Critics argue that the leases were unfairly awarded because of an unspecified “relationship” between the utility’s CEO and a Life Cycle Power employee.

Did a relationship that began a decade ago between a chief executive of a Fortune 500 company and a recent college graduate lead to a controversial $818 million deal that Houston-area residents could be paying off for years? That’s a question elected officials and energy regulators may grapple with as new revelations arise about the contract that Lieutenant Governor Dan Patrick recently described as “potential fraud.”

The deal under scrutiny was struck in 2021 between CenterPoint, the electric utility to which state officials granted a monopoly to serve Greater Houston, and Life Cycle Power, a small start-up based in the northwest Houston suburb of Jersey Village. CenterPoint told regulators it needed to lease twenty tractor-trailer–mounted mobile power generators from Life Cycle to help keep the lights on during extreme weather, including arctic blasts and hurricanes. The state approved the expenditure and allowed CenterPoint to pass on the cost—plus a bit more to make a profit for the utility—to its customers. Houstonians are paying an average of $2.87 on their monthly electric bills for these generators.

Yet last month, when Hurricane Beryl barreled across the region, toppling thousands of trees and knocking out electricity to more than two million customers, the generators proved nearly useless. Restoring power took days, leaving hundreds of thousands without electricity in sweltering summer temperatures. More than thirty Texans died of heat-related causes. “If I were an inspector general, I would be investigating this contract,” says state senator Paul Bettencourt, a Republican who represents parts of Houston and its suburbs.

The details of the generator deal are spelled out in thousands of pages of regulatory filings. Sworn testimony and uncontested findings raise uncomfortable questions for CenterPoint. The company’s initial lease for the generators was supposed to be competitively bid, but an administrative law judge later determined it was not and that the process showed a “lack of transparency and fairness.” Life Cycle was run at the time by a felon convicted in 2012 of discharging untreated wastewater into the Red River without a permit.

Lawyers who scrutinized the deal also uncovered that CenterPoint’s then-chief executive David Lesar, had a long-standing “relationship” with Life Cycle’s head of business development, Knoell Coombs. Neither Lesar nor Coombs responded to questions about the nature of that relationship. But allegations have been leveled by critics of the deal that CenterPoint steered the contract to Life Cycle at least in part because of this personal connection. CenterPoint spokesman John Sousa told Texas Monthly that the company investigated the issue when allegations were first made, while Lesar was still CEO, and found “no evidence of an improper relationship” between Lesar and Coombs.

Coombs and Lesar met in about 2014. Then 61-year-old Lesar had been chief executive of Halliburton for nearly fifteen years, having taken over from Dick Cheney, who had abruptly left to become George W. Bush’s vice president. Coombs was about 24, a recent health-science graduate of Lamar University, in Beaumont. Her first job out of college was running the corporate gyms and wellness program at Halliburton’s corporate headquarters, in north Houston. Later, appearing on the podcast Oil & Gaslighting, she said: “I talked to a lot of people, everybody from like the janitor to the CEO. That was my job.”

Coombs worked for eighteen months for the company that Halliburton paid to run its gyms. Then she was hired into a Halliburton training program as an entry-level salesperson. She relocated to Denver, where she sold Halliburton services to fracking crews in the oil fields of northeast Colorado. CenterPoint, in a regulatory filing, later confirmed that Coombs and Lesar maintained a relationship (the nature of which was not specified) after they met at Halliburton. In a 2019 Facebook post, later deleted, they can be seen posing together in Denver.

Lesar left Halliburton in 2018, served briefly as interim chief executive for a health insurance company, and in July 2020 became chief executive of CenterPoint. That same year, Coombs left Halliburton and began working for Life Cycle Power in September, right around the time the company received private-equity funding. Her job: business development manager, responsible for landing big new accounts. Previously Life Cycle’s business had involved leasing mobile generators to fracking operators. After the capital infusion, it planned to expand into providing much larger generators to electric utilities.

After the Texas power grid, lacking winter protections required in neighboring states, failed amid a February 2021 winter storm, resulting in deadly blackouts, the Legislature passed a law to allow utility companies, including CenterPoint, to lease mobile generators. Previously, CenterPoint and other so-called “wires” companies operated the transmission and distribution network, but were not permitted to supply power.  The new legislation granted an exception in case of emergencies such as disruptive weather events and other natural disasters.

Less than two months after the bill was signed into law, in August 2021, CenterPoint began looking to make a deal. The utility later said it moved quickly because it wanted to have the generators leased before the end of that year’s hurricane season. A group of CenterPoint executives, including chief financial officer Jason Wells, met with Life Cycle Power representatives to discuss a short-term lease to have 125 megawatts available by the end of that month, as well as a longer-term lease for 500 megawatts, enough to power about 125,000 homes during the peak demand of summer.

In contrast, Oncor, the electric utility serving the Dallas area, procured about 10 megawatts of generator capacity. When lawmakers have questioned why CenterPoint needed so much more reserve power, the utility argued that the potential weather threats in its geographic coverage area make its needs far different from Oncor’s. But while Dallas doesn’t contend with hurricanes, it is far more vulnerable to ice storms.

Making these deals with CenterPoint would represent a huge opportunity for Life Cycle, more than quadrupling the amount of mobile power generation it was leasing. At the meeting, the utility described bid terms and details, providing Life Cycle a valuable heads-up. CenterPoint had not publicly announced its request for bids, and when it did, it would give other vendors only three days to respond.

Not long after that, Wells emailed the two Life Cycle representatives with whom he had met: the chief financial officer Ross Bartley and Coombs. “Let’s get past this short-term lease process and then immediately turn our attention towards the longer-term structure,” he wrote. CenterPoint still had not publicly solicited bids at the time.

