CPS Energy suspends 2 execs in probe
November 3, 2009
By Tracy Idell Hamilton
San Antonio Express-News
CPS Energy suspended two members of its nuclear development team Tuesday while it investigates why a higher-than-expected cost estimate for its nuclear expansion was kept secret.
"Preliminary findings have resulted in two CPS Energy employees being placed on administrative leave pending the completion of the investigation," the utility said in a news release Tuesday night.
Mayor JulÍan Castro last week asked board Chairwoman Aurora Geis to launch the internal review after he learned a cost estimate as much as $4 billion higher than previously acknowledged had been kept from the board - and by extension, the City Council.
News of the higher estimate caused the council to delay its vote on $400 million in financing for the project.
Secrecy surrounding the higher nuclear price tag infuriated Castro and the council. Forced to backpedal and explain the estimate as preliminary, CPS Energy officials apologized for withholding the information and declared a new era of openness at the utility.
But a week after pledging more transparency, the utility Tuesday withheld word of the suspensions until after the 6 p.m. television newscasts.
CPS Energy leaders also wouldn't give substantive interviews about their investigation, nor would they confirm the names of the suspended executives.
A source close to the investigation said the employees were Mike Kotara, vice president of energy development, who has been one of the utility's most public faces in its summerlong effort to gain support for the project, and Jim Nesrsta, vice president of power plant construction.
Reached at home Tuesday night, Nesrsta wouldn't comment. Kotara did not return phone messages.
Geis would not reveal the names of the employees Tuesday and referred the question to utility interim General Manager, Steve Bartley.
Bartley did not return several phone calls.
Last week, Geis expressed confidence in the utility's leadership and said it wasn't worrisome to her that the board had not been informed of the higher number. In Tuesday's announcement, she called it "very troubling."
"My board colleagues and I are intensely interested in this matter, and thus we have requested a thorough examination as to what transpired," she said in the statement.
"Because of the magnitude of the community's nuclear expansion decision," she said, "it is our expectation that any pertinent information be shared with the board, the City Council, customers and other key stakeholders in a prudent and timely manner."
Castro said the CPS Energy investigation "is just the first step" in changing the culture of secrecy at the utility.
"If records reveal that material information was intentionally withheld, I expect the consequences to be more severe," he said, praising CPS Energy for making an "earnest effort" to find out who knew what, and when.
Bartley said in the news release that the cost-estimate investigation "is in keeping with the company's long history of service based on the community's trust in the organization."
Previously, he has said his staffers kept the estimate from him for several days after they got it from nuclear plant contractor Toshiba Inc., through the staff at the South Texas Project near Bay City. He didn't inform the board until after Castro's aide asked directly about rumors of the increase.
"Right now, the trust our community has placed in us for many years is being tested," he said in the statement. "Our forthrightness has been called into question. That's why it's important that the investigation be completed as expeditiously as possible and, based on the findings, that appropriate action be taken."
Bartley also said changes in internal processes already have been made, and additional emphasis will be placed on information-sharing to prevent a recurrence of the cost-estimate situation.
In late June, CPS Energy released a cost estimate to build two more reactors at STP of $10 billion, or $13 billion with financing. CPS Energy owns half of the project with NRG Energy. Both companies have agreed to find another buyer for 20 percent of the investment.
Last month, the CPS Energy board directed the utility to reduce its share further, to 20 percent to 25 percent.
CPS Energy long has said the expansion could be paid for with 5 percent bill increases every other year for a decade.
Council anger over the way the higher estimate was handled has many members calling for additional oversight of the city-owned utility.
Councilman John Clamp, who has led the charge, called Tuesday's news another symptom of the utility's communication problem.
Neither management nor the board has formally briefed the council yet on what happened over the past two weeks, he said. So to put out a public release was "unconscionable," he said.
"Our confidence level in CPS is about zero right now," he continued.
Today, in a closed-door session, the council will be briefed on CPS Energy's governing structure with an eye toward increasing its oversight.
Geis said she expects the utility's internal auditor to report on findings at a yet-to-be scheduled board meeting Monday - a meeting scheduled for Thursday has been canceled because the investigation wouldn't be complete, she said.
"Elements" of that report would be presented in closed session, Geis said, but "we do expect to have a discussion in open session."
Staff Writer Anton Caputo contributed to this report.
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