Puerto Rico Oversight Board sues PREPA suppliers, labs for potentially billions

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The Puerto Rico Oversight Board filed a lawsuit Sunday against fuel suppliers and laboratories for the Puerto Rico Electric Power Authority, in a suit that could gain billions of dollars for the struggling electrical utility.

The causes of the suit are the same as those cited in a 2015 one against PREPA, certain PREPA professionals, and other energy companies. The 2015 suit also sought more than $1 billion.

The board alleges from 2002 to 2015 PREPA gave fuel suppliers substantial over payments and other improper compensation for the supplied fuel. PREPA paid the suppliers for high-grade fuel but received supplied low-grade fuel. This was contrary to both contractual stipulations and environmental regulations.

The board is accusing Trafigura and Vitol of supplying the low-grade fuel.

The suit is also directed at the laboratories: Carlos R. Mendez & Associates, Inspectorate America Corp., and Altol. The board says they received payments for falsified test results on the delivered fuel.
Trafigural didn’t immediately respond to a request for comment.

“The allegations in respect of Vitol are untrue and unfounded. There is no evidence of wrongdoing on Vitol’s part,” said spokeswoman Andrea Schlaepfer.

The labs couldn’t be reached.

The suit filed in 2015 by consumers and businesses is now on hold because of PREPA’s Title III bankruptcy filing in July 2017.

“The Oversight Board has a responsibility to recover payments that were made illegally,” said board member David Skeel. “Based on the facts known, PREPA’s customers and creditors were harmed and we intend to pursue those claims vigorously.”

In the 2015 suit the litigants said 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. Professionals at the PREPA fuel oil office accepted the inferior oil in exchange for kickbacks and commissions from the fuel oil suppliers, the suit alleged.

As of February 2017 PREPA had $8.3 billion in bond debt outstanding.

Gov. Ricardo Rosselló is working to sell the transmission and distribution parts of PREPA. It remains to be seen how these suits may affect this effort.

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PROMESA Puerto Rico Electric Power Authority Puerto Rico
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