The Navigant Consulting Company review of the Pedernales Electric Cooperative (PEC) clearly demonstrated that the previous board and management of the organization betrayed the membership and tarnished the reputation of the nation’s largest electrical cooperative. I have been a longtime critic of the PEC dating back to the 1970’s. In June of 2008, I became one of three newly elected board members. As a board member, I have pursued and will continue to pursue positive reforms at the PEC.The Navigant report substantiates what many of us have maintained for years about the financial deficiencies, ill-advised decisions, conflicts of interest and mismanagement at the PEC. As a newly elected board member, I now feel a sense of urgency to address the issues that this report brings to light.
The Navigant investigators stated in the report, “The lack of controls and effective Board oversight allowed PEC’s former Senior Management to enter into questionable transactions, receive significant compensation, and operate the Cooperative inefficiently, as well as on a basis contrary to the best interests of the Cooperative’s members.”
Beginning with the June 2008 election of three new voting Board members, including myself, PEC entered a new era committed to openness and transparency with our members and the public. We have achieved the following reforms:
• Ratified new ethical standards, including whistleblower protections and policies addressing conflicts of interest for directors and key employees;
• Implemented a landmark open meetings/open records policy that provides access to PEC’s decision-making process. We now provide members with materials for each Board meeting and post video of each meeting on PEC’s web site;
• Reduced the Board’s compensation package by an estimated 40 percent and restricted reimbursable expenses;
• Approved a long-term wholesale power agreement with the Lower Colorado River Authority that promotes transparency and the sharing of information on costs and rates; and
• Adopted groundbreaking goals that promote energy conservation and the increased use of renewable resources.
We have adopted these policies because the new leadership demands it and our members deserve it. I look forward to the future when PEC resumes its status as an exemplary corporate citizen and a model for other companies.
However, we still have much to do. The actions of the previous board and management left us with many financial and governance issues that still need to be addressed. Specifically, we should insure that we:
• Develop an Equity Management Plan that will balance the PEC equity and debt;
• Provide a Capital Expenditure Plan to assure the member’s money is spent wisely;
• Bring resolution to the Texland Electric Cooperative, Envision and other third party transactions that resulted in millions of dollars of costs to PEC and develop new strategic policies for any outside agreements;
• Assure that PEC management adopts an appropriate budget process with clear accountability to the Board and members for any variances from that budget;
• Provide accurate financial reporting to the IRS and PEC members and secure new audit services; and
• Ensure an open, fair election process for 2009 such as calling for one member-one vote, instituting residency requirements for directors and addressing the imbalance in membership among the seven districts.
On December 21, the Austin American Statesman editorial called for the current PEC Board President to step down from his position in light of the Navigant findings. In order to achieve the further reforms that the members deserve, I urge President R.B. Felps and Secretary-Treasurer O.C. Harmon to step down as officers of the PEC Board.
Even with the many challenges that we face, I am encouraged by the many people who applaud our efforts to change the PEC. Members I meet at the grocery store, bank, church, civic clubs and on the street provide constructive criticism and support for reforms. I will continue to listen to our members and advocate further initiatives and changes that will restore the integrity of the PEC.
When the PEC formed in 1938, it endowed in its membership the power to effect change through the electoral process. For the past thirty years, I have been an advocate for responsible leadership and management at the PEC. For many years the election process perpetuated board directors, reinforced existing management, and prevented meaningful member participation. Changes to the electoral processes have once again provided members with an opportunity to participate in their cooperative.
Proving the cooperative business model remains relevant and viable, our members cast their ballots for change in 2008 – a change in leadership, standards, and practices. We have begun in earnest to address that call for a newer and stronger PEC, and I look forward to working in that endeavor.
by Patrick Cox, Ph.D
PEC District 7 Director
Dr. Patrick Cox is a member of the PEC Board of Directors. This editorial is his personal opinion; he is not speaking on behalf of the PEC Board or the corporation.