The Tenaska Parasite: A Socialist Summary

INTRODUCTION

After reading local media reports, the 70-page audit and its executive summary by Carr, Riggs, & Ingram (CRI), a Certified Public Accountant (CPA) and advisor hired by the City of Brownsville to document 7 objectives, I see it now as the initial phase of veiled attacks to privatize a key productive public asset by the same old standard techniques documented in history.

Certain local leaders that are fans of capitalists or are capitalist themselves start suggesting de-funding it (e.g., remove the Resaca Restoration Fee that is matched by EPA), make sure or project that things don’t work, people get rightfully angry generating more than 600 signatures to fire the General Manager and CEO John Bruciak without substantiated cause, then you hand it over to private capital.

The last objective for the audit required the highest burden of proof to substantiate, that was, to identify,

“whether any irregularities or illegal acts were detected in connection with all transactions identified in the scope of services... The report shall detail any evidence, if any, of illegal or irregular acts.”

Even with BPUB having some awareness of the project’s potential demise in November 2017 and allegedly chose not to notify the city and the public until August 2020, the audit found no evidence of BPUB intentionally misleading the city. 

Long story short, no illegal acts were documented, only alleged irregular acts. Stating that

“CRI found no evidence of fraud associated with payments to vendors.” 

From the fallout of September 16, 2008, the failures caused by large US financial capitalists - experienced by the exposure of subprime loans and credit default swaps - devolve into a global economic crisis, we were reminded that capitalism socializes the costs and risks as much as possible, while profit is privatized. 

In other words, it is legal for a few to profit while everyone else pays the increased prices. Is it corruption? Yes, legal corruption.

As this is a summary of my review, I recommend to first read the background in the audit in its entirety to set the scene about this structural problem in capitalism, that is, accumulation for the sake of accumulation. 


  • Pipelines, transmission lines, and their ROW acquisitions

  • Other Findings conflating municipal-owned cash transfers to a conflict of interest

  • The disposition of the raised funds, and 

  • My conclusion


PIPELINES, TRANSMISSION LINES & ROW ACQUISITIONS

After BPUB and former Mayor Tony Martinez received word from Tenaska on April 1, 2017, that they are not going to build, BPUB stated the project was delayed and it was still viable which allowed for the rate hikes to remain in place and to continue with ROW acquisitions taking place to complete the associated “Cross-Valley Pipeline.”

This pipeline should not be confused with Valley Crossing System (see my review for a reminder). It is referring to the Cross Valley Projects to add more transmission capacity in the Brownsville area.

According to Transmission Hub.

Electric Transmission Texas in a joint partnership with Sharyland Utilities is proposed to build an approximately 96 mile, 345-kV line in south Texas. Referred to as the Cross Valley Project, the planned transmission line will begin at AEP’s North Edinburg substation near Hidalog County and terminate at the Brownsville Public Utilities Board Loma Alta Substation. ERCOT determined the project was critical to improving the reliability of the grid in the Brownsville region. ETT will construct the western portion of the line, while Sharyland will be responsible for the eastern portion. The total estimate cost of the project is $309m. The final route was approved by the PUCT in late March, 2014 with an in-service date of summer 2016.

This needed transmission project was also noted by CRI.

“Prior to the IRP’s completion, it was known that ERCOT’s Board of Directors had unanimously voted to endorse the Cross Valley 345kV Line Project. Thus by 2014, an additional 100MW of transmission capacity into the Brownsville area was expected.”

I like one of CRI’s recommendations regarding the Cross Valley Project.

“If the Public Utility Commission of Texas (“PUCT”) does not approve the new Cross Valley transmission line, or if ERCOT chooses not to build additional new transmission for speculative loads, BPUB may want to consider building and owning such transmission itself.”

In late 2017, after one of BPUB’s hired attorneys knew internally that the project was dead and after Tenaska defaulted, they decided to not let the public know so ROW acquisitions can continue without interference.

“just let the sleeping dog lie”

Specifically, attorney John Davison of DTRG stated.

“At that time, there were still holdouts that were going through the condemnation process and wrote: if the holdouts learn that the principal reason for the pipeline no longer exists, they could delay final acquisition by refusing to settle or contesting the acquisition on the grounds that there is no longer a legitimate public purpose for the acquisition Just let the sleeping dog lie.”

BPUB could’ve terminated the final agreement on August 4, 2019, but under advisement from their counsel DTRG, they waited until February 4, 2020, to terminate the agreement.

The reason was, once again, to avoid any conflicts with the ROW acquisition” which were to support the project. It’s suspected that the termination of the final agreement created a need to announce that the project was officially over. 

However, another pipeline project not well known (at least to me) was approved by the city in 2012.

“as part of the Project, BPUB proposed before the Commission a plan to build and own a natural gas pipeline.”

“According to BPUB, the pipeline would not only allow BPUB to more reliably supply gas to its facilities, but would also allow BPUB to become a gas utility provider. The Commission approved the creation of a gas utility in December 2012.”

To build and own a pipeline, “BPUB would need to begin the ROW acquisition process.”

Once BPUB’s pipeline project failed to move forward, they defended the ROW acquisitions by stating that it still had value (e.g., water transportation) even though the pipeline was no longer going to be built.

I can see BPUB’s point after the original intent of the project is no longer there. Transportation of water is always needed no matter if there is a drought or not.

Still, BPUB should had ignored DTRG’s advice and notify the public about the doomed pipeline proposal. No wonder I didn’t know about this failed pipeline until this audit.

Though BPUB is a city-owned enterprise that uses the surplus value of society for social needs. They need to hire private lawyers, consultants, contractors, etc. All these types of entities live within a global system of capitalism and are forced to seek profit or go under.

“[Capitalism, as a whole, does not] depend on the good or ill will of the individual capitalist. Free competition brings out the inherent laws of capitalist production; external coercive laws which have a power over every individual capitalist.” - Karl Marx, 1867

These external coercive laws force all to seek capital accumulation to prosper no matter the cost to the environment, justice, social needs, or life itself. 

“The essence of capitalism is to turn nature into commodities and commodities into capital. The live green earth is transformed into dead gold bricks, with luxury items for the few and toxic slag heaps for the many.” - Michael Parenti


MUNICIPAL-OWNED CASH TRANSFERS

CRI’s focused on the city and on the benefits of city transfers. They try to paint municipal-owned utilities themselves as a conflict of interest for the city because if you increase rates, you increase revenue for the city to balance its budget. An undue level of influence from the utility onto the city in CRI’s opinion.

The audit notes that BPUB applied pressure on the city by reminding them about the benefits of the city transfer revenue and the consequences to that revenue stream if the rate increases are rescinded without a plan to make up the difference.

All while acknowledging that the city “has all rights and power to roll the rates back.” BPUB giving the pros and cons about rate increases or decreases affecting the city coffers is not undue leverage over the city.

I disagree with this opinion on city transfers and think more publicly- or municipal-owned enterprises in key productive areas should be operating to generate more revenue (e.g., selling surplus capacity) and more value for the city and its surrounding areas without increasing taxes or providing tax credits as in the case with established or proposed polluting infrastructure. 

There is a higher level of accountability and transparency applicable to publicly-owned enterprises than private ones. For example, this audit requested by the current city administration “to review the disposition of funds expended in connection with the Project and the Pipeline” partially allows citizens to determine where their political leaders are going astray and exert well-targeted pressure to put them back on track. 

Public participation will provide public institutions with direct input on how to best respond to citizen needs with shared, verifiable facts and bring additional information into the open so the public can understand the problem for themselves and include all reasons, opinions, and intentions for delays into everyone’s decision making process. 

Don’t let the audit be used to justify privatization of our utilities and neglect the handful of wealthy, influential individuals and entities that benefited from the pain of these increased rates and who took advantage to mislead, intentional or not, parts of the board, the city, and the people. As the audit notes, BPUB is the only city-owned electric provider in the so-called Rio Grande Valley. 

If I was a capitalist or one of their fans observing one of the largest municipal-owned assets in the state and country for more than 60 years, with its stable growth rates, I would want to profit from that public service by pushing privatization and market liberalization when they make major mistakes like they have in these dirty projects. 

You don’t have to be a socialist to see the class war in action locally. 

On October 10, 2022, Keila Taboada, an angry Brownsville resident expressed her frustration in the BPUB’s public meeting,

“I think it’s time you guys take action in reducing [utilities] rates that were raised for us,” “...Because, clearly, they went to nowhere, just to enrich other people.

Susan Ruvalcaba saw the project as an

“elaborate plan to steal money from the citizens of Brownsville.”

Who are the capitalists that milked BPUB throughout this painful process? 


DISPOSITION OF FUNDS

To recap, how long was this going on? 

~ 9 years from the start of communication in 2011 to when BPUB terminated the final agreement in 2020.

~ 4 years of a series of five rate hikes. The first taking effect April 1, 2013, and the last on October 1, 2016. This series of rate hikes increased the electrical rates by a total of 36% over four years, or 41.57% when compared to pre-Project rates.

How much money was raised related to the rate increases?

