PUD clean-energy contract on hold amid ethics probe

EVERETT — A new $3.8 million contract for a clean-energy project is on hold because of the ethics investigation at the Snohomish County Public Utility District.

The PUD’s commissioners decided over the weekend to remove from Tuesday’s meeting agenda a proposed contract between the district and 1Energy Systems, a clean-tech contractor.

“What we really want to do is wait until we have the investigation” report, said Commissioner Kathy Vaughn, the board’s president.

The PUD’s board of commissioners launched an investigation into contracts between Seattle-based 1Energy and the district following allegations by a PUD employee. He accused the PUD’s leaders of improperly steering no-bid contracts to the company, which was set up while its founder still worked for the PUD. 1Energy has been working to develop energy-storage technology for the district.

The commissioners have no questions about the contract but don’t want to vote on it until after the investigator delivers findings, Vaughn said.

Energy storage means adding huge batteries to the power grid, which should allow a utility to more efficiently handle fluctuations in electricity demand. In addition to increased efficiency, advocates say, the technology also promises to enable utilities to make greater use of wind, solar and other forms of green power.

The bumped contract with 1Energy, worth about $3.8 million, was for a lithium-ion battery made by Tesla Motors, best known for its high-end electric cars. “Initial plans were to bring it online by mid-2016,” said Neil Neroutsos, a spokesman for the PUD.

Like all other contracts with 1Energy, it was not put out for bid.

1Energy has designed control software and managed the projects. The company won its first contract with the PUD in 2011, only a few weeks after its owner, Dave Kaplan, resigned from the PUD.

An email from earlier that year indicates that he and his supervisors negotiated most of the contract while Kaplan was still working for the district. He was part of the district’s executive team and reported directly to PUD CEO and General Manager Steve Klein.

Klein retired last Thursday. He announced his planned retirement in February, before the allegations came out.

Since Seattle-based 1Energy got its first contract with the PUD, it has won work worth about $16 million. Some of that money has gone to subcontractors, including battery manufacturers.

Last summer, the state gave the district $7.3 million in clean-tech grants to help pay for the projects.

The district brought its first huge lithium-ion battery online in January. A second lithium-ion battery should start operating next month. Another type of battery is to be installed later this year.

The PUD has said the lack of competition for contracts with 1Energy is justified by the fact that grid energy storage is a young field and there are few companies with adequate qualifications.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

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