Central Maine Power owner Avangrid is investigating allegations of costly fraud by a contractor working on the utility’s already troubled efforts to connect hundreds of new solar projects to the state’s electric grid, according to internal company documents.
The allegations are a new complication in an area where CMP has faced backlash from Maine's burgeoning renewables industry, which has accused the utility of delaying and over-pricing the rollout of energy sources the state will need in order to meet its ambitious climate change goals.
Avangrid's internal ethics hotline received the allegations against contractor K&A Engineering Consulting in January, records show. In March, after an initial investigation, Avangrid decided to fold the complaint into what it described as an ongoing, routine internal audit of the CMP program at issue, which is known as solar interconnection.
The author of the ethics complaint, a person familiar with K&A's work for Avangrid, shared it with Spectrum News Maine on condition of anonymity. Their complaint estimates the cost of the alleged fraud at between $1 million and $5 million over two years, a range that comes from both a drop-down menu of options used in the ethics reporting process and the complaint author's familiarity with the work.
"I believe the program is so big that it hasn't caught the attention of management," the person wrote in the complaint. "The K&A leadership … have continued to hide this from Avangrid."
The complaint claims that K&A staff have been directed to overbill CMP for work on the utility's solar interconnection efforts, and describes oversight of these invoices as lax.
"K&A has hired individuals and billed them (to Avangrid) repeatedly without putting them to work on projects or programs. They were overhead staff to support K&A marketing and other efforts but were billed to Avangrid/CMP," the ethics complaint's author wrote. "There has been double billing as well…. Overbilling of mileage and fraudulent expense claims. … Also, there isn't internal audit of invoices being performed which concerned me. Having that many people charging expenses and time usually results in errors or in some cases inappropriate charges coming through."
(Click here to read the complaint and Avangrid's responses. Spectrum News Maine made redactions to protect the identity of the author and certain K&A staff who are not accused of being complicit in the alleged fraud.)
Avangrid would not confirm whether it had received any fraud complaint, since its ethics process is confidential. An official with K&A, which is based in New York but has offices in South Portland and Bangor, denied engaging in any fraud. The company's general counsel said it has not been notified by CMP of any "accusation or complaint" but would look into the matter.
At issue is an area of CMP's work called "distributed generation," which includes engineering studies that assess whether Maine's substations, poles and wires can handle proposed new solar projects and estimate what developers need to pay for upgrades before connecting to the grid.
These kinds of improvements — and the growth of renewable energy sources, like solar — are crucial to Maine's efforts to rapidly decarbonize its grid in time to meet the state's ambitious goals to ease the harms of climate change. Ratepayers typically bear the cost of grid upgrades that aren't paid for by private companies, meaning issues in CMP's solar interconnection program now could shift those costs from developers to the public in the future.
Solar companies' reports of unexplained hikes in CMP's estimates for these infrastructure upgrade costs prompted a PUC investigation last year that resulted in a settlement between developers and CMP. CMP officials now maintain that these increases are mainly driven by supply chain issues, but solar advocates like Jeremy Payne, who leads the Maine Renewable Energy Association, aren't convinced.
"If there's double-billing or money being shifted from the left pocket to the right pocket… that can help explain why — or at least partially explain why — some of these costs have suddenly exploded," Payne said. "I think it's deeply concerning, and… could really tank a number of projects if that's the way it stays."
As the Biden administration faces increasing concerns about the impacts of a federal investigation on solar imports and tariffs, these struggles with CMP represent a longer-running set of state-level problems for Maine developers.
Avangrid does not appear to have notified the state about related allegations against K&A. Utility industry experts say this would have been standard only if ratepayers were directly affected.
With the permission of the complaint's author, Spectrum News Maine shared the allegations and Avangrid's response with Maine Public Advocate William Harwood, whose state office is responsible for representing ratepayer interests at the PUC, legislature and elsewhere.
