California’s Imperial Irrigation District wanted to start a community solar program, in which electricity generated by a local solar farm is offered to low-income ratepayers at a low price — and last year, the publicly owned utility was on the verge of making it happen. IID staff said in September they were close to finalizing a contract to buy power from a proposed solar farm at Allegretti Ranch in western Imperial County, near the border with San Diego County.
But there was a problem with the contract.
Frank Oswalt, IID’s general counsel, told the utility’s board of directors in March 2017 that the land where the new solar farm would be built was owned by Ziad Alaywan. Alaywan was the founder and president of ZGlobal Inc. — a longtime IID consultant that had received $18 million worth of contracts from the utility since 2005 and was halfway through a three-year, $9.1-million deal to run IID’s transmission planning unit, a critical part of the utility’s Energy Department.
During contract negotiations for the Allegretti Ranch solar farm, IID staff had “solicited Mr. Alaywan’s professional opinions to certain calculations material to contract terms,” Oswalt wrote in a public memo to IID’s board of directors. That was a problem, Oswalt wrote, because, “a conflict is created when a consultant is asked to consult on a contract in which it has an interest.”
Oswalt also outlined a solution: Alaywan would sell the land. Once the sale was finalized, the attorney wrote, there would be “no legal basis for rejecting a bid by a third party (assuming that one is submitted) based solely on Mr. Alaywan’s former ownership of the real property.”
IID has since signed a 20-year contract to buy power from a solar farm at Allegretti Ranch. But despite assurances from Alaywan that he no longer owns the land, public records show the property is still owned by a company with close ties to the ZGlobal founder — raising questions about whether IID actually avoided the conflict-of-interest problem its top attorney warned against.
The company that currently owns the land, Solana Energy Farms I, LLC, lists Melissa Vaa — an employee of Alaywan’s at ZGlobal — as its registered agent in state business filings. State records also show Solana is managed or owned by Jeremy Vaa — Melissa’s brother and the CEO of Green Light Energy Corp., a solar developer that has worked extensively with ZGlobal.
Based partly on the assurance that Alaywan no longer owned the land at Allegretti Ranch, IID’s board of directors approved the 20-year power purchase contract with the Regenerate subsidiary, Titan Solar 1, LLC, in July. Last week the board voted again, this time approving a $5-million payment to Titan Solar under the terms of the contract — the first of five such payments Titan will receive from IID over the next few years, in what industry experts say is a highly unusual structure for a solar power contract.
Asked about Alaywan’s ties to the company that owns the land, IID government affairs officer Antonio Ortega said in an email that “IID’s board and legal counsel are taking additional steps to ensure the power purchase agreement with Titan Solar 1 conforms to all state laws and regulations.”
It’s hard to track how the ownership of Allegretti Ranch, which used to be a farm, has changed hands in recent years. But public records and statements by Alaywan provide some clarity.
In February 2015, Allegretti & Company granted the deeds for 10 parcels of land to Solana Energy Farms, according to Imperial County property records. Some of those parcels were used for the construction of the 50-megawatt Seville solar project, which was initially developed by Green Light Energy Corp. with ZGlobal as a consultant. That land was later transferred to a subsidiary of Duke Energy, a North Carolina-based power company that bought the Seville project.
Other Allegretti Ranch parcels never changed ownership after they were sold to Solana Energy Farms. Imperial County property records show that the land where Regenerate’s Titan Solar project would be built is still owned by Solana.
But public records suggest Solana’s management may have changed earlier this year, around the time IID’s general counsel said Alaywan had agreed to sell the Allegretti Ranch land.
A June 2015 state business filing showed that Solana’s address was 604 Sutter Street, Suite 250 in Folsom, California — the same office suite as ZGlobal’s headquarters. At the time, Solana was either owned or managed by Apex Energy Solutions, LLC, which is owned by Alaywan, according to other public documents. Solana’s June 2015 state business filing also listed ZGlobal employee Melissa Vaa as the company’s registered agent. Vaa’s address was given as 604 Sutter Street, Suite 250 in Folsom.
