Appearances matter to public

Published 5:36 pm Wednesday, June 3, 2015

Deserved or not, government agencies and officials aren’t always afforded a high degree of trust by the public, which is why it’s important that they avoid the mere appearance of any conflict of interest.

Tuesday’s release of an outside review of the Snohomish County Public Utility District’s contracts with a company run by a former employee found there had been no conflict of interest in negotiating the contracts. But the report did find the utility had failed to show enough regard for the PUD’s own policies meant to avoid the appearance of a conflict of interest. Herald Writer Dan Catchpole reported on the findings Wednesday.

The report was ordered by the PUD’s commissioners shortly after a utility employee raised concerns about the contracts in March. While the investigation was ongoing, PUD commissioners also elected to put a hold on another contract with the same company, 1Energy and its founder, David Kaplan.

The contracts, which so far total about $16 million with $9.3 million from a state Department of Commerce grant, involve an emerging technology called Modular Storage Energy Architecture, a battery system that is seen as crucial to the PUD’s goals of increasing its portfolio of conservation and renewable energy sources. MESA stores electricity generated by wind, solar and other renewable sources at peak times for later use when their energy production drops. By storing the energy, the PUD can avoid buying additional electricity during peak demand when it’s at its highest cost.

The report outlines how Kaplan, a former Microsoft employee with software expertise who was hired initially to improve delivery of information technology systems, soon began talking with PUD officials about development of battery storage. The report also states that Kaplan was clear with PUD officials about his intention to identify an entrepreneurial opportunity during his work at the PUD. Kaplan had created 1Energy and had discussed the basics of a contract with PUD officials prior to his leaving the utility, but no contracts were signed while he was an employee.

In reviewing the contracts, which involved Kaplan providing system integration and software development, the report finds that no state laws were violated and the commissioners were justified in waiving a competitive bid process, noting that there would have been few others able to meet the contracts’ needs and match Kaplan’s knowledge.

Even so, the enthusiasm and advocacy demonstrated by the PUD’s now-retired CEO Steve Klein and other officials for 1Energy raised the potential for an appearance of a conflict of interest, the report found. And because of Kaplan’s advantage in his knowledge of the PUD and its operations, it would have served the utility better if it had used more caution through a competitive bidding process from the start, if it had waited longer between Kaplan’s departure and the signing of the first contract and sought a review of the contract by a third party.

It’s likely that 1Energy would have proved to be the preferred bidder had there been a competition. The PUD’s enthusiasm for the MESA project is understandable, especially as it considers a further project, called MESA III that involves Elon Musk’s Tesla Motors, a world leader in battery technology.

The report recommends, and we agree, that the PUD should carefully evaluate MESA III and further contracts and make clear its reasons for waiving a competitive bidding process.

The PUD’s ratepayers put a high standard on their trust, one that requires transparency and clear explanation of the commissioners’ decisions.