(Texas Scorecard) – Lt. Gov. Dan Patrick believes a prominent consulting firm must make amends for overlooking a company’s “falsified application” to obtain a low-interest loan from the Texas Energy Fund.
In his Tuesday statement, the lieutenant governor urged the Public Utility Commission of Texas to follow through with its demand “of clawing back at least 10% of Deloitte’s contract value” for the mistake.
“Taxpayers must be protected, so the legislature will also review the state’s other existing contracts with Deloitte,” stated Patrick.
Patrick’s strong words came hours after the Texas Energy Fund Advisory Committee chaired by State Sen. Charles Schwertner (R-Georgetown) held a hearing on the matter.
At the hearing, witnesses walked through Deloitte’s decision to allow the process to move forward on Aegle Power’s proposal, which included a misleading claim surrounding the involvement of NextEra Energy as a joint partner.
The project would have been the second-largest the PUCT has approved since the fund’s inception last year, generating 1,292 megawatts of capacity.
Lawmakers first proposed the fund as a constitutional amendment, which voters approved on November 7, 2023. It serves largely as an opportunity for Texas to expand its energy capacity, which has undergone strain in recent years due to new arrivals, natural disasters, and pushes for unreliable wind and solar energy.
Overall, the PUCT has approved applications totaling 9,781 megawatts of power generation through $5.38 billion in loans from the TEF.
Patrick stated Tuesday that it was “of utmost importance for the PUCT to quickly replace the 1,200-megawatt gap left by the fraudulent Aegle Power application with well-qualified projects.”
“Our grid needs more dispatchable power as quickly as possible, and the Texas Energy Fund loan program is the most expeditious way to get more dispatchable megawatts online. Deloitte has only slowed down this important program,” continued Patrick. “They need to correct their errors now or be gone.”
Questions arose regarding Aegle’s application after NextEra Vice President and General Counsel Mitchell S. Ross notified the PUCT on September 3 that NextEra had been included in the submission without its consent or knowledge.
The agency subsequently discovered that Aegle CEO Kathleen Smith pleaded guilty in 2017 to conspiracy to commit mail and wire fraud while she led another energy company, Chase Power Development, from 2008 until 2012.
One day later, on September 4, the PUCT issued an order denying the loan to Aegle.
Deloitte Principal Ron Kleinhammer and Risk and Financial Advisory Principal Chris May represented the company during the Tuesday hearing and admitted to faulty procedures throughout the approval process.
“We should have accelerated some of the additional risk and reputational checks we had planned for due diligence to occur prior to the release of the 17 Texas Energy Fund loan applications being made public,” said Kleinhammer.
“We’ve modified our processes and are confident the safeguards we have in place will continue to assure that no entities will be approved for funding before rigorous and thorough review of the applicants and sponsors has been completed,” he added.
After the hearing, Schwertner posted on X that he was “glad” to see Deloitte begin to comply with the Texas government’s demands, sharing a new letter by Kleinhammer that disclosed the details of his company’s contract with the PUCT.
“I write to confirm the agreement of Deloitte to credit to the Public Utility Commission of Texas … professional fees … in the amount of $7,300,000.00, to be applied across future invoices under the Contract,” read the letter.
The committee had also asked Aegle CEO Kathleen Smith to testify. While she initially accepted, Smith canceled at the last minute, citing problematic traveling conditions coming from Florida as the state braces for Hurricane Milton.