Over 75 people packed the meeting room at the Pedernales Electric Cooperative board meeting at the Cedar Park Library on Monday afternoon and witnessed two historic moments.
Invited guest, Tom Mason, General Manager of the Lower Colorado River Authority, spoke eloquently of a future based on shared goals, mutual respect and cooperation between the PEC and LCRA. Mason spoke highly of PEC General Manager Juan Garza and said they both are “motivated by a sense of service.”
When Mason said, “We’re looking forward, not backward,” only long time PEC members understood his meaning. PEC Board President E. B. Price explained, “In the past, the LCRA and the PEC have had general managers who conflicted.” Price welcomed this new era of friendship with the LCRA.
PEC is the LCRA’s fastest growing wholesale electric customer and takes 33% of the entire LCRA electric load. “The PEC has a right to know about LCRA’s pricing,” said Mason, as both utilities focus on transparency, cost conservation and customer service.
The LCRA is in the process of divesting itself of water and wastewater projects, according to Mason, “because it is not fair to have our electric customers underwrite water and wastewater customers.”
The second historic event occurred later in the meeting as Price introduced the official slate of 58 candidates who have filed and been qualified to run for 5 seats on the board of directors. Having removed the self-perpetuating Nominating Committee system and proxy voting process, board elections were opened up this year to all members.
Mike Racis, PEC Marketing Manager, assured the audience that the election process is being professionally handled by Election Services Corporation. Biographies of each nominee will be mailed with the ballots on May 7 to all members in a large envelope distinctly marked on the outside as containing a ballot. Each ballot will be randomly coded. Voting can be done by mail, over the internet or in person at the June membership meeting.
Approximately 20 of the candidates attended the meeting, some wearing name tags that identified them and the position they are seeking, and a few delivered mini campaign speeches during the member comments portion of the meeting.
The PEC will put out requests for bids for a study of PEC rates. The last study was done in 2004, Price said, and that for too many years the PEC has charged far too little for hook-ups. “It is time for new customers to pay their fair share of the cost of extending new service to them.”
Todd Lester of Navigant Consulting described the “process methodology” the company will use to evaluate PEC board compensation policy. Navigant will create a “quantitative analysis” using compensation data from electric cooperatives across the nation, other utilities, public information from Internal Revenue Service filings, and informal surveys from electric cooperatives and board compensation experts. Navigant will also prepare a “qualitative analysis” based on factors specific to PEC and input from members.
Lester said that Navigant was already on the ground working at the PEC and expects to report its compensation analysis to the board’s Compensation Committee within the next three weeks. Advisory Director Libby Linebarger is chair of the committee which includes Directors R. B. Felps and Vi Cloud, and Advisory Director Robert Reed.
PEC member John Watson, who said he attends all monthly board meetings and had never heard of a Compensation Committee, asked Price when and how this committee came into existence. There was some confusion in answering by the board, but after the meeting Racis said the committee was formed at a March 20 special meeting of the board. The PEC does not post notice of its special meetings.
With the proposed settlement in the class action law suit filed against the PEC and its leaders set for a hearing on April 30, Watson quizzed the board on how Director Barry Adair and the non-voting advisory directors became a “Disinterested Committee” with authority to make a valid corporate decision to enter into the settlement and release PEC’s potential causes of action against its directors, attorneys, insurer and others. Watson referred to the PEC bylaws which defines a quorum as a majority of the voting directors and denies the right to vote to advisory directors.
PEC in-house attorney Kimberly Paffe said there was no bylaw amendment. “It was done by board resolution.” After the meeting adjourned, Director Val Smith was adamant that the process the board used was proper, saying, “We had five lawyers tell us it was ok.” Smith said that the directors passed a resolution conferring the authority on Adair and the advisory directors to decide whether or not to enter into the settlement agreement.
Members have until Monday to object to the proposed settlement agreement which calls for the PEC to pay $1.4 million of the $4 million going to the plaintiffs and their attorneys. Howard Siegel, candidate for District 3 Director, told the board, “The PEC should not pay any of the settlement. If the insurance company wants to pay the $2.6 million in attorneys fees, that should be enough for the attorneys. And I’m an attorney!”
Last Friday, Senator Troy Fraser sent a letter to Judge John Dietz objecting to the proposed settlement as not in the best interest of PEC members. Fraser said in part, “I am concerned that PEC’s insurer refused to pay $1.4 million of the settlement. This refusal to pay for the entire amount sends a message that the insurer found sufficient wrongdoing to deny paying part of the claim. The PEC Directors were quick to agree to pay the $1.4 million with money belonging to the members of the cooperative. None of the settlement is coming out of the directors’ pockets – pockets that were lined with millions of dollars taken from PEC members.”
PEC Marketing Manager Michael Racis explained the shared payment arrangement last week. “The amounts being paid by AIG (the insurer) and PEC are the result of a negotiated settlement between insurer and insured. The amounts themselves are not tied to any specific issues or claims made in the lawsuit, and the settlement avoids any potential litigation regarding coverage disputes.”
Fraser objected to the settlement because it addresses only one issue raised by the law suit, the re-payment of some capital credits, and fails to address governance issues. “My perception is that this settlement agreement only benefits the Board of Directors, the former General Manager and the attorneys in the case. It allows their actions to go unpunished and rewards their wrongdoing…The settlement agreement not only leaves the current Board of Directors in place, but it also allows each of them to run for re-election.”
Of the 58 candidates running for the PEC board this year, District 5 Advisory Director D. L. Ruff is the only incumbent seeking re-election. Former Director Bud Burnett resigned earlier this year and his seat is vacant; Directors Price and Adair, and Advisory Directors Ola Armstrong, are not seeking re-election.