A Redding Electric Utility official resigns amid allegations of corruption and fraud. But city officials say his retirement does not mean Tim Nichols is guilty.
In an email to the city council, Michael Brown, a recently fired employee of REU, alleged corruption in the utility and its employees.
Brown alleged that his superior, Tim Nichols, made corrupt energy deals in exchange for kickbacks from energy companies. He also alleged that other r-e-u officals lost the city millions of dollars through the purchase of un-need natural gas futures. Nichols resigned after these allegations, but city manager starman says, he actually retired last year and was just helping part time to train a recently hired replacement.
“He concluded that really, he does not need the trials and tribulations of mr. Brown and his accusations so he decided to terminate his part time roll here at the city, earlier that we anticipated,” said Starman.
Starman says he believes the accusations are the rampblings of a disgruntled employee. But because of their seriousness, he has called for a full investigation. The information has also been forwarded to the Grand Jury and the Shasta County District Attorneys Office.
Tim Nichols was not the only official accused in Browns letter, several others also came under-fire. Prompting a likely, lengthy investigation.
Take a look at the letter yourself below.
Subject: Request to End Corruption at Redding Electric Utility and complete a long-term plan for the Utility independent of political pressures
Date: Mon, 6 Aug 2012 13:56:17 -0700
To: Redding City Council
Honorable Mayor and Council Members:
We received an unusual e-mail from Michael Brown this weekend (please see below).
Michael Brown was hired by REU on or about January 1, 2012, to work in the Resources Division. It did not take long for REU to discern that Mr. Brown was not a good fit. REU originally intended to dismiss Mr. Brown after 90 days. However, REU decided to give him a second chance to see if he could improve. That did not happen. Thus, Mr. Brown was dismissed from REU last week (i.e., he did not pass probation). As you can tell from his long e-mail below, he did not take it well.
It is clear that Mr. Brown is a disgruntled ex-employee. I am reluctant to give him much credibility. Nevertheless, he has made some serious accusations about REU. Therefore, we will review his accusations. In order to be as transparent and objective as possible, we may refer his e-mail to the Shasta County District Attorney and/or the Shasta County Grand Jury, too, to ensure an impartial review.
If you have any questions regarding this topic, please do not hesitate to contact me.
From: Michael Brown
To: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org
Sent: Sun, Aug 5, 2012 20:40:22 GMT+00:00
Subject: Request to End Corruption at Redding Electric Utility and complete a long-term plan for the Utility independent of political pressures
*Request to End Corruption at **Redding** Electric Utility and complete a
long-term plan for the Utility independent of political pressures*
Dear Redding City Council members,
*Request:* Redding City Counsel should reinstate Michael Brown as
Supervisor of Electric Resources at Redding Electric Utility (REU) and
order him to complete an Integrated Resources Plan (IRP) for Redding
Electric Utility. An Integrated Resource Plan is the long-term plan for the
Electric Utility. The majority of Public Electric Utilities publish IRP's
on their website for public view and comment. The purpose of an IRP is to
provide understandable information for the City Counsel and public to
provide direction to the Public Electric Utility.
Redding City Counsel should have Michael Brown report directly to Redding
City Counsel to keep him independent of political pressures in the Utility.
The IRP is already 70% complete. This plan contains a detailed analysis of
the assets of REU and a 10-year plan for dealing with the resource needs of
the Electric Utility. The report would be put in a form that is
understandable to a layperson so that the public can intelligently
participate in decisions affecting the Redding Electric Utility.
*Redding**Electric Utility will ask the City Counsel to approve rate
approximately 24% over the next 3 years. I believe 10% of this increase can
be directly linked to corrupt energy deals that have no oversite by **
Redding** **City** Counsel. Please serve the citizens of **Redding** by
ending corruption at **Redding** Electric Utility and allow the public to
participate in major decisions affecting their electricity. Allowing
Michael to complete the IRP is essential to providing unbiased information
to the public and the City Council. *
*Background for request:* My name is Michael Brown and I was hired in
January 2012 as the supervisor of electric resources at REU. I have a law
degree from the University of San Francisco and an engineering degree from
Cal Poly San Luis Obispo. I worked for over 6 years at PG&E building
electric powerplants and transmission lines. I am an expert in the economic
evaluation and legal negotiation of electric energy deals. My industry
reputation is impeccable. I was recruited in 2011 by then Assistant City
Manager Barry Tippin to work for REU to negotiate long-term energy deals
and formulate a long-term plan for REU. Barry told me that I would report
to the departing Assistant Director of Resources.
One of my first assignments from Barry was to create an Integrated
Resources Plan (IRP) for the Utility. The majority of public utilities have
IRPs. The reason for creating an IRP is to provide transparency to the
public about what the Electric Utility is doing, and let the public
participate in major decisions affecting the Utility. Tim Nichols told me
REU hadn't created an IRP because the City Council hadn't asked them to do
it. Also Tim personally didn't want any real oversite of his many corrupt
*Shocking amount of corruption at REU:* My first 5 weeks on the job at REU
I was told by Barry Tippin to "learn" from Tim Nichols and report to him.
