According to a forensic audit conducted by accounting firm Carr Riggs & Ingram (CRI) at the city’s behest, Brownsville officials intentionally used faulty data to push forward a natural gas power plant project agreed to be constructed by Tenaska and partially paid for with the corresponding rate hikes.
“[G]iven the level of interference and manipulation of the narrative and the overall process,” the executive summary of the report states, “it is our opinion that Management intentionally misrepresented or omitted key information in order to ensure that the Project (and its related rate hikes) would be approved by the Board and ultimately the [City of Brownsville].”
In 2011, energy company Tenaska proposed an 800-megawatt (MW) natural gas-powered generation plant to the Brownsville Public Utilities Board (BPUB) and a corresponding pipeline to transport the necessary fuel. BPUB would own one-fourth of that capacity — enough to power 40,000 homes during peak demand, summer afternoons through early evenings — and the rest was to be sold into the Electric Reliability Council of Texas (ERCOT) wholesale electricity market.
The plan was proposed in conjunction with a 20-year load forecast spanning 2009 through 2028 that estimated peak demand in BPUB’s jurisdiction would reach 405 MW by 2018. That projection was based on 2007 historical data.
Its 2015 projection overestimated the actual peak demand by 100 MW. That’s enough to power 20,000 extra homes during peak demand that didn’t need to be accounted for at the summer’s hottest point.
Engineering firm R.W. Beck cautioned the utility board that the projection would require revision down the road as trends changed and recommended it be revisited as frequently as monthly. Two years later, BPUB contracted with another firm to create a plan for resource development.
This plan, created by engineering firm Black & Veatch, used the Beck forecast and baked in a 13.75 percent reserve margin — increasing further the electricity capacity needs spelled out by the projections. It did not account for electricity load data from 2008 through 2011. Additionally, it substantially overestimated the 20-year growth in electricity market prices and forecasted a contradictory doubling of gas prices alongside a tripling of available gas supply in South Texas.
According to the audit, BPUB management, including CEO John Bruciak, warned of “imminent capacity shortages” unless the board commissioned new generation. It also states that Bruciak and another BPUB employee lied that ERCOT required the inclusion of the reserve margin.
Based on this projection, BPUB and city officials approved utility rate increases from April 2013 through October 2016.
The revenues from the increases were injected into the annual pots of money from BPUB used to supplement the city’s budget; the CRI audit found that officials specifically safeguarded these revenues when discussing a reversal of the rate increases.
“Management always highlighted the city transfer during discussions about rescinding or deferring rate increases, specifically cautioning commissioners to consider the potential adverse impact on [Brownsville’s] budget if utility rates were lowered,” CRI stated.
From the 2013 Fiscal Year through 2017, the City of Brownsville transferred $40 million to its general operating fund from BPUB revenues. In the previous five years, those transfers amounted to $35 million.
“It is our opinion that, in an effort to hold on to a codified rate increase, BPIB concocted a plan to mask the increased energy charges on customer utility bills. BPUB artificially lowered the [fuel purchase energy charges (FPEC)] to an unrealistic cudgel to keep the [city] from rescinding rate increases.”
The FPEC is a utility bill fee that pays for the cost of procuring natural gas or other fuel used to generate the electricity used. By lowering the FPEC, the audit contends, drastic bill increases stemming from the Tenaska-affiliated rate hikes were masked through a kind of low-stakes shell game.
The audit goes on to state that the money collected from the operations and maintenance portion of the rate hike was not used for that purpose, but rather put toward funding the power plant as well as an “equity fund” and “rate-stabilization program.”
Throughout this process, Tenaska was tasked with securing agreements to purchase the remaining 600 MW of electricity the plant would generate — something they failed to find in ERCOT, causing them to look instead to Mexico.
To assist with this search and other consulting purposes, BPUB contracted out Max Yzaguirre, an Enron executive before the energy company’s titanic fall. He served as the chairman of the Public Utility Commission of Texas during former Governor Rick Perry’s tenure.
Yzaguirre was paid $35,000 per month for an indefinite term — something CRI found to be a conflict of interest, seeing an incentive to prolong the project’s development stage. Yzaguirre was simultaneously consulting for both BPUB and Tenaska, aiding with the company’s search for electricity buyers across the border.
Critical for pipeline development was the acquisition of rights of way, something CRI found that Bruciak and then-Mayor Tony Martinez “knowingly continued…under false pretenses.”
According to CRI, once it became clear the power plant and its corresponding contracts were kaput, the utilities board put off notifying either the city commission or the public in order to push through the right-of-way acquisition.
“The justification given was that if holdouts learned that the principal reason for the pipeline no longer existed, they could contest condemnation on grounds that there was no longer a public purpose,” reads the audit. “Management has defended the [right of way] acquisition, stating that it still had value even though the pipeline was no longer to be built.”
In a statement on October 11, BPUB said the audit contains “some potential factual issues” but did not specify, and added, “We feel it prudent to allow those listed in the report a specified period of time to respond to the opinions and allegations specified in the audit.”
The board also stated it will “conduct an expedited review of the audit, either internally or with the possible help of outside professionals, to help us sort through the facts and present an accurate foundation for moving forward.”
On top of this, current Cameron County Judge Eddie Treviño Jr. was paid $1.3 million by BPUB for legal advice on the project.
“My role was as a legal advisor and not as a decision maker,” Treviño said in a statement after the report was released. “As general counsel, I was not asked to provide an opinion on the economic or technological viability of the Tenaska project.”
“My law firm was retained as general counsel along with other firms providing legal advice and as a professional, I billed fairly and accurately for my time associated with this project and representing BPUB in other matters.”
Treviño, who first won his election in 2016, was part of the effort to place a $33 million bond for the construction of the now twice-rejected Cameron County Arena project.
“[H]is role as Board counsel was a potential source of conflict due to his elected position of Cameron County Judge,” the audit states. “In fact, it appears to be that conflict that sparked his resignation in late 2017.”
The county judge is locked in a re-election fight against Republican and former Texas Secretary of State Carlos Cascos.
“CRI found no evidence of fraud associated with payments to vendors,” the audit concluded about those such as Treviño’s firm who provided services to BPUB in relation to the Tenaska plant project.
Overall, the utility board spent $30.9 billion on legal and engineering consulting services, and ratepayers were stuck with $118 million in payments earmarked for a project that neither got off the ground nor was planned for an uncontrived need.
Disclosure: Unlike almost every other media outlet, The Texan is not beholden to any special interests, does not apply for any type of state or federal funding, and relies exclusively on its readers for financial support. If you’d like to become one of the people we’re financially accountable to, click here to subscribe.
Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.