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Imperial Irrigation District backing away from another multi-million dollar energy deal

The Imperial Irrigation District is likely to cancel a $6.9-million agreement to expand its battery storage facility in El Centro following Desert Sun reporting on possible conflicts of interest involving ZGlobal Inc., an influential consultant for the publicly owned utility.

IID’s board of directors voted in May to give the $6.9-million contract to Coachella Energy Storage Partners, or CESP, a company led by former IID board member Mike Abatti. CESP won the contract even though another firm submitted a cheaper proposal, newly obtained documents show — and even though concerns had been raised about CESP’s business relationship with ZGlobal, an engineering firm that also works for IID.

The Desert Sun previously reported on CESP winning the battery expansion contract. Last week, we sent IID additional questions about the project, focused on CESP’s ties to ZGlobal and the utility’s reasons for rejecting the lower-cost expansion proposal.

In response to those questions, IID provided the following emailed statement from its general counsel, Frank Oswalt: “IID has not moved forward with the battery expansion project; if it does so, it will most likely be through a new solicitation process.”

If the $6.9-million contract falls through, it will be the second energy deal scrutinized by The Desert Sun to be canceled by IID. Last month the utility canceled a $75-million agreement to buy electricity from an Imperial County solar project being developed by Regenerate Power, after The Desert Sun reported on documents linking ZGlobal to Regenerate and the owner of the land where the project would be built.

IID’s relationship with ZGlobal has also caught the attention of Imperial County’s district attorney, Gilbert Otero. He said last week he has launched a preliminary but wide-ranging investigation into the public utility in response to The Desert Sun’s reporting.

ZGlobal’s promise to IID

IID officials wouldn’t say why they’re backing away from the battery expansion deal with Coachella Energy Storage Partners. But public documents suggest the agreement may have faced similar conflict-of-interest concerns as the axed $75-million solar contract.

CESP built the original battery project for IID after receiving a $35-million contract from the utility. The facility started operating last year and has been hailed a success. It’s one of the country’s largest lithium-ion batteries, built with help from General Electric and Samsung and designed to improve the reliability of IID’s grid, integrate more solar and wind into the utility’s power mix and get the lights back on faster after an outage.

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ZGlobal worked for CESP on the original battery, serving as the firm’s chief engineer. During that same period of time, ZGlobal employees were also running a key unit in IID’s Energy Department that works on power grid issues as part of a three-year, $9-million consulting contract that runs through next year. It’s one of 15 contracts ZGlobal has signed with the utility going back to 2005, collectively worth as much as $18 million.

CESP pitched IID on a $5.3-million expansion of its battery earlier this year. But then ZGlobal employee Jesse Montaño, in his capacity as an IID consultant, discussed the merits of CESP’s proposed expansion at a January 2017 meeting of the utility’s board of directors. Almost immediately, a member of the public — Mike Morgan, a former and longtime critic of IID — complained to the board that ZGlobal had a conflict of interest.

You have a consultant that’s working for Coachella Energy (Storage) Partners, and I think he still works as a member of your electrical department,” Morgan said.

Two months later, IID’s general counsel, Frank Oswalt, responded to concerns about potential conflicts of interest in a public memo. Oswalt wrote that ZGlobal had agreed to stop working for private-sector companies that were looking to connect their energy projects to IID’s power grid. He also said the utility would hold an open bidding process where any company could submit a proposal to expand the battery facility.

ZGlobal founder Ziad Alaywan “has advised legal counsel that ZGlobal terminated its consultancy agreement with CESP,” Oswalt wrote.

“Once the (request for proposals) is published any interested bidder, including CESP should be allowed to submit a proposal. There would be no basis for rejecting the proposal from CESP (assuming that one is submitted) based solely on ZGlobal’s former consulting relationship with CESP,” Oswalt wrote in the memo, dated March 8, 2017.

But public documents show continued links between ZGlobal and CESP.

CESP filed its most recent “statement of information” with California’s secretary of state on June 27, 2017 — three months after Oswalt’s memo, and a month after IID’s board voted to give CESP a $6.9-million contract. The document says the company’s business address is 750 W. Main Street in El Centro, California — the same address as ZGlobal’s Imperial Valley office. CESP’s registered agent is Melissa Vaa, a ZGlobal employee.

Read full article at The Desert Sun