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Cleveland incinerator: Consultant gets caught cooking the books

CLEVELAND — “When the City of Cleveland notified Peter Tien on February 23, 2012, that he was in default on his $1.5 million no-bid contract to design a garbage incinerator for Cleveland Public Power, Utilities Director Barry Withers’ letter said there were numerous errors in Tien’s reports.

Ohio Citizen Action filed a public records request for copies of Tien’s reports and received several copies of reports on March 9.  We still have requests pending for updates that Tien apparently submitted at the end of last week.

Although there were a variety of errors and inconsistencies in Tien’s filings, making all of the numbers suspect, the most damning mistake appears to be a miscalculation of the profit and loss for the facility.

Tien apparently submitted three different versions of his “Design Memorandum” to the city, one dated February 4, one dated February 11, and one dated February 17 (all had the wrong year on them, 2011 rather than 2012).

Tien’s analyses all showed that the facility would make money, with the final document on February 17, showing an annual profit of $4.7 million after covering operating cost and debt service.

But if he had done the math correctly, the February 17 report would have shown the facility losing approximately $17 million per year after operations and debt service.

Here’s the documentation:

1) Tien’s design memorandum dated “February 10, 2011” contained a financial breakdown on pages 7-9.  A key figure in the revenues is an estimate for how much would come in from sales of electricity (electricity would be sold to Cleveland Public Power, presumably).

Tien estimated that electricity would be sold for $.055 per kilowatt hour, at 10 megawatts per hour. He listed revenue from these sales at $132,000/dayThe $132,000 per day figure, added to other revenue estimates, made total daily revenues total $227,628 per day, and Tien then totaled this number to an average of $40,674,572 per year.  With annual operating costs and debt service of approximately $35 million per year, Tien’s numbers showed the facility making a profit.  But Tien was off by an order of magnitude — the amount listed should have been $13,200 per day.

2) When Tien submitted the next version of the memorandum, on February 17 he changed the assumptions on the electric generation, to $.055 per kilowatt hour at 12 megawatts per hour. The daily revenue for this column then was totaled to $15,840 per day.

Although this figure dropped by an order of magnitude, changing the daily revenue to $101,367 (down 46.5% from the last estimate), Tien left the total average annual revenues at the same figure as the February 10  report, at $40,674,572 per year.

3) If Tien had decreased the annual revenue by 46.5%, as he should have, the average annual revenue would have dropped to approximately $18.9 million per year.

4) With operating expenses of $2.3 million per year, the facility would lose $4.5 million each year.  Debt service, estimated at $12.5 million would be added to that, for an average loss of $17 million per year.

No wonder the City wants to cancel the contract. 

— Sandy Buchanan, Executive Director, Ohio Citizen Action

Basic mathematical errors will doom incinerator project

CLEVELAND — Cleveland Public Power’s proposal to build a garbage incinerator on Ridge Road is premised on the idea of turning garbage into pellets and then burning them as fuel.  Although Cleveland Public Power Commissioner Ivan Henderson has never released a financing plan or finalized cost estimates for the project, he has repeatedly said the City will rely on the pellets to fuel the incinerator and that the project will generate additional revenue by selling excess pellets to various companies, including Cleveland Thermal.  Financing for the project would be based on the generation of electricity from the incinerator.

But an elementary mathematical calculation shows that the city has nowhere near enough garbage to make this project work, much less enough to sell “extra” pellets to make money.   The City of Cleveland only takes in enough trash from its own residents, as well as the residents of Lakewood and Brooklyn, to fuel a machine from one quarter to one third of the size of what they are planning.

When questioned about the volume of trash at public meetings, city officials have repeatedly stated they will produce enough trash to run the incinerator.  But this statement doesn’t hold up against the following simple math:

1) As proposed, the incinerator would run three combustion units at 96% capacity (Source: City of Cleveland comments to Ohio EPA, February 23, 2012). The units would run 24/7, and would require 420 tons per day total at full capacity.  The permit requests that they be allowed to operate at 96% capacity.