In May 2017, Solana filed an updated statement of information with California’s secretary of state. ZGlobal’s address is gone, as is any mention of Apex, the company owned by Alaywan. But the new document still lists ZGlobal employee Melissa Vaa as Solana’s registered agent, albeit with a different address. The company is now managed or owned by Jeremy Vaa, Melissa’s brother and the CEO of Green Light Energy Corp.
Alaywan told The Desert Sun earlier this year he had resolved IID’s conflict-of-interest concerns by selling the Allegretti Ranch land to Green Light and Regenerate Power, which he said had a joint option to buy the property — even though Green Light and ZGlobal share addresses and representatives across more than a dozen limited liability companies, many of which are owned or managed by Alaywan, public records show.
Green Light and ZGlobal have collaborated on the development of at least 11 energy projects in California, including seven in Imperial County, The Desert Sun has found.
Alaywan didn’t respond to emailed questions about the nature of his current relationship with Solana Energy Farms, and whether IID’s conflict-of-interest concerns have actually been resolved. He has said previously that Green Light is “owned by folks that I have no relationship with, neither financial or family.”
Melissa Vaa and Jeremy Vaa didn’t respond to emails seeking comment.
An Imperial County permitting document for a second solar project Regenerate Power is developing at Allegretti Ranch also links ZGlobal to Solana Energy Farms.
The permitting document says correspondence to Solana — which owns the land for this solar project as well — should be sent to Jurg Heuberger. Heuberger is listed on ZGlobal’s website as a member of the firm’s technical team. The permitting document also gives the address of ZGlobal’s Imperial County office as Solana’s mailing address.
Heuberger signed that document in April 2017 — a month after Oswalt told IID’s board ZGlobal that had ended its business relationships with all of its private-sector clients in the utility’s service territory, in an effort to avoid conflicts of interest while ZGlobal worked for IID.
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Reached by phone, Heuberger said he has consulted for ZGlobal but isn’t an employee. He said he signed the permitting document in his role as a consultant for Solana.
“My function is basically just to get the permits processed,” Heuberger said.
ZGlobal linked to Allegretti Ranch solar developer
In addition to asking Alaywan to sell the land at Allegretti Ranch, IID officials decided earlier this year to solicit bids for a community solar farm, rather than resuming the contract negotiations with Regenerate on which Alaywan had advised them. Out of 10 bids submitted, utility staff chose Regenerate’s proposal to build a 60-megawatt solar farm at Allegretti Ranch. IID has said that Regenerate submitted the lowest-cost bid.
Public records show ties between ZGlobal and Titan Solar, the Regenerate subsidiary that signed a 20-year contract with IID.
Titan Solar made its most recent filing with California’s secretary of state in October 2016. That document lists ZGlobal employee Melissa Vaa as Titan’s registered agent.
Also, the Imperial County permitting document for Regenerate’s second solar farm at Allegretti Ranch, known as Seville 4, lists the address of ZGlobal’s Imperial County office as the mailing address of the Regenerate subsidiary developing the project.
Alaywan didn’t respond to emailed questions about whether ZGlobal is still working on either of Regenerate’s Allegretti Ranch solar farms, even though he told IID officials earlier this year that ZGlobal had dropped all of its private-sector clients in the utility’s service territory. Oswalt, IID’s general counsel, told the board of directors at the time that ZGlobal “realized that having that kind of entanglement creates issues with this public agency, because you’re constrained to operate in a manner to avoid any kind of a conflict where ZGlobal or any consultant for that matter could on the one hand advise the IID, and on the other hand represent a potential outside vendor.”
Regenerate Power CEO Reyad Fezzani didn’t respond to emailed question about his company’s relationship with ZGlobal.
IID board member Bruce Kuhn also has a connection to Allegretti Ranch.
In late 2015 or early 2016, former IID board member Mike Abatti hired Kuhn to level land at the ranch. Alaywan, who said he owned the land at the time, said he’d asked Abatti to find out whether the ranch could be farmed again. (This wasn’t the first collaboration between Abatti and Alaywan; a company led by Abatti, and employing ZGlobal, got a $35-million contract from IID to build a massive lithium-ion battery.)
