How the solar power purchase agreement works
Ten municipal agencies in Centre County are on the cusp of entering into a 15-year contract to purchase solar energy from Prospect14, a solar developer. The pending agreement is more than five years in the making.
“This endeavor, at least in regards to the [cooperation] of multiple municipal entities, is a first of its kind in Pennsylvania as best we know,” Amy Bader, president of the State College Area School District Board of Directors, said in a September meeting.
Prospect14 will build, own, and maintain a 22-megawatt solar array in the county’s Walker Township. The roughly 100-acre project will provide nearly 80% of the total electricity used by the entire cohort.
Through the agreement, the participating organizations — Centre County, Centre Region Council of Governments, State College Area School District, Borough of State College, College, Ferguson, and Patton Townships, State College Borough Water Authority, College Township Water Authority, and Centre Hall Potter Joint Authority — anticipate lower electricity bills and the ability to meet their clean energy goals.
The group expects that locking in rates over a 15-year period will also make the electricity bills each partner receives more predictable.
Projections by the solar purchase agreement working group estimate that stability could translate into potential savings between $124,000 and $263,000 for the collective in its first year of operation and more than $1.5 million for the full span of the contract.
The school district is projected to use 60% of the power consumed by the cohort, according to the latest breakdown that the project’s working group provided to Spotlight PA. Because of this large usage, the district is serving as the fiduciary of the project. That means it makes payments to third-party vendors, like lawyers and consultants, and gets reimbursed later by the other members of the cohort.
In addition, the school district gets two votes in the partnership, while the others each get one.
So far, the pending agreement has accumulated $358,000 in consulting and legal fees. The member agencies pay for expenditures at percentages proportional to their shares of planned electricity usage.
Solar projects like this have been cropping up around Pennsylvania. Philadelphia’s municipal buildings now receive about 25% of their electricity from a 70-megawatt solar facility 140 miles west in Adams County. The city said its 20-year power purchase agreement involving the Philadelphia Energy Authority is one of the largest of its kind in the state.
Another large-scale solar project already has roots in central Pennsylvania. Penn State entered into a 25-year agreement with Lightsource BP in 2019, saying in a news release at the time that the move will save money and reduce greenhouse gas emissions.
But the Centre County solar power purchase agreement is unique in at least one sense: the number of municipal entities involved.
“[Power purchase agreements] have been done before, but what we’re doing is something that hasn’t quite been done,” Pam Adams, the sustainability planner for the Centre Regional Planning Agency and a member of the working group, said in a recent public meeting. “We’re sort of breaking some new ground.”
Financial oversight questions turned controversial
Because of the complexity and novelty of the solar power purchase agreement in Centre County, challenges and delays were almost inevitable.
Creating an agreement between 10 municipal entities — down from the original 15 interested parties — and various outside vendors means every change in the planning process must be cleared by everyone involved.
In February, the working group realized that legal provisions such as how the collective entity would respond to public records requests needed to be added to the contract. Betsy Dupuis, solicitor for Centre County and Patton and Ferguson Townships, was tasked with incorporating those elements alongside the project’s outside attorney Chris Berendt, who was hired to evaluate risks and liabilities in the contract drafts.
Member agencies had originally approved $165,000 total for Berendt’s service.
Because of the additional work necessary, Berendt, the energy market attorney from the firm Faegre Drinker, offered to work at risk — understanding there was a chance he might not get paid — to get the project over the finish line, according to meeting minutes of the working group. Those records indicated that Berendt also waived $70,110 of his fees.
The working group didn’t have a dollar amount for the extra legal work until its Aug. 28 meeting. At that meeting, the group directed liaisons to get approval to pay an extra $123,346 from their respective governing boards, according to meeting minutes.
The working group gave municipal partners the option to not pay their portion of the additional fees, but none indicated they would do that.
When State College Borough Council Member Josh Portney heard about the extra legal fees, he aired his discontent on a local radio talk show and said the issue was turning into “a financial scandal.”
“We are faced with a choice of retroactively approving money that was spent without our approval, and that’s a really uncomfortable position to be in,” Portney said on the Tor Michaels Show in late August. Michaels, the host of the morning radio program, is also the chief of staff for state Rep. Scott Conklin (D., Centre).
Portney told Spotlight PA he has been frustrated by how difficult it has felt to get updates on the agreement as an elected official. Portney, like his fellow council members, receives information mostly from the borough manager, who relays communication from the municipality’s liaison on the project.
Questions surrounding the additional fees — mainly, whether additional authorization should have been sought before the attorney expanded his work — were brought to the borough council’s Sept. 9 work session.
The borough typically pays legal fees when it receives bills from attorneys, rather than budgeting a specific amount to be spent, State College Borough Manager Tom Fountaine said at the meeting. That’s the way costs for outside professional services, including construction projects, are expensed: The borough pays for the work after it’s completed.
“It’s virtually impossible to estimate legal fees,” Fountaine said. “You make your best estimate.”
In this case, the borough budget had room for extra spending for the attorney when it first approved the engagement. Paying the borough’s share — an additional $13,799.27 — would not require another council vote, Fountaine said.
