Two officers of a Lackawanna County company that failed to fulfill its promises to save local towns thousands of dollars in street lighting costs are being investigated by a Northampton County grand jury, possibly in connection with allegations of defrauding Bethlehem Township of more than $800,000.

Northampton District Attorney John Morganelli has said that the investigation grew from his office's scrutiny in late spring of the company and its dealings with the township, which is suing the company, Municipal Energy Managers Inc. and its principals, P. J. McLaine and Robert Kearns, according to published reports. The grand jury, whose proceedings are secret, began its investigation in September.

The company has drawn fire from several local towns for failing to follow through on its promises to pare thousands of dollars from their street lighting bills by buying the equipment from PPL instead of leasing it. MEM would upgrade and maintain the lights for a flat annual fee.

PPL spokesman Michael Wood said early Monday that his company has "been available and participated in interviews with the district attorney's office, so we have supported the investigation as needed."

Efforts to reach Morganelli were unsuccessful early Monday, as were efforts to reach McLaine, Kearns and their attorney, John O'Boyle of Scranton.

Not only did MEM fail to negotiate the necessary contracts with PPL, it also failed to return telephone calls and letters from increasingly frustrated municipalities.

Lansford borough council President Rose Mary Cannon is furious with MEM.

"The amount of money we lost to this firm ... we paid up front over $360,100. That included $249,800, including $10,000 to (former solicitor Robert T.) Yurchak for doing the paperwork, and other costs," she said. "I was against this from day one."

Tamaqua in June refused to pay a $2,500 bill from MEM, citing its failure to uphold the contract it had with the borough.

MEM promised Coaldale it would save $213,346 in street lighting costs over the next 20 years. Coaldale signed onto the MEM ownership vs. leasing deal in February 2009. Under the contract, the borough leases its street lights from PPL for $28,000 a year. The borough borrowed $182,400 from Jim Thorpe National Bank at a 4.45 percent fixed rate to acquire the street lights.

"That set us back quite a bit, just having to keep up with that. We in good faith took out this loan, and now we're doing our part paying it back. We're stuck between a rock and a hard place with MEM," council President Susan Solt said.

Other towns, including Nesquehoning and Jim Thorpe, have also had similar problems with the company.

MEM's failure to follow through on its contracts prompted attorney Michael Greek, who serves as solicitor for Tamaqua, Coaldale and Lansford, to take the towns' complaints to the state Public Utilities Commission.

PPL spokesman Wood said there "hasn't been any activity (with MEM) in many months. We are waiting word out of the district attorney's office."

He said that if "municipalities themselves wish to pursue street lights, we certainly stand ready to consult with them. However, as the price of energy has come down in the past two or three years, it has become less of a financial benefit."

Wood said that PPL would have continued to work with MEM the process was approved by the PUC.

"The activity with this group kind of floundered," he said. "They didn't progress at the rate which some of the towns would have liked. The bottom line for us, our job will be to keep the lights on."