As the blades turn — An energy soap opera 

The energy industry conjures images of soot-covered coal miners, grease-caked oil rig workers, windfall profits and political intrigue.

Last week, Minnesota’s seemingly virginal wind-energy industry proved that the renewable energy business it is not above a whiff of scandal, either.

Greg Jaunich, the Minnesota wind-power entrepreneur indicted last week for allegedly overstating power produced by a couple of his southwestern Minnesota wind turbines, also has butted heads with business adversaries who, it turns out, helped state and federal authorities build the case against him.

“I was contacted [by the Minnesota Department of Commerce in 2005] about the two turbines in question,” said Jim Nichols, a farmer, and wind-energy competitor to Jaunich and former Minnesota agriculture commissioner. “It’s pretty easy to cheat and we don’t need cheaters in this industry,” Nichols said in an interview. “Those two turbines were hardly running during the period that he claimed they were and I said I would be willing to testify to that.”

Jaunich, 45, is charged with over-billing the Minnesota Commerce Department and Xcel Energy more than $500,000 in 2003 and 2004 for electricity provided by two Gamesa wind turbines in a corner of Lincoln County. According to federal and state authorities, the turbines produced only a fraction of that juice.

Jaunich, through a member of his legal team Monday, said he wouldn’t risk a 15-year career in the industry and a huge investment by cheating a regulator and a power company. He said he and subordinates may have been guilty of sloppy estimates and bookkeeping, but he is not guilty of defrauding anybody.

“There were accounting errors and we don’t know exactly what they are yet,” said Amy Rotenberg, an attorney and spokeswoman for Jaunich. “When he became aware of them, Greg went to Xcel and the Commerce Department in writing. … In fact, in 2006, Greg voluntarily reimbursed the Commerce Department $140,000 and change.”

Rotenberg said Xcel has yet to be paid the nearly $400,000 it claims because it has yet to respond to Jaunich’s other inquiries. “Greg continues to have a good working relationship with Xcel,” she said.

In short, the Jaunich camp implies that this should be an administrative or civil matter – which it fully intended to settle – that now has been blown into a federal criminal case thanks, in part, to former associates who are angry over the exploits of an aggressive outsider-entrepreneur.

Nichols is a farmer and wind-turbine owner who also has worked for a turbine monitoring-and-repair firm owned by Dan Juhl, a Pipestone resident and one of the deans of the Minnesota wind industry dating to the 1970s.

Juhl and Jaunich also worked jointly on at least one project several years ago that dissolved, in part, over their different styles and outlooks, said Nichols.

And the locals, by their own testimony, still blame Jaunich for violating the spirit of a 1990s law that was intended to exempt from property taxes small projects of up to 2 megawatts that are owned by local farmers and other citizens. In response to the Minnesota local-ownership law, Jaunich and investors erected more than 30 turbines in one project around 2000 that produced more than 30 megawatts of power. But the project was structured as 15 separate legal entities that would qualify for a special state subsidy.

That outraged local community-energy advocates and got the attention of the Commerce Department. The Minnesota Legislature in 2003 passed legislation that outlawed such legal structures for purposes of the state subsidy in an act that was dubbed the “Jaunich amendment” by his detractors, confirmed Bill Walsh, a spokesman for commerce.

Nichols, who also has opposed some Jaunich projects as a Lincoln County commissioner, claims this case is not about political retribution but about illegality. He said he didn’t run to regulators, but was contacted by Jeremy DeFiebre, a commerce employee charged with running the subsidy program.

“As a state agency, we thought the money was taken fraudulently,” Walsh said. “We cashed the check [from Jaunich]. We also said [in 2006] that this doesn’t exonerate you. We will continue to investigate.”

Commerce Department investigators had shared their concerns with the IRS and FBI, who began a joint investigation in 2005.

Jaunich’s team says he was swamped, developing properties for wind power; selling a majority stake in his subsidiary, Navitas Energy, for what Jaunich said was $3 million back in 2003; managing wind farms owned by his family owned parent company, Northern Alternative Energy, and working projects for other companies.

Jaunich, who left a family options and commodities-trading business in Chicago to get into the wind business in 1992, is a well-known regional and national figure who has advised the Clinton and Bush administrations on wind’s growing importance.

John Dunlop, an engineer and another Minnesota wind pioneer who is Midwest officer for the American Wind Energy Association, shook his head over the whole matter.

“This challenges the image of the wind industry,” Dunlop said over the weekend. “But this is now a multi-billion dollar industry and the first case of this nature I’m aware of, at least since some investors got bilked in California in the 1980s.”

More proof that at the confluence of big bucks and energy, regardless of the type, there’s bound to be controversy.

By Neal St. Anthony

Star Tribune

24 September 2007