~ $118 million (allegedly ~ $14 million/year)

Where did that money go?

~ $35 million had been spent on the project, while 

~ $29 million was set aside in a Tenaska Equity Fund, and 

~ $54 million was allegedly allocated to fund rate reductions beginning in April 2016.

According to the full audit, half of the rate increases went to O&M and allegedly that wouldn’t have been approved without a large capital project. However, the executive summary emphasizes that the approved allocation related to the rate increases didn’t go to O&M.

“none of the revenue raised from the O&M portion of the rate increases was ever used for O&M. All of the revenue went to the Project, the equity fund, or the rate-stabilization program.”

~ $15 million of the rate increases went to a fuel subaccount for the “Bill Reduction Plan.” A “solution” implemented after April 2016 to lower residential electric bills by “stabilizing” the Fuel Purchase and Energy Charge (FPEC) that is passed through to customers. 

“The plan was to use the fuel subaccount to lower the average customer bill (1000kwh) to $102. The goal, of course, was to keep the energy charges (rates)… customers were able to benefit from an 8% reduction in bills and BPUB was able to avoid a loss of revenue from rate rescission.”

“Over the next several years, this rate stabilization program would be used as a ready defense whenever rate rescission was discussed.”

all pre-development expenditures, BPUB spent the most on attorney fees. Throughout the life of the Project, BPUB spent approximately $9.2 million on legal services to DTRG, Trevino & Bodden (Trevino), Smith Murdaugh Little & Bonham (SMLB), and Andrews Kurth. BPUB retained Trevino as local board counsel and DTRG as special board counsel. Andrews Kurth, at the urging of Eddie Trevino, was hired to handle ROW condemnation proceedings and act as bond counsel, while SMLB handled ROW acquisition, condemnation, and eminent domain legal proceedings.”

Over half of all legal fees were paid to DTRG at nearly $4.7 million. 

Regarding the lack of impartial guidance, I agree with CRI’s observation of a vulnerability about term limits for public board members and how it negatively impacts the retention of pertinent institutional knowledge for proper long-term governance. I also agree that “it was Management’s duty to provide the context of previous Board decisions” when reviewing changing presentations over time with the city. 

However, with the authority to decrease or defer the rate increases anytime, it was the city’s duty to pay attention and be critical of any public-private partnership where one party is trying to meet its mission to reliably meet public energy demands over time, another party is seeking profits in an unprofitable global market at the time, while the others are milking BPUB through delays, false assurances, and attorneys’ fees. 

The audit agrees with me as well stating that the city “could have also chosen to defer the rate increases until the Project was more certain.”

In a for-profit system, they will be scammers and corruption, and the elected city commissioners should evaluate any project from that understanding to avoid opportunism and impropriety. 

Take for example the most paid law firm DTRG hired by BPUB and their alleged mistreatment towards about half of the City of Poteet’s city council in 2020. 

The public opinion in Poteet to get rid of DTRG was conveyed by two council members which caused the council in a split decision to table the item.

“Newly elected councilman Jeremy Fernandez discussed terminating the City of Poteet’s legal counsel of Davidson Troilo Ream Garza, PC, including City Attorney Molly Solis.”

“‘I was wanting to see about an attorney who actually won’t be biased and actually give legal advice to council and mayor across the board, equally. As well as cost efficiency and job performance,’ said Fernandez.”

Councilman/Mayor Pro Tem Nicholas Sanchez “asked council if they were willing to risk the city’s financial standing by terminating the law firm based on hearsay. Mayor Sanchez responded that the current firm is costing the city money with their pending cases.” 

It appears DTRG has a history of dragging their feet to accrue attorney fees. Everyone is biased, especially lawyers. Don’t believe them if they say they are not and only look to the law. After all, most private law firms are for-profit entities and have a bias to remain profitable. 

Even if that means prolonging municipal-led projects by taking advantage of the lack of institutional knowledge and the lack of critical, disciplined, and principled leaders in the city and utility boards. 

This includes the local capitalist media that emphasized the “BPUB bad, be mad at it” narrative and neglected the few wealthy individuals and entities listed in the audit as well that benefited from the people’s suffering. I don’t see their names in the headlines where they should be and I don’t expect them to be.

Inventing Reality: The Politics of Mass Media by Michael Parenti

Inventing Reality: The Politics of the Mass Media by Michael Parenti

CONCLUSION 

CRI makes clear their opinion that

“BPUB’s comfort with other firms and their reluctance to issue public RFP’s can sometimes create an overly comfortable relationship at the sacrifice of independence.” 

For corrective action, CRI provided a list of recommendations in page 14, one of them being that the RFP “should also allow for proposals involving renewable generating resources.” I can’t disagree with this recommendation. 

To wrap it all up and to get to the audit’s core allegation about BPUB’s future capacity shortage propaganda to finalize the power plant:

“Perhaps more so than any other factor, the driving force behind the 2011 IRP and the subsequent pursuit of the Tenaska Project was the widely publicized impending capacity shortage described in the IRP and frequently vocalized by BPUB and Mayor Martinez. Yet, the 2011 IRP merely parroted an outdated and overstated forecast at Management’s direction.”

Wait, at BPUB's direction? Who was contracted “to study and write the IRP,”  who wrote the “Power Supply RFP”, and who “prepared” the biased presentations, and who “completed” the Cost of Service Study in February 2013? I didn’t see anywhere in the audit explaining BPUB forcing B&V to cook their numbers. 

Requesting B&V to use the Beck Forecast without changes appears to be a decision within its authority to capture data at that time for “load forecasts performed in 2009 for BPUB” and work from there. 

“R. W. Beck, Inc. (“Beck”) was retained by BPUB in 2008 to prepare a long-term forecast of retail electricity sales, energy requirements, and peak demand of the BPUB electric system (the “Beck Forecast”).

The Beck Forecast was prepared for the 20-year period beginning calendar year 2009 through 2028 and relied on an econometric approach to forecast retroactive retail electricity sales over the period 1994 through 2008 based upon certain explanatory factors that were found to be highly correlated to retail sales.”

“The Beck Forecast concluded that system energy requirements were expected to grow at annual average rates of 4.2% from 2009-2018 and 3.0% from 2019-2028. System annual peak demand (in MW) was expected to grow slightly faster, at 4.3% per year from 2009-2018 and 3.1% over 2019-2028. The results of the Beck Forecast reflected annual peak demand growing to 405.0 MW by 2018 and to 548.7 MW by 2028, as reflected in Figure 1 below.”

As you can see in Figure 1, the 2009 Beck Forecast’s historical data is from before December 2007 (start of economic crash), showing stable, modest growth in energy demand. The issue is with the projected peak demand growth rate potentially not including data from the global economic crash.

“Data used to illustrate 2008 was projected by Moody’s and likely does not reflect the economic downturn of the 2008-2009 period.”

However, as admitted by B&V below and without them plainly saying not to rely on the Beck Forecast.

“The load forecast utilized in this IRP was developed for BPUB by R.W. Beck, Inc. /SAIC in the 2009 timeframe. On the basis of the load forecast and existing generating resources, BPUB is projected to require additional capacity to satisfy its reliability criteria beginning in 2012...The need for future resources was determined on the basis of available existing resources and BPUB’s projected peak demands through the 2031 planning horizon. [emphasis added by me]”

As John Bruciak stated in the audit, showing his cautiousness and awareness of the uncertainty in his industry,

“Those things (load forecasts) are as good as the day you published it, and they may be really accurate, some of them are. Most of them change”

Under section 6.1.2.3.1. - Contrived Capacity Shortage, the audit notes B&V’s peak summer demand forecast and projected capacity shortage was based entirely upon the Beck Forecast.”

Below B&V explain the Beck Forecast with some cautionary detail.

“The need for future resources was determined on the basis of available existing resources and BPUB’s projected peak demands through the 2031 planning horizon….the expansion plans in this IRP focused on a single set of input assumptions in this regard, consideration should be given to evaluating the potential impact of changes to various input assumptions (such as the load forecast, fuel prices, CO2 emissions allowance prices, and market power prices).

Or as CPI rephrased it, a reassessment of growth rates assumptions before making any future resource decisions. CPI focuses on BPUB not using four years of real data it paid to be collected.

“In using the Beck Forecast’s Peak Demand as the IRP’s driving factor, Management ignored nearly four years of historical data and its own policy, intentionally casting aside the opportunity to derive meaningful results from the studies for which BPUB paid substantial money.”

I think B&V could've recommended or explicitly state BPUB’s projected peak demands were based on unrealistic assumptions and that they should not be relied upon at all. However, that would be against their best interests to be profitable. Instead, B&V only delayed by

“suggesting deferring long-term action until an IRP update in 2014 when the update can take into account what is known at the time.”

It appears CRI is doing B&V’s job for them years later.

“Further, Management directed B&V to add an additional capacity reserve margin of 13.75%, falsely claiming to its Board and the COB that it was an ERCOT requirement.”