He said state regulators take whistleblower allegations such as these seriously, and his office will look into this complaint to see if any “imprudence” by CMP may have harmed ratepayers. If the Public Utilities Commission finds that was the case, it could bar the utility from recovering those related costs from customers, meaning the investor-owned company's shareholders would pay instead.
“Imprudence is basically similar to what some people might think of as negligence,” Harwood said in an interview. “You put yourself in the position of the utility at the time it made its decision, looking at all of the factors and circumstances that it either knew or should have known when it made that decision. And if the decision is unreasonable… then all of the consequences and costs that flow from that imprudent decision are disallowed in a future rate case.”
The question of what CMP "knew or should have known" is also top of mind for groups like Payne's, which were party to the settlement with CMP in the PUC's investigation on this issue. In that deal, the utility promised $700,000 in shareholder money for new staff to improve the solar interconnection process.
Payne said CMP has since been frustratingly slow to roll out those fixes, while cost issues have worsened. Now, he wants to know what, if any, role any alleged misconduct by K&A may be playing in rising project costs.
“It sort of begs the same question that we asked a year ago — what did they (CMP) know and when did they know it? And are they still just sort of sending out invoices to companies to pay even though they are internally questioning whether some of these costs are appropriate?" Payne said. "If that's where we're at, it sort of feels like we're doing this all over again."
The fraud allegations are the latest twist in a three-year saga that stems from Maine's climate-driven expansion of its "net energy billing" law, which gives developers a credit for building small renewable energy projects, typically solar arrays. Utility customers can "subscribe" to these arrays to get part of that credit as a discount on their energy bill. Businesses can also have these arrays built to lower their energy costs directly.
The expansion of the law led to hundreds of applications to connect new projects — a boom that CMP was not prepared to manage. The utility reported during the PUC's solar interconnection investigation that it did not plan for the impacts of the net billing law. CMP "accept(ed) responsibility" in this year's settlement that certain issues were not "identified sooner," calling its communications with developers "deficient in timeliness and clarity."
K&A was the largest contractor brought in to deal with the sudden influx of projects, beginning in late 2020, according to news releases and PUC filings.
"We're really excited to be part of that renewable energy journey that Maine has started, and we are expecting to grow this practice going forward," said CEO Purna Kharel at a ribbon-cutting ceremony for the company's South Portland office, its first in Maine, in April 2020. "We'd like to have thousands of jobs in the state of Maine in the next several years."
Kharel is accused in the ethics complaint of being "engaged in" the alleged fraud, along with K&A accounts director Heidi Tallman and vice president Rob Russ.
This organizational chart, produced by CMP in May 2021 and shared with the PUC at the request of solar stakeholders, shows the utility has paid for dozens of K&A workers to study if and how the grid could accommodate each solar project.
"We were told that, you know, 'This is a great outfit of people who really understand our system,' " Payne said. "The thing that they (CMP) were excited about was they (K&A) could really hit the ground running … that this is the work they do all over the country."
K&A also began working on solar interconnection for the rural Maine utility Versant Power around the same time. This past April, the contractor opened a new Bangor office that it said will focus on Versant projects. A Versant spokesperson confirmed in a statement that K&A works on the rural Maine utility's distributed generation program, but said they have no concerns about the contractor.
The allegations against K&A that Avangrid is investigating are limited to CMP. Tallman, who oversees K&A’s work with Avangrid, defended the company's billing practices when reached by phone May 2.
“I stand by our invoicing – we do not overcharge for our people,” Tallman said. In a follow-up email, she described the fraud allegations as "truly shocking."
Avangrid declined to make CMP leadership available for an interview, instead sending a statement from chief compliance officer Alistair Raymond on May 6. He said the company could not comment on whether it had received any complaint, but confirmed "a routine audit underway now of contractor services and invoicing" for the distributed generation program.
"The audit will include a review of invoices and the payment approval process to ensure compliance with service contracts. While these audits are routine, they take several months to conduct," Raymond said in his statement. "If any issues are identified, our management team will address them with the individual contractor, and if there are impacts to customers or other stakeholders we will make the appropriate adjustments."
