Pedernales Electric reorganizes after lawsuits, investigation

Pedernales Electric reorganizes after lawsuits, investigation

Written by Kara Vaught Friday, 19 September 2008

The faces and terms of leadership at the Pedernales Electric Cooperative changed drastically since the filing of a member-led lawsuit more than a year ago. Resolution of the suit, for which a settlement was approved in May, was halted due to member appeals that will last indefinitely. A criminal investigation of the PEC was recently turned over to the Texas Attorney General Greg Abbott, who has not announced what he intends to do with the case.

Meanwhile, PEC continues to provide electricity service to more than 200,000 locations in 24 counties, including 63,176 in the Leander and Cedar Park area.

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Research

• Pedernales Electric Cooperative home page
• PEC news releases
• Pedernales Electric General Manager Juan Garza's congressional testimony
• PEC4U (A website hosted by a group of PEC members)

What is an electric co-op?

In 1935, Franklin Delano Roosevelt signed the Rural Electrification Act, which made loans available to rural residents for the establishment of cooperatives. These member-owned, tax-paying, not-for-profit entities were responsible for bringing power to areas with populations too sparse to be profitable for investor-owned electricity companies to serve. PEC was formed 70 years ago and is now the largest electric cooperative in the United States.

Leadership and policy changes

In addition to a general manager, a board of directors governs PEC: seven have a vote and seven are non-voting advisers. There are also provisions for directors at large. Eight board members left office within the last year — three resigned, four did not seek re-election and one lost a bid for re-election. Bennie Fuelberg, who had a 35-year tenure as general manager, retired in November.

In February, PEC hired Juan Garza as PEC general manager. He was formerly general manager of Austin Energy, the city-owned electricity provider.

When he was hired, Garza told co-op members he intended to build on PEC’s strengths while focusing on making it a more open and accountable organization.

That process included revising board of director benefits and compensation. PEC no longer pays for health, dental and life insurance for board members and dependents. In 2007, average benefits per board member totaled $11,200. Also, the board is now compensated for only one meeting per day; in the past, they received fees for multiple meetings on the same day. Most board members have employment outside their PEC duties.

The changes continued in June with an election. Rather than the decades-old practice known as the proxy system, which often kept the same people in director positions for years, PEC bylaws were changed to allow every member of the co-op to vote in board of director elections either online or by mail. Also, an independent company now conducts the elections.

Five board positions were on the ballot, and five new directors were elected. Three directors not up for re-election resigned in July. A committee is considering whether to fill or eliminate those positions.

At its meeting Aug. 18, the board approved another change: an open meetings and open records policy. That night, newly elected director Patrick Cox said he expects the legislature to address transparency and accountability in electric co-ops, and, therefore, it is essential PEC put a policy in place. In June, Garza and PEC members gave testimony at a hearing about electric co-ops convened by the congressional Committee on Oversight and Government Reform in Washington, D.C.

Up in the air

With the discovery of more than half a million dollars in a bank account that listed former general manager Fuelberg and former president Bud Burnett as signatories, PEC moved to form a new board for Texland, a subsidiary company and partnership with Bluebonnet Electric Cooperative. Approval for Texland’s planned power plants was denied more than 25 years ago, effectively killing the company, but not all of its assets were dissolved.

Cox, newly elected Texland treasurer, said he is dissatisfied with the records the new board has received from the bank where the money was held, adding he intends to fully investigate the financial history of the company.

“The Texland board believes that we are rightfully entitled to recover interest on this Texland account from the day it was established in 1986 to the present,” Cox said at a Sept. 11 meeting. “According to our calculations, we are looking at roughly $1 million in interest that we’re seeking to recover, along with court costs.”

The Texland board is now pursuing legal action to that end.

Sources and rates

PEC purchases power from the Lower Colorado River Authority, which generates electricity through a coal-fired power plant, three gas-fired plants, six hydroelectric dams and wind power facilities in West Texas.

In July, PEC’s rate increased $0.10678 per kilowatt-hour to compensate for a LCRA rate hike. The LCRA will again raise its prices in October. Almost 40 percent of LCRA’s power is generated by gas plants, which have been affected by the overall rise in oil prices.

An independent third party is in the process of a complete PEC rate and fee study. When the results are available, the board will re-evaluate its rate structure. PEC members can use an interactive tool to analyze their homes’ energy efficiency and find money-saving tips on the PEC Home Energy Center page at www.pec.coop.

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