ST. CROIX — An attorney who filed a federal complaint more than two years ago against the Virgin Islands Water and Power Authority alleging overbilling due to faulty smart meters recently submitted a motion to add a class action claim representing 50,000 ratepayers.
The civil lawsuit accuses WAPA of incorrectly billing based on estimated electrical usage. It was originally filed December 3, 2021 under seal as a “qui tam” whistleblower complaint by attorney Terri Griffiths in District Court, Division of St. Thomas/St. John.
Plaintiffs allege violation of the federal False Claims Act by defendants for falsely representing the functionality and technological aspects of the smart meter grid system that Tantalus Systems Holding and Itron Inc. designed, sold and/or manufactured, and installed into the Virgin Islands power grid.
Defendants, including WAPA, Tantalus and Itron, have filed motions to dismiss the complaint based on absence of certain legal requirements. The Itron smart meters utilize a communications network provided by Tantalus.
“The authority is aware of the plaintiffs’ amended action in response to the pending motions to dismiss,” WAPA Spokesperson Shanell Petersen said in an email. “We think it best to allow the legal system to follow its course.”
Lawsuit claims:
Defendants are accused of knowing that false information was provided to the U.S. Department of Agriculture, Rural Utilities Service Division so WAPA could obtain a $13 million loan, of which the authority still owes $11 million for the “defective, non-functioning” smart grid system, according to District Court documents.
Despite spending millions on the advanced metering infrastructure smart grid system to provide customers with accurate bills based on actual usage, the complaint accuses WAPA of overbilling because of a non-functional smart meter system. It alleges subsequent violation of federal due process rights by unlawfully terminating and threatening to terminate electrical service without any formal avenue to dispute the charges.
Plaintiffs allege Tantalus and Itron wrongly claimed that installation of their AMI smart grid system would give WAPA automatic, remote reporting of customers’ energy consumption for billing purposes, and could save the authority money by terminating its meter readers. Based on these representations, WAPA eliminated all or substantially all its meter reader workforce, according to the complaint.
Plaintiffs further allege defendants created an environment in the territory’s electrical grid vulnerable to cyberattacks due to cyber security concerns by installing smart meters.
“The smart grid system is non-functional, and as a result, people are receiving bills that are not based on actual consumption,” Griffiths said. “It’s crippling the senior citizen community. And not only that; it poses a national security risk that would take years to bounce back from.”
The complaint, which initially identified three plaintiffs/qui tam relators by their initials, was unsealed last year. It was amended July 25, 2023 to include retired businessman Gordon Ackley as a plaintiff.
Class action claim:
Griffiths filed a motion on January 27 to further amend the complaint to add a class action claim pursuant to the Virgin Islands Consumer Fraud and Deceptive Business Practices Act. The class action plaintiffs represent 50,000 ratepayers, meet minimal diversity, and their damages exceed $5 million, which also provides subject matter jurisdiction pursuant to the federal Class Action Fairness Act, according to the second amended complaint.
“We added the class action,” Griffiths said.
Once the complaint became unsealed, the St. Thomas-based attorney and former acting attorney general said she began receiving hundreds of phone calls from other ratepayers in similar situations.
“The only way we could deal with it was through a class action,” she said.
Ratepayer concerns:
Ackley, while discussing his inclusion in the lawsuit, spoke out against WAPA and the inability for ratepayers to formally dispute their bills.
“There’s people who talk and do nothing, there’s people who don’t talk much but do a lot, and we do things when we see things that are not right,” Ackley said. “WAPA’s a bully. They verge on organized crime. They do things and you don’t get due diligence.”
WAPA is accused of overbilling Ackley $8,553.
“They overbilled me,” he said. “And it’s not just the overbilling; it’s the threat: ‘we’re gonna turn you off, we’re gonna turn you off.’”
Ackley has taken photographs of his smart meter during consecutive months while holding up his wristwatch to reflect the date to record his usage of kilowatt-hours to dispute the allegedly inflated bills he received from WAPA. In one instance, he recorded that his smart meter showed 70,436 kilowatt-hours on July 11, 2020, and 73,482 kilowatt-hours on August 12, 2020. He wrote a check to WAPA reflecting usage of 3,046 kilowatt-hours for the monthlong period.
Clifford Joseph, a career firefighter who rose through the ranks to become director of the Virgin Islands Fire Service before his retirement, was convinced his electric bills did not reflect actual usage so he installed solar panels on his residence. After reducing his WAPA energy consumption, his utility bills allegedly increased.
“I installed the solar to help myself as far as my billing,” he said, noting his bills went up to $300. “I never paid a bill for $300 prior to putting in solar, so something else is wrong.”
Joseph questioned why his bills are being estimated, as well as why the estimated bills are higher than when WAPA was reading his meter. He said he joined the lawsuit because he felt a sense of duty for his neighbors and fellow Virgin Islanders.
