Puerto Rico Utility Hammered With $10 Million in Fines

Puerto Rico Utility Hammered With $10 Million in Fines

Source: http://enr.construction.com, July 10, 2006
By Mary Buckner Powers

In what the U.S. Justice Dept. calls a “landmark enforcement action,” the Puerto Rico Aqueduct and Sewer Authority has agreed to plead guilty to 15 felony counts of violating the Clean Water Act and pay $10 million in criminal and civil fines. Justice officials says the fine is the largest ever for a utility.

Under a civil consent decree with the U.S., PRASA and the Commonwealth of Puerto Rico also agreed to spend about $1.7 billion for capital improvements and other projects at 61 wastewater treatment plant systems over the next 15 years. PRASA pleaded guilty to illegally discharging pollutants from nine treatment plants and agreed to spend $109 million in upgrades. It also pleaded guilty to illegal discharges at five drinking water plants.

PRASA “is an offender with a pervasive history of violations,” of the clean water law, says Sue Ellen Wooldridge, a Justice environmental division official. PRASA Executive President Jorge Rodriguez concedes that terms of the new agreement will ensure that the utility is in compliance. The consent decree requires PRASA to complete 32 short-term projects within the first six months of the pact and 50 projects within the next one to two years. Another 63 long-term projects must be completed through 2021.

PRASA must also submit evidence of record keeping, maintenance planning and scheduling to the U.S Environmental Protection Agency. “We are sure we will comply because of the details. We understand what it takes,” Rodriguez says.

PRASA must implement a 400% rate hike to replace subsidies from the state government. It needs the revenue stream before it can sell bonds to fund the construction projects. The immediate projects will be funded through local financial institutions, Rodriguez says.

PRASA’s problems stem from a long history of corruption and “featherbedding,” say consultants who have worked with the utility. Two contractors brought in to privatize some PRASA functions since the mid-1990s were fired, the last in 2001 after a change in government, says Emilio Colon, a former Army Corps of Engineers official loaned to the utility to assist its compliance with EPA requirements. “It was a good strategy, but it failed,” Rodriguez says. Colon blames PRASA mismanagement of the privatizations contracts for the current problems. The agency once again took over water-wastewater operations in 2004.

Rodriguez says new agency management will remove political influences, including diminishing the role of unions. Ten union leaders were charged with diverting PRASA money for personal use and are in jail.

“The reality of the past is the unions were controlling the agency,” Rodriguez says. The utility also is aggressively searching for illegal hookups, finding on average 2,000 a month, he says. It aims to complete $2.5 billion in projects in five years. “We have to comply or we’ll go to jail,” he says.

Justice officials say the government has not ruled out indicting individuals.

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