine provides to its electric utilities a monopoly and, in return, they owe to Maine people reliable service at just and reasonable rates – nothing less,” Mills said. “Any act of wrongdoing or any misconduct that harms Maine people deserves swift action, accountability and consequences. I call on the Maine Public Utilities Commission to closely review the federal complaint, to examine Avangrid’s history of equipment purchases in Maine, and to ensure that no Maine CMP ratepayer has been or will be harmed by these activities if proven to be true.”
Silva alleges that Avangrid rigged bids and bought unnecessary equipment because it knew it could recover its capital expenses, plus a profit margin of 7 to 15 percent through rate hikes sought from states’ public utilities commissions. It also alleges that the company steered work toward favored subcontractors through the way it operated the bidding process, and that it stole business secrets from Silva’s company to give to its competitors to provide them with an edge in that process.
In a statement, Avangrid Networks called Silva “a disgruntled subcontractor, bitter he didn’t win competitive procurements and that his relationship with the contractor soured.”
Avangrid Networks said it was aware of the lawsuit but had not yet been served.
“The allegations and claims have no merit and the company will vigorously defend itself,” the statement said.
The company also said that Silva was interfering with Avangrid’s proposed merger with PNM Resources, an electric utility in New Mexico and Texas, in an effort to win other contracts “based on false statements.”
New Mexico regulatory authorities are investigating other allegations against Iberdrola, and the staff of that state’s Public Regulation Commission has recommended against the merger, according to Searchlight New Mexico, an online investigative journalism site. A majority of the commission’s members indicated at a meeting Wednesday that they would vote against the merger, Searchlight New Mexico reported.
Maine Acting Public Advocate Andrew Landry said the allegations in the lawsuit “are very concerning, particularly those relating to alleged sale of wasteful equipment to Avangrid’s U.S. utilities, including Maine.”
“We intend to follow the case and, if it is demonstrated to have any merit, to explore in an appropriate PUC proceeding whether CMP customers are being charged for any such equipment,” Landry said.
The suit is the latest setback for Avangrid, which has run into roadblocks on the transmission corridor it is attempting to build with its subsidiary NECEC Transmission LLC. Work on the project to bring hydroelectric power to Massachusetts has been suspended in the wake of a Nov. 2 referendum approved by voters that blocks its construction. Avangrid is challenging the referendum’s constitutionality in court.
And CMP has suffered from unfavorable public perception stemming from a mismanaged billing system rollout in 2017 and other missteps.