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CMP parent company accused of wasteful spending to pad payouts

Utility Merger New Mexico
Andres Kudacki
FILE - This Dec. 29, 2012, file photo, shows the exterior of Spanish energy company Iberdrola in Madrid, Spain.
Updated: February 10, 2022 at 5:10 PM EST
According to a press release from Avangrid, this case has been voluntarily dismissed by Security Limits Inc.

AUGUSTA, Maine — A cybersecurity firm sued the parent company of Central Maine Power Co. in federal court this week, alleging it engineered a bid-rigging scheme in the tens of millions of dollars aimed at increasing payouts from ratepayers.

Avangrid, a U.S. subsidiary of the Spain-based Iberdrola, categorically denied the allegations contained in the bombshell lawsuit from Pennsylvania-based Security Limits Inc., calling its CEO “a disgruntled subcontractor” who was angry that he did not win more business.

The lawsuit comes at a highly sensitive time for Avangrid and CMP. Construction has stopped on their $1 billion hydropower corridor through western Maine after voters rejected the project in a November referendum. A proposed Avangrid merger with a New Mexico utility is complicated by a criminal probe in Spain involving Iberdrola, though no wrongdoing has been charged.

Gov. Janet Mills called the allegations “alarming and deeply troubling,” saying the Maine Public Utilities Commission should review the charges and ensure ratepayers were not harmed.

“Any act of wrongdoing or any misconduct that harms Maine people deserves swift action, accountability, and consequences,” she said.

Security Limits and its CEO, Paulo Silva, allege that the company became a subcontractor working on an Avangrid cybersecurity program in 2018. After completing work successfully on an initial phase, the firm expected to win equipment contracts for the next phase.

When Silva later raised concerns about how equipment was being purchased, the lawsuit says Avangrid steered lucrative contracts improperly toward competitors, eschewing competitive bidding and buying equipment at “premium prices” because it could recover capital costs plus a profit under arrangements with state utility companies.

It resulted in “tens of millions” in unused and depreciating equipment sitting in an Avangrid contractor’s warehouses in Maine and New York, Security Limits alleges, with at least some purchased in 2018 and 2019 in storage as recently as January of this year.

The lawsuit cites public filings from Avangrid that disclose it raised capital expenditures from $1.8 billion in 2018 to $2.8 billion in 2019 as evidence to back Silva’s claim.

But Avangrid looked to discredit Silva and his company in a statement lambasting his 72-page lawsuit in the Southern District of New York seeking $110 million in damages, saying he was “bitter he didn’t win competitive procurements and that his relationship with the contractor soured.”

“The allegations and claims have no merit, and the company will vigorously defend itself,” the statement said.

Maine utility watchers reacted strongly to the allegations of malfeasance in the lawsuit, which was first reported by Searchlight New Mexico, a nonprofit newsroom.

Acting Maine Public Advocate Andrew Landry called the allegation “very disturbing,” saying his office will follow the case and “explore in an appropriate PUC proceeding whether CMP customers are being charged for any such equipment and to pursue appropriate remedies.”

It is the latest public-relations problem for CMP, which was slapped with a $10 million penalty in 2020 after widespread customer service issues and complaints of high bills. A state audit released in July said the utility’s ownership structure contributed to many of its deficiencies, which led to CMP saying this week it will add Maine executives as part of an improvement plan.

The new allegations come amid political and regulatory fallout from the corridor vote and as CMP faces a mortal threat in a referendum being targeted for the 2022 ballot that would establish a new quasi-public agency to buy out the infrastructure of Maine’s two dominant utilities and put them under the control of an elected board.

This story appears through a partnership with the Bangor Daily News.