In the Free Lance editorial of Feb. 2, there are allegations
that city officials skipped doing homework in signing a power
purchase agreement with ClearSpot Energy.
By City Councilman Doug Emerson
In the Free Lance editorial of Feb. 2, there are allegations that city officials skipped doing homework in signing a power purchase agreement with ClearSpot Energy. The article stated that the city failed to use an outside consultant to do an analysis, failed to consider what would happen if ClearSpot goes under, failed to allow an open bidding process, ignored due process and barred other competitors such as Ignacio Velasquez from offering the same service. Clearly, some response from the city council is warranted and I thank the Free Lance for the opportunity to share my experience with this project.
When considering solar power for the wastewater treatment plant, there are two basic approaches available to the city.
First, the city could solicit bids to construct a solar plant – the formal bidding process would occur, surety bonds would be required, etc., and the city would pay the $5 million – $7 million in costs through the issuance of a bond. Rate payers would repay the bond through increased sewer rates. After the plant is completed, the city would have significant savings as the plant would produce the majority of the electric power at no cost. However, with this scenario, the city assumes all the risk, is responsible for all maintenance, upkeep and problems. Additional technical staff would be needed to make sure the plant is run efficiently with the ability to switch power consumption between solar and PG&E to reach maximum savings.
Second, the city can sign a power purchase agreement with an outside company. With this scenario, the outside company builds, owns and operates the plant. There is no cost to the city and virtually no risk to the city. The risk lies with the outside company. The city agrees to buy power from the outside company at a cost less than PG&E rates. The risk to the City is that if PG&E rates decrease (highly unlikely), the city is still committed to purchasing power from the outside company at the agreed upon rate.
During the last 10-11 months, the city manager and I received a number of formal and informal proposals regarding solar at the wastewater treatment plant. Discussions with a number of potential partners occurred. Ignacio Velasquez did have discussions with the city manager and one or two brief discussions with me regarding his ideas.
Given the pros and cons of the two scenarios, the recommendation presented to the council was scenario two. There was more than one company that could have provided the plant under this scenario, but ClearSpot was selected for a number of reasons. First, they were the only company that has a plan for solar beyond the wastewater treatment plant. ClearSpot had representatives working in Sacramento for 15 days last year working on legislation that would enable San Benito County to be a leader in solar energy – and would provide a future revenue source for the City of Hollister. Second, ClearSpot will partner with Rosendin Electric for the plant construction. Rosendin is probably the most experienced solar grid contractor in the western United States. They have installed solar in almost all of San Jose Unified schools. Rosendin’s president is a Hollister resident and the agreement states that all labor will be local. ClearSpot’s principals are former INTEL electrical engineers who have a history of developing successful alternative energy projects.
As to due diligence, the city hired Stone and Youngberg to do an independent financial and project analysis of the agreement. A few concerns were raised and those concerns were addressed in about 5-6 weeks of negotiations.
In needs to be understood that Ignacio Velasquez in no way proposed, or is capable of, offering the same service. His proposal was for the city to contract with his company to construct the solar plant. There might have been some grant money available, but the bottom line is that the rate payers would end up financing $5 million to $7 million through increased rates with a high degree of risk to the city. Mr. Velasquez has no experience in a project of this magnitude. If the city contracted with him and his company goes under – well we end up holding the bag – just like the T-shirts! (A LESSON LEARNED)
All in all, the Editorial Board of the Free Lance really failed to do its homework on this issue.
Doug Emerson, Hollister City Council, District 4
This guest view will appear in the Free Lance on Tuesday.
