Important Update: On Feb. 10, Security Limits Inc. voluntarily dismissed its complaint against Avangrid, the energy corporate utility company with plans to come into New Mexico. SLI’s CEO, Paulo Silva, said his company “stands behind the allegations ” and plans to refile the suit with strategic changes in the near future.

Avangrid nevertheless has claimed victory in the case. In a statement released Feb. 11, the energy conglomerate said that Silva’s allegations were unfounded, adding that it would pursue damages through a defamation suit under way in New Mexico.

Meanwhile, the Maine Public Utilities Commission has launched an investigation of the original allegations, despite a formal request by Avangrid that the investigation be shut down.

A cybersecurity company filed a $110 million lawsuit in New York on Monday, accusing the Spanish global energy giant Iberdrola and its U.S. subsidiary Avangrid of bid-rigging and racketeering.  

The 72-page federal court complaint outlines an elaborate scheme by Iberdrola executives to generate millions of dollars in wasteful equipment expenditures in order to turn a profit from its utility customers in New York, Connecticut and Maine. The lawsuit further alleges that much of this equipment was never put to use and is instead collecting dust in warehouses across the region.

Iberdrola came to prominence about 20 years ago with investments in massive wind farms, natural gas and hydroelectric power. In addition to Avangrid, it holds subsidiaries throughout Europe, Brazil and Mexico. The complaint comes just as New Mexico authorities are deciding whether to approve a proposed merger between the state’s largest utility, PNM, and Avangrid. 

Even before the filing of the lawsuit, New Mexico officials involved in vetting the merger had raised concerns over Avangrid’s parent company, which has come under growing scrutiny in its home country, Spain. Two of the Iberdrola defendants named in the lawsuit, Antonio Asenjo and Enrique Victorero, are currently under investigation in Spain for alleged corporate espionage and fraud. These allegations are among a list of reasons that prompted the staff of New Mexico’s utility regulator, the Public Regulation Commission, to recommend rejecting the merger. A majority of the commission members said in their Dec. 1 meeting that they planned to vote against it.

Mariel Nanasi, executive director of the Santa Fe-based environmental group New Energy Economy, has long been an ardent opponent of the merger, often voicing concerns about Iberdrola’s criminal investigations in Spain and the potential implications for New Mexico.

Paulo Silva, a cybersecurity contractor, has accused energy giant Iberdrola and its U.S. subsidiary, Avangrid, of bid-rigging and racketeering. / via LinkedIn

“Fraud, bid-rigging, jacking up customer rates by making phantom capital expenditures — there is a pattern of misconduct that has emerged,” she said. “Avangrid and Iberdrola act outside the law and the public be damned.”

The complaint was filed in the Southern District Court of New York by lawyers representing Paulo Silva, a cybersecurity expert and CEO of Pennsylvania-based Security Limits Inc. In it, lawyers describe events in the nearly two years that Silva spent working as a subcontractor for Avangrid, designing and building secure data centers for its utilities.  

Silva alleges that in 2018 he complained about overspending on equipment. Shortly after, Avangrid executives began manipulating the bidding process and steering lucrative contracts toward five companies with ties to Iberdrola, the lawsuit asserts.

According to the complaint, these companies were responsible for buying large amounts of equipment for new data centers, for which they charged Avangrid markups of 40 percent or more. Much of the equipment was never put to use but instead was stored in a warehouse, which had to be expanded three times over the course of several years in order to accommodate it, according to the lawsuit. 

Iberdrola and Avangrid “actually paid to have structures erected to house the dust-gathering hardware that lacked any discernible purpose apart from serving as a vehicle for the [companies’] accounting misfeasance,” the suit states.

In response to the complaint, Joanie Griffin, an Avangrid spokeswoman, described Silva as a disgruntled former subcontractor, bitter that he did not win bids from the company.

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

PNM spokesman Ray Sandoval also dismissed the allegations. “We believe that once the facts are presented that these allegations will be shown as frivolous,” he said.

Purchases questioned

The alleged benefit to Avangrid and Iberdrola derives from a half-century-old utility regulation strategy designed to encourage the development of critical infrastructure. These regulations allow utilities to charge customers for the cost of capital expenditures — long-term investments in things like equipment — plus an additional 7 to 15 percent, which the utility keeps as profit. 

Under these regulations, Avangrid was allegedly able to charge its customers on their electricity bills for every piece of over-priced and unused equipment — while greatly enriching its shareholders. While the civil complaint does not include an exhaustive review of Avangrid’s unnecessary purchases, the company’s SEC filings show that when the alleged scheme took place, Avangrid increased its capital expenditures by nearly $1 billion.

As technology has changed and improved, utility watchdogs have lambasted such regulations, saying they create a perverse incentive for companies to invest in unneeded equipment, while ignoring important maintenance and operational expenses. In Iberdrola’s case, the complaint says that the company over-purchased certain equipment, while also leaving major lapses in the utility’s cybersecurity. These lapses left critical utility infrastructure unprotected from things like cyberattacks, the complaint asserts.

“The [scheme], and its inherent waste, deprived SLI of valuable contracts it would have otherwise been awarded in an unrigged bidding process, wasted millions of rate-payers’ dollars, and wrongly enriched the [scheme’s] participants,” lawyers concluded in the complaint.

This latest lawsuit comes amid a series of high-profile utility malfeasance cases across the country, involving bribery and dark money groups used to influence elections and public officials. The largest of these cases, a $60 million alleged bribery scheme in Ohio, led to the expulsion of the state’s Republican speaker of the House. A $230 million fine was levied against the utility, FirstEnergy, this summer.

Lindsay Fendt got her start covering the environment as a reporter for The Tico Times in San José, Costa Rica. She covered human rights, immigration and the environment throughout Latin America before...