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Industry News

EUA Unit Charged with Fraud; Cops a Plea

LCG, Sept. 12, 2000The U.S. Justice Department has charged a Lowell, Mass., company that specialized in electric power and heat cogeneration with fraud, saying the firm's customers were charged for electricity they never received.

The U.S. Attorney's Office said yesterday that a criminal information has been filed chargingEUA/FRC II Energy Associates with a single count of mail fraud for defrauding former customers between January 1994 and January 1995.

The case was investigated by special agents of the Federal Bureau of Investigation and is beingprosecuted by Assistant U.S. Attorneys Adam J. Bookbinder and Paul Levenson of U.S. Attorney Donald K. Stern's Economic Crimes Unit.

The information alleges that the Lowell-based partnership was in the business of supplying electricity and heating-cooling to residential and commercial buildings through small on-site cogeneration plants. Under its contracts with customers, FRC's billings were based on a formula that was designed to share with the customers any savings that resulted from using the cogeneration plants, rather than buying power from utility companies.

The information alleges that in January 1994, EUA/FRC officials learned that some electrical meters on FRC's cogeneration units were not accurately measuring customers' power usage. Without informing its customers, EUA/FRC began billing its customers on an entirely different basis.
The company started charging for the number of hours per month that its cogeneration unitswere in operation, multiplied by the theoretical maximum output of those units. It is alleged that inactuality, EUA/FRC officials knew, the units were "throttled back" so that they could run only at about 70 percent of their rated capacity.

Filed along with yesterday's information was a plea agreement in which FRC has agreed to plead guilty to the charge. Under the agreement which is subject to approval by the Court, the parties will jointly recommend that FRC be required to pay a fine of $259,132. In addition, FRC would be required topay $172,755 in restitution to former customers that were overcharged.

In Stern's words, "Energy and utility billing is often highly complex and technical, which leaves customers in a vulnerable position. The simple fact is that FRC was charging customers for energy which the company knew the customers never received. That's when electric charges turn into criminal charges."

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