2) According to the project design 100 tons of garbage would be converted to  15-20 tons of fuel pellets.

3) Therefore, it would take from 2016 to 2700 tons of trash per day, or 735,840 to 986,025 tons of trash per year, to run the incinerator as proposed (3 lines at 96%).

4) The City of Cleveland takes in 230,000 tons of garbage per year at the Ridge Road transfer station, including the waste the City takes from Brooklyn and Lakewood.  Of this, 10,000 tons is now being recycled, leaving 220,000 tons available for incineration.  These numbers presume NO increase in the recycling program.

5) The City has announced it will continue to roll out its recycling program, with a goal of  25%  recycling.. This goal is much lower than surrounding communities, but even the 25% recycling rate would reduce the available garbage for the incinerator to 172,500 tons per year.

6) Therefore, the City would fall short of producing the garbage needed to run the incinerator by anywhere from 563,340 to 813,525 tons per year.

Why does this matter?

1) All of the projections for building and financing the incinerator will depend on how much electricity the incinerator can generate.  If it can generate less than a third or a half of what’s projected, the financial projections will completely fall apart, or the city will be stuck with paying double or triple the price of the projected price of the electricity.

2) The city could be forced to halt any expansion of its recycling program, since they will need every scrap of waste to “feed the machine” to run the incinerator.

3) The only way to get enough garbage would be to get other municipalities to agree to send their garbage to the incinerator, thereby doubling or tripling the truck traffic on Ridge Road.  Public opposition to increased truck traffic has been strong, and city officials have stated at several public meetings that they have dropped their plan to bring garbage in from other communities.

4) They could try to run the incinerator on other fuels, like natural gas, which would defeat the purpose of building a garbage-burning facility to “generate” electricity.

5) They will have no pellets available for sale to other entities like Cleveland Thermal, which is another pillar of their financial projections.

— Sandy Buchanan, Executive Director, Ohio Citizen Action

— Chris Trepal, Executive Director, Earth Day Coalition

— Brian J. Cummins, Cleveland City Council

Do the math: ”New” incinerator proposal would have same amount of dangerous pollutants from soot, more dioxin, and still be the largest polluter of mercury in the county

CLEVELAND —   In an attempt to avoid federal regulation as a “major” source of pollution under the Clean Air Act, Cleveland Public Power announced on February 23, 2012, that it plans to have three combustion units at is proposed garbage incinerator rather than four.  Cleveland Public Power says it now plans to run the three incinerator units at 96% capacity rather than four units at 72% capacity, as outlined in its draft permit.

The City’s press release  stated the following:

“These enhancements will significantly reduce the maximum annual emissions from the CREG [Cleveland Recycling and Energy] Center by an average of more than 25% and also reduce the predicted maximum air quality impact in the nearby neighborhoods by an average of more than 50%.“

However, a chart attached to the same press release shows the following :

• The amount of pollution from soot, which includes fine particles that get into people’s lungs and bloodstream and aggravate asthma and heart disease, is virtually the same in the two proposals, at 78 tons per year

• Emissions of volatile organic chemicals would also remain virtually the same, at an increase of .1%

• “Hazardous air pollutants,” which includes dioxin, lead, mercury, sulfuric acid, cadmium, and hydrogen fluoride, would decrease by only 6.3%

• Dioxin emissions would go up by 38%

• The facility would still be the largest polluter of mercury in the county, at 144 pounds, and lead emissions would be 392 pounds

• Nitrogen oxide emissions would come in just 6% under the federal threshold for major sources of 100 tons per year.  CPP claims these emissions would now be at 94 tons, rather than 194 tons.  This claim should raise alarms at the regulatory agencies, since permits which contain numbers obviously designed for the purpose of avoiding regulation are known as “sham permits.”

The city’s claim of reducing pollution in nearby neighborhoods by “an average of more than 50%” is a reference to their plan to raise the smokestacks from 175 feet to 200 feet. Of course, this does nothing to reduce the amount of pollution coming from the incinerator and only serves to spread it to more parts of the city, county, and region.

