Maine regulators say they are closely watching a lawsuit accusing the parent company of Central Maine Power of bid-rigging and racketeering, but no decision has been made about launching a formal inquiry.
The federal lawsuit filed last week by a former subcontractor for the parent company, Avangrid Networks, charges that the company favored some subcontractors, paid higher-than-needed prices and ordered unnecessary equipment while knowing that the cost of capital expenditures, plus a profit margin, can be recouped through higher electric rates. The contractor, Security Limits Inc., filed the lawsuit in New York seeking damages of more than $600 million.
Avangrid has denied the allegations and late last week filed its own lawsuit in New Mexico, where the company is seeking to buy an electric utility, accusing the contractor and its top executive of defamation and attempted extortion.
In a statement issued Monday, the Maine Public Utilities Commission called the allegations in the initial lawsuit “serious” and said it will closely follow the proceedings in the case, which was filed in federal court in New York.
The PUC regulates Maine power companies, including CMP, and has the power to set the rates charged to customers. It can use its rate-setting power to limit a utility’s profits if it believes a utility acted improperly and unfairly drove up its rates.
“As we learn more, we will determine what additional review by the commission may be warranted,” the PUC said in a statement.
Neither CMP nor any of its executives are mentioned in the original suit against Avangrid. There’s only one reference to Maine in the 65-page suit, relating to an allegation that Avangrid bought unneeded equipment in 2018 and 2019 and, as of January, most of it was in warehouses in Maine and New York.
The suit doesn’t specify where those warehouses are or who owns them. It suggests that the warehouse space was under the control of another subcontractor, Unlimited Technology, which it says bought the equipment and resold it to Avangrid.
CMP has declined to comment on the suit, but on Monday pointed to Avangrid’s statements and countersuit saying it has been falsely targeted by a disgruntled former contractor who is now trying to interfere with Avangrid’s planned purchase of a utility in New Mexico. The staff of that state’s utilities commission has reportedly recommended against approving the purchase.
Avangrid’s suit said Silva sought contracts with Avangrid, and after not getting more business he threatened to make negative, public statements against the company.
An attorney for Silva and Security Limits Inc. responded to those claims in a written statement Monday.
“Avangrid’s countersuit against Mr. Silva is a PR stunt that threatens the rights of all consumers to raise concerns about corporate wrongdoing,’ John M. Griem said. “Mr. Silva spoke up at a public hearing and acted in good faith to appraise inside legal counsel at Avangrid of wrongdoing at the company, and is now being sued for it.”
Catharine Harnett, a spokeswoman for CMP, said most of the equipment that CMP and other utilities need are purchased by an Avangrid corporate team, and Avangrid has a detailed code of ethics and regular employee training in ethics and compliance. It has been recognized regularly for its ethical standards, she said.
But state Rep. Seth Berry, D-Bowdoinham, said investor-owned utilities such as CMP have an incentive to pay higher prices for equipment because of their ability to recover those costs, along with a profit margin that is tacked on, from ratepayers.
“This problem is endemic in the investor-owned utility industry,” said Berry, a leader in the effort to have the state buy CMP and Versant Power, the other large investor-owned utility in Maine, and convert them to consumer-owned utilities.
A bill to start that process passed the Legislature this year, but was vetoed by Gov. Janet Mills, who said it was drafted hastily and without enough public participation. Berry said supporters of the effort are gathering signatures to put a referendum question on creating a public utility on next November’ ballot.
He said that if the allegations in the suit turn out to be true, Central Maine Power Co.’s customers may have been overcharged.
“Maine’s regulators and perhaps even Maine’s attorney general should be very actively looking into this,” he said. “It does appear there’s smoke, if not fire. This should be a reminder that the investor-owned utility model tends to produce a lot of evidence of corruption.”
Staff Writer Peter McGuire contributed to this story.