Members of the state attorney general’s office have inquired about municipal energy projects in Rensselaer County in the wake of an investigation of a Warren County cogeneration plant project that could have resulted in criminal charges had prosecutors decided to go that route.
Rensselaer County officials took part in a recent “fact-finding” meeting with members of Attorney General Eric Schneiderman’s Taxpayer Protection Bureau to address questions about the county’s use of “energy performance contracts,” a specialized development tool that allows municipalities to make shortcuts in the usual procurement process. Rensselaer County has approved $56 million in EPC projects with Siemens Building Technologies, an arm of the German engineering giant Siemens.
The attorney general’s office declined to discuss the scope of the inquiry, though county officials were left with the impression it was statewide.
In Warren County, a multiyear investigation by the Sheriff’s Department found there was probable cause to charge County Administrator Paul Dusek for allegedly misinforming the county board of supervisors during negotiation of an energy performance contract for a cogeneration plant. Dusek was the county attorney at the time.
The contract was with Siemens Building Technologies, which is alleged to have intentionally overstated energy savings in the contract, according to the investigation.
Warren County District Attorney Kathleen Hogan requested assistance from Schneiderman’s office, which ultimately declined to pursue criminal prosecution against Siemens. There were indications, however, that the attorney general may pursue the case as a civil investigation.
A Siemens spokeswoman declined to say whether the company had been contacted by the attorney general’s office regarding municipal contracts in Rensselaer County or elsewhere in New York.
Coming Monday: Siemens has a history of allegations of bribery to advance its business concerns.
One of the many aspects of state energy law understood almost exclusively by policy wonks, energy performance contracts allow municipalities to enter into long-term agreements — running up to 35 years — for projects specifically designed to reduce energy consumption and costs.
Unlike regular development contracts, EPCs allow a municipality to hand off to contractors much of the subcontracting responsibilities that would otherwise be handled by local officials. EPCs have piqued the interest of some within Rensselaer County, including at least one engineering firm that has competed with Siemens to secure contracts for major sewer system upgrades.
When EPCs were developed by the state Legislature in the 1980s, “We thought we were doing things like storm windows or maybe a heating plant at a school or a hospital,” said Frank Breselor, the Rensselaer County Sewer District Board chairman and an attorney who helped write the section of law governing EPCs. (Breselor joined the board in 2014.)
Rensselaer County’s use of EPCs has been considerably more ambitious.
Siemens has spearheaded management of upgrade work to the county sewer systems, a three-phase undertaking that includes improvements to pump stations and the county sewage treatment plant as well as an extension of sewer lines to the Regeneron Pharmaceuticals facility in East Greenbush. Under the terms of the EPCs, Siemens manages subcontractors such as well-known local firms BCI Construction and Clough Harbor Associates.
The law states that EPCs must save a municipality money and meet the standard definition of competitiveness under the state’s procurement requirements. County officials characterized the contracts as a tool to streamline projects that otherwise would require multiple subcontracts. By entering into a contract with Siemens, the county could work in direct contact with the company while it managed the subcontractors tasked with performing the work and the purchasing of parts.
Rensselaer County officials are adamant they have done their due diligence before and after signing the EPCs with Siemens.
“This was a new concept for us because it took us outside the normal bidding process,” said Chris Meyer, the deputy county attorney. “We spent a great deal of time trying to flesh it out … and make sure we were on firm footing.”
In 2008, Rensselaer County entered into an EPC with Siemens for an array of county properties. It later struck a multiphase contract with the firm for upgrades to pump stations and a sewer treatment plant that county officials said are necessary under the “Albany Pool” consent order, part of a regionwide blueprint developed to address the blight of sewer system discharges into the river and improve water quality.
These projects, in other words, are not primarily aimed at saving energy.
“Some of these improvements were done through regular bonding mechanisms and bidding processes,” said sewer district counsel David Little. “Only the ones that would create financial efficiencies that could be quantified were included in the performance contracts.”
County officials initially made outreach to state Comptroller Tom DiNapoli’s office, the state Energy Research and Development Authority and the county’s outside bond lawyers to check the appropriateness of using EPCs for such work before going ahead with the contract.
A competing engineering firm began asking questions about the EPCs in 2013.