Maybe Mayor Frank Jackson and city officials did not hear what hundreds of Clevelanders were saying over the past two months in their testimony at six public meetings, and their written comments submitted on the draft permit:  we don’t want or need this new source of air pollution,  in our backyard or anyone else’s.

— Sandy Buchanan, Executive Director, Ohio Citizen Action

What happened to Peter Tien’s requirement to hire Clevelanders with his $1.5 million contract?

CLEVELAND — Cleveland Public Power signed a no-bid $1.5 million contract with Princeton Environmental Group, headed by Peter Tien, to develop the proposed incineration facility on Ridge Road.  The proposal was based on the Kinsei-Sangyo gasification technology, for which Tien is the U.S. representative.  Kinsei-Sangyo’s patent applications define its technology as: “Method of incinerating waste material by way of dry distillation and gasification” or “waste incineration disposal method.”

A key requirement of the contract, dated March 30, 2010 was that Tien would “establish an office in Cleveland, OH and staff it with Cleveland residents on or before March 30, 2010.”  As has been well-documented by Cleveland Scene, Tien is maintaining an empty office space within the offices of the Ralph Tyler Companies at 1120 Chester, with a New Jersey phone number.  Tien apparently occasionally visits the office from his home in New Jersey.

So if Tien did not hire any Clevelanders in an actual office, how much of the $1.5 million went to Cleveland area engineers or other subcontractors?  According to a statement Tien sent to Cleveland Public Power in April 2011, which Ohio Citizen Action obtained  in a public records request, Tien hired six subcontractors to work on the plans for this facility.

This document describes the subcontractors:

Labor Cost Statement
Project: Municipal Solid Waste to Energy Process/Systems Design
Customer: City of Cleveland
Ordinance Number: 480-09
Invoice Number: PEG-1002
Invoice Date: April 8th, 2011
Sub-Contractor Name Functions Labor Cost Incurred Labor Cost Paid
GT Environmental Air permit application $105,995.02 $94,260.19
Ralph Tyler & Company Civil Engineering $23,468.98 $17,000.00
PFK & Associates Electrical Engineering $18,489.08 $5,000.00
Kinsei Sangyo & Co Gasification System Design $300,000.00 $50,000.00
Bio Energy & Co. Front end System Design $200,000.00 None
Shanghai Electric Institute Power Island Design $100,000.00 None
Total labor Cost Incurred & Paid: $747,953.08 $166,260.19

Of the total cost of $747,953 that Tien says he will owe to subcontractors, only $23,468  appears to be for a company located in Cleveland:  Ralph Tyler & Company, where Tien maintains his empty office. This amount is equal to 1.5% of Tien’s total contract.

GT Environmental, which developed the air permit, is located in Westerville, Ohio.  PFK & Associates is listed as having an office in Akron, as well as other states.  Kinsei-Sangyo is in Takasaki, Japan and Shanghai Electric Institute is in Shanghai, China.   Bio Energy & Co does not appear to be listed by that name anywhere, so the name may be incorrect.

Emails between Tien and Cleveland Public Power Commissioner Ivan Henderson indicate that Tien did not have the funds to advance money to his subcontractors.  Tien’s contract with the City says that he will not be paid until the Ohio EPA air pollution permit for the facility is issued.  Tien sent several requests to the City asking them to advance him the money, but this has not occurred.

Tien missed the deadlines for his deliverables in his original contract, and CPP has extended them several times.  At a public hearing on January 19, Henderson said that Tien’s deadline for the cost estimates has been extended again, to sometime in February.

— Sandy Buchanan, Executive Director, Ohio Citizen Action

Cleveland's incinerator plans don't add up

CLEVELAND — The City of Cleveland is basing its plans to build a garbage incinerator, and its proposed air pollution permit, on a design prepared by developer Princeton Environmental Group (PEG), under the direction of Peter Tien.  City officials are also presenting information to the public in a series of meetings being held around the city in January and February.

But the numbers in the city’s presentations and reports from Princeton Environmental Group don’t add up.

