Senators Thomas Umberg, Josh Newman, and Dave Min issued the following statements today in response to the release of the California State Auditor’s Audit Report on the Orange County Power Authority (OCPA):
“The findings in the audit report released today regarding the Orange County Power Authority have revealed what appears to be a disconcerting pattern of deception and a level of mismanagement bordering on misconduct, to include opaque contracting processes, deficient transparency and accountability to ratepayers, and an overall poor fiscal state that calls into question whether the agency’s actions have been conducted in good faith or in the public’s best interest. My colleagues and I will continue to monitor OCPA’s actions moving forward to ensure that they address the concerns outlined in the audit and implement reforms that deliver on the promises originally made to Orange County ratepayers.” – Senator Josh Newman (D-Fullerton)
“I want to thank the State Auditor’s office for conducting this emergency audit with haste and limited resources. It is vitally important to many of us that OCPA begin to be held accountable and that they be forced to course correct before serious damage is incurred.
The findings of the State Auditor’s office are numerous and troublesome and should worry the residents, businesses, and elected officials of Orange County. Among other things, OCPA’s misuse of marketing funds is of particular concern. The Agency should have used taxpayer dollars to educate the public about forthcoming changes, possible price fluctuations, and the ability to opt-out of OCPA services. Instead, OCPA seems to have used these monies to craftily conceal vital information from consumers. To make matters worse, those same taxpayer dollars have been used to manage the Agency’s struggling reputation via the hiring of a public relations firm whose principal chief strategist is none other than former State Auditor, Elaine Howle.
Frankly, these activities are deceptive on a ‘good day.’ However, Occam’s razor suggests that the simplest answer is often the truth; realistically, these are just further evidence of OCPA’s goal of hiding the ball from the public to which it is accountable.
This is just one example of misdeeds and lack transparency by OCPA. The audit outlines plenty of others. The residents of Orange County should rest assured that my colleagues and I will continue to keep a close eye on the operations of OCPA and work to consistently hold them accountable moving forward.” – Senator Thomas J. Umberg (D-Santa Ana)
“Community Choice Aggregation—where cities and other local jurisdictions authorize the creation of alternative electricity providers to offer more climate-friendly electric power options—has been a critical tool in our state’s effort to transition off of fossil fuels. That’s why I am so disappointed to read today’s report from the California State Auditor, which is not only highly critical of the operations of Orange County Power Authority (OCPA), but which raises serious questions of potential fraud, self-dealing, and corporate malfeasance, especially by OCPA’s Chief Executive Officer Brian Probolsky.
While the State Auditor looked only into a handful of transactions, the report makes clear that the transgressions it found may be just the tip of the iceberg. I have had concerns for some time about the OCPA, but to date, I have not yet called for any specific action. But today’s report makes clear that major changes—and much greater accountability for taxpayers in the cities of Irvine, Buena Park, Fullerton, and Huntington Beach—are needed.
I am calling for the immediate resignation of Mr. Probolsky, and if he does not step down, I would urge the Board of Directors at OCPA to fire him. This is not enough, however. OCPA’s Board of Directors should immediately authorize an outside independent investigation into the origins and activities of OCPA and Mr. Probolsky, including looking into the circumstances under which he was hired, and any connections that he or others associated with him might have had with the firms that received the suspicious contracts described by the State Auditor. I believe strongly in local control, but if these steps do not occur, I believe that our state legislature has a role to play to protect the taxpayers and ratepayers we represent, and I will seek intervention from the state of California.” – Senator Dave Min (D-Irvine)
The audit of OCPA’s internal business practices was conducted on an emergency request by Senators Umberg, Dave Min, and Josh Newman and Assemblymembers Tom Daly, Cottie Petrie-Norris, and Sharon Quirk-Silva – in July of last year over heightened concerns of corruption, Brown Act violations, and questionable electricity procurement practices. The audit comes on the heels of two years of allegations of mismanagement, inaction, and lack of transparency on the part of the OCPA, and as the authority began transferring electrical service for some residents in four Orange County cities.
The audit, released this morning, highlighted a number of deficiencies within OCPAs policies and practices including the following:
- Residential customer participation rate in OCPA dropped to 77% within a few months of service beginning resulting in a loss of an estimated $22 million to taxpayers;
- OCPA engaged in contracting that was neither competitive nor sufficiently accountable;
- OCPA deliberately and willfully circumvented the state’s competitive bidding practices;
- The Authority has not consistently or appropriately addressed or responded to public records requests;
- OCPA has not hired sufficient and/or qualified staff to oversee its functions; and
- Accountability of its promised efficiencies and functions is lacking.
To these findings, the Senator Umberg specifically stated, “Between the state audit and previous analysis conducted by Orange County, it’s become crystal clear that complaints and allegations launched against OCPA by both businesses and residents are grounded in fact. This is not especially a satisfying conclusion, however. ‘I told you so’s’ are of little consequence when taxpayer dollars and the provision of energy is at risk.”