If you read page 21, it appears that the 13.75% capacity reserve margin is confused by BPUB to be a requirement by ERCOT onto them instead of an internal protocol for ERCOT. There may be some reason for that confusion. Take a look.

“ERCOT, as the independent system operator for the region, did in fact use a 12.75% target reserve margin capacity internally to manage the region’s power needs and had discussed increasing its margin to 13.75% around 2011.”

“‘Yet.. according to an ERCOT representative on August 5, 2022: ‘ERCOT does not have a Reserve Capacity Margin requirement for LSEs [Load Serving Entities]. There has not been a change to no longer have a requirement for Reserve Capacity Margin. There has never been such a requirement in the ERCOT market. [Emphasis added (by CRI)]

According to CRI,

“It appears that the reserve margin’s inclusion, at Management’s request, was merely another means to artificially inflate the hyped capacity shortage even further in an effort to justify the Project.” 

“Using allies at the BEDC [Brownsville Economic Development Commission], Mayor Martinez, and Management pushed the Tenaska Project on commissioners as if it was an emergency, using the artificial “imminent” capacity shortage together with a narrative of failed business development efforts, which they claimed were linked to lack of generating capacity – an intentional fabrication. Management’s overemphasis of an artificial and contrived capacity shortage and lost business prospects were key drivers in the decisions of the Board and COB to approve the Project.”

The audit provides no evidence to prove if capacity shortage had the resulting effects of large manufacturing and other energy intensive productive industries’ inability to operate in the Brownsville area as “an intentional fabrication.” 

The audit doesn’t verify if there were actually any lost business prospects from the future capacity shortages projections and relied on words from anonymous sources in the Greater Brownsville Incentives Corporation (GBIC) and in the city government to develop their unsubstantiated allegation that

“none of the cases cited were actually factual.”

The only so-called “evidence” the audit listed is an email exchange too vague to determine intention or if BPUB “used its influence over certain commissioners to insure the smooth reception of the Project”

I don’t find evidence in the audit that BPUB showed intent to purposely misrepresent, change facts, or omit key information to create a fake narrative that will ensure the project and the related rate hikes were approved, nor to ensure a distortion of the project’s status and viability. 

The individuals and entities named in this audit should also be investigated to gather more information about this core allegation. So we can verify if the future capacity shortage was propaganda to finalize the project with no real basis for expansion as the population steadily grows as well as its many needs and wants for prosperity.

As you can tell, I disagree with this unsubstantiated allegation, that is, to justify the project, BPUB and the former mayor repeatedly publicized a false capacity shortage issue that all utilities face with population growth from non-industrial and industrial sectors just like in Brownsville. 

Also, I can allege, after reviewing the Contrived Capacity Shortage section, there is a possibility that BPUB confused ERCOT’s internal protocol as a requirement for them to follow. 

On October 11, 2022, at 11:45 a.m. Tuesday, BPUB issued a statement as part of their initial response to the audit’s release, to the public, and to the angry protesters that were outside the Board’s public meeting that was held the day before on Monday:

More information from BPUB will be revealed in the weeks and months to come. BPUB’s response to the audit was that they 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.”

I doubt the others named in the audit will have the same pressure like BPUB to explain themselves to the media or in front of the public. There may be internal policy or personnel changes in the private companies to keep making profits after this audit but they are not accountable to the public compared to BPUB or the city government.

The audit does note that the issue was made worse by some of the key consultants that were hired to be independent advisors but had a clear conflict of interests with BPUB and Tenaska. One of them was a former Enron executive!

“... given the size of the Project and the number of moving parts, Board members should have been more skeptical and asked more questions, especially as the failure of Tenaska to get subscriptions continued to mount.”

No complaint from me on this recommendation. 


Let’s step back for a while and get some perspective from two individuals that have decades of experience proposing these types of exploitative projects to local leaders in the global south.

As experienced by former Economic Hit Man John Perkins,

“it had been easy for me to provide government officials… with impressive materials that they could use to justify the loans to their people. My staff of economists, financial experts, statisticians, and mathematicians was skilled at developing sophisticated econometric models that proved that such investments - in electric power systems, highways, ports, airports, and industrial parks - would spur economic growth.” 

“For years I also had relied on those models to convince myself that my actions were beneficial. I had justified my job by the fact that gross domestic product did increase after the infrastructure was built. Now I came to face the facts of the story behind the mathematics. The statistics were highly biased; they were skewed to the fortunes of the families that owned the industries, banks, shopping malls, supermarkets, hotels, and a variety of other businesses that prospered from the infrastructure we built.”

“They prospered

Everyone else suffered”

John Perkins met Howard Parker in Bandung who was the retired chief load forecaster for the New England Electric System. During that time in Bandung, Howard Parker was

“responsible for forecasting the amount of energy and generating capacity (the load) the island of Java would need over the next twenty-five years, breaking this down into city and regional forecasts. Because electricity demand is highly correlated with economic growth, his forecasts depended on [John’s] economic projections. The rest of [John’] team would develop the master plan around these forecasts, locating and designing power plants, transmission and distribution lines, and fuel transportation systems in a manner that would satisfy [their] projections as efficiently as possible…”

Seeing right through John Perkins’s embarrassed guilt for believing the numbers cooked up by their boss Chas. T. Main, LLC (MAIN), an international consulting firm, Howard Parker explained

“I forecasted electric loads all my life - during the Depression, World War II, times of bust and boom. And I can say for sure that no electric load ever grew by more than 7 to 9 percent a year for any sustained period. And that’s in the best of times. Six percent is more reasonable.”

Now that you have John Perkins’s and Howard Parker’s experience with their forecasting electric capacity for global south countries, we can see a familiar pattern with another law firm, B&V, that the audit cites as a conflict of interest in the project. Take a look at page 19, under Contrived Capacity Storage.

The audit then spotlights that B&V

“emphasized its concern over Tenaska’s ability to garner enough interest by prospective subscribers, a theme that resonated throughout the following six years.”

The audit continues by noting B&V kept telling the board that the capacity needs in the Beck Forecast which BPUB wanted to use to forecast the load in 2011 with dynamic absolute and non-absolute data from the 2009 Beck Forecast were overstated

“due to the lackluster state of the Greater Brownsville Area economy.”

That being said, it acknowledges

“that utilities planning cycle typical consists of a load forecast, which projects future power needs and an IRP, and given Management’s plan to update its long-term load forecast every two years, the use of a load forecast based on actual data from 2007 and prior years…, four years later is nonsensical and assures unreliability in the results.” 

John Bruciak didn’t show to be over reliant on the evolving determination methodologies of load forecasting and showed institutional knowledge to not blindly rely on highlighted changing data and uncertainties presented by B&V, which the Beck Forecast also cautioned to make these decisions “with care and with an allowance for flexibility.” 

There was one part that interested me about the Beck Forecast and the modest estimates it provided described by CRI, a CPA, who is not a load forecasting expert, as “an unrealistic assumption.” CRI explains, “When viewed together, the forecast graphs look very similar; all project the same consistently rosy, above average growth, as illustrated in Figure 3 below.”

It shows four forecasting graphs. It compares Megawatts (MWs), MW per hour (MW/h), Average Customer Count, and Peak Demand with Historical (absolute data) and Projected (non-absolute data) over three decades (cycles) from 1999 to 2028.

The audit focuses on certain time frames but I wanted to see the estimated average annual growth rate for each graph over three cycles. Below are my calculations for estimated average annual growth rates per graph over three decades:

  1. MWs v Historical and Projected Net Energy for Load 

    • ~ 3.6%

  2. MW/h v Historical and Projected Residential Sales 

    • ~ 3.8%

  3. Average Customer Count v Historical and Projected Residential Counts 

    • ~ 2.7%

  4. Peak Demand v Historical and Projected Annual Peak Demand 

    • ~ 3.8%

After learning from John Perkins’s experience of trying to please his boss MAIN who expected both John Perkins and Howard Parker to come up with growth rates of at least 17% percent per annum! I don’t think these growth rates are “unrealistic assumptions.” 

The economy at the time was slowly recovering for a few while the rest struggled more after the 2008 Great Recession. The local growth rates at the time didn't show an above average growth but a modest one below the reasonable 6% per year from an expert with decades of institutional knowledge and international experience in load forecasting. 

At that time, with the current size and growth of the local economy, anything at or above ~6% per year, depending on other variables, should be highly scrutinized as impropriety.

“In August 2016, CFO Leandro Garcia requested assistance preparing a list of concerns that would arise if the COB deferred or permanently rescinded the October 1, 2016 rate increase. Bond Counsel Andrews Kurth and Financial advisors Estrada Hinojosa were asked to opine. Mr. Garcia relayed the following:

The scheduled rate increase for Electric totals 7% of which 4% is to support ongoing growth and O&M and 3% to support Tenaska debt service. Deferring the rate increase at this time may be okay (except growth and O&M part which impacts 2017 budget) so long as the current or future Commission is willing to reinstate it at such time that Tenaska provides a notice to proceed. Rescinding the rate increase on a permanent basis will impact BPUB’s ability to demonstrate debt service capacity for new Tenaska debt and may result in rating agency negative outlooks and/or downgrades.”

