Keaton PetersConsulting firm Deloitte is facing scrutiny in Texas over the company’s management of the Texas Energy Fund, a taxpayer-funded program to provide low-interest loans for new power plants. Deloitte was awarded a $74 million contract to manage the program on behalf of the Public Utility Commission of Texas (PUC). But now, Texas lawmakers are looking to hold the company accountable, including reducing their contract by 10%, after one of the loan applications that Deloitte approved contained false information.
Texas lawmakers created the Texas Energy Fund in 2023, which was then approved by voters as a state constitutional amendment that November. The program is designed to increase reliability on the state’s main power grid by providing financing for new natural gas power plants. Applications for the fund opened in March, and $39 billion worth of proposed projects were submitted. With only $5 billion available for the initial round of funding, the applicants had to undergo a thorough review process.
The controversy started after the Public Utility Commission published an initial list of projects that had been approved to receive funding pending final reviews and agreement to loan terms. On the list was a 1200-megawatt natural gas power plant listed as a joint venture between Aegle Power and NextEra Energy.
But NextEra Energy later came forward stating that the application had been submitted without the company’s “knowledge or consent.” And upon further scrutiny, the PUC realized that Aegle Power’s CEO had also previously been convicted in an “embezzlement scheme” in 2017.
As a result, the PUC rejected Aegle Power’s application and revised its list of approved projects. At a hearing in the Texas Senate last week, lawmakers grilled representatives from Deloitte and the PUC, trying to get to the bottom of how such a mistake could have happened.
Deloitte’s role in administering the fund is extensive and includes managing the application system, creating methods to evaluate each application, performing due diligence fact checking, and managing fund disbursement and monitoring. Deloitte is also responsible for managing data and providing regular reports to the PUC on program status and cash flows.
Additionally, Deloitte is tasked with maintaining stakeholder communication, including operating a call center and developing guidance materials for applicants. They are required to devise an inspection plan and conduct facility inspections.
At a hearing in front of the Senate’s Texas Energy Fund Advisory Committee, PUC Chair Thomas Gleeson acknowledged that the commission’s oversight of Deloitte had faltered, saying, “we had too much of an arm’s length relationship with our contractor.”
In an email to Government Market News, a spokesperson for the PUC confirmed that “Deloitte has agreed to a 10 percent ($7.3 million) reduction in their contract payment amount,” and said the updated contract will soon be posted on the PUC website.
Rob Kleinhammer, the leader of Deloitte’s account with the state of Texas, also acknowledged that the company has made a mistake. Kleinhammer said the company did not plan to contact the loan applicants directly to confirm details until the “due diligence” phase, which occurs after making an initial list of qualifying projects.
Lieutenant Gov. Dan Patrick issued a statement calling the incident “extremely troubling,” saying, “Deloitte had no believable explanation for the many troubling details they failed to uncover during their vetting process.”
Patrick went on to encourage a thorough review of the company’s work. “Taxpayers must be protected, so the legislature will also review the state’s other existing contracts with Deloitte,” Patrick said.
Kleinhammer told Senators that Deloitte’s contracts with the state of Texas are worth about $200 million annually.
Photo by Mitchell Kmetz on Unsplash