K&A general counsel James Commodore sent a similar comment on May 6, a few days after Spectrum News Maine initially reached out to both Tallman and CMP about this story.
"K&A has not received any notice from CMP or anyone other than yourself that any accusation or complaint has been made against K&A," Commodore wrote in an email. "If and when K&A receives a complaint or accusation, we take the matter seriously and conduct an investigation, and we have begun actively investigating based upon what information you have shared."
The interconnection cost estimates that K&A provides to CMP can determine whether a solar project moves forward, and can send a message to future developers who need to use that same infrastructure to connect to Maine’s grid.
People like Payne worry it could have a chilling effect on future renewable development if costs are inflated — especially as a result of any alleged misconduct. Payne also said ratepayers could eventually be asked to pay some version of these costs if developers can't or won't.
"As we do beneficial electrification, as we do electric vehicles, heat pumps, all of these things, we're going to have to upgrade our grid," he said. "So the more upgrades that are going on now with private capital, the less upgrades will be required for consumers to absorb."
Payne recently surveyed 32 companies trying to build solar in Maine to get a sense of how CMP has increased its estimated interconnection costs between 2019-2020 and this spring. The average increase was 112%, which he said can represent hundreds of thousands of dollars for a typical project. Some projects saw much greater hikes — up to 2,800%.
CMP told hundreds of developers who joined a webinar on May 6 that these changes are driven primarily by inflation and supply chain issues that have led to higher construction costs, as well as a need for more administrative capacity to process the rising number of project applications.
The solar stakeholders were frustrated, asking for more detailed breakdowns of what has driven each project's costs to rise and criticizing CMP's decision to base interconnection cost estimates on what it described as "worst-case scenarios."
Soon after, CMP sent out a press release detailing the "demonstrable progress" it has made with developers on improving the interconnection process and getting more solar online. In the release, CEO Joe Purington nodded to the utility's oversight of contractors like K&A.
“In this unpredictable and fluid construction environment, with hundreds of projects in front of us, CMP is committed to using every tool and resource we have to ensure our employees and contractors are providing responsive and accurate information to solar developers,” Purington said. “In-house, we have a very focused audit and compliance area that oversees all purchasing and invoicing to ensure responsible and accountable pricing.”
The K&A allegations represent yet another front where CMP and Avangrid may have to defend their management choices to Maine lawmakers, regulators and ratepayers. The utility faces a separate PUC investigation about how Avangrid's ownership of CMP affects local customers and service.
Legislators and Gov. Janet Mills recently approved a new accountability law that will generate quarterly report cards for CMP and Versant, where failing grades could prompt the PUC to consider replacing the utilities outright. The law also requires more robust PUC and utility planning for climate change and grid upgrades, strengthens protections for whistleblowers to report misconduct, and directs the PUC to study whether the utilities should have to use competitive procurements for contractor services.
CMP attorneys were also at the state Supreme Court earlier last week, trying to revive the utility's stalled western Maine transmission line to import Canadian hydropower. And all the while, activists are blanketing the state with petitions to put forth a 2023 ballot initiative — vigorously opposed by CMP and Versant — that would replace the investor-owned companies with a consumer-owned nonprofit.
Fraud allegations within CMP's solar program may seem disconnected from these political debates, customers' concerns or the state's climate efforts — but they could have big-picture consequences.
Sean Burke is policy manager for the Northeast Clean Energy Council, an advocacy group that has worked on solar interconnection issues in Maine and other New England states. He said problems in this process, especially if exacerbated by alleged impropriety, have ripple effects for efforts like Maine's to lessen the harms of climate change by moving quickly to a clean grid.
"The longer the backlog is on (solar) project interconnections, the later those projects come online and the longer fossil (fuel) generators remain online," Burke said. "We really just don't have the time to spend on interconnection delays. … This is the nitty-gritty and where the rubber really meets the road on whether we meet our climate commitments."
Under its Climate Action Plan, Maine aims to become carbon neutral within the next 13 years.