   For example:

Incinerator fuel numbers

The “Basis of Design” report submitted to Cleveland Public Power by Princeton Environmental Group on August 31, 2011 to Cleveland, says that the incinerator will be designed to burn 500 tons per day of pellets made of trash, called “Refused Derived Fuel” or “RDF,” to produce 15 megawatts of electricity (p. 57).   In a November 16, 2011 presentation to Cleveland City Council, Cleveland Public Power stated that 15-20 tons of fuel pellets can be made from 100 tons of garbage (p. 36).  If we assume the high end of that range, where 100 tons of trash makes 20 tons of pellets, then it would take 2500 tons of trash a day to make enough pellets to run the incinerator.

According to its own reports the City of Cleveland only generates between 756 and 991 tons of trash each day.  To make up the difference to get to 2500 tons per day, Cleveland would have to take in at least 1500 tons of additional garbage each day from other communities.  But in presentations to the public and City Council last week, city officials repeatedly stated that the City would not take other communities’ garbage to feed the incinerator.

Recycling numbers

Even if the city implements curbside recycling,its stated goal is to recycle “up to 25%” of its garbage.

The “Basis of Design” report lists the recyclable percentage of different kinds of materials in Cleveland’s waste stream. (p. 15).   For example, it says that of the paper waste collected, 60% is recyclable.  Notwithstanding the fact that other Cuyahoga County communities are already achieving higher recycling rates, PEG says that  32.92% of collected waste is readily recyclable. And the city’s own  presentation says that “approximately 62% of the current waste stream is recyclable,” (p. 28).  Why would the City’s stated goal be 25% when their lead designer says that 32.92% can be recycled, and the City says 62% can be recycled?

— Nathan Rutz, Cleveland campaign organizer, Ohio Citizen Action

Here's what Cleveland could do if it were serious about reaching its goal of "Zero Waste"

CLEVELAND — “Mayor Frank Jackson’s ‘Sustainability Cleveland 2019’ program has set a goal of ‘Zero Waste’ for the City of Cleveland.  But the city’s plan to reach this goal seems to have gone astray, as the City has decided instead to focus on building a municipal waste incinerator, and recycling ‘up to 25%’ of its waste.”

— Sandy Buchanan, Executive Director, Ohio Citizen Action

Read the whole story

In promoting incinerator, Cleveland Public Power misleads public about its power portfolio

CLEVELAND — In its materials promoting its plan to build a garbage incinerator at the Ridge Road Transfer Station, Cleveland Public Power (CPP) says that the alternative to building the facility is to “keep doing what we are doing,” including “continue buying 99.9% of our power from the market.”    CPP also says that it needs to build the incinerator to “obtain electric generation that helps meet the City’s AEPS [Advanced Energy Portfolio Standards] goals for CPP.”

However, in recent years, Cleveland Public Power has in fact already made the decision not to continue buying 99.9% of its power from the market.  Since the fall of 2007, CPP has come to Cleveland City Council to get approval to buy into a number of energy generation sources being built by American Municipal Power, arguing that it does not want to rely on the market for its electricity sources.

With Council approval, CPP has entered into long-term “take or pay” contracts for various generation facilities. “Take or pay,” a form of financing that has become notorious due to its potential risk to municipalities, means that the city is taking the financial risks for building and operating a portion of these facilities, no matter what the cost and whether or not they produce power.

Like all utilities, CPP makes projections for several types of power, including “baseload” power (which runs 24/7), “intermediate power” (16 hours each day/5 days per week), and “peak” power (usually characterized as power needed during the hottest days of the summer).

CPP’s baseload power is between 160-180 megawatts per year, and their peak load is 330 megawatts.    With the take or pay contracts it has already signed, Cleveland Public Power is currently planning on getting at least 75 megawatts of baseload power and 60 megawatts of intermediate power that does not come from the market.  Most of these new plants are slated to go on line by 2013.

What generation facilities has CPP bought into already?

CPP has signed take or pay contracts for 50 megawatts of power from AMP’s new hydro plants on the Ohio River, and says this power will be available to the city by 2013.  The hydro power meets the city’s definition of “advanced energy,” and will allow the city to fully meet, and likely surpass, its own standard of purchasing 15% of its power by renewable sources by 2015.  CPP does not need a municipal waste incinerator to meet this standard.