As stated above, Howard Parker needed John Perkins’s inflated economic forecasts to determine the estimated load needed to achieve the unrealistic economic growth presented to their client so their client can agree on taking out large amounts of debt from western institutions like the International Monitoring Fund (IMF) and the World Bank. 

Which came with strict structural readjustment conditionalities and debt servicing fees. What does John Perkins and Howard Parker’s experience explain regarding foreign government loans and projected growth rates? As the audit notes,

“the vast majority of expenditures and write-offs were for Engineering and Legal Fees.” 

John Perkins explains the intention about their types of projects when advising local leaders.

“they were intended to create large profits for the contractors, and to make a handful of wealthy and influential families ... very happy, while assuring the long-term financial dependence and therefore the political loyalty of governments… The larger the loan [or rate increase], the better. That fact that the debt [or higher rate] burden placed on a country [or utility] would deprive its poorest citizens of [affordable energy], healthcare, education, and other social services for decades to come was not taken into consideration.”

As Howard Parker rebelliously said to John Perkins in Bandung,

“No need to cook the numbers… I’ll not be part of that scam, no matter what you say about the miracles of economic growth!” 

Who are the handful of wealthy and influential entities listed in the audit that benefited from the people’s suffering and took advantage to mislead parts of the board and the city? 

  • Tenaska,

  • Max Yzaguirre,

  • B&V,

  • DTRG,

  • Other Engineering and Legal Services

Money that had been budgeted to operate an essential service properly was diverted to pay a equity fund and debt serving fees to Tenaska and potentially risk BPUB’s credit score being degraded by the Big Three credit rating agencies that had a major role in the 2008 subprime crisis. The financed subprime mortgages could not have been sold without ratings by Moody's Investors Service, Standard & Poor's, and Fitch Ratings.

Shackled with this Tenaska parasite, BPUB and the city begin to withdraw from this exploitative relationship. That’s when the knives come out from all profiting off the debtor and its ratepayers, and from all who want to profit in the future from this newly open window of opportunity.

In this moment of public shaming, BPUB admits “mistakes… were made” and that they will investigate

“the root causes, and make whatever structural and/or personnel changes that are needed to ensure the Brownsville Public Utilities ship returns quickly without delay to its core mission and the major challenges we and the entire utility industry are facing.”

With the assistance from ratepayers’ rightful outrage under the slogan to “Put the Public Back in PUB”, unprincipled opportunists in our community, in our city government, and inside BPUB will use this moment to, as conceded above, “make whatever structural … changes'' needed and John Bruciak is in their way.

In a for-profit system with its myth that “free competition” is the solution, it will most likely include balkanization and privatization of its electric, water, sewer, and other public sector institutions and sell them to capitalist parasites who only seek larger profits for themselves and with no chartered mission to its city and ratepayers to create value as their provider of utility services. 

The only structural change needed in this case is to transition from capitalism to socialism. So that municipal-owned enterprises can meet their mission without parasites legally allowed to steal from the people. 

Where decommodification, decarbonization, and decolonization of energy production is planned by and for the people. Especially applying proposals from the people most affected and least responsible for the theft and plunder caused by the few least affected but most responsible.

These are the initial phases of the attack and when the proposals to structurally change the enterprise from public to private are propagated by the capitalists, their media, their fans, and the opportunists - it must be resisted on all fronts! 

Don’t neglect the parasites that benefited from the pain, who played with the vulnerabilities within the board and the city, and who stole from ratepayers! Those parasites need to be blacklisted, criminally investigated, and prosecuted for reparations!

Don’t allow the Nazi policy of privatization!

Against the mainstream: Nazi privatization in 1930s Germany by Germá Bel

http://www.ub.edu/graap/EHR.pdf

The Tenaska Parasite: A Socialist Review

INTRODUCTION

After reading local media reports, the 70-page audit and its executive summary by Carr, Riggs, & Ingram (CRI), a Certified Public Accountant (CPA) and advisor hired by the City of Brownsville (COB) to document 7 objectives, I see it now as the initial phase of veiled attacks to privatize a key productive public asset by the same old standard techniques documented in history.

Certain local leaders that are fans of capitalists or are capitalist themselves start suggesting de-funding it (e.g., remove the Resaca Restoration Fee that is matched by EPA), make sure or project that things don’t work, people get rightfully angry generating more than 600 signatures to fire the General Manager and CEO John Bruciak without substantiated cause, then you hand it over to private capital.

The last objective for the audit required the highest burden of proof to substantiate, that was, to identify,

“whether any irregularities or illegal acts were detected in connection with all transactions identified in the scope of services... The report shall detail any evidence, if any, of illegal or irregular acts.”

Even with BPUB having some awareness of the project’s potential demise in November 2017 and allegedly chose not to notify the city and the public until August 2020, the audit found no evidence of BPUB intentionally misleading the city. 

Long story short, no illegal acts were documented, only alleged irregular acts. Stating that

“CRI found no evidence of fraud associated with payments to vendors.” 

BACKGROUND

From the fallout of September 16, 2008, the failures caused by large US financial capitalists - experienced by the exposure of subprime loans and credit default swaps - devolve into a global economic crisis, we were reminded that capitalism socializes the costs and risks as much as possible, while profit is privatized. 

In other words, it is legal for a few to profit while everyone else pays the increased prices. Is it corruption? Yes, legal corruption. First let’s read the background in the audit in its entirety to set the scene about this structural problem in capitalism, that is, accumulation for the sake of accumulation. 

“Since the COB Commission (the “Commission”) amended the charter in 1960, BPUB has been the major provider of electric, water, and wastewater services to customers in the Brownsville area. The utility has the largest load of three electric providers in the city and currently owns, in part or wholly, two power plants and distributes power through 4,000 miles of wires and 14 substations. It is the only city-owned electric provider in the Rio Grande Valley.

The Electric System provides retail electric service through its electric facilities to consumers inside and outside of the Brownsville city limits. The existing customer service area of the electric facilities encompasses approximately 133 square miles of Cameron County, including substantially the entire city of Brownsville. The electric system serves a base of some 50,000 customers and has a peak load of 305 megawatts (“MW”).

Under the terms of the City Charter, BPUB is comprised of seven members (the “Board” collectively), six of whom are appointed by the Commission for four-year terms. The seventh member is Brownsville’s Mayor serving ex-officio. The Commission fills Board vacancies as they arise but, absent a vacancy, may only remove one Board member in any 12-month period upon unanimous vote of the entire Commission.

Article VI of the City Charter gives BPUB absolute and complete authority and power over the control, management, and operation of the power and light, water, and sewerage systems owned by the City. However, BPUB does not have the right to encumber, sell, or pledge the assets of the utilities system, nor can it unilaterally set utility rates or approve the issuance of debt. The setting of rates and approval of debt fall under the purview of the Commission. BPUB appoints a general manager and chief executive officer that is responsible for retaining and managing a staff to operate the System.

Throughout the timeframe of the Project, the BPUB management team (“Management”) has been:

- John Bruciak, GM/CEO

- Fernando Saenz, Assistant GM/COO1 (retired from BPUB in mid-2022)

- Leandro Garcia, CFO2 (resigned from BPUB in late 2020.)

- Marilyn Gilbert, former Director of Energy Services and Energy Risk Manager (left BPUB in 2014 and returned in 2022, serving in the capacity of Assistant GM/COO.)

Prior to October 1, 2020, BPUB met its power supply obligations through a combination of resources. These included the Oklaunion plant (which was sold to an unrelated party in 2020), the Silas Ray Power Production Facilities, and the Calpine/Hidalgo combined-cycle Power Plant.

BPUB issues its own set of audited financial reports but as a component unit, is also included in the COB’s Comprehensive Annual Financial Report (“CAFR”). The financial statements of BPUB include a blended component, Southmost Regional Water Authority, which provides treated water to various parts of Cameron County. BPUB holds a 92.91% ownership interest in the water authority. BPUB is a single enterprise fund that is organized on the basis of the three systems of electric, water, and wastewater, each of which is considered a separate accounting entity.

In the summer of 2011, BPUB was in the process of developing an Integrated Resource Plan (“IRP”) which would aid BPUB in long-term planning by evaluating supply and demand for energy services. Black and Veatch (“B&V”) was awarded the Professional Engineering and Technical Services contract to study and write the IRP.

In the late summer of 2011, Management contacted Tenaska to express interest in locally building a generating station to meet anticipated capacity shortfalls predicted by the IRP. Tenaska responded that it was interested in locating a facility in Brownsville. In October 2011, a non-disclosure agreement was executed between BPUB and Tenaska to facilitate discussions. In December 2011, Tenaska was invited to make a presentation at a BPUB closed executive session.

Nearly one year after the Tenaska presentation before the Board, BPUB signed a Memorandum of Understanding (“MOU”). BPUB negotiated the MOU and subsequent agreements with the aid of contracted consultants. The finalized agreements (the “Definitive Agreements”) were executed January 25, 2013 with the commercial operational date (“COD”) of the Tenaska Brownsville Generating Station (“TBGS”) scheduled for June 2016.