In May 2013, Rensselaer County Executive Kathy Jimino sent an email to top county and legislative officials regarding a conversation she had with George Weissman, an attorney who is also a commissioner on the state Joint Commission on Public Ethics. Jimino’s email indicated Weissman was reaching out in an unofficial capacity.
The concerns Weissman brought forward were similar to those Jimino had heard previously — from a longtime political operative as well as Delaware Engineering, which had once sought to do work in the county and ultimately did some limited design work in the sewer district. In the email, Jimino did not say where these concerns originated.
“I told (Weissman) we felt confident that the project was being done according to the law and in a cost-effective manner, while at the same time acknowledging that some individual component costs may be higher than a bid,” Jimino wrote, adding that the higher costs were attributed to “wrap around services from the contractor.”
Presented with a copy of the email during a break in a recent JCOPE meeting, Weissman said it had “nothing to do with the commission” and declined additional comment.
In a phone interview last week, Jimino said she did not recall any other details regarding the conversation other than what was included in her email correspondence. “That’s all that I heard from him about it,” she said.
JCOPE spokesman Walt McClure concurred that the situation does not appear to be related to the commission’s work. There is no regulatory mechanism commissioners should follow if information is brought to their personal attention in an informal capacity, he said.
Delaware Engineering had previously raised concerns about oversight of upgrades to the county sewage treatment plant. Delaware also complained that an extension of the sewer district’s reach into East Greenbush to serve the headquarters of Regeneron Pharmaceuticals should not qualify as an EPC.
According to a memo prepared by the County Legislature’s majority’s counsel and legislative clerk, County Attorney Stephen Pechenik felt confident in the county’s use of an EPC because the contract provided “100 percent indemnification if the energy savings are not as represented.”
Delaware sought an outside opinion on the use of EPCs. The analysis prepared by attorney John Privitera of the Albany firm McNamee, Lochner, Titus Williams concluded that EPCs “are a very narrow exception to the general rules of transparency and competitive bidding.”
“The exception for energy performance contracts applies only to energy service agreements that are paid for out of energy savings,” Privitera wrote in the report, which was obtained by the Times Union. State Energy Law Article 9 — the statute that created EPCs — “cannot be used for capital projects or for general building or infrastructure construction,” he wrote.
According to Privitera’s interpretation, contracts may only be for services and do not cover capital projects that are funded from sources other than energy savings.
Delaware Engineering’s Ed Hernandez also specifically raised concerns with the legislature majority’s counsel Craig Crist about the use of EPCs. In an email to Crist, Hernandez seemed to indicate an interpretation of the energy performance contract law could be that municipalities can construct projects without meeting municipal bidding requirements, and without the need for a third party to revue how cost savings projections were reached.
Delaware Engineering officials declined to comment. Hernandez, who has since left the company, also declined to comment.
Ratepayers have had to bear some of the debt service costs for Rensselaer County’s upgrade projects, though county officials said long-run cost savings are expected.
In January, sewer district rates were raised 17.5 percent. A 17 percent increase for those without metered municipal water service also was approved by the County Legislature.
A possible 2016 rate increase of 10 percent is being mulled by the sewer district board, which will submit its recommendations to the County Legislature for final approval.
County officials contend that the rate increase has little to do with the Siemens contract, but stem from the improvements required by the Albany Pool plan consent order.
Martin Daley, who oversees the implementation of the Albany Pool plan for the Capital District Regional Planning Commission, said some of the work Rensselaer County has done falls under a pre-existing consent order from the state, some of it falls under the Albany Pool consent order, and some of it is likely above and beyond. “Some of the work is likely above and beyond,” he said, “because it’s like, ‘Hey, look: We’re going to pull the engine out — we don’t have to fix the air conditioning now, but let’s fix the air conditioning.'”
In a brief statement, Siemens spokeswoman Amanda Naiman said the company has guaranteed more than $500 million in savings for more than 135 projects in upstate New York over the past two decades. “We are proud of the work we’ve completed, which has provided our customers with an improved infrastructure that has reduced its energy consumption and its environmental footprint,” she said.
Chris Bragg contributed. • [email protected] • 518-454-5449 • @matt_hamilton10