In 2007, CPP signed a take or pay contract for 25 megawatts of baseload power from the Prairie State coal plant currently under construction in Illinois.

Last year, CPP signed a take or pay contract for  60 megawatts of the AMP Fremont natural gas plant, which began commercial operation this week.  This power is characterized as intermediate power, though AMP CEO Marc Gerken told Martinsville, VA City Council last year that if the price of natural gas continues to go down this could even become viable as baseload power.

CPP also signed a take or pay contract in 2007 for 80 megawatts of power from AMP’s proposal to build a coal plant in Meigs County, Ohio.  Opponents of the plant warned that the new coal plant would be both an environmental and an economic mistake.  The plant was cancelled in November 2009 because it became too expensive.  The City of Cleveland is liable for up to $8 million in costs for this plant, for which they will receive not even one megawatt of electricity.

— Sandy Buchanan, Executive Director, Ohio Citizen Action

New report on Southwest Ohio aggregation shows competition providing savings to customers

Potential savings for Cincinnati residents nearly $20 million

CINCINNATI – A new report by Ohio Citizen Action shows that ballot measures authorizing Greater Cincinnati local governments to negotiate group buying rates have passed by wide margins and produced significant savings for residential and small business consumers in those communities.

In August, Cincinnati City Council approved ordinances sponsored by Vice Mayor Roxanne Qualls to put Issues 44 and 45 on the November 8 ballot. If approved, the measures would authorize the city to use a tool that has allowed communities around the state and in Southwest Ohio to secure savings for residential consumers on their electric and gas bills by allowing competitors to bid for their business.

A potential competitor to Duke Energy Ohio has estimated that if voters authorize the city to negotiate a new group buying rate with Duke Energy Retail or another electric supply provider, competition could return nearly $20 million citywide – $200 to $250 annually per household – to consumers in savings on their electric bills.

— press release, Rachael Belz, Ohio Citizen Action

Read the report

Planck Holdings in Florida is a subsidiary of India's JSW Steel

Baard Energy's Florida investor, Planck Trading is in a "virtual office"

BOCA RATON, FL — While asserting that “investors in the coal and energy markets have committed $2.5 billion” to his coal refinery project, Baard Energy CEO John Baardson has only named one of them, Planck Trading LLC of Boca Raton, Florida. According to Tracy Drake, CEO of the Columbiana County Port Authority, “Planck is a company formed in 2009 by ‘a group of heavy hitters in the investment community to look at opportunities in the energy industry’ . . . Planck told the port authority it has acquired metallurgical coal reserves in excess of 100 million short tons and owns a high wall mining company in Kentucky, West Virginia and Virginia.”

To learn more, last Friday Ohio Citizen Action’s Alison Auciello and Mike Koscielak, visited Planck’s office address, 595 S. Federal Highway, Suite 600, in Boca Raton. They learned that Planck’s corporate headquarters is a “virtual office,” provided by Cloud Virtual Office. For $79 a month and up, they get a “professional mailing address,” a telephone line, a shared receptionist, and use of a meeting room. According to the Cloud Virtual Office brochure, the meeting room means you can “meet outside of your home . . . Trying to close a deal while the barista at Starbucks is yelling out drink orders is only one step above asking the decision maker for a big account to ‘please excuse the mess’ in your living room.”

Many other outfits share the same mailing address and suite number; some of these are Dollars4Gold, Amerivest Gold, Inc., Brilliant Jewelry, Inc., Metal Plastic Molding, Inc., Cambridge Investment Research, Scolaro, Shulman, Cohen, Fetter & Burstein law firm, interCLICK, Inc., Danieli Realty, Inc., Daniel Law Offices, J. Beck and Associates, Michael Elon Zaidel, attorney, Dynamics Edge, Inc., and Intellect Neurosciences, Inc.

— Paul Ryder, Organizing Director, Ohio Citizen Action