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The executives of the embattled Orange County Power Authority (OCPA) sidestepped their company guidelines to avoid board supervision, the California State Auditor said in an audit report released Feb. 28.
Staff members of the green power agency—which procures energy for Irvine, Huntington Beach, Fullerton, and Buena Park—“skirted [their] board’s oversight” when awarding contracts to certain companies.
“[T]he pattern of contracting practices we identified at OCPA that were neither competitive nor accountable to the board’s oversight poses a risk to the organization,” the audit reads.
In one instance, OCPA executives in March 2021 awarded three separate contracts to one proposal instead of issuing one high-dollar contract that would have to be reviewed by the board of directors, according to the audit.
Usually for contracts worth more than $125,000, approval by the agency’s board is required. But OCPA staff avoided that process by creating three different contracts—each not exceeding $50,000—and approved them, according to the audit.
According to the report, when auditors asked power authority CEO Brian Probolsky about the incident, he said the agreement gave the OCPA the ability to “award individual contracts for separate scopes of work,” and the multiple contracts were “warranted given the distinct scope of services provided by each company.” Three contracts were awarded to three companies, from one proposal, instead of multiple proposals for each contract.
The audit said OCPA staff intentionally drafted the service request—receiving seven proposals—in a way as to avoid policy requirements.
Rules such as board approval “were designed to provide transparency and accountability, and they would have been necessary had OCPA entered into a single agreement,” according to the audit.
The audit also revealed that at least four proposals were awarded contracts under similar circumstances, in which the OCPA bypassed board policy.
Due to a limited review, the audit said the problems may be more widespread than what was found, since not all contracts have been reviewed.
The Power Authority also failed to show that the contracts were selected in the best interest of its customers, auditors claimed.
The audit also found that in October 2021, Probolsky amended two $50,000 contracts and increased each of them to $125,000, which is the maximum amount staff is allowed to approve without board consideration.
Although he was within the policy guidelines to increase the contract amount, according to OCPA’s board requirements, doing so would require notifying the board at its next scheduled meeting, which there is no evidence of such, the audit found.
Probolsky also told the auditors he doesn’t know whether he reported the increases, according to the audit.
Since then, though, all contracts have been reported to the board appropriately, spokesman for the OCPA Joe Mosca told The Epoch Times.
After the state audit release, representatives from the power authority told The Epoch Times the agency has addressed many of the key concerns, including hiring new staff and fixing issues related to transparency with more disclosures.
“OCPA takes this audit and all audits very seriously, we see these as a resource as we strive for continuous improvement,” CEO Brian Probolsky told The Epoch Times in a Feb. 28 statement.
Sen. Tom Umberg (D-Santa Ana)—one of six members of the Orange County Legislative Delegation, which called for the audit last September—said the findings are “numerous and troublesome and should worry the residents, businesses, and elected officials of Orange County,” he said in a Feb. 28 statement.
“I hope that this cumulative process has shown the officials and staff at OCPA that transparency and procedures matter in government when entrusted with taxpayer dollars,” he added.
Sen. Dave Min (D-Irvine)—also one of the delegation members—said in a statement that the audit results were disappointing and “raises serious questions of potential fraud, self-dealing, and corporate malfeasance, especially by OCPA’s Chief Executive Officer Brian Probolsky.”
Min also called for the immediate resignation or termination of Probolsky.
Since it began providing power last year, OCPA has faced accusations of not sharing information related to “power purchase agreements,” to its joint member cities when requested. Such agreements show how much power the agency bought, which cities may use to evaluate whether enough power was purchased to supply their residents and businesses.
In response, the OCPA has since begun to form non-disclosure agreements (NDAs) with its members so such information could be shared. Executives of the agency said because the purchase agreements contained confidential information, they couldn’t easily be shared prior to the NDAs.
Probolsky said in the same Feb. 28 statement the cities were concerned or confused about the purchase agreements because they misunderstood “the confidentiality of agreement terms.”
Three of the four cities covered by OCPA have requested such NDAs, he said.
Irvine councilors voted 4–1—with Councilwoman Kathleen Treseder dissenting—hours after the release of the audit to request for an NDA with the power authority. During the council meeting, Irvine officials identified Huntington Beach as the first city to have such an agreement.
The audit requested OCPA to also hire more qualified staff with adequate institutional and technical knowledge of the industry to “safeguard the use of its customers’ funds and their interests through effective oversight of outside consultants.”
The OCPA has entered into 100 power purchase agreements—advised by third-party consultants—totaling more than $1 billion as of September 2022, according to the audit.
Auditors recommended the OCPA hire a “power resource director,” who would oversee the third-party companies hired to purchase power on the agency’s behalf.
OCPA executives said they have been “actively recruiting” for a power resource director, with two qualified candidates considering the offer.
Probolsky said the agency has “already begun working on many of the suggested improvements, not only from the state auditor but also from the previous audits.”
Power authority officials said other recent changes include website improvements to provide more information on discount rates, cost of energy, and default rates for each city displayed clearly, as requested by the most recent audit.
The green energy agency was first formed in November 2020 as an alternative to Southern California Edison, the region’s primary energy provider. The OCPA began serving commercial customers in April 2022, and residential in October 2022.
The OCPA is a community choice aggregation, or CCA, which allows local governments to procure power and sell it to residents and businesses, promising greener and cheaper energy options. OCPA offers three plans for energy: “Basic Choice” which provides 38 percent renewable energy, “Smart Choice” with 69 percent, and a 100 percent renewable plan.
Residents and businesses in Irvine and Huntington Beach were automatically opted into the 100 percent renewable energy plan, costing 7 percent more than Edison’s default basic plan providing 33 percent renewable energy. Huntington Beach later reduced its services to the basic plan.
The Orange County Board of Supervisors also voted to join the power authority to offer services to the county’s unincorporated areas in December 2021, before deciding to leave a year later in December 2022, as the first member to do such.