In order to meet its Project financing obligations and operations and maintenance (“O&M”) costs, BPUB made a rate presentation to the COB Commission. A component of this presentation was an Electric, Water, and Wastewater Evaluation and Recommendation that B&V prepared. The Commission approved a series of five rate hikes, with the first taking effect April 1, 2013 and the last on October 1, 2016. This series of rate hikes increased the electrical rates by a total of 36% over four years, or 41.57% when compared to pre-Project rates. In addition to the rate increase ordinance, the COB approved an ordinance establishing a gas utility under the control and management of BPUB. The rate ordinance required BPUB to file a Cost of Service Study to allocate the rate adjustments by customer. B&V completed the Cost of Service Study in February 2013.

The Project was to be an 800 MW natural gas-fired power plant. The COB would be entitled to 200 MW of power, and Tenaska would be required to sell or find subscribers for the remainder of the capacity. BPUB negotiated an agreement to provide the natural gas transportation to the plant via a BPUB owned pipeline (the “Pipeline”) spanning approximately 50 miles, thus requiring the acquisition of land Right of Ways (“ROW”). Construction of the Project would not commence until Tenaska found subscribers for the remaining capacity. BPUB and Tenaska agreed at least six times to extend the agreement deadlines to give Tenaska more time to find subscribers. Eventually the lack of subscribers led to the final termination of the Project. Formal notice of the Project’s termination was not provided to the COB until August 2020. Of the approximately $118 million in revenue attributable to Project-related rate increases, approximately $35 million had been spent on the Project, while $29 Million was set aside in a Tenaska Equity Fund, and $54 Million was allegedly allocated to fund rate reductions beginning in April 2016.

On November 1, 2021, CRI was engaged by the COB to conduct a forensic analysis of the events leading up to and subsequent to the formation of the Project.”


The next four sections will be about:

  • The pipelines, transmission lines, and their ROW acquisitions; 

  • Other Findings conflating municipal-owned cash transfers to a conflict of interest

  • The disposition of the raised funds, and 

  • My conclusion.


PIPELINES, TRANSMISSION LINES & ROW ACQUISITIONS

I’m going to start in 2016 where BPUB asked for corrective action recommendations from their hired law firm, Davidson & Troilo Ream & Garza (DTRG). Records reviewed by CRI

“indicated that delaying notification was at least in part to protect ROW proceedings.”

“After the email discussion was forwarded to DTRG and discussed in a follow-up call on August 24, 2016, Mr. Bruciak requested an email from John Davidson on the calculated time to give notice and exit the Definitive Agreements. He also asked for DTRG recommendations on how to course correct the situation with Tenaska. DTRG provided a list of options available to BPUB but noted that, at the time, there were no immediate exits from the Definitive Agreements outside of a breach by Tenaska. The options were:

- Deliver notice to Tenaska of termination of automatic extensions on 10/31/2016.

- Terminate automatic extensions. Require extensions on 1/1 of each year beginning 1/1/17 or 1/1/18.

- Pay BPUB its cost of money set aside for the Tenaska Project.

- Reimburse BPUB now for all reasonable and necessary Project expenditures to date.

- Reduce purchase price.

- Allow BPUB to reduce 200 MW commitment proportionately if BPUB elects to install new generation or elects to replace existing generation.

- Release BPUB from the restriction which prohibits doing a substitute similar Project with a third party.

- Give BPUB an exit to terminate within 9 months after written notice to Tenaska.

The first two options were available to BPUB at any time. The others were recommendations to negotiate BPUB’s position.”

“In April 2017, after the Commission again pushed for rate rescission, Mr. Bruciak brought up the impending 2017 IRP to postpone Commission action, suggesting they wait for the results that would be available the following month. The IRP results, as discussed above, were presented on July 11, 2017. After months of discussion and a November 2017 meeting in San Antonio, which Mayor Martinez attended, the Board determined that BPUB needed to terminate the Project.”

So after BPUB and former Mayor Tony Martinez received word from Tenaska on April 1, 2017, that they are not going to build, BPUB stated the project was delayed and it was still viable which allowed for the rate hikes to remain in place and to continue with ROW acquisitions taking place to complete the associated “Cross-Valley Pipeline.”

This pipeline should not be confused with Valley Crossing System (which I provide a quick reminder below). It is referring to the Cross Valley Projects to add more transmission capacity in the Brownsville area.

According to Transmission Hub,

Electric Transmission Texas in a joint partnership with Sharyland Utilities is proposed to build an approximately 96 mile, 345-kV line in south Texas. Referred to as the Cross Valley Project, the planned transmission line will begin at AEP’s North Edinburg substation near Hidalog County and terminate at the Brownsville Public Utilities Board Loma Alta Substation. ERCOT determined the project was critical to improving the reliability of the grid in the Brownsville region. ETT will construct the western portion of the line, while Sharyland will be responsible for the eastern portion. The total estimate cost of the project is $309m. The final route was approved by the PUCT in late March, 2014 with an in-service date of summer 2016.

Noted by CRI, “Prior to the IRP’s completion, it was known that ERCOT’s Board of Directors had unanimously voted to endorse the Cross Valley 345kV Line Project. Thus by 2014, an additional 100MW of transmission capacity into the Brownsville area was expected.”

I liked one of CRI’s recommendations regarding the Cross Valley Project. “If the Public Utility Commission of Texas (“PUCT”) does not approve the new Cross Valley transmission line, or if ERCOT chooses not to build additional new transmission for speculative loads, BPUB may want to consider building and owning such transmission itself.”


Reminder:

The intrastate Valley Crossing System runs from Agua Dulce, Texas, to the U.S.-Mexico border in the Gulf of Mexico, where it connects with the Sur de Texas-Tuxpan pipeline (Mexican Marina Pipeline).

According to Federal Energy Regulatory Commission (FERC) Environmental Assessment (EA) of the Border Crossing Project proposed by Valley Crossing Pipeline, LLC, the pipeline

“consists of approximately 165 miles of 48-inch and 42-inch diameter natural gas transmission pipeline, numerous interconnects, and associated facilities, and two compressor stations (Nueces and Brownsville Compressor Stations).”

FERC’s EA states that according

“to Valley Crossing, the non-jurisdictional Marina Pipeline would consist of approximately 500 miles of 42-inch- and 36-inch-diameter natural gas transmission pipeline and associated facilities between its interconnection with the [Border Crossing] Project and a point near Tuxpan in the state of Veracruz.”

Additionally, the pipeline is proposed to feed gas to the proposed Texas LNG export terminal contrary to what Valley Crossing and former State Representative Eddie Lucio III have said publicly, in which the pipeline and the export terminals are unaffiliated.

The truth came out in December 2017.

“The agreement with Valley Crossing was conveniently made public after Valley Crossing received all their permits, negotiated with all the landowners, and much of the pipe was in the ground.”


Back to BPUB”S failed pipeline:

In late 2017, after one of BPUB’s hired attorneys knew internally that the project was dead and after Tenaska defaulted, they decided to not let the public know so ROW acquisitions can continue without interference.

“just let the sleeping dog lie”

Specifically, attorney John Davison of DTRG stated.

“At that time, there were still holdouts that were going through the condemnation process and wrote: if the holdouts learn that the principal reason for the pipeline no longer exists, they could delay final acquisition by refusing to settle or contesting the acquisition on the grounds that there is no longer a legitimate public purpose for the acquisition Just let the sleeping dog lie.”

BPUB could’ve terminated the final agreement on August 4, 2019, but under advisement from their counsel DTRG, they waited until February 4, 2020, to terminate the agreement. “The reason was, once again, to avoid any conflicts with the ROW acquisition” which were to support the project. It’s suspected that the termination of the final agreement created a need to announce that the project was officially over. 

Connecting the pipeline to Texas LNG had been known publicly despite the pipeline company and local leaders saying otherwise. However, another pipeline project not well known (at least to me) was approved by the city in 2012. Under section 6.5.3 - Delayed Notification to Public in Order to Pursue ROW Acquisition,

“as part of the Project, BPUB proposed before the Commission a plan to build and own a natural gas pipeline.”

“According to BPUB, the pipeline would not only allow BPUB to more reliably supply gas to its facilities, but would also allow BPUB to become a gas utility provider. The Commission approved the creation of a gas utility in December 2012.”

To build and own a pipeline, “BPUB would need to begin the ROW acquisition process.”

Once BPUB’s pipeline project failed to move forward, they defended the ROW acquisitions by stating that it still had value (e.g., water transportation) even though the pipeline was no longer going to be built.

I can see BPUB’s point after the original intent of the project is no longer there. Transportation of water is always needed no matter if there is a drought or not.

Still, BPUB should had ignored DTRG’s advice and notify the public about the doomed pipeline proposal. No wonder I didn’t know about this failed pipeline until this audit.

Though BPUB is a city-owned enterprise that uses the surplus value of society for social needs. They need to hire private lawyers, consultants, contractors, etc. All these types of entities live within a global system of capitalism and are forced to seek profit or go under.

