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Remember Tenaska in Brownsville? You Paid $118 Million for a Power Plant That Never Got Built

3 days ago
6 min read

$118 million. Five rate hikes. Zero power plants.


That is the short version of the Tenaska deal, the largest public utility failure in recent Brownsville memory. If you paid a Brownsville Public Utilities Board electric bill between 2013 and 2016, you helped pay for it.


The plant was supposed to be an 800-megawatt natural gas generating station on about 270 acres at F.M. 511 and Old Alice Road. It was never built. Not one shovel of construction.


Four years after a city-commissioned forensic report laid out how it happened, the story has mostly faded from public view. With Brownsville once again planning for big new power demand from LNG, port industry, SpaceX and data centers, it is worth remembering.



THE DEAL


In January 2013, Omaha-based Tenaska Inc. and BPUB announced an agreement to build the plant. The estimated cost was about $500 million.


BPUB would own a share entitling it to 200 megawatts, one quarter of the output. Tenaska, working through a company called Tenaska Brownsville Partners LLC, had to find buyers, called subscribers, for the other 600 megawatts. Without those buyers, the plant could not be financed.


BPUB would also pay development costs, supply water, and build a gas pipeline of about 50 miles from the Edinburg area to fuel the plant.


To pay for its share, the Brownsville City Commission approved a series of five electric rate increases in December 2012. They took effect between April 2013 and October 2016. According to the forensic report, they raised electric rates about 36 percent.


THE BUYERS NEVER CAME


Tenaska never signed a single subscriber.


The deadlines were extended at least six times. Natural gas prices fell. Wholesale power on the open market got cheaper. Brownsville's own financial advisor, Noe Hinojosa Jr., told The Bond Buyer that Tenaska had not found enough customers to make the project viable.


The ratings agencies noticed early. In November 2013, Fitch Ratings wrote that BPUB's participation as proposed "will likely lead to a rating downgrade."


The rate hikes stayed in place anyway.


According to BPUB's own timeline, the project was terminated on February 4, 2020.


WHAT THE FORENSIC REPORT FOUND


In November 2021, the City of Brownsville hired accounting firm Carr, Riggs & Ingram (CRI) to examine what happened. Its report, dated September 29, 2022, was released by the city that October.


The findings below are the conclusions of that report. They are the opinions of a forensic accountant, not findings by any court.


The shortage. BPUB sold the project as the answer to an urgent electricity capacity shortage. The report concluded that the shortage rested on an outdated, overstated 2009 load forecast that management directed consultants to use.


The ERCOT claim. Management added a 13.75 percent reserve margin to the forecast and told the board and the City that the state grid operator, ERCOT, required it. In August 2022, ERCOT told the auditors it has no such requirement. The report said statements made by then-CEO John Bruciak and another manager "appear to have been intentionally false."


A document page with highlighted text about ERCOT; blue-highlighted sentence says statements by Mr. Bruciak and Ms. Gilbert appear intentionally false.

The consultant's work. The report said a draft presentation from engineering firm Black & Veatch was replaced with a BPUB version "biased toward the Tenaska proposal," and that cheaper alternatives were left out of what decision-makers saw.


The bottom line. The report's opinion is that management, with the participation of then-Mayor Tony Martinez, intentionally misrepresented or omitted key information to win board and city approval of the project and the rate increases.


The silence. The report found that the BPUB board knew the project was dead in November 2017 but did not tell the City Commission or the public until August 2020. According to the report, part of the reason was to protect pending condemnation cases for the pipeline land.


Document page with a blue-highlighted sentence about the Board delaying notice until August 2020, plus section 8 Restrictions.

The pipeline. BPUB kept acquiring right-of-way for a pipeline to a plant that would never exist. The report said that work continued after April 2017 on "false pretenses."


The report also found that the BPUB board did not intentionally mislead the City, though it said members should have asked harder questions. And in the vendor payments it sampled, it found no evidence of fraud.


Slide titled Why the Project Was Terminated with bullets on market changes and a beige Communication Commitment notice about poor customer updates

FOLLOW THE MONEY


Here is where it gets complicated. The numbers depend on who is counting.


The forensic report puts the revenue from the Tenaska rate increases at about $118 million.


BPUB's own figures say $114.8 million. By BPUB's accounting:

- $74.3 million went back to customers through a "Bill Reduction Program" from 2017 to 2022

- $29 million was set aside in a Tenaska Equity Fund

- $11.5 million was transferred to the City of Brownsville


KRGV reported in 2023 that the figures in a BPUB statement added up to $144 million, even though the same statement said BPUB collected $114 million.