When IID’s board authorized utility staff to negotiate a power purchase contract for the Regenerate project in May, Kuhn said he “wouldn’t touch it with a vaccinated crow bar.” He also recused himself from voting on the contract itself in July.
But when the $5-million payment to the Regenerate subsidiary developing the project came before the board last week, Kuhn voted with the other four directors to approve it.
Kuhn didn’t respond to emails asking why he hadn’t recused himself this time around.
Experts call $5-million payment unusual
One of IID’s primary responsibilities is to provide affordable energy in California’s Imperial Valley, where low-income, largely Latino farmworkers power a $2-billion agricultural industry. IID customers pay some of the lowest electricity rates in California — but some Imperial Valley residents are concerned by the millions of dollars’ worth of contracts IID has given to ZGlobal.
The $5-million payment approved by IID’s board of directors last week will go to a company that public records link to ZGlobal.
The utility’s contract with Regenerate subsidiary Titan Solar 1 commits IID to spending an average of $2.53 million per year for electricity, for 20 years. The contract says IID will pay $27.85 per megawatt-hour of electricity over the solar farm’s first five years of operation, and $11.57 per megawatt-hour over the next 15 years — an unusual structure for such a contract, industry experts say. Solar power purchase agreements usually feature flat rates, or rates that rise over time to keep pace with inflation.
As a result of that contract structure, Regenerate Power will receive a majority of its tens of millions of dollars in payments from IID during the first five years of the 20-year deal.
Colin Smith, a solar analyst for the clean-tech consulting firm GTM Research, said the average price IID will pay for electricity over the contract’s 20-year lifespan — $29.72 per megawatt-hour — is “on par with the lowest prices we’ve seen, ever” for a large solar farm. Smith also said he’d never seen a contract structured like this one, with front-loaded electricity costs and millions of dollars in up-front payments to the developer.
“It still strikes me as a very unique and odd way of structuring it,” Smith said.
Matthew Freedman — a staff attorney at The Utility Reform Network, a San Francisco-based ratepayer watchdog — had a similar assessment. For nearly two decades, Freedman has worked to ensure California utilities are making financial decisions that benefit their customers. He said he’d never seen a solar contract like this one.
“It’s not a structure that I am generally familiar with. I haven’t seen it for the big investor-owned utilities,” Freedman said. “It is a little unusual.”
Still, Freedman said the contract structure isn’t necessarily bad for IID ratepayers. He said the front-loaded electricity costs and $25-million in up-front payments could make it easier for the developer to finance the solar project while still selling energy to IID at a competitive rate. The average price of $29.72 per megawatt-hour is “a great deal for IID customers,” Freedman said.
“It doesn’t seem like an obviously problematic structure,” he said. “The idea that the developer is getting a lot of money early to maybe bring down their costs and make energy payments cheaper may end up being a good strategy.”
IID officials have largely dismissed concerns about the utility’s relationship with ZGlobal. They say the consultant has helped IID maintain its low rates by analyzing or modifying dozens of transmission projects, eliminating a backlog of unfinished work and cleaning up faulty data, and by supporting the utility in its legal battle with the California Independent System Operator.
“I’ve seen nothing from ZGlobal but an outstanding work product, and I wouldn’t change a thing,” Kevin Kelley, IID’s general manager, said in an interview in June.
IID has also touted its planned community solar program, known as eGreen, as a boon for low-income ratepayers.
About half the power capacity at Regenerate’s 60-megawatt solar farm at Allegretti Ranch could be used for community solar, IID officials say. The utility’s goal is “to provide all of our customers with an opportunity to support and benefit from clean, renewable, locally produced energy,” Vicken Kasarjian, IID’s energy manager, said in a July statement.
“There can be many barriers to developing a solar project on your own — eGreen will make renewable energy obtainable for everyone,” said Kasarjian, who is a former ZGlobal employee.