PREPA Lawsuit

The Puerto Rico Electric Power Authority (PREPA) has had a tough year… or series of years. It took nearly a year for PREPA to get all its customers back in service after Hurricane Maria and more outages came with Hurricane Isaac. PREPA had already defaulted on debts prior to the 2017 hurricanes and filed for bankruptcy earlier this year. Governor Rossello plans to privatize PREPA, but this has not yet provided a solution to the utility’s problems.

There have been four CEOs at PREPA since Hurricane Maria, and the PROMESA board has just approved their budget for 2019. The Institute for Energy Economics and Financial Analysis claims that PROMESA’s approval and the governor’s plans lack needed reforms of the systems in place at PREPA.

Now a judge has made a preliminary ruling in a lawsuit filed against PREPA in 2015, agreeing that the plaintiffs can file a class action suit against PREPA and Shell Oil, Petrobras, Alchem, and various other fuel oil suppliers and laboratories.

The suit claims that PREPA and its vendors charged for “clean” fuel oil while actually delivering cheaper “dirty” fuel oil. The price difference was passed on to consumers, resulting in overcharges from 2002 on, according to the lawsuit.

A shipment of fuel oil must be tested by two laboratories to make sure that it is compliant, “clean” oil. The supplier chooses one lab and PREPA chooses the other. If the two labs don’t agree that the oil is compliant, a third lab is brought in. The system is designed to ensure that all fuel oil is compliant. Dirty fuel oil could not be passed off as clean fuel oil unless PREPA , its suppliers, and the labs colluded to do so. The lawsuit claims that this collusion took place over a period of more than a decade.

The suit asks for compensation for more than a million of PREPA’s customers, as well as for damages. The new court decision allows the lawsuit to continue.

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