As InDaily reported yesterday, Ombudsman Wayne Lines found the Coober Pedy Council committed serious maladministration in its decision to enter into a $198 million power purchase agreement with an energy company without a competitive tender process.

The deal, outlined extensively in a series of exclusive reports by InDaily, had been referred to him by the Independent Commissioner Against Corruption.

In his report, released yesterday, the Ombudsman found that the council had made a number of errors which amounted to “the substantial mismanagement of public resources”. He invited the local government minister to consider whether the council was in breach of its statutory obligations – a position which could lead to the elected members being replaced by an administrator.

The Ombudsman also detailed how the former State Government had supported and, ultimately, underwritten the deal for 20 years.

The council is struggling to come to terms with the serious findings against it, in the light of the Ombudsman detailing how the Government had underwritten the deal and had, in his view, taken reasonable steps to satisfy itself that the agreement was value for money.

Knoll told InDaily in a statement that the report “raises serious issues about the operation of the District Council of Coober Pedy”.

“I am therefore giving careful consideration to my responsibilities and powers under the Local Government Act 1999,” he said.

“There are a range of potential actions that I may take under this Act to assist in addressing council issues and failures to comply with statutory obligations.

“However, before I take any action to give directions to a council or recommend to the Governor that a council be declared defaulting, I am required to provide this council with a reasonable opportunity to make submissions to me on the relevant report.”

The Coober Pedy Council believes it has been harshly treated by the Ombudsman’s report and is seeking a meeting with Knoll and Premier Steven Marshall to make its case.

InDaily understands the council wants to present evidence to the Premier and Minister that the council felt pressured into signing up.

The Ombudsman’s report finds that undue pressure was not applied by the Government.

In a letter to the Ombudsman responding to his final report, seen by InDaily, the council contests this conclusion and others in the report.

The council says it did make an error of judgement in signing the agreement with energy company EDL, but argues this did not amount to maladministration due to a number of mitigating factors.

These include that the council was pressured by the Government to sign on, that it did not have the knowledge necessary to evaluate the agreement, and that it had therefore relied on the advice of third parties.

Lines was unequivocal in apportioning blame to the council for signing up to the deal without going through proper procurement processes. However, he also concludes that the State Government bureaucracy “undertook reasonable endeavours to satisfy itself that subsidising the project presented value for money to the State”.

He did find the department, while not guilty of maladministration, had been wrong in failing to demonstrate in briefings to then minister Tom Koutsantonis that the agreement executed by the council was “fairly and reasonably priced when considered against comparable projects”.

As InDaily has reported, the council had misgivings from the beginning about the risks in a deal to replace Coober Pedy’s diesel power generation with a hybrid-renewable system. It argues that its members were under pressure at a January 2016 council meeting to approve the agreement or it would lose Federal Government renewable energy funding for the project and face other legal consequences.

The Government has consistently rejected suggestions that it applied undue pressure to the council and Lines agreed with this.

Lines’ report does show considerable support for the deal within the energy bureaucracy, which also trenchantly rejected the view of the council’s consultant engineer, Graham Davies of Resonant Solutions, who produced a report warning that the agreement would cost $85 million more than it would have if it had been subjected to a competitive tender.

The Ombudsman’s report shows that the State Government’s Coordinator-General did not believe the project was required to be assessed under its “unsolicited bid” guidelines, introduced after the Gillman debacle.

Coober Pedy council essentially acts as the energy retailer for the town, with the South Australian taxpayer exposed via subsidies the State Government provides to the council to ensure electricity prices are kept on par with those in the city.

EDL, which ran the town’s old diesel generation, has upgraded the infrastructure to include a greater mix of renewables and battery storage under the 20-year power purchase agreement with the council.

After the system was switched on in July last year, EDL argues it passed several significant milestones, including running entirely off renewable energy for more than 24 hours.