Tim Nichols was then the Assistant Director of long term resources at REU.
He is currently working as a retired annuitant for REU. Tim asked me to
travel with him to "watch how it is done". During me first week working for
REU I was flown to Arizona with Tim. I stayed at a private house of an REU
contractor for one week and was taken for four separate rounds of golf at
different expensive golf clubs. The contractor I stayed with served us
wine, paid for our golf, and let us stay at his private mansion. The
contractor works for a Joint Powers Agency (JPA) called (Modesto-Santa
Clara-Redding) which receives 15% of its funding by the City of Redding and
REU. The purpose of this JPA is to jointly fund and manage electric
generation projects for our three cities.
Tim Nichols, my ex-boss, is a board member on MSR who votes on behalf of
Redding. He raises proposals and votes on proposals at MSR. He used this
power to extract benefits from the people who work for MSR and people who
receive contracts from MSR. Tim also represents REU and the City of Redding
at other commissions including TANC (of which he is president).
For a month I saw Tim Nichols abuse his power again, and again, and again.
I probably played 30 rounds of golf, of which I paid for about 2 rounds. I
would have dinner and lunch bought for me on a regular basis by
contractors. I was told by Tim not to submit receipts for reimbursement,
but rather request per diem reimbursement from the City of Redding. Tim
regularly drank alcohol when he was supposed to be working. When I
questioned what we were doing and how this was possible, he said "Welcome
to public power. Barry isn't a big fan of all of this so shut up about it."
Tim abused his position for golf, food, wine, and entertainment. However, I
believe he also abused his position for money. I believe he consistently
completed energy deals which benefit him personally to the detriment of the
City. He claims to do consulting work on the side and that is how he makes
extra money. I can provide specific details on this if you would like.
These deals have included: Roseburg power purchase agreement, Natural Gas
purchasing strategy, and an upcoming request to purchase additional natural
gas generation (Wartzilla). That is just what I know about.
I continued to report to Tim and follow Tim around for over a month. At the
end of this time period Tim told me it was now "time to go to work". I was
asked to participate in a corrupt natural gas purchase and to "do what I
*Natural Gas Purchase and **Redding** Power Plant*: Redding owns a natural
gas power plant located on Clear Creek Road. I immediately recognized that
the powerplant was uneconomic. Natural Gas Power Plants are judged by their
"heat rate" or the amount of natural gas they use in creating electricity.
The lower the heat rate, the better the powerplant. Redding Power Plant is
relatively inefficient with a heat rate of between 8,500 to 12,000
depending on which units are operating. By comparison, most newer natural
gas power plants have heat rates of 7,000 or less. There have been quite a
few new natural gas power plants constructed in California and adjacent
states in the last 10 years. Most of these units are more efficient than
Redding Power Plant*. This means that usually it is cheaper for REU to
purchase electricity on the open market rather than generate the needed
electricity at the **Redding** Power Plant.*
In 2011 and 2012 Redding Power Plant operated very sparingly. *Basically,
the Power Plant is only useful when there is a major outage somewhere in **
California**; or during the summertime when there is very high electricity
use in **California**.* If you look at the numbers, REU has been forced to
purchase electricity from other, more efficient, natural gas powerplants
rather than run its own plant. REU purchases far more electricity on the
market than it generates. REU will probably *use less than 2,000 decatherms
per day of natural gas in 2012*. Yet, *REU has purchased approximately
13,000 decatherms per day of natural gas in 2012*. Furthermore, REU owns
9,000 Decatherms per day of natural gas pipeline capacity which is not
used. REU also owns 600,000 Decatherms of underground natural gas storage
In other words, REU has made an opulent investment in the commodity of
natural gas, natural gas pipeline transportation capacity, and natural gas
storage; given that REU rarely uses the powerplant for which this natural
gas is supposed to be serving. *The motivation for these nonsensical
purchases is that the manager of the powerplant has put political pressure
on past directors to make investments which will make getting rid of
Redding Power Plant economically impossible for Redding City Council.*The
manager of the Redding Power Plant is Paul Cummings who I believe does not
have a college degree and was promoted through the ranks by sheer
ruthlessness. You may recognize him as the REU person speaking on the Enron
tapes. Paul understands that the Redding Power Plant is uneconomic. He told
me his strategy for preventing a shutdown of Redding Power Plant is to
overpurchase natural gas infrastructure so that Redding will have no choice
but to continue to fund and use the powerplant. *Paul has done a great job
of implementing his strategy and will continue to do a great job if **
Redding** **City** Council doesn't act.* Paul said he would not hesitate to
use his political influence as Assistant Director to fire anyone who got in
his way. He told me he would use his staff, including Marvin Briggs and
Nick Zettel to refuse to work with anyone who didn't "fit in". As soon as
I questioned the purchase, Marvin and Nick both told me that I had crossed
Paul and my time at the utility was limited. They told me not to buy a
house in Redding.