The report counted about $30.9 million in project spending, most of it on engineers, lawyers and consultants. About $9.2 million went to legal services alone.


That bill reduction program deserves a closer look. The report said it was used as a defense against rolling back the rate hikes. Put simply, customers paid higher base rates, and some of that money came back as a lower fuel charge. Ratepayers were financing their own discount.


The City also had a stake. BPUB transfers 10 percent of its gross revenue to the City. When rates went up, so did the City's cut. By fiscal 2017, BPUB transfers made up nearly 10 percent of the City budget. The report said that created a conflict of interest for the City itself.


WHO GOT PAID


Among the project's top vendors, according to the report:

- DTRG, an outside law firm: about $4.66 million

- Willbros: about $3.73 million

- Ambiotec: about $3.69 million

- Black & Veatch: about $2.16 million

- Tetra Tech: about $2.15 million

- The Yzaguirre Group: about $1.98 million


The report flagged several conflicts of interest.


Consultant Max Yzaguirre was paid a flat $35,000 a month, with no time records required. Under a 2015 extension, Tenaska funded that payment through BPUB while Yzaguirre advised the BPUB board. The report said every extension he helped negotiate benefited his own fee arrangement.


Black & Veatch helped plan the project while also assessing whether it should go forward, and it had separate contracts with Tenaska entities.


A Tenaska affiliate, Tenaska Power Services, also provided BPUB with scheduling, market and energy services.


BPUB's general counsel during the project, Eddie Treviño Jr., later became Cameron County Judge. The report said about $1.28 million of his firm's fees were Tenaska-related and questioned his role. Treviño said in a statement that his role "was as a legal advisor and not as a decision maker" and that his firm billed fairly.


WHAT HAPPENED NEXT


Bruciak, who led BPUB for nearly 25 years, was placed on 60 days of paid administrative leave in October 2022. He announced his retirement in January 2023. He was not fired.


BPUB's board said the report contained "some potential factual issues." The utility hired a local firm, Burton, McCumber & Longoria, to review the numbers. That review did not match the forensic report's figures. Then-Commissioner John Cowen Jr., now mayor, said he believed the report's findings were fundamentally accurate.


The City Commission rolled back the Tenaska rate hikes.


In May 2023, the Tenaska Equity Fund was refunded to customers. With interest, it totaled $31.35 million. Current customers got a bill credit. Former customers were mailed checks.


Also in May 2023, voters approved charter amendments giving the City Commission more power to appoint and remove BPUB board members. Proposition E, which lets a two-thirds supermajority remove up to three board members in a year, passed 6,390 to 2,026.


THE QUESTIONS NOBODY HAS ANSWERED


The forensic report recommended that its findings be forwarded to authorities for review. No criminal charges have been publicly filed in connection with the Tenaska project, according to available records. Was the report ever sent to a prosecutor? If so, to whom, and what came of it?


What happened to the pipeline land? BPUB spent years acquiring right-of-way through condemnation for a pipeline that will never be built. How many parcels does it still hold, what did they cost, and what is BPUB doing with them?


Why do the numbers still disagree? The forensic report, BPUB's project page and BPUB's own January 2023 statement give different totals.


Does any Tenaska company still do business with BPUB?


And the big one: what stops it from happening again? The charter changes gave the commission more control over the board. They did not change the fact that the City makes more money when BPUB rates go up.


WHY IT MATTERS NOW (ANALYSIS)


Brownsville is being pitched big power demand again. LNG terminals. Port industry. SpaceX. Data center proposals serious enough that the City paused them with a moratorium.


The Tenaska record shows what happens when a utility's forecast, its consultants and its leadership all point in one direction, and the public cannot see the underlying numbers.


Brownsville residents paid for that lesson. The least they are owed is that the next major power decision comes with a published forecast, competing bids, and the consultant's recommendation exactly as the consultant wrote it.


You can read the full forensic report yourself on the City of Brownsville Auditor's reports page at brownsvilletx.gov/2103/Reports.



SOURCES


- Carr, Riggs & Ingram, Forensic Examination Report, Sept. 29, 2022 (City of Brownsville): https://www.brownsvilletx.gov/2103/Reports

- City of Brownsville statement on the Tenaska audit, Oct. 5, 2022: https://www.brownsvilletx.gov/CivicAlerts.aspx?AID=1472

- BPUB Tenaska project page and TEF distribution details

- The Bond Buyer, "Low Natural Gas Prices Sideline $500M Texas Plant": https://bondbuyer.com/news/low-natural-gas-prices-sideline-500m-texas-plant

- MyRGV, May 2023 charter election results: https://myrgv.com/?p=163306

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