A group of Puerto Rico consumers and businesses sued the Puerto Rico Electric Power Authority, professionals at PREPA, and other energy companies for more than $1 billion.
The suit, filed Tuesday in United States District Court for Puerto Rico, is a class action suit that also names several large fuel oil supply companies, and several commercial oil-testing labs.
The suit alleges that PREPA used lower-grade oil than it had promised to the U.S. Environmental Protection Agency. This allowed the authority to pay a lower price. PREPA then pretended to consumers and other outside parties that it had used the higher grade oil, the suit contends.
The litigants say that because the authority's electric rates include a direct pass-through of fuel costs to the consumer, consumers were forced to pay higher rates than they should have.
The fuel oil office accepted the inferior oil in exchange for kickbacks and commissions from the fuel oil suppliers, the suit alleges.
At the authority, the fuel oil office was principally responsible for the inferior oil and other illegal behavior, according to Beth Fegan, partner at Hagens Berman Sobol Shapiro, which is one of the litigating law firms. However, some of PREPA's leadership has been complicit in burying an audit showing problems at the fuel oil office, she said.
The practice of accepting inferior oil and charging for higher grade oil started in 2002 and continues to this day, according to Fegan.
Puerto Rico customers and business have suffered over-charges of over $1 billion, the litigants claim. As part of a class action they will be seeking treble damages plus attorney's fees and expenses.
PREPA legal affairs director Jorge Concepci-n Rivera said this afternoon that the authority had not yet received the complaint or summons and could thus not comment.
In June 2014 Fitch Ratings dropped PREPA deeper into non-investment grade, citing inadequate liquidity to make near-term bank loan payments. In the fall, as part of an agreement with forbearing bondholders, PREPA hired a chief restructuring officer. Puerto Rico indicated in the fall that a restructuring of the authority's debt was in the works.
