The penalty was issued last week against San Diego-based Terra-Gen, which federal regulators said improperly claimed two of its energy storage systems were offline at times when California’s Independent System Operator had ordered it to purchase and store electricity while energy prices were high.
Terra-Gen admitted it failed to follow required orders from the system operator and “selectively and improperly declar(ing) outages,” but did not admit or deny manipulating energy markets. The settlement also noted the company fully cooperated with the investigation.
“This strategy was devised by, implemented by, and maintained at the direction of (Terra-Gen subsidiary) TGP Energy’s former Vice President of Origination,” according to the settlement, which did not name the former company official.
The settlement centers on two California facilities co-located with wind farms, which store energy generated on-site as well as electricity from the broader grid.
Bulk battery energy storage systems like the one Terra-Gen has proposed in Ulster are designed to balance fluctuations in renewable energy supply, storing electricity when production is high and releasing it when demand increases. They are considered a key component of New York’s climate goals.
Under the agreement, Terra-Gen will pay a $4.95 million civil penalty to the U.S. Treasury and return $681,007, plus interest, to the California Independent System Operator — the amount regulators said the company was “unjustly enriched” by claiming its facilities were offline for a combined 262 hours between July 7, 2020, and April 17, 2022.
The settlement states that Terra-Gen has since terminated the vice president who led the subsidiary, TGP Energy, during the period in question and taken steps to strengthen compliance. Those measures include creating new oversight positions, establishing an anonymous third-party reporting system for employees, and hiring an outside attorney to conduct compliance training.
In a statement, Terra-Gen cited those changes, saying it “has proactively taken significant steps to enhance its risk management and compliance culture company-wide.”
The company’s proposed Ulster facility has drawn both support and opposition. Assemblywoman Sarahana Shrestha and state Sen. Michelle Hinchey have backed the project, while some residents and the supervisor of the neighboring town of Hurley have raised concerns about potential fires from lithium-ion batteries, which can be difficult to extinguish.