Puerto Rico electric company sued for allegedly overcharging customers, taking kickbacks

IndustriesAssociated Press

Puerto Rico's heavily indebted power company was slapped Tuesday with a federal class-action lawsuit alleging the agency joined several international oil companies in overcharging customers in the U.S. territory by more than $1 billion.

The lawsuit filed by Seattle-based Hagens Berman Sobol Shapiro LLP names 20 defendants, including Brazil's Petrobras, the Shell Trading Company and Puma Energy Caribe LLC.

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It alleges that Puerto Rico's Electric Energy Authority overpaid suppliers in exchange for hundreds of millions of dollars' worth of kickbacks, and overpaid for millions of barrels of oil that did not meet U.S. environmental standards. The agency is considered one of the largest public power companies in the U.S.

"The scheme has certainly contributed to the overall recession that Puerto Rico has been in," Beth Fegan, an attorney with Hagens Berman, said in a telephone interview.

The Electric Energy Authority is accused of paying regular prices for subpar fuel oil and passing the cost to clients since January 2002, as well as allegedly falsifying thousands of lab reports that tested its quality.

Jorge Concepcion, director of the power company's legal affairs, said he had not received a copy of the lawsuit and declined to comment.

Fegan said attorneys are seeking a still undefined amount of money for the plaintiffs. A jury trial has been requested.

The lawsuit comes as the island's government tries to reform the power company following complaints of corruption and electricity bills that average about twice those of the U.S. mainland. The company also holds some $9 billion in debt, and U.S. investors have grown increasingly concerned that it might soon go bankrupt.

Legislators have already begun reviewing similar allegations as part of the reform, while government prosecutors have accused some power company officials of fraud in a case related to renewable energy contracts. The case is currently being heard in court, but no one has been arrested.

Puerto Rico depends on petroleum to generate nearly 70 percent of its electricity, with the power company paying more than $3 billion a year for fuel oil.