Pentagon to probe energy services contract award

The Pentagon has launched a formal investigation into an energy services contract awarded to Reliant Energy Inc., in May, one month after a subsidiary of the Houston-based firm was indicted for its role in the California energy crisis of 2000-01.

Pentagon officials said July 28 that the Air Force had assumed the lead role in the probe, which could result in recommendations to suspend the contract or bar the company or its subsidiaries from receiving Defense Department contracts.

Reliant Energy has been under scrutiny by lawmakers and government watchdog groups since the indictment was handed down April 8. Both California Democratic Sen. Dianne Feinstein and Public Citizen, a Washington-based public interest group, have been questioning the award of a $36 million contract in May to subsidiary Reliant Energy Solutions East. Under the contract terms, the company would provide electricity to several military installations, including Andrews Air Force Base in Maryland and the Walter Reed Army Medical Center in Washington. The Pentagon, backed by the parent company, has maintained sharp distinctions between Reliant Energy Solutions East and Reliant Energy Services, which the Justice Department charged with wire fraud and manipulating electricity prices during the California energy crisis.

But in a July 6 letter to the Pentagon's Defense Logistics Agency, Public Citizen asserted that after reviewing documents filed with federal regulators in late 2003 and early this year, the group found the indicted subsidiary conducts most of its operations on the East Coast and sells significant quantities of electricity to Reliant Energy Solutions East. In addition, both subsidiaries share in common at least three officers, according to documents filed May 27 with the Federal Energy Regulatory Commission. The documents list Daniel Hannon as senior vice president, Tanya Rohauer as assistant treasurer and Wendi Zerwas as assistant corporate secretary for both Reliant Energy Services and Reliant Energy Solutions East.

Lynette Ebberts, communications director for the DLA's Defense Energy Support Center, which awarded the Pentagon contract, said in a statement to CongressDaily that electricity is a commodity available from many wholesalers. And while Ebberts confirmed that the two subsidiaries share three officers in common, she noted that none of them were named in the April indictment. In July, lawmakers called for a Pentagon inspector general probe into the contract with language inserted at Feinstein's urging into the fiscal 2005 Defense appropriations bill during House-Senate conference deliberations. That bill is now headed to the White House for signing.