As a result of these findings, the State Auditor’s office recommended several actions, including:
- OCPA’s need to adequately address member communities’ concerns about transparency and accountability;
- Improving the quality of administrative practices including contracting and public records act requests;
- The need to strengthen certain planning and operational processes.
Senator Umberg lastly noted that, “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. I will be watching their next steps and hope they won’t disappoint.”
OCPA is a new Community Choice Aggregation, established in 2020, to enable local government control over energy procurement. It offers automatic enrollment to both business and residential customers with the ability for customers to opt-out of the program. The launch of OCPA’s business/commercial services occurred on April 1, 2022 with residential services slated to begin on October 1st to the cities of Buena Park, Fullerton, Huntington Beach, and Irvine.
Since 2020, the six legislators have received multiple complaints regarding the governance, operation, and basic competence of the Authority. Additionally, part of the promise of OCPA was that it would provide cheaper energy, however, business consumers have reported that their rates have actually been more expensive than under Southern California Edison and have steadily increased over the last year. These concerns appear to be echoed, at least in part, by the California Public Utilities Commission who levied a major fine of $1.96 million against OCPA in April of this year for failing to purchase adequate electricity to avoid service interruption last summer.
The California State Auditor’s report including findings and recommendations can be found at: Report 2022-120 (ca.gov).
Statement from OCPA Board
RE: California State Auditor’s Report
of Orange County Power Authority February 28, 2023
The Orange County Power Authority (OCPA) respects the role of the California State Auditor in ensuring that government and public agencies provide efficient and high-quality services in a transparent manner.
The State Auditor found OCPA to be fully transparent with its finances by posting budgets, treasurer reports, and audited financial statements on its website. The Auditor stated that OCPA follows state law when it keeps certain details of power purchase agreements confidential, such as the price of power. The Auditor asserts that criticisms regarding OCPA not sharing certain details of power purchase agreements arise from requesters’ misunderstandings about the confidentiality of the agreements’ terms. The Auditor acknowledged in his report that OCPA is working with its member agencies to share more information regarding our power purchase agreements. In addition, the Auditor concluded that OCPA generally complied with Public Records Act requirements and that OCPA met the requirement to, within 10 days, notify the person making the request of its determination about whether the request sought disclosable records.
OCPA takes this and all audits seriously and sees them as a resource for OCPA and our Board of Directors as we strive for continued improvement. As a new community choice energy (CCE) program with a critically important mission of climate action, a focus on continuous improvement will allow OCPA to succeed in reaching its goals of providing our customers with an energy choice for the first time ever, moving our region closer to 100% clean energy at a competitive rate – OCPA’s Basic Choice gives customers more clean energy at a 2% cost savings compared to Southern California Edison (SCE) on the equivalent generation rate – and investing in innovative programs that benefit residents, businesses, and the economy in our communities.
Participating in OCPA is the main way for our member agencies to decarbonize the electric grid and reduce their local greenhouse gas emissions from the generation of electricity. OCPA is the sixth largest and one of the greenest CCEs in the state with 78% of its customers at the 100% renewable energy level and 18% at the 69% renewable energy level, which is the equivalent of taking 200,000 traditionally powered vehicles off the road per year.
We are committed to working with our Board of Directors on an Improvement Plan that will include consideration of the recommendations contained in the state audit.
With 80% market share, OCPA is financially strong and operating in the black, as demonstrated by the June 30, 2022, financial statements validated by an Independent Auditor’s report.
“Our Board looks forward to discussing policies that will enhance oversight of OCPA to ensure its success. We feel validated that the question of transparency has been reviewed by the State auditor. The Board and staff have already begun to make proactive improvements, including many of the recommended actions in this latest report. We’ll continue to make progress by implementing processes recommended by the esteemed team from Balance Public Relations who are advising OCPA on our path forward.” – Fred Jung, Orange County Power Authority Board Chair
“Audits evaluate complex problems and recommend actionable solutions to government agencies, like OCPA. The recommendations in the State Auditor’s report will serve as a roadmap for the OCPA and its board to work together to improve its operations as it continues a path to operating a successful organization that its stakeholders can trust and count on.” – Elaine Howle, CPA, Principal, Balance Public Relations and Former California State Auditor
OCPA recently retained the services of Balance Public Relations and its well respected, experienced team to provide strategic consulting and audit compliance advisory services.
Elaine M. Howle, CPA, former California State Auditor now holds the position of principal and chief strategist with Balance Public Relations, to provide counsel on an improvement plan for the various reports and audits issued about OCPA.
Howle served as the California State Auditor for 21 years from 2000-2021. Under her leadership, the California State Auditor’s Office grew from a steadfast financial and compliance watchdog into a robust government and policy powerhouse that has been recognized both nationally and internationally. Howle is joined by Dean Florez, founder and CEO of Balance Public Relations and former California State Assemblymember and Senator in advising OCPA.