 Jake s schoolwork is failing, mainly due to his double life as the American Dragon. His principal, Ms. Derceto (a paraplegic), wants to talk to his parents, but they re out of town. Jake s current mission is to track down a kelpie, a shape-shifting creature from the ocean that robs magical creatures of their power. After Ms. Derceto comes by to talk to his Grampa, the two of them start dating. Jake notices that kelpie attacks seem to happen whenever Ms. Derceto comes by, and he suspects that she is the kelpie. When he confronts her at her home, she jumps out of her wheelchair and attacks Jake. Jake captures her, but then realizes that she s a mermaid, one of several undercover merpolice that have been looking for the kelpie for a year. She thought Jake was the kelpie, due to the changes in his grades and attitude in the last year. They then realize that Grampa is defenseless against the kelpie, who is disguised as Fu Dog s date. They return to Grampa s shop and battle the kelpie, finally defeating him and turning him over to the merpolice. Sadly, though, Ms. Derceto must return to the ocean and break up with Grampa. Even worse, Jake s mythology teacher, Mr. Rottwood, has been promoted to principal.