“[Capitalism, as a whole, does not] depend on the good or ill will of the individual capitalist. Free competition brings out the inherent laws of capitalist production; external coercive laws which have a power over every individual capitalist.” - Karl Marx, 1867

These external coercive laws force all to seek capital accumulation to prosper no matter the cost to the environment, justice, social needs, or life itself. 

“The essence of capitalism is to turn nature into commodities and commodities into capital. The live green earth is transformed into dead gold bricks, with luxury items for the few and toxic slag heaps for the many.” - Michael Parenti


MUNICIPAL-OWNED CASH TRANSFERS 

The Other Findings section of the audit is about CRI’s focus on the city and on the benefits of city transfers. They try to paint municipal-owned utilities themselves as a conflict of interest for the city because if you increase rates, you increase revenue for the city to balance its budget. An undue level of influence from the utility onto the city in CRI’s opinion. 

As noted in CRI’s audit,

“Since 2006, BPUB had an obligation to transfer to the COB ten percent of the gross revenues on a quarterly basis. The transfer amount is then reduced by the amount owed to BPUB for COB utility services. The gross revenue calculation is adjusted by funding requirements to the Southmost Regional Water Authority and all costs for the purchase of power and fuel. Thus, the city transfer is directly impacted by any rate increases (or decreases), but increased collections due to the cost of fuel and purchased power do not factor into gross revenue.

The audit notes that BPUB applied pressure on the city by reminding them about the benefits of the city transfer revenue and the consequences to that revenue stream if the rate increases are rescinded without a plan to make up the difference. All while acknowledging that the city “has all rights and power to roll the rates back.”

BPUB giving the pros and cons about rate increases or decreases affecting the city coffers is not undue leverage over the city.

I disagree with this opinion on city transfers and think more publicly- or municipal-owned enterprises in key productive areas should be operating to generate more revenue (e.g., selling surplus capacity) and more value for the city and its surrounding areas without increasing taxes or providing tax credits as in the case with established or proposed polluting infrastructure. 

There is a higher level of accountability and transparency applicable to publicly-owned enterprises than private ones. For example, this audit requested by the current city administration “to review the disposition of funds expended in connection with the Project and the Pipeline” partially allows citizens to determine where their political leaders are going astray and exert well-targeted pressure to put them back on track. 

Public participation will provide public institutions with direct input on how to best respond to citizen needs with shared, verifiable facts and bring additional information into the open so the public can understand the problem for themselves and include all reasons, opinions, and intentions for delays into everyone’s decision making process. 

Don’t let the audit be used to justify privatization of our utilities and neglect the handful of wealthy, influential individuals and entities that benefited from the pain of these increased rates and who took advantage to mislead, intentional or not, parts of the board, the city, and the people. As the audit notes, BPUB is the only city-owned electric provider in the so-called Rio Grande Valley. 

If I was a capitalist or one of their fans observing one of the largest municipal-owned assets in the state and country for more than 60 years, with its stable growth rates, I would want to profit from that public service by pushing privatization and market liberalization when they make major mistakes like they have in these dirty projects. 

You don’t have to be a socialist to see the class war in action locally. 

On October 10, 2022, Keila Taboada, an angry Brownsville resident expressed her frustration in the BPUB’s public meeting,

“I think it’s time you guys take action in reducing [utilities] rates that were raised for us,” “...Because, clearly, they went to nowhere, just to enrich other people.

Susan Ruvalcaba saw the project as an

“elaborate plan to steal money from the citizens of Brownsville.”

Who are the capitalists that milked BPUB throughout this painful process? 


DISPOSITION OF FUNDS

To recap, how long was this going on? 

~ 9 years from the start of communication in 2011 to when BPUB terminated the final agreement in 2020.

~ 4 years of a series of five rate hikes. The first taking effect April 1, 2013, and the last on October 1, 2016. This series of rate hikes increased the electrical rates by a total of 36% over four years, or 41.57% when compared to pre-Project rates.

Below is the timeline found in page 35 of the project after the Definitive Agreements were signed.

How much money was raised related to the rate increases?

~ $118 million (allegedly ~ $14 million per year as per FY 2016 records)

Where did that money go?

~ $35 million had been spent on the project, while 

~ $29 million was set aside in a Tenaska Equity Fund, and 

~ $54 million was allegedly allocated to fund rate reductions beginning in April 2016.

According to the full audit, half of the rate increases went to O&M and allegedly that wouldn’t have been approved without a large capital project. However, the executive summary emphasizes that the approved allocation related to the rate increases didn’t go to O&M.

“none of the revenue raised from the O&M portion of the rate increases was ever used for O&M. All of the revenue went to the Project, the equity fund, or the rate-stabilization program.”

According to Tenaska’s fact sheet, the natural gas-fueled power plant was proposed to be built on 270 acres in north Brownsville on the north side of the FM 511 Corridor at Old Alice Road. This general location is where BPUB built their new Service Center and Service Yard. 

According to BPUB’s FY18, FY21, and FY22 annual budgets, the new Annex building on Robinhood Dr., and the new Service Yard near the FM 511 and Old Alice Road intersection are considered O&M expenses.

Without conducting my own full investigation with the parties involved in this failed project and because I am just one concerned citizen with limited time, resources, and no experience in forensic accounting, I was unable to verify if the money raised was also used in the construction of these new buildings.

Looking at the dates they were built and the time frame of the increase rates, it appears that the money from rate increases was not used for these new buildings. Nevertheless, the proposed general location of the failed power plant is now BPUB’s new Service Yard.

Brownsville PUB Annex Building

https://nobletx.net/project/brownsville-public-utilities-board-annex-building-in-progress/

~ $15 million of the rate increases went to a fuel subaccount for the “Bill Reduction Plan.” A “solution” implemented after April 2016 to lower residential electric bills by “stabilizing” the Fuel Purchase and Energy Charge (FPEC) that is passed through to customers. 

“The plan was to use the fuel subaccount to lower the average customer bill (1000kwh) to $102. The goal, of course, was to keep the energy charges (rates)… customers were able to benefit from an 8% reduction in bills and BPUB was able to avoid a loss of revenue from rate rescission.”

“Over the next several years, this rate stabilization program would be used as a ready defense whenever rate rescission was discussed.”

In section 6.5.4. - Inflated Consulting and Attorney Costs Due to Unnecessary Extension, of

all pre-development expenditures, BPUB spent the most on attorney fees. Throughout the life of the Project, BPUB spent approximately $9.2 million on legal services to DTRG, Trevino & Bodden (Trevino), Smith Murdaugh Little & Bonham (SMLB), and Andrews Kurth. BPUB retained Trevino as local board counsel and DTRG as special board counsel. Andrews Kurth, at the urging of Eddie Trevino, was hired to handle ROW condemnation proceedings and act as bond counsel, while SMLB handled ROW acquisition, condemnation, and eminent domain legal proceedings.”

Over half of all legal fees were paid to DTRG at nearly $4.7 million. 

Regarding the lack of impartial guidance, I agree with CRI’s observation of a vulnerability about term limits for public board members and how it negatively impacts the retention of pertinent institutional knowledge for proper long-term governance. I also agree that “it was Management’s duty to provide the context of previous Board decisions” when reviewing changing presentations over time with the city. 

However, with the authority to decrease or defer the rates anytime, it was the city’s duty to pay attention and be critical of any public-private partnership where one party is trying to meet its mission to reliably meet public energy demands over time, another party is seeking profits in an unprofitable global market at the time, while the others are milking BPUB through delays, false assurances, and attorneys’ fees. 

The audit agrees with me as well stating that the city “could have also chosen to defer the rate increases until the Project was more certain.”

In a for-profit system, they will be scammers and corruption, and the elected city commissioners should evaluate any project from that understanding to avoid opportunism and impropriety. 

Take for example the most paid law firm DTRG hired by BPUB and their alleged mistreatment towards about half of the City of Poteet’s city council in 2020. 

The public opinion in Poteet to get rid of DTRG was conveyed by two council members which caused the council in a split decision to table the item.

“Newly elected councilman Jeremy Fernandez discussed terminating the City of Poteet’s legal counsel of Davidson Troilo Ream Garza, PC, including City Attorney Molly Solis.”

“‘I was wanting to see about an attorney who actually won’t be biased and actually give legal advice to council and mayor across the board, equally. As well as cost efficiency and job performance,’ said Fernandez.”

Councilman/Mayor Pro Tem Nicholas Sanchez “asked council if they were willing to risk the city’s financial standing by terminating the law firm based on hearsay. Mayor Sanchez responded that the current firm is costing the city money with their pending cases.” 

It appears DTRG has a history of dragging their feet to accrue attorney fees. Everyone is biased, especially lawyers. Don’t believe them if they say they are not and only look to the law. After all, most private law firms are for-profit entities and have a bias to remain profitable. 

Even if that means prolonging municipal-led projects by taking advantage of the lack of institutional knowledge and the lack of critical, disciplined, and principled leaders in the city and utility boards. 

