San Marcos Mercury | Local News from San Marcos and Hays County, Texas

March 12th, 2009
Rose’s bill on electric co-ops could do more harm than good

GUEST COMMENTARY by MIKE WILLIAMS
Texas Electric Cooperatives

Typically, electric cooperatives in Texas hum along doing their members’ business without incident. These co-ops normally do not attract the spotlight, but one cooperative has been regularly making the headlines.

Its problems made good copy because of irregularities in governance and transparency practices. But beyond that, the story got a lot of attention because nonprofit, privately owned electric cooperatives have a reputation as the guys in white hats.

This co-op’s problems prompted member involvement, resulting in positive changes in the way the members’ business is conducted.

Generally, co-ops operate as democratic and open organizations. Existing laws and practices ensure compensation information for directors and key employees is available to the public. Annual audits are performed at every co-op and shared with members. Co-op financial records are available to any member.

Any co-op member can attend a board meeting and discuss any issue relevant to the co-op. Any member can get on the ballot by petition or by showing up at a district meeting. And co-ops hold annual meetings where votes are cast and counted and board members are elected — and where it is not uncommon for incumbent directors to lose elections and be replaced by challengers. Most would say that makes for a solid model of democracy and transparency.

Last December, co-ops delivered to state Sen. Troy Fraser and Rep. Patrick Rose proposals to prevent a recurrence of the problems at the old Pedernales. Co-ops in Texas believed it was appropriate to offer constructive solutions.

The bills filed by Fraser and Rose are intended to ensure that the problems at one system will not happen at any cooperative in the future. And that’s a good thing. But their bills contain some provisions with the potential to harm the members of electric co-ops.

For example, the bills do not tie a request for co-op records to the member’s interest in the co-op. Instead, they only require that the member state any purpose that is “reasonably related” to the business of the co-op. This would allow a member to obtain access to information for the member’s personal or business gain. That would not be a prudent change in the minds of most co-op members.

Another example is membership lists, which are considered valuable business assets and, therefore, treated as proprietary. The bills do not protect lists of co-op members from being handed over to non-member third parties such as out-of-state venture capitalists interested in purchasing co-ops. We believe that few co-op members would support such a change.

The bills would treat electric co-ops as if we are governmental entities imposing Government Code procedural requirements on private cooperative corporations. As private corporations, co-ops pay property taxes and other state and local taxes and are therefore comparable to other private nonprofit and member-owned organizations that are not the focus of the legislation. The proposal is a major departure from how such entities are currently treated under Texas law.

A Feb. 20 Austin American-Statesman editorial spoke favorably of the right of appeal to the Public Utility Commission concerning governance and transparency issues and stated that such a process would be far less expensive than a lawsuit. We disagree. The PUC has no expertise in these issues and a PUC proceeding would likely become a contested case guaranteeing extensive litigation and a heyday for lawyers and consultants.

We believe a more appropriate safeguard is to establish a procedure at the Consumer Protection Division of the Attorney General’s Office where cooperative members can file complaints about governance and transparency issues and seek resolution without having to hire an attorney and go to court. The Attorney General’s Office actually has expertise in such matters and the Consumer Protection Division offers a far more consumer-friendly place for such resolution. If this safeguard had been in effect, the protracted and expensive member lawsuit at Pedernales could have been avoided.

Co-ops support reasonable proposals to ensure that the problems at PEC could not happen in the future. But such proposals must be appropriate for co-ops. They must protect co-op members and not repackage statutes intended for governmental entities.

More than 3 million Texans receive their electricity from cooperatives that have successfully served their areas with integrity and commitment for more than 70 years. During these turbulent times of volatile energy prices and changing markets co-ops remain remarkably popular with their members. Their commitment to reliable and reasonably priced energy service is no accident.

Let’s preserve that tradition.

MIKE WILLIAMS is chief executive officer of Texas Electric Cooperatives.

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5 thoughts on “Rose’s bill on electric co-ops could do more harm than good

  1. Sorry, Mike,
    I hope the new law passes and that all electric co-ops be governed in compliance with the new regs. In the last 2 years I have seen all too often what happens when someone having power & operating in an environment with lack of transparency goes his own way to serve his own interests. The fact that most co-ops are doing the right thing does not mean for one moment that another abuse of the members is not right around the corner. Whether we’re talking about PEC, or Bernie Madoff, or the former Countrywide executives, or any other of the so many greedy B..tards, if they do the illegal I want them prosecuted under the law.

  2. The tradition you want to preserve is that of no regulation or oversight of coops. And at a time when the policy of “no regulation” of private corporations has led to a meltdown of our economy. I don’t think anyone is going to buy this argument. Anyone watching the news closely these days is beginning to see the many good reasons there are for regulation – of private corporations (non-profit or otherwise). If the electric coops of Texas are so full of integrity, they should have nothing to fear.

  3. Mike,

    While I agree that the majority of cooperatives in Texas appear to be operating in clear view of their members, I don’t agree that cutting off member access to their cooperatives is a good alternative to the Fraser/Rose bills.

    Making the State Attorney General Office a filter for members who want more complete information about how their board members are running the cooperative is a recipe for disaster.

    Circumventing citizen access by empowering a small group in a state agency has been shown to result in the industry gaining influence over the decisions of the agency. TCEQ, Railroad Commission, Agriculture Commission, Transportation Commission and Education Commission are just a few examples of government agencies being dominated by special interests.

    Even the AG Office has demonstrated it can operate contrary to the public interest when it recently close a case of massive voter fraud that involved forgery in San Marcos.

    No one disputes that voter fraud occurred, and yet after more than four years of investigation by the AG Office into a matter that involved a well connected local developer, the campaign manager of the local state representative (who has sponsored a coop reform bill) and others, the case was quietly closed when a local Hays County judge recently dismissed the case. No one was brought to justice and the AG Office is fighting our open records request.

    What chance would a citizen looking into problems at his/her coop have against the influence of well connected board members if there were an AG filter standing between the coop and the citizen.

    Is there a crisis of trust with our state and local government officials? You bet there is, and I urge citizens to watch carefully the language contained in the Rose bill. You can be sure special interests will attempt to amend (gut) the language and Rose has a reputation of “playing ball” with special interests who don’t have the public interest at heart.

    If a coop is operating in the sunlight, it doesn’t have anything to hide from its members or from citizens at large.

  4. We in Socorro county New Mexico are following very closely what is happening in your county. Oversight is indeed needed, why are our “trustees” having to pay in excess of 18K dollars a year for their health insurance, when retired state of N.M. employees only have to pay a little over 6K? Something is very wrong, and our “trustees” refuse to answer!!! Arogant bunch of snakes, that seem to think that once they win a position that it is theirs for life. Socorro county co-op trustees meet twice a month and therefore get paid twice a month. The joke around here is they are a little slow and therefore need the extra meeting to learn. They pay themselves whether there is a required 20 members or not present for the meetings! I would love to get rid of the co-op alltogether, and have public service of New Mexico serve the entire state. Good luck and keep up the good work.

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