“I just want a fair shake for the people in the community,” he said.
Second amended complaint:
The second amended complaint, which Griffiths expects will be opposed by the defense, and take up to five months for the court to rule on, includes class action plaintiffs representing all members of the residential ratepayer class, senior citizen residential ratepayer subclass, and commercial ratepayer class.
Joseph and plaintiffs Leonard Stephen and Catherine Stephen are members of the residential ratepayer class. Ackley and plaintiffs Johann Clendenin, a former member and chair of the Virgin Islands Public Services Commission, and Jean Persad are members of the residential ratepayer class and senior citizen residential ratepayer subclass. Plaintiffs The Fruit Bowl Inc., and Gasworks Inc. are members of the commercial ratepayer class.
Plaintiffs allege that WAPA has avoided disclosing for years that the Tantalus/Itron AMI smart grid system is not communicating actual consumption data from its customers to WAPA, as well as that the authority rigs the data, and simply changes the “estimated” bills after three months to purportedly but wrongly reflect “actual consumption.”
WAPA is accused of concealing that the Itron smart meters were failing in the thousands prior to Hurricanes Irma and Maria in September 2017. The plaintiffs allege that from 2016 to 2020, WAPA concealed that the meters were not communicating its customers’ power usage back to the authority. WAPA executives are accused of lying and deflecting inquiries from its own board members and members of the Public Services Commission about the specifics and functionality of the Tantalus/Itron AMI smart grid system.
Numerous PSC commissioners, including Clendenin, who served on the commission from 2014 to 2019, unsuccessfully objected to the installation of the Tantalus/Itron AMI smart grid system, which WAPA installed anyway, according to the complaint. Clendenin was among PSC members who objected to continuing to do business with Tantalus and Itron for restoration work after the 2017 hurricanes. He alleges in the complaint that he was unlawfully billed for electricity he did not use following installation of the Tantalus AMI smart grid system.
Smart meter system:
Solange Camacho, a U.S. Department of Energy Clean Energy Innovator fellow working with the Virgin Islands Public Services Commission on AMI-related issues, recently discussed the importance of implementing AMI in the territory to improve energy management and enhance grid reliability during a PSC meeting Tuesday. She also discussed challenges with the smart meters.
“Due to the impact of Hurricanes Irma and Maria in 2017, and other related factors, the failure rate of active meters is less than 60%, which is below industry standards,” she said. “Moreover, the geographical location of the U.S. Virgin Islands exposes smart meters to hot temperatures and humidity, affecting their operational functions and significantly reducing their effective useful life from the typical 10 to 12 years to three to five years. A study conducted by the Electric Power Research Institute found that average cost of a smart meter failure can range from $500 to $1,000 per meter, including replacement costs and associated labor expenses.”
Camacho said, however, technological advances offer promising solutions for future AMI systems, making them more cost effective and resilient.
Senate Majority Leader Kenneth Gittens, who has sponsored numerous pieces of legislation relating to accountability at WAPA, said it is unfortunate that it has come to the point with WAPA that a lawsuit has been filed. He said, however, the plaintiffs are fully justified in their concerns.
“WAPA expended millions of dollars and I believe still owes millions for the advanced metering infrastructure, or smart metering system that have never been fully implemented in the territory,” he said. “And as a result, many bills are still being estimated each month, or as the suit alleges, basically, fabricated. Customers are being disconnected over guesstimated bills.”
Evidence suggests most of the smart meters were never fully functional, the St. Croix senator said.
“We can’t lose sight of one of the important points made in the lawsuit, and that is the fact that WAPA made no effort to sue the companies involved in installing this faulty meter system, or even recoup any of the monies lost to this project,” Gittens said, noting a total lack of accountability at WAPA.
Cybersecurity concerns:
The second amended complaint alleges in Count IV (failure to warn of catastrophic risk) that the actions of the defendants have exposed Virgin Islands residents, and possibly the U.S. mainland to catastrophic consequences due to the lack of electrical grid security. It alleges that Tantalus, Itron and 10 other defendants (corporations, companies or other entities whose identities are unknown to plaintiffs/qui tam relators) have engaged in the business of manufacturing and distributing a defective smart grid system, and/or components thereof to WAPA.
Griffiths said smart meters have chips made using Chinese components, so the territory’s smart grid system is a domestic security risk and national security risk since the Virgin Islands is a U.S. border.
“The threat is very real,” she said, adding that China could compromise the smart meters by simply hitting a switch as opposed to hacking into them. “Our grid could be taken down in the Virgin Islands.”
Defense motions:
WAPA and Andrew Smith, in his capacity as the authority’s CEO and executive director, as well as Tantalus and Itron filed motions in October 2023 to dismiss the first amended complaint.
