In a significant legal development, U.S. District Judge Juan R. Sánchez ruled Friday that customers of the Virgin Islands Water and Power Authority may proceed with a constitutional claim alleging the utility failed to provide due process before threatening or cutting off electricity services tied to a faulty metering system.
The decision stems from a broader case in which a group of residents and businesses claim they were overbilled due to a failed smart meter installation and left without a meaningful avenue to challenge those charges.
While Sánchez allowed the due process claim to proceed, he dismissed all other counts brought against WAPA and its private contractors, Tantalus Systems Inc. and Itron Networked Services Inc. The plaintiffs had alleged violations under the federal False Claims Act, the Virgin Islands Consumer Fraud and Deceptive Business Practices Act, and a product liability claim related to cybersecurity vulnerabilities in the electrical grid. The ruling narrows the scope of the lawsuit considerably but leaves the door open for legal scrutiny of WAPA’s internal procedures and the statutory protections afforded to customers.
At the heart of the case is WAPA’s 2014 contract with Tantalus and Itron to replace its analog meters with a digital Advanced Metering Infrastructure system. The $13 million project was financed in part by a loan from the U.S. Department of Agriculture and was promoted as a cost-saving measure that would eliminate the need for meter readers and allow customers to monitor real-time usage. But according to the plaintiff — a mix of individual residents and local businesses, including KH, RV, Gordon Ackley, Gasworks Inc., and Fruit Bowl Inc. — the AMI system never worked as promised. They allege that WAPA continues to estimate bills because the meters cannot reliably report usage, resulting in frequent overbilling.
Some of the examples cited in the complaint are stark. One plaintiff said he relied solely on a generator for an entire billing period, yet still received a high-usage bill. Another was charged thousands of dollars during a time when his family was out of town. Several plaintiffs reported receiving disconnection notices after unsuccessfully disputing charges with WAPA’s customer service. Ackley, one of the named plaintiffs, had his service temporarily shut off for nonpayment of what he claims was an incorrect bill and continues to receive disconnection warnings.
These billing issues are compounded by what the plaintiffs describe as a lack of transparency and recourse. Virgin Islands law allows customers to appeal unresolved disputes to the Public Services Commission, but plaintiffs argue that the process is ineffective and, in practice, unavailable. The complaint points to the experience of plaintiff Johann Clendenin, who served as a commissioner of the PSC and said he was “beset with Virgin Islanders complaining about their bills,” none of which were resolved through the Commission.
The plaintiffs further alleged that the PSC “never provided the ratepayers with notice and implemented formalized procedures to resolve customer complaints.” Taken together, the court found the allegations sufficient to support the claim that WAPA violated the plaintiffs’ right to due process under the Fourteenth Amendment by failing to provide meaningful procedures before terminating or threatening to terminate service.
The plaintiffs’ remaining claims, however, did not survive. They alleged that Tantalus and Itron knowingly misrepresented the functionality of the AMI system to secure the USDA loan and that they submitted false invoices for “services not performed and faulty equipment.”
But the court ruled that these allegations were too vague, lacking the specific details required under the heightened pleading standards for fraud. Sánchez noted that “Plaintiffs conclusorily allege a false claims scheme without details,” and emphasized that they failed to provide “any details on the services that were not performed or the alleged faulty equipment.”
A consumer fraud claim under Virgin Islands law was also dismissed. The court found that the claim fell under an exemption that shields actions taken under the authority of a public utility. Since WAPA — a government instrumentality — approved the AMI system’s installation, the court ruled that the defendants were acting within the bounds of an authorized public contract and thus not subject to the consumer protection statute.
The final count in the complaint alleged that Tantalus and Itron failed to warn customers about the increased risk of cyberattacks introduced by the new digital infrastructure. Plaintiffs claimed the AMI system created “additional points of access” and warned of the potential for a long-term blackout that could result in “a dramatic increase in drug, weapons, and human trafficking.”
One plaintiff, Gordon Ackley, said he incurred costs for emergency solar energy systems due to the stress of worrying about the safety of his home and family. But the court called the theory of harm “far too attenuated to be cognizable,” ruling that fears of future criminal activity and personal anxiety do not amount to the kind of injury required for a valid failure-to-warn claim.
With most of the case now dismissed, the lawsuit will move forward solely on the question of whether WAPA deprived its customers of constitutionally protected rights by failing to provide notice and an adequate opportunity to challenge billing issues. That remaining claim, rooted in the Virgin Islands Ratepayers’ Bill of Rights and long-standing federal protections for utility customers, ensures that WAPA’s handling of disputes and disconnections will remain under a legal microscope.
Though much of the plaintiffs’ case has been pared back, the court’s decision affirms that at least one key issue merits deeper examination: whether a government-run utility can threaten to cut off service without offering a real path to contest the charges.
As Sánchez wrote in denying WAPA’s motion to dismiss the due process count, “Viewing these allegations in light most favorable to Plaintiffs, the PSC resolution process was futile and VIWAPA did not provide with the required procedural due process under the Fourteenth Amendment before terminating or threatening to terminate service.”