This includes the local capitalist media that emphasized the “BPUB bad, be mad at it” narrative and neglected the few wealthy individuals and entities listed in the audit as well that benefited from the people’s suffering. I don’t see their names in the headlines where they should be and I don’t expect them to be.

Inventing Reality: The Politics of the Mass Media by Michael Parenti


CONCLUSION 

CRI makes clear their opinion that “BPUB’s comfort with other firms and their reluctance to issue public RFP’s can sometimes create an overly comfortable relationship at the sacrifice of independence.” 

For corrective action, CRI provided a list of recommendations in page 14, one of them being that the RFP “should also allow for proposals involving renewable generating resources.” I can’t disagree with this recommendation. 

To wrap it all up and to get to the audit’s core allegation about BPUB’s future capacity shortage propaganda to finalize the power plant:

“Perhaps more so than any other factor, the driving force behind the 2011 IRP and the subsequent pursuit of the Tenaska Project was the widely publicized impending capacity shortage described in the IRP and frequently vocalized by BPUB and Mayor Martinez. Yet, the 2011 IRP merely parroted an outdated and overstated forecast at Management’s direction.”

Wait, at BPUB's direction? Who was contracted “to study and write the IRP,”  who wrote the “Power Supply RFP”, and who “prepared” the biased presentations, and who “completed” the Cost of Service Study in February 2013? I didn’t see anywhere in the audit explaining BPUB forcing B&V to cook their numbers. 

Requesting B&V to use the Beck Forecast without changes appears to be a decision within its authority to capture data at that time for “load forecasts performed in 2009 for BPUB” and work from there. 

“R. W. Beck, Inc. (“Beck”) was retained by BPUB in 2008 to prepare a long-term forecast of retail electricity sales, energy requirements, and peak demand of the BPUB electric system (the “Beck Forecast”).

The Beck Forecast was prepared for the 20-year period beginning calendar year 2009 through 2028 and relied on an econometric approach to forecast retroactive retail electricity sales over the period 1994 through 2008 based upon certain explanatory factors that were found to be highly correlated to retail sales.”

“The Beck Forecast concluded that system energy requirements were expected to grow at annual average rates of 4.2% from 2009-2018 and 3.0% from 2019-2028. System annual peak demand (in MW) was expected to grow slightly faster, at 4.3% per year from 2009-2018 and 3.1% over 2019-2028. The results of the Beck Forecast reflected annual peak demand growing to 405.0 MW by 2018 and to 548.7 MW by 2028, as reflected in Figure 1 below.”

As you can see in Figure 1, the 2009 Beck Forecast’s historical data is from before December 2007 (start of economic crash), showing stable, modest growth in energy demand. The issue is with the projected peak demand growth rate potentially not including data from the global economic crash.

“Data used to illustrate 2008 was projected by Moody’s and likely does not reflect the economic downturn of the 2008-2009 period.”

However, as admitted by B&V below and without them plainly saying not to rely on the Beck Forecast.

“The load forecast utilized in this IRP was developed for BPUB by R.W. Beck, Inc. /SAIC in the 2009 timeframe. On the basis of the load forecast and existing generating resources, BPUB is projected to require additional capacity to satisfy its reliability criteria beginning in 2012...The need for future resources was determined on the basis of available existing resources and BPUB’s projected peak demands through the 2031 planning horizon. [emphasis added by me]”

As John Bruciak stated in the audit, showing his cautiousness and awareness of the uncertainty in his industry.

“Those things (load forecasts) are as good as the day you published it, and they may be really accurate, some of them are. Most of them change”

Under section 6.1.2.3.1. - Contrived Capacity Shortage, the audit notes B&V’s peak summer demand forecast and projected capacity shortage was based entirely upon the Beck Forecast.”

Below B&V explain the Beck Forecast with some cautionary detail.

“The need for future resources was determined on the basis of available existing resources and BPUB’s projected peak demands through the 2031 planning horizon….the expansion plans in this IRP focused on a single set of input assumptions in this regard, consideration should be given to evaluating the potential impact of changes to various input assumptions (such as the load forecast, fuel prices, CO2 emissions allowance prices, and market power prices).

Or as CPI rephrased it, a reassessment of growth rates assumptions before making any future resource decisions. CPI focuses on BPUB not using four years of real data it paid to be collected.

“In using the Beck Forecast’s Peak Demand as the IRP’s driving factor, Management ignored nearly four years of historical data and its own policy, intentionally casting aside the opportunity to derive meaningful results from the studies for which BPUB paid substantial money.”

B&V could've recommended or explicitly state BPUB’s projected peak demands were based on unrealistic assumptions and that they should not be relied upon at all. However, that would be against their best interests to be profitable. Instead, B&V only delayed by

“suggesting deferring long-term action until an IRP update in 2014 when the update can take into account what is known at the time.”

It appears CRI is doing B&V’s job for them years later.

“Further, Management directed B&V to add an additional capacity reserve margin of 13.75%, falsely claiming to its Board and the COB that it was an ERCOT requirement.”

If you read page 21, it appears that the 13.75% capacity reserve margin is confused by BPUB to be a requirement by ERCOT onto them instead of an internal protocol for ERCOT. There may be some reason for that confusion. Take a look.

“ERCOT, as the independent system operator for the region, did in fact use a 12.75% target reserve margin capacity internally to manage the region’s power needs and had discussed increasing its margin to 13.75% around 2011.”

“‘Yet.. according to an ERCOT representative on August 5, 2022: ‘ERCOT does not have a Reserve Capacity Margin requirement for LSEs [Load Serving Entities]. There has not been a change to no longer have a requirement for Reserve Capacity Margin. There has never been such a requirement in the ERCOT market. [Emphasis added (by CRI)]

According to CRI,

“It appears that the reserve margin’s inclusion, at Management’s request, was merely another means to artificially inflate the hyped capacity shortage even further in an effort to justify the Project.” 

“Using allies at the BEDC [Brownsville Economic Development Commission], Mayor Martinez, and Management pushed the Tenaska Project on commissioners as if it was an emergency, using the artificial “imminent” capacity shortage together with a narrative of failed business development efforts, which they claimed were linked to lack of generating capacity – an intentional fabrication. Management’s overemphasis of an artificial and contrived capacity shortage and lost business prospects were key drivers in the decisions of the Board and COB to approve the Project.”

The audit provides no evidence to prove if capacity shortage had the resulting effects of large manufacturing and other energy intensive productive industries’ inability to operate in the Brownsville area as

“an intentional fabrication.” 

The audit doesn’t verify if there were actually any lost business prospects from the future capacity shortages projections and relied on words from anonymous sources in the Greater Brownsville Incentives Corporation (GBIC) and in the city government to develop their unsubstantiated allegation that

“none of the cases cited were actually factual.”

The only so-called “evidence” the audit listed is an email exchange too vague to determine intention or if BPUB “used its influence over certain commissioners to insure the smooth reception of the Project”

I don’t find evidence in the audit showing intent to purposely misrepresent, change facts, or omit key information to create a fake narrative that will ensure the project and the related rate hikes were approved, nor to ensure a distortion of the project’s status and viability. 

The individuals and entities named in this audit should also be investigated to gather more information about this core allegation. So we can verify if the future capacity shortage was propaganda to finalize the project with no real basis for expansion as the population steadily grows as well as its many needs and wants for prosperity.

As you can tell, I disagree with this unsubstantiated allegation, that is, to justify the project, BPUB and the former mayor repeatedly publicized a false capacity shortage issue that all utilities face with population growth from non-industrial and industrial sectors just like in Brownsville. 

Also, I can allege, after reviewing the Contrived Capacity Shortage section, there is a possibility that BPUB confused ERCOT’s internal protocol as a requirement for them to follow. 

On October 11, 2022, at 11:45 a.m. Tuesday, BPUB issued a statement as part of their initial response to the audit’s release, to the public, and to the angry protesters that were outside the Board’s public meeting that was held the day before on Monday:

Brownsville PUB Issues Statement on Tenaska Audit

https://www.brownsville-pub.com/bpub-board-issues-statement-on-tenaska-audit/

More information from BPUB will be revealed in the weeks and months to come. BPUB’s response to the audit was that they 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.”

I doubt the others named in the audit will have the same pressure like BPUB to explain themselves to the media or in front of the public. There may be internal policy or personnel changes in the private companies to keep making profits after this audit but they are not accountable to the public compared to BPUB or the city government.

The audit does note that the issue was made worse by some of the key consultants that were hired to be independent advisors but had a clear conflict of interests with BPUB and Tenaska. One of them was a former Enron executive!

“... given the size of the Project and the number of moving parts, Board members should have been more skeptical and asked more questions, especially as the failure of Tenaska to get subscriptions continued to mount.”

No complaint from me on this recommendation. 


Let’s step back for a while and get some perspective from two individuals that have decades of experience proposing these types of exploitative projects to local leaders in the global south.