WAPA and Smith, in a memorandum in support of their motion to dismiss and sever filed by attorney Carol Ann Rich, of Dudley Rich LLP on St. Thomas, argued that plaintiffs’ claims against WAPA in the first count (the due process right to light) were improperly joined with the claims against the other defendants in the three other counts — False Claims Act, duty to warn of catastrophic risk, and design and/or manufacturing defect.
WAPA argued that plaintiffs’ claims against the authority in the due process right to light count cannot properly be joined with the qui tam claims under the False Claims Act, or with the tort claims against the other defendants. WAPA argued that the unrelated claims against separate defendants cannot be properly joined in one action and must, therefore, be severed. WAPA argued that once the claims against WAPA and Smith are severed, the due process right to light claim must be dismissed for failure to exhaust administrative remedies, and failure to state a claim upon which relief can be granted.
Tantalus, in a memorandum in support of its motion to dismiss filed by attorney Chad Messier, of Dudley Newman Feuerzeig LLP on St. Thomas, noted the crux of the relators’ False Claims Act cause of action against Tantalus appeared to be that the company knowingly made false representations to WAPA regarding the functionality of its smart-grid technology, and that Tantalus knew WAPA would pass those false representations on to the federal government in connection with the authority seeking a federal loan.
Tantalus noted the relators primarily complain about their personal electric bills, which they anecdotally describe as, “wildly inaccurate and unlawful billing.” Tantalus argued that receiving incorrect electric bills does not give rise to an action under the FCA. Because relators do not allege, and cannot credibly allege with particularity, that Tantalus made any false claims or representations, the motion to dismiss argued that the FCA claim against the company should be dismissed.
Tantalus, which noted the due process claim in Count I appeared to be asserted only against WAPA, further noted that the two additional products liability tort claims for duty to warn of catastrophic risk and design/manufacturing defect also failed to state a claim against Tantalus.
Itron, in a motion to dismiss filed by attorney Tirzah Lollar, of Arnold & Porter Kaye Scholer LLP in Washington, D.C., and attorney Daryl Dodson, of Moore Dodson Russell & Wilhite P.C. on St. Thomas, moved the court to dismiss the amended complaint with prejudice pursuant to Federal Rules of Civil Procedure. Itron noted that the smart grid technology, or AMI system, consisted of Itron’s electronic meters, and a communications network provided by Tantalus that was deployed to the Virgin Islands beginning in 2015.
In addition to the plaintiffs’ False Claims Act claims, Itron argued that plaintiffs assert a hodgepodge of tort and constitutional claims related to the installation, operation, and administration of the AMI system. The company argued that the amended complaint suffers from numerous fundamental, incurable pleading deficiencies, and plaintiffs’ claims against Itron should be dismissed in their entirety with prejudice.
While plaintiffs assert under the FCA claim that WAPA made false statements to the USDA in connection with and following its loan application, Itron argued that they did not offer any details about those supposed false statements. Itron noted there is no allegation that the company itself made any statements to the USDA, arguing that plaintiffs do not attribute a single misrepresentation to Itron.
Itron noted plaintiffs’ tort claims attack the AMI system from a different angle, alleging that design/manufacturing defects in the system have created a risk that the Virgin Islands electrical grid will be subject to cyberattack. Itron argued that the court should dismiss these speculative claims because plaintiffs lack standing to assert them. Even if plaintiffs had standing to assert their tort claims, Itron argued the court should dismiss them because plaintiffs failed to plead essential elements of those claims — most notably, injury.
Ongoing motions:
The civil lawsuit has been assigned to Chief Judge Juan Sanchez, of the Eastern District of Pennsylvania. Magistrate Judge Ruth Miller has been ruling on the motions filed in the case.
Today, Miller denied plaintiffs motion to reconsider the court’s January 31 order staying discovery with respect to defendants Tantalus and Itron. Plaintiffs contend that FBI Director Christopher Wray testified in a congressional hearing that China’s hackers are targeting American critical infrastructure, including electrical power systems, the day the court entered its order to stay, according to the court’s order. Plaintiffs argued that the FBI director’s testimony reflects imminent and catastrophic risk of cyberattack. Plaintiffs noted that reconsideration of the order staying discovery would prevent manifest injustice borne by plaintiffs and the VI community.
Defendants argued the motion to reconsider should be denied because plaintiffs failed to obtain their position on the motion prior to filing, in violation of local rule, as well as that the motion on the merits does not meet the requirements for reconsideration because the “new” evidence does not add anything to the plaintiffs’ contentions that the court has not already considered and rejected.
Miller, in her order denying the motion to reconsider, noted the motion did not comply with local rule, and did not set forth sufficiently any of the three bases for reconsideration. The court found that to the extent the motion was based on new evidence, plaintiffs failed to demonstrate how Wray’s generalized remarks have any bearing on the issue of whether a stay of discovery pending resolution of certain motions was appropriate in this case. Similarly, Miller noted that plaintiffs have not demonstrated manifest injustice resulting from the discovery stay.
