Energias de Portugal Nets €3 Million in Scam Operations

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Energias de Portugal (EDP), the recently-privatized energy supply company, is embroiled in another controversy. This time, its customers are directly - and negatively - affected by its actions.

It is alleged that EDP has been running a pervasive scam affecting thousands of its consumers and robbing them, literally and figuratively, of an estimated €3 million. The amount comes from overcharges on utility bills reflected on the bills and subsequently paid for by the consumers.

With the negative effects of the current European debt crisis, of which Portugal has not been spared, the overcharging scheme certainly adds to the already strained finances of EDP consumers.

EDP is, by the way, one of Europe’s major electricity operators and one of Portugal’s largest business groups with interests in various electricity-related areas including water, gas and laboratory testing, among others.

The scam was exposed by DECO – the Portuguese Association for Consumer Protection (Associaçáo Portugesa para a Defesa do Consumidor) – with the independent non-profit organization filing a formal complaint. Said complaint was made on the basis of a study involving 165 households in 48 areas and conducted between March and April 2012. All households had multi-tariff meters.

In the study, the DECO staff analyzed the meters in the households. Findings showed that 12% of the households had a clock error of 30 minutes or more while 14% had lesser yet still substantial clock errors between 11 to 30 minutes. Many cases were even found to have clock errors of one hour while others had a staggering 2-hour error.

Multi-tariff meters use a relatively simple electromechanical time switch for switching from two basic types of tariffs, namely, peak and off-peak. These tariffs are used to better reflect the costs of electricity generation, distribution and transmission at different times of the day. Off-peak tariff rates are obviously cheaper than peak tariff rates.

Thus, any clock error in switching from peak to off-peak times will adversely affect the total bill. The result is overcharging customers, as is alleged in the DECO complaint.

According to DECO’s deputy secretary general, to Ana Tapadinhas, the study was conducted after the organization has received dozens of complaints from affected consumers. These consumers observed that their utility bills have increased even when they have opted for the cheaper off-peak electricity. It should be noted that one of the main activities of the organization is consumer representation and advocacy, thus, its swift action on the complaints.

Considering the failure, deliberate or not, of the EDP to publicize, much less resolve, the problem at hand, DECO has demanded “immediate rectification of the counters. The least that EDP can do is to control and monitor the service it provides."

DECO has also demanded an independent audit on the meters, which should be conducted by the Energy Services Regulatory Authority (ERSE). The scale of the problem – scam, as many will call it – may even be greater than previously thought considering the limited number of households with multi-tariff meters under the DECO study.

According to DECO’s legal department coordinator, the overcharged consumers should be compensated – refunded, in other words – of the amount they have overpaid to the utility company. Most, if not all, consumers cannot agree more based on legal and ethical grounds, not to mention the fact that refunds will ease the burden of their economic woes.

The energy company will only admit to a small fraction of the affected households. According to DECO, an estimated 480,000 households on the low-rate tariff effective at night and on weekends are affected by the scam yet EDP only admits to 30,000 customers. Worse, the overcharging was attributed to a “computer failure” instead of the clock errors, much less a scam.

EDP has also admitted that it has prior knowledge of the problem. Following a complaint filed in 2011, the company identified 2 sources of the complaint – first, “a lower accuracy of the clock in a limited number of meters that were supplied in 2007” and, second, “an error in the software used in setting hybrid counters in 2010”. The estimated total of meters was 100,000 of which only 30,000 meters were affected. These affected meters are now either being replaced or fixed.

The question then is: If these meters were faulty, as acknowledged by EDP in 2011, and the source was just a computer glitch, as suggested by the company, then why was it not fixed in the intervening 6 months? The seemingly obvious answer: €3 million in cash inflow plus overcharged IVA.


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Published in: News and Updates / Portuguese Life