Pedernales Electric Cooperative’s Board of Directors voted unanimously Monday, Dec. 20, to adopt a capital credits policy for allocating and retiring capital credits. The new policy will be effective Jan. 1, 2011, and will be implemented on April 1, 2011.
The policy was developed by the Financial Strategies, Contracts and Budget Committee, which is chaired by District 1 Director Cristi Clement. “This is our first normalized capital credits policy,” Clement said. “Capital credits are an important and unique financial aspect of the cooperative business model. We are pleased to institute a well-researched and thoughtful policy to serve our members.”
Allocating and distributing capital credits back to members is a fundamental principle of all cooperatives. Capital credits are each member’s share (allocation) of the net margins (profits) made during the business-year operations and are generally retained to help fund the Cooperative’s business needs. Each year, depending on financial conditions, the Cooperative will determine if a portion of the capital credits can be retired (paid back). When the Cooperative retires that determined amount of capital credits, it will do so in the following order:
1. Total allocation of capital credits to the estates of deceased members
2. Approximately one-half of any remaining payout funds for a member’s capital credits from the oldest outstanding year(s) that have not yet been retired
3. Any remaining payout funds for a member’s capital credits from the most recent year(s) that have been allocated
The Board also revised PEC’s bylaws to allow capital credits retirements outside the normal retirement schedule by payment of a discounted amount when it receives proper notification that a member or former member has died.
“We have before you a brand new, modernized capital credits policy with fair distribution,” said Mike Vollmer, PEC Chief Financial Officer. “We compared this policy with other co-ops, and it’s in line with what many are doing.”
In other action, the Board of Directors approved the posting of a draft of PEC’s strategic issues document to the Cooperative’s website, from Jan. 3 through Jan. 14, 2011, for member review and comment.
Members addressing the Board voiced concern about spending compared with other utilities and about the trial and sentencing of former general manager Bennie Fuelberg. Earlier in the meeting, the Board agreed to have the Cooperative’s acting general counsel prepare and file a victim impact statement with the court to reflect financial and other damage to the Cooperative and its membership and the limited alternative avenues for recouping losses.
During the meeting, the Board also:
• Agreed to make payments to employees in recognition of PEC’s achievements on the Board’s Key Performance Indicators, which are used to measure the Co-op’s performance.
• Presented Lower Colorado River Authority Community Development Partnership Program grant checks to six area organizations. The grant checks were received with the help of PEC’s grant-writing service and were funded by LCRA.
Adopted a resource planning policy to govern PEC’s planning for and procurement of resources to meet its requirements for energy services. PEC will plan for and select supply and demand resources according to a Board-approved “integrated resource plan” developed every three years.
Amended its member assistance policy to more accurately reflect current practices in working with agencies to process applications.
Revised its tariff and business rules to implement the second phase of creditworthiness — risk assessment — to go into effect Jan 1. To receive service from PEC without paying a deposit, new applicants will be able to provide either a satisfactory letter of credit history from their previous electric service provider or receive a satisfactory credit risk assessment conducted by the Cooperative or on its behalf.
Wrapping up the meeting, Acting Chief Executive Officer Luis A. Garcia presented a 2010 year-end review, focusing on PEC’s accomplishments throughout the year.
A special Board meeting will be held at 10 a.m. Tuesday, Jan. 4, 2011, to discuss matters that are currently before the Executive Search Committee of the Board. The next regular Board meeting will be held Monday, Jan. 24.