Auditor: EPB partially at fault for green lighting fiasco

photo Acorn lights sit on the assembly line at the Global Green Lights plant opening in Chattanooga. The new facility is the result of Global Green Lights moving its manufacturing from China to the U.S.

BY THE NUMBERSCost of lights: $18 millionCity projected cost: $27.5 millionAuditor projected cost: $24 millionSource: Office of internal audit

Chattanooga Auditor Stan Sewell released a report late Friday that fingered EPB for the spiraling cost of the city's streetlight replacement project, bolstering the case of Global Green Lighting in its feud with the city-owned utility.

Asked by the City Council to sort out the protracted kerfuffle among EPB, Global Green Lighting and Chattanooga Mayor Andy Berke's administration, Sewell found that fuzzy maintenance figures, millions of dollars in ongoing charges and a $5 million "billing discrepancy" introduced by EPB were the primary drivers behind the high price of replacing the city's 26,551 streetlights.

EPB said that it does not profit off its lighting contract with the city. Those charges are merely "pass-through" costs, said David Wade, executive vice president and chief operating officer at EPB, in an earlier interview.

Don Lepard, CEO of Chattanooga-based Global Green Lighting, heaped praise on Sewell, but stopped short of pointing fingers at EPB or the city as he has in the past.

"It has been difficult and has taken much longer than we had wished for us, the City and the EPB to sort through all the numbers regarding the cost of the deployment of Phase One," Lepard said in a statement. "The Council requesting the independent audit was the best thing that could have happened."

Originally, the replacement of all of Chattanooga's high-pressure sodium streetlights with new LED bulbs was priced at $18 million. At that price, the deal would have saved taxpayers millions of dollars over the long run.

That was before administration officials, operating in part from EPB figures, added millions more in charges to their cost projections, such as an ongoing maintenance fee and a surcharge for lights taken down before the end of their useful lives, not to mention standard add-ons like interest and installation charges.

Those costs, coupled with reports from EPB that showed the lights were unreliable, caused the city to ask Global Green for an expensive 15-year warranty on the lights, resulting in a total $27.5 million price tag.

But Sewell found that maintenance figures reported by EPB -- which suggested that one-fifth of the new lights had required some type of repair or replacement -- didn't paint a complete picture. In fact, EPB's data included duplicate reports, activations, pole resets and other minor work orders.

In reality, just over 400 of the first 6,100 lights were replaced, and 300 of those failed because of a recalled relay switch that has been fixed, Sewell said.

Global Green was also partially vindicated on its lights' energy savings. The company had claimed the lights would be 75 percent more efficient than the current lights. The city's estimate was 60 percent, but the actual figure will come closer to 68.8 percent, Sewell found.

The city will save another 12.7 percent on energy costs thanks to an EPB billing discrepancy uncovered and corrected by Sewell. Sewell discovered that EPB was overbilling the city for power, a discrepancy that could have added up to $4.9 million over 15 years.

Much of the new cost savings, however, will come from Global Green itself, which when contacted by Sewell agreed to cut its own fees. The company agreed to offer a 13-year warranty at no extra charge and waive monitoring fees, among other compromises.

That will decrease taxpayers' outlay to $24 million over 13 years, Sewell found.

But not everyone is satisfied with a compromise under which Global Green gives up fee income for managing the system, while EPB continues to charge taxpayers millions -- $10 million over 15 years -- for lights the city will no longer use. Those charges are for lights not completely depreciated and for certain operating costs.

City Councilman Ken Smith said he's looking forward to meeting with Sewell on Tuesday during the council's regularly-scheduled session to hear more about the audit's results.

"It's hard for me to see, if we take down every single light of EPB's 27,000 lights, how the facilities charge barely drops just in half," Smith said. "I truly believe ... that we would have to have a lot more detailed numbers on where those amounts and how those amounts were determined. I have yet to see any of that."

Global Green has said that if the city chooses to move forward with the second phase of the project, after months of delays, the company will immediately create 60 jobs, with 40 more by the fall of 2014.

If the company can leverage its success in Chattanooga to attract more clients, Lepard predicts that he could hire more than 250 workers locally and 1,500 nationwide.

Contact staff writer Ellis Smith at 423-757-6315 or with tips and documents.