As experienced by former Economic Hit Man John Perkins,

“it had been easy for me to provide government officials… with impressive materials that they could use to justify the loans to their people. My staff of economists, financial experts, statisticians, and mathematicians was skilled at developing sophisticated econometric models that proved that such investments - in electric power systems, highways, ports, airports, and industrial parks - would spur economic growth.” 

He continues, for

“years I also had relied on those models to convince myself that my actions were beneficial. I had justified my job by the fact that gross domestic product did increase after the infrastructure was built. Now I came to face the facts of the story behind the mathematics. The statistics were highly biased; they were skewed to the fortunes of the families that owned the industries, banks, shopping malls, supermarkets, hotels, and a variety of other businesses that prospered from the infrastructure we built.”

“They prospered

Everyone else suffered”

John Perkins met Howard Parker in Bandung who was the retired chief load forecaster for the New England Electric System. During that time in Bandung, Howard Parker was

“responsible for forecasting the amount of energy and generating capacity (the load) the island of Java would need over the next twenty-five years, breaking this down into city and regional forecasts. Because electricity demand is highly correlated with economic growth, his forecasts depended on [John’s] economic projections. The rest of [John’] team would develop the master plan around these forecasts, locating and designing power plants, transmission and distribution lines, and fuel transportation systems in a manner that would satisfy [their] projections as efficiently as possible…”

Seeing right through John Perkins’s embarrassed guilt for believing the numbers cooked up by their boss Chas. T. Main, LLC (MAIN), an international consulting firm, Howard Parker explained

“I forecasted electric loads all my life - during the Depression, World War II, times of bust and boom. And I can say for sure that no electric load ever grew by more than 7 to 9 percent a year for any sustained period. And that’s in the best of times. Six percent is more reasonable.”

Now that you have John Perkins’s and Howard Parker’s experience with their forecasting electric capacity for global south countries, we can see a familiar pattern with another law firm, B&V, that the audit cites as a conflict of interest in the project. Take a look at page 19, under Contrived Capacity Storage.

The audit then spotlights that B&V

“emphasized its concern over Tenaska’s ability to garner enough interest by prospective subscribers, a theme that resonated throughout the following six years.”

The audit continues by noting B&V kept telling the board that the capacity needs in the Beck Forecast which BPUB wanted to use to forecast the load in 2011 with dynamic absolute and non-absolute data from the 2009 Beck Forecast were overstated

“due to the lackluster state of the Greater Brownsville Area economy.”

That being said, it acknowledges

“that utilities planning cycle typical consists of a load forecast, which projects future power needs and an IRP, and given Management’s plan to update its long-term load forecast every two years, the use of a load forecast based on actual data from 2007 and prior years…, four years later is nonsensical and assures unreliability in the results.” 

John Bruciak didn’t show to be over reliant on the evolving determination methodologies of load forecasting and showed institutional knowledge to not blindly rely on highlighted changing data and uncertainties presented by B&V, which the Beck Forecast also cautioned to make these decisions “with care and with an allowance for flexibility.” 

There was one part that interested me about the Beck Forecast and the modest estimates it provided described by CRI, a CPA, who is not a load forecasting expert, as “an unrealistic assumption.” CRI explains, “When viewed together, the forecast graphs look very similar; all project the same consistently rosy, above average growth, as illustrated in Figure 3 below.

It shows four forecasting graphs. It compares Megawatts (MWs), MW per hour (MW/h), Average Customer Count, and Peak Demand with Historical (absolute data) and Projected (non-absolute data) over three decades (cycles) from 1999 to 2028.

The audit focuses on certain time frames but I wanted to see the estimated average annual growth rate for each graph over three cycles. Below are my calculations for estimated average annual growth rates per graph over three decades:

  1. MWs v Historical and Projected Net Energy for Load 

    • ~ 3.6%

  2. MW/h v Historical and Projected Residential Sales 

    • ~ 3.8%

  3. Average Customer Count v Historical and Projected Residential Counts 

    • ~ 2.7%

  4. Peak Demand v Historical and Projected Annual Peak Demand 

    • ~ 3.8%

After learning from John Perkins’s experience of trying to please his boss MAIN who expected both John Perkin and Howard Parker to come up with growth rates of at least 17% percent per annum! I don’t think these growth rates are “unrealistic assumptions.” 

The economy at the time was slowly recovering for a few while the rest struggled more after the 2008 Great Recession. The local growth rates at the time didn't show an above average growth but a modest one below the reasonable 6% per year from an expert with decades of institutional knowledge and international experience in load forecasting. 

At that time, with the current size and growth of the local economy, anything at or above ~6% per year, depending on other variables, should be highly scrutinized as impropriety.

“In August 2016, CFO Leandro Garcia requested assistance preparing a list of concerns that would arise if the COB deferred or permanently rescinded the October 1, 2016 rate increase. Bond Counsel Andrews Kurth and Financial advisors Estrada Hinojosa were asked to opine. Mr. Garcia relayed the following:

The scheduled rate increase for Electric totals 7% of which 4% is to support ongoing growth and O&M and 3% to support Tenaska debt service. Deferring the rate increase at this time may be okay (except growth and O&M part which impacts 2017 budget) so long as the current or future Commission is willing to reinstate it at such time that Tenaska provides a notice to proceed. Rescinding the rate increase on a permanent basis will impact BPUB’s ability to demonstrate debt service capacity for new Tenaska debt and may result in rating agency negative outlooks and/or downgrades.”

As stated above, Howard Parker needed John Perkins’s inflated economic forecasts to determine the estimated load needed to achieve the unrealistic economic growth presented to their client so their client can agree on taking out large amounts of debt from western institutions like the International Monitoring Fund (IMF) and the World Bank. 

Which came with strict structural readjustment conditionalities and debt servicing fees. What does John Perkins’s and Howard Parker’s experience explain regarding foreign government loans and projected growth rates? As the audit notes,

“the vast majority of expenditures and write-offs were for Engineering and Legal Fees.” 

John Perkins explains the intent about their types of projects when advising local leaders.

“they were intended to create large profits for the contractors, and to make a handful of wealthy and influential families [see Section 6.3  Conflicts of Interest & Table 7 - Top Vendor Payments]... very happy, while assuring the long-term financial dependence and therefore the political loyalty of governments… The larger the loan [or rate increase], the better. That fact that the debt [or higher rate] burden placed on a country [or utility] would deprive its poorest citizens of [affordable energy], healthcare, education, and other social services for decades to come was not taken into consideration.”

As Howard Parker rebelliously said to John Perkins in Bandung,

“No need to cook the numbers… I’ll not be part of that scam, no matter what you say about the miracles of economic growth!” 

Who are the handful of wealthy and influential entities listed in the audit that benefited from the people’s suffering and took advantage to mislead parts of the board and the city? 

After reviewing section 6.1.2.2. - Flaws in Variables, Assumptions, and Methodology and Table 7, they are:

  • Tenaska,

  • Max Yzaguirre,

  • B&V,

  • DTRG, and

  • Other Engineering and Legal Services

Money that had been budgeted to operate an essential service properly was diverted to pay a equity fund and debt serving fees to Tenaska and potentially risk its credit score being degraded by the Big Three credit rating agencies that had a major role in the 2008 subprime crisis. The financed subprime mortgages could not have been sold without ratings by Moody's Investors Service, Standard & Poor's, and Fitch Ratings.

Shackled with this Tenaska parasite, BPUB and the city begin to withdraw from this exploitative relationship. That’s when the knives come out from all profiting off the debtor and its ratepayers, and from all who want to profit in the future from this newly open window of opportunity.

In this moment of public shaming, BPUB admits “mistakes… were made” and that they will investigate

“the root causes, and make whatever structural and/or personnel changes that are needed to ensure the Brownsville Public Utilities ship returns quickly without delay to its core mission and the major challenges we and the entire utility industry are facing.”

With the assistance from ratepayers’ rightful outrage under the slogan to “Put the Public Back in PUB”, unprincipled opportunists in our community, in our city government, and inside BPUB will use this moment to, as conceded above, “make whatever structural … changes'' needed and John Bruciak is in their way.

In a for-profit system with its myth that “free competition” is the solution, it will most likely include balkanization and privatization of its electric, water, sewer, and other public sector institutions and sell them to capitalist parasites who only seek larger profits for themselves and with no chartered mission to its city and ratepayers to create value as their provider of utility services. 

The only structural change needed in this case is to transition from capitalism to socialism. So that municipal-owned enterprises can meet their mission without parasites legally allowed to steal from the people. 

Where decommodification, decarbonization, and decolonization of energy production is planned by and for the people. Especially applying proposals from the people most affected and least responsible for the theft and plunder caused by the few least affected but most responsible.

These are the initial phases of the attack and when the proposals to structurally change the enterprise from public to private are propagated by the capitalists, their media, their fans, and the opportunists - it must be resisted on all fronts! 

Don’t neglect the parasites that benefited from the pain, who played with the vulnerabilities within the board and the city, and who stole from ratepayers! Those parasites need to be blacklisted, criminally investigated, and prosecuted for reparations!

Don’t allow the Nazi policy of privatization!

http://www.ub.edu/graap/EHR.pdf