CEC Pulls Plug on Bioenergy Plant Funding

The California Energy Commission this week took the rare step of cancelling an active financial grant when it terminated a multi-million dollar award to a bioenergy company due to what the commission called “significant and unresolved financial irregularities.”

The action was by unanimous vote at the commission’s Dec. 9 business meeting.

The grant dates back to March 2013, when the commission awarded Mendota Bioenergy $4.9 million to build and operate the Advanced Biorefinery Center in Fresno County.

The facility was expected to produce 60,000 gallons of 200 proof advanced biofuel ethanol from sugar beets. The ultimate aim was to demonstrate the economic viability of a possible future commercial facility that potentially could produce 15 million gallons annually.

In November 2014 Energy Commission staff identified and began questioning an issue that later revealed significant financial irregularities under the agreement, according to John Butler, a manager in the agency’s Fuels & Transportation Division.

The irregularities date back to 2013 when Mendota submitted two payment requests totaling nearly $1.8 million for equipment purchases from Mendota’s subcontractor, Easy Energy Systems, Butler said.

Even though the Energy Commission disbursed the funds to Mendota, only $750,000—42 percent of the funds received—was then paid to the subcontractor. Mendota retained the approximate $1 million balance.

Last December, Energy Commission staff demanded the return of the $1 million, but Mendota said returning the money would jeopardize the project’s momentum and viability due to the commission’s lengthy process of approving and paying invoices.

“Mendota treated the funds as an advance, which is not allowable in this situation,” Butler said. “Mendota retained and subsequently used the funds without obtaining Energy Commission staff approval.”

This past January, Mendota paid back $300,000 of the amount, but no more. In July, commission staff sent the company a letter demanding payment of $1.3 million, which has yet to be paid, leading to this week’s grant cancellation.

When given time to respond during the business meeting, Mendota Bioenergy general manager William Pucheu, a beet farmer by trade, said his facility has “fundamental misunderstandings” with Energy Commission staff based on misconceptions regarding how the funds could be spent. Pucheu called for a neutral third party auditor.

“Mistakes have been made on both sides,” Pucheu said.

The Energy Commission, however, didn’t agree and voted unanimously to terminate the grant.

“This is not a problem where we can turn to a third-party auditor and say ‘can you resolve this?’” Energy Commission President Bob Weisenmiller told Pucheu. “We’re state officials, we have the obligation to make tough decisions like this.”

The funds for the grant came from the Commission’s Alternative & Renewable Fuel & Vehicle Technology Program. That program awards up to $100 million annually to various public, private and public-private partnership projects to promote alternative-fueled transportation, including electric and compressed natural gas vehicles.

Also during the meeting, which was the last public gathering of the year for the board, the commission adopted amendments to its Appliance Efficiency Regulations, which cover the water use of showerheads.

In adopting and implementing the regulations, California is now allowing the development and sale of lower flow showerheads than currently allowed under the previous regulation.

The minimum flow at 20 and 45 pounds per square inch is now a percentage of the measured flow rather than the maximum flow.

The efficiency regulation amendments were made under the authority of Gov. Jerry Brown’s April 1 executive order requiring the commission to adopt emergency regulations establishing standards that improve the efficiency of water appliances available for sale and installation in California, such as faucets and showerheads.