Portney told Spotlight PA he wasn’t satisfied with that answer because it “doesn’t feel like proper fiscal responsibility.”
Fellow council member Nalini Krishnankutty had similar concerns. “What if we didn’t have that money?” Krishnankutty asked at the session.
The county government also scrutinized how the spending was approved.
Centre County’s portion of the additional legal fees was $7,820.70. That expense was authorized by county administrator John Franek, but during an Aug. 27 meeting he told the board of commissioners that he neglected to include it in his quarterly report.
Franek apologized for the oversight, but it prompted “questions of transparency” from county controller Jason Moser, who also voiced concerns in separate appearances on the Tor Michaels Show. Moser serves as treasurer of Conklin’s reelection campaign.
Moser told Spotlight PA that he worries whether the municipalities of the agreement will be forced to shoulder costs without a choice or advanced notice.
Moser did not determine whether there was any wrongdoing on Franek’s part, but said he is continuing to review invoices the county has received from the project.
Complications beyond what the project management team expected were bound to arise, said Randy Brown, the school district’s finance and operations officer.
“No one had any idea what kind of dollars and cents we were looking at for those fees,” Brown told school board members during the Sept. 9 meeting.
Adams, one of the leading members of the working group, told Spotlight PA there was “naivete thinking” about how much time would be needed in dealing with so many government agencies. At the Sept. 9 borough work session, she acknowledged a lag in communication.
“Looking back, it’s very easy to see that we could have had conversations differently. I will totally admit that,” Adams said. “We didn’t know what the expenses were, and nobody said we need to stop and have that conversation next, but maybe we should have, right? I can see that now.”
But what some considered a miscommunication turned divisive: State College Mayor Ezra Nanes called for Portney to apologize for his remarks on air, and the chair of the working group, Peter Buck, said the controversy was “manufactured.”
The need for additional legal work and fees associated with it “was broadly communicated,” Buck told Spotlight PA. He said he could have done better to explain the details, but the logistics of managing proper communication among 10 entities are difficult.
“I believe that the questions that these people are hammering on are disingenuous, because they’ve all been answered,” he said.
The school district, as project fiduciary, voted unanimously on Sept. 9 to approve the $123,346 in additional legal fees on behalf of all the participating agencies.
“We will be paying this because the contracts, at the end of this, were put together to protect us so that we get a good payback on an affordable, long-term, very stable, predictable electricity price,” Buck said before the vote.
Uncharted waters
Local governments in Pennsylvania are allowed by state law to cooperate with each other on anything they have authority to do on their own. They can pool resources to provide services like trash pickup or law enforcement more efficiently, reaping the benefits of economies of scale. It is, in fact, encouraged by the state.
However, a state handbook on the practice also warns, “more good ideas for intergovernmental cooperation fail because of poor communications than for any other reason.”
Adams, of the working group, told Spotlight PA that the exhaustive back and forth in communication about the solar purchase agreement “doesn’t indicate problems. It just indicates everybody’s looking out for their best interests.”
State College Area School District Board Member Aaron Miller attributed the growing pains of the project to its novelty.
“We don’t typically operate in this way,” Miller said in a September meeting. “This is not typical business anyhow.”
Tom Murphy, solar adviser for the Pennsylvania State Association of Township Supervisors, said municipalities stay away from energy agreements like this because they dread the unknown and get intimidated by the tedium — which he admits is grueling.
“It’s not just hiring an attorney, but it’s hiring an attorney that’s experienced in that space. … And here we are trying to put together a cooperative type of a purchase and then power purchase agreements on top of all that,” he said. “You just have multiple levels of complexity in there to navigate through.”
Projects like the solar power purchase agreement in Centre County are charting new waters, he continued.
“It’s an early mover scenario … You’re trying to navigate a situation that you don’t understand all the rules, and to some degree that all the rules might not be there,” Murphy told Spotlight PA. “People are looking to you to help figure out what that might look like going forward.”
What’s next
The controversy surrounding the solar purchase power agreement’s legal bills has impacted the project. Harris Township, which held less than half a percent in shares of the agreement, voted in early September to pay $469 in additional legal fees — and leave the project altogether.
Nigel Wilson, chair of the township’s board of supervisors, said in a Sept. 9 public meeting that the scope of the project, the time commitment it required of partners, and the costs associated have “grown larger than anyone anticipated.”
At the same meeting, Supervisor Frank Harden said the township got its own quote for 100% green energy at a price that’s essentially the same as what they would get as part of the agreement.
“If we can do it on our own, why commit to 15 years of a contract that … is going to be a monster?” Harden added.
Wilson later told the Centre Daily Times the board might reconsider departing the agreement, but did not respond to a request for comment for this story.
Buck, the chair of the working group, told Spotlight PA that he expects all remaining partners to move forward with the project.
Because the school district unanimously voted to pay the extra attorney fees, the other member agencies are asked to officially decide whether they will reimburse it for their portions — some requiring a vote and others not.
Adams, of the working group, told Spotlight PA in an email that the hope is to have the contracts signed by the end of the year, which will allow a construction schedule to take shape. The project is on track to meet the target date of getting up and running by October 2026.
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