Paul, and eventually Barry Tippin, placed tremendous pressure on me to
purchase natural gas. REU is a participant in a natural gas prepay
agreement in which we use our tax exempt bond status to receive 5,000
decatherms per day of natural gas at slightly below market rate. On top of
this 5,000, REU has purchased on average an additional 6,000 decatherms per
day of natural gas for the next 8 years for a total of over 11,000
decatherms per day of natural gas. In 2011, REU used less than 2,000
decatherms per day at the Redding Power Plant. *This means REU purchased
more than 5 times as much natural gas as it could economically use.*
The rationale I was told by Redding Powerplant Employees (Marvin Briggs
and Nick Zettel) to justify the purchases was that we needed to purchase
enough natural gas to generate all the electricity we could possibly need
that we haven't purchased already. They said, if you don't need it, we will
just sell off the gas. I told them that decision has cost the utility well
in excess of $30M. They told me to do what I was told.
I voiced my objections to the purchase and I have emails to prove it. Paul
Cummings (Assistant Director of Redding Power Plant) put pressure on me and
the new Utility Director, Barry Tippin, to purchase the gas. Paul had Tim
Nichols, my then boss, to write a letter to Barry Tippin that I "didn't
understand public power" and "didn't fit in". Barry Tippin called me into
his office and threatened to fire me if I failed to "get along with the
power plant". I told him I understood and would do what he wanted.
Barry and I ended up purchasing over $10 million dollars of natural gas. I
believe the exact purchase amount was in the range of $11M to $14M. I do
not believe there is any possibility that REU will use the natural gas
which was purchased. The good news is that natural gas prices are
historically low. However, the purchase Barry and I completed was for the
years 2016-2020. The price REU bought the gas at was almost double what
ithe price was at the time of purchase. So if REU is speculating to "make
money", the price of natural gas must almost double for REU to break even
on the purchase.
I received further details on the natural gas strategy which made me truly
sick. REU predominately buys natural gas from Shell Energy. The difference
between the market price of natural gas and the contract price of the
natural gas my predecessor had purchased is about $30 million dollars. That
means that because of our natural gas policy, we are expected to lose $30
million dollars over the next 8 years based on the current market. That $30
million figure doesn't count what REU has lost in the past on natural gas
sales. REU further loses hundreds of thousands of dollars a year by owning
natural gas pipeline capacity that it never uses. My predecessor, the
previous supervisor of resources, was rewarded by Shell Energy for his
tremendous failure in losing Redding $30 million. He was taken to the
Kentucky Derby by Shell Energy. Tim Nichols undoubtably was also rewarded
for giving money away to Shell.
I tried to save REU from this disaster and was unceremoniously fired. I
objected to this corruption and money wasting. Ultimately, my protests led
to my termination. At the end of July, Barry took a vacation and had the
Assistant Director of Transmission, Brian Kimg, fire me. Barry wanted to
distance himself as much as possible from this decision. Brian had no idea
why he was firing me. He said my work was good, but, "I guess you don't fit
Barry Tippin has no Electric Utility experience and must rely on others to
function as Utility Director. After Barry was directly involved in the gas
deal, he found out he had made a mistake. Barry told me I had worked for
less than one year with REU, and he could fire me without a hearing or
reason. He further told me a story about a recent contractor who complained
to City Council that the contract award process for a large water utility
project. He told me that complaining serves no purpose and was inferring
that my complaints would not lead to any changes. He inferred that if he
wanted to fire Paul Cummings, the Power Plant Assistant Director, it would
take an embarrassing public process. So Barry took the politically
expedient option of getting rid of me to save himself embarrassment. He
even had someone else fire me. I don't believe Barry believes he will serve
as Director for very long. He wants to avoid any short-term conflict. I
don't really hate Barry, but he recruited me to Redding and promised to do
the right thing. Please help him do that.
*Contempt for City Council:* During my time at REU I consistently heard
from REU employees that City Counsel was incapable of regulating the
Utility because our business is so complicated. This is why you should
allow me to finish the Integrated Resource Plan for the Electric Utility. I
have the knowledge and background to complete the task. I have already
completed 70% of the work necessary to provide you with an Integrated
Resources Plan. I would like to finish my work and present the information
to the public, with your approval. I would like to allow you and the public
to participate in guiding the Electric Utility. Public participation in
complicated decisions is usually not a good thing. However, in this case
there is so much corruption at REU at the senior level, I believe public
participation would benefit the Utility. At least it would provide some
*Final Request*: I implore you. Do not let these REU employees rip off the
city. You need to do something! I was intimately involved at the senior
level in the decisions at REU and I'm telling you that you need to get the
Utility under control. I would love to help you do this. I was recruited to
Redding and was fired for trying to do the right thing! Please let me
complete what I was recruited to Redding to do, free of political pressure
from Barry and Paul! I want to complete the Integrated Resource Plan and
give you some transparency into the decisions of the Utility. This
transparency is long overdue!....