Bartley responded enthusiastically to Wells’s message, indicating that Life Cycle could accommodate the lease terms that they had discussed. A few minutes later, Coombs chimed in. She was looking forward, she wrote, “to getting some turbines on the ground for you guys.”

These emails were disclosed in a Public Utility Commission case to determine whether CenterPoint had been prudent in its leasing of the mobile generation units. “When read together, these two emails . . . strongly suggest that the contract award to Life Cycle Power was already a foregone conclusion,” Texas Competitive Power Advocates—a coalition of large power plant owners, including Constellation, Luminant, and NRG—argued in a filing in the case.

Four hours after the emails were exchanged, CenterPoint issued its request for bidders. It ruled out certain types of generation and required delivery within eleven days. “I would not characterize that process as competitive,” Charles Griffey, a consultant for groups opposing the bid later testified. He said the parameters set by CenterPoint were “unreasonably and unnecessarily limited.”

Two companies submitted bids: Life Cycle and Distributed Power Solutions. According to Bettencourt, the Houston state senator, DPS submitted the low bid: 44 percent less for the 32-megawatt generators and 60 percent for the smaller, 5-megawatt generators. “That’s a huge differential in cost,” he said at a hearing on July 29. “This $800 million could have been substantially less.” Bettencourt asked Tom Gleeson, the chairman of the PUC, why CenterPoint had chosen the more expensive and smaller company. Gleeson responded that it was “fair to question why they needed so many of these” generators but didn’t address why CenterPoint accepted the higher-cost bid or why state regulators, all appointed by Governor Greg Abbott, approved that decision.

CenterPoint disputes that DPS’s bid was lower “when considering all cost issues,” including additional fees and discounts beyond the monthly lease rate per generator. The utility also stated in regulatory filings that Life Cycle was the only bidder with compatible units that “were ready to be delivered before the 2021 hurricane season.” The bid called for the units to be delivered by mid-August. Life Cycle missed the deadline by four weeks. Texas Competitive Power later argued in a filing that the bid was structured to deliver the lease to Life Cycle. “These parameters were so onerous that no vendor—­aside from a single vendor already working surreptitiously on arrangements to meet the requirements well in advance of the RFP—could possibly satisfy the bid requirements,” it argued.

The short-term lease in place, CenterPoint turned to soliciting bids for the long-term lease, which would run through 2029. Six companies bid on the project, and again Life Cycle won. Details on this bid—who was the lowest, and how many companies offered qualifying bids—were not readily available.

CenterPoint filed to pass along the first $200 million in lease expenses to ratepayers. Several groups that represented local governments and power-plant owners objected, arguing that the mobile generators were unnecessary. The case went to a panel of administrative law judges in 2022. The judges found that the short-term bidding process wasn’t competitive and that the leasing of the entire five hundred megawatts, the long-term lease, was “not prudent or reasonable and necessary.” It said CenterPoint had not justified why it needed so many mobile generators.

But the PUC overruled them by a four to one vote. The only “no” vote was from commissioner Jimmy Glotfelty, who said he felt that electric companies responsible for distribution wires should stick to the wires. “Increasing their responsibility to include smaller generation is not what we should expect from them,” he wrote Texas Monthly in a recent statement.

In asking for a rehearing, Texas Competitive Power Advocates raised the issue of the Lesar-Coombs personal connection, but did not characterize it. CenterPoint was “pre-determined to select Life Cycle Power from the very beginning” because of the “pre-existing relationship between Life Cycle Power’s sales representative, Knoell Coombs, and [CenterPoint’s] Chief Executive Officer . . . David Lesar.” It argued that the fix had been in on any leasing deal from the start, with the bidding parameters designed to favor Life Cycle. As evidence, it pointed to the emails exchanged among Bartley, Coombs, and Wells. The PUC did not grant TCPA’s request for a rehearing.

Lesar retired from CenterPoint this past January and was replaced by Jason Wells, the chief financial officer who had met with and emailed Life Cycle Power representatives before the bidding process began. Last week, in two appearances before legislative hearings, Wells was asked about the leases. “It doesn’t smell good, at all,” said state senator Charles Schwertner, a Republican who represents an area between Georgetown and Huntsville. “Whose pockets are getting lined here?” Wells responded that he believed the generators would be useful if there were ever another disastrous event like the February 2021 winter storm.

When Beryl hit Houston, CenterPoint used few of the Life Cycle mobile generators. The fifteen larger, 32-megawatt models take two days to prepare for transport and are so heavy that they require a special permit that takes five days to secure. None of them were used after the hurricane. CenterPoint says these were never intended for an event such as Beryl—despite, in the past, having cited hurricanes as a justification for leasing them. The utility says it did deploy its five smaller, five-megawatt generators. The Houston Chronicle reported that three of those were used at a water processing plant and two senior citizen centers.

At the July 29 hearing, senators expressed frustration that CenterPoint had wasted time and money that could have been spent on building a more resilient power grid, including by replacing wooden poles with sturdier ones made from composite materials.

Brad Bailey sits on the board of directors of The Woodlands, a suburban community north of Houston that is partly served by CenterPoint. He attended the state Senate hearing in late July, which is where he first learned of the $818 million lease arrangement. “It sounded very fraudulent to me,” he said. “I heard the CEO testify for five hours, and he could never give an honest answer on why he went with a vendor whose bid was almost double what the other bids were.”

Senator Schwertner said the Legislature will continue to investigate the utility. “CenterPoint put profits over the people they were entrusted to serve by circumventing the intent of the law and abusing the regulatory process,” he wrote in a statement to Texas Monthly. “The Senate will hold CenterPoint accountable and take decisive action to rectify these issues in the upcoming session.”

CenterPoint’s Sousa said that, owing to the numerous allegations raised during this week’s legislative hearings, the company has launched an internal review of the leasing process.

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