Long-Delayed Solar Project at San Diego County School District Completed, Now Facing Lawsuit

The $23.7 million project, involving seven schools in San Ysidro, is expected to slash utility costs by 80 percent.

by David Hernandez, The San Diego Union-Tribune / September 6, 2018 0
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(TNS) — Over the past decade, the delayed completion of the San Ysidro School District’s $23.7 million solar panel project was a constant source of frustration and tension.

Now, the project that once was the subject of a breach-of-contract lawsuit against the district is complete. Solar panels are installed at seven schools and the district’s office.

But now the project once again is at the center of yet another breach-of-contract lawsuit.

This time around contractor BAP Power Corp., which does business as Cenergy Power, has sued the school district and the solar company in charge of the project. Cenergy claims it is owed about $963,000 for work completed between January 2017 and March 2018.

Under a $4.4 million contract, solar company Manzana Energy was supposed to periodically pay Cenergy when the project reached milestones. According to the lawsuit, Cenergy “performed under all milestones” and was paid almost $3.4 million, but the Carlsbad-based company is still owed the rest of the money.

Cenergy invoiced Manzana and unsuccessfully tried to negotiate with the solar company, according to the lawsuit. In April, Cenergy sent the school district what is called a stop payment notice to request that the district freeze final payments to Manzana.

Superintendent Gina Potter confirmed the district received the notice and said the district plans to withhold the remaining balance it owes Manzana — $570,310 — until the dispute is resolved.

Meanwhile, Manzana CEO Art Castañares confirmed his company owes Cenergy a final payment.

He claims Cenergy failed to provide proper documentation to show that its subcontractors were paid after Manzana paid Cenergy’s invoices over the course of the project. He said he reached out to subcontractors, who said they were owed money from Cenergy.

“Why would I make payments if I know that the other payments I made didn’t go where they were supposed to go?” he said.

Castañares said he withheld the last payment so neither Manzana nor the district ends up being responsible for paying subcontractors the money they are owed.

“We’re just protecting ourselves by holding the last bit of payment I have until they fix it,” Castañares said.

He said Manzana more than once requested the documentation, which he said is required under the contract, and called for mediation before Cenergy filed the lawsuit.

In addition to the money Cenergy is owed, the company seeks to recover attorney fees and charge Manzana penalty fees. The lawsuit was filed on May 3 in Orange County.

According to the lawsuit, the contract was signed in Orange County — a claim Castañares disputes. He said Manzana’s lawyers will request that the case be heard in San Diego County.

Potter, meanwhile, said the district plans to request a court order to prevent actions against the district while the matter is resolved.

“The District believes this is a contract dispute between Cenergy and Manzana and intends to seek a stay of the action against the District while the parties resolve their differences,” she said in a statement.

Now that the long-delayed solar project is installed, the district is working with Manzana and San Diego Gas & Electric Co. to get the system online and under the control of the district.

The solar panels are installed on parking canopies at six schools. Sunset Elementary and the district’s office have ground-mounted solar panels.

The installation occurred over the first few months of this year, with the entire 2.2 megawatt system up and running by late April or early May, Castañares said.

He said the solar project is expected to slash the district’s utility bill by 80 percent, or about $850,000, a year.

The history of the solar project dates back to 2008, when the district and Manzana signed a contract.

The troubles began in 2011 after then-Superintendent Manuel Paul cancelled the contract, citing non-performance. The move led to a breach-of-contract lawsuit against the district.

In 2014, Manzana Energy won a $12 million jury verdict, which was set aside a year later when the district and solar energy company agreed to amend and reboot the contract.

Initially, the company was to install the panels at no cost, then sell power to the district for $18 million over 25 years. Under the revised contract, the district agreed to pay for the panels, using bond funds from Proposition C, approved by voters in 1997.

Castañares has said the project stalled in part because the district decided to first modernize two campuses, although the district said the project would be completed in early 2017, with the exception of Smythe and La Mirada elementary schools.

Later, Castañares estimated the project would be completed by fall 2017.

As of Febuary 2017, Manzana Energy had been paid $16 million, even though not a single solar panel had been installed.

©2018 The San Diego Union-Tribune Distributed by Tribune Content Agency, LLC.