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PEC Board Approves “Landmark” Contract with LCRA
Wednesday, November 26, 2008 • Posted November 25, 2008

At its regularly scheduled November 17 meeting, Pedernales Electric’s Board of Directors unanimously approved a resolution authorizing a new wholesale power contract with the Lower Colorado River Authority. PEC Board President R.B. Felps said the approval of the contract “is probably the biggest vote that any one of us will ever encounter in our history with PEC.” LCRA’s Board is expected to address the contract at its November 19 meeting.

The new agreement would extend the relationship between PEC and LCRA through 2041. An expert team composed of PEC staff, including General Manager Juan Garza, Deputy General Manager Paul Hilgers and Distribution Engineering Manager Dale Jones; utility industry consultants and attorneys collaborated on the new deal, which supersedes the current contract that was set to expire in 2016. PEC’s Power Supply, Contracts and Agreements Committee, comprised of Board members Felps, Val Smith and James Spellman, proposed the resolution that formally approved an “amended and restated wholesale power agreement with the LCRA.” The resolution also authorizes Garza to execute the agreement with LCRA and to organize a Rates and Resources Council that will have direct input on LCRA decisions affecting strategic operational planning.

“In all negotiations, there is a give and take that is involved,” Garza said. “If you read all the literature, they all recommend a win-win outcome where both parties feel like they have won.”

“This new agreement, with its Rates and Resources Council and ‘progressive power’ provisions, really couples the LCRA to PEC, just like a fully integrated utility, allowing both entities to truly strive for the lowest cost of electricity,” Spellman said in a statement to the Board.

“I think this really is a landmark decision we’re making,” said PEC District 7 Director Dr. Patrick Cox. “This contract is really a change in direction for us, and in looking at all the provisions, it really provides openness on the rates and costs and other provisions that are stipulated. This is in the best interest of the Cooperative, and especially, it’s in the best interest of our members.”

LCRA General Manager Tom Mason addressed the Board after the resolution was approved. “This is a truly historic occasion,” Mason said. “I view your [the PEC Board’s] action today as a vote of confidence in the future, where PEC and LCRA work together as partners in public service who promote the benefits of public power throughout Central Texas.”

The contract will give PEC more flexibility, unprecedented access to LCRA information, and establish a more collaborative partnership on costs, rates and resource planning. The amended agreement also includes progressive power provisions, greater flexibility to purchase power from other suppliers and heightened transparency and information sharing on costs and rates.

After endorsing the LCRA contract, PEC’s Board also approved a policy that “defines the relationship” between PEC’s Board of Directors and management “through a description of responsibilities and expectations and through the establishment of guidelines for the delegation of certain powers and duties.” In short, the policy defines the Board’s responsibility to “establish the overall goals and objectives of PEC” and to set policies that direct management to attain the goals and objectives. The policy does not change or supersede the Cooperative’s bylaws, but delegates authority to PEC’s General Manager to “accomplish PEC’s purpose, plans and objectives as approved by the Board.” A draft of the new policy is available at www.pec.coop, in the supporting material that accompanied the agenda for the Cooperative’s November 17 meeting.

In other action, PEC’s Board continued the Cooperative’s HVAC Rebate and Commercial Lighting Rebate programs, renewed the Cooperative’s American Public Power Association membership and approved funding for PEC’s Partners in Learning program to make contributions to education foundations within PEC’s service area. The Board also agreed to a partnership with the University of Texas’ Lady Bird Johnson Wildflower Center that will provide PEC with research and educational opportunities in a variety of fields, such as energy conservation, solar energy and sustainable development. PEC also will sponsor the Luminations event held December 12-14 at the Wildflower Center in Austin.

PEC Directors also approved $100,000 in additional funding for the Cooperative’s Community Assistance Program, which helps PEC members unable to pay their electric bills. The program, which had already paid out $500,000 in allotted funds for 2008, uses local agencies to screen and qualify applicants based on financial need.

Members addressing the Board requested information related to the settlement agreement, commented on the 2009 Board election process and asked for the upcoming release date of a report by Navigant Consulting, Inc., to be amended to allow members time to review the report before upcoming Board meetings. Navigant is conducting an independent, comprehensive investigation of PEC’s financial and management operations, going back 10 years from December 31, 2007, with an emphasis on the last five years of this period. Garza explained that when the Navigant report is released December 16, it will be the first time PEC’s management and Board receives a copy of the report, which helps ensure the independence of the report.

The last item of business was to authorize holding the Board’s regular December meeting at 10a.m. on December 8, at the PEC Training Center, 1506 North U.S. Highway 281, in Johnson City. The meeting date was moved up to accommodate a December 16 special Board meeting, where the Board will receive the Navigant report at 10:00a.m.

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