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

March 19th, 2009
PEC to refund member fees


The Pedernales Electric Cooperative (PEC) Board of Directors put in a busy meeting this week, deciding to refund some member fees, discussing rates, hiring new general counsel and reviewing a program to aid members in financial distress.

The board voted to refund fees paid by members in excess of the initial fees required for membership. PEC will return about $2.6 million to members who paid multiple membership fees. The change goes with a recent PEC switch to a one-member, one-vote system for electing directors. Previously, members paid a fee each time they applied for electric service, then received one vote for each membership fee paid. PEC stopped collecting multiple membership fees on March 1.

“At the end of the day, I just couldn’t justify in my mind not refunding (the fees),” PEC General Manager Juan Garza said. “This is really the right thing to do.”

At their March 16 regular meeting, Pedernales Electric’s Board of Directors approved a resolution to refund the fees members paid in excess of the initial fee required to establish membership. The resolution follows the Cooperative’s recent switch to a one-member, one-vote election system. Previously, PEC members paid a membership fee each time they applied for electric service and received one vote in elections and on Cooperative matters per membership fee paid.

C.H. Guernsey & Company reported to the board on a cost-of-service and rates study, recommending that PEC consider revisions to its rates, service availability charge, demand charge for large power members, line extension fee and area lighting fees. PEC will conduct a forum for members to learn more about the cost-of-service study and rates findings on Monday, March 23, at 6:30 p.m., at PEC headquarters in Johnson City. Members will have the opportunity to ask questions and provide feedback. PEC’s Board of Directors is expected to make a final decision on rates and fees at the April 20 Board meeting.

The board’s review of its rate structure comes in light of an announcement by Garza confirming PEC’s bond rating on outstanding first mortgage bonds being lowered by Fitch Ratings to A+ from AA-, with a “stable” rating outlook.

“Moving forward, we know we are going to be focused on improving our equity position and our cash flow,” Garza said. “While it has been acknowledged that we’ve made significant improvements recently to strengthen our financial position, given the economy and the scrutiny that both corporations and rating agencies are under, it is not surprising that our bond rating (was) lowered.”

Fitch commended PEC’s decision to extend its wholesale power agreement with the Lower Colorado River Authority.

“We also must keep in mind that an A+ with a stable outlook is a strong financial rating,” Garza said. “The cost of service study and rate design analysis is another significant step on our road to assuring PEC has an even stronger financial future.”

Garza said PEC is exploring the impact of reclassifying contributed capital as an asset rather than as equity. Any action taken in this area will be brought to the board next month for ratification, and the Cooperative will develop a long-range plan to rebuild equity.

The board also voted Monday to make Luis A. Garcia the cooperative’s official general counsel. Garcia has served as interim general counsel for PEC since September 2008.

The board approved PEC Assistant General Manager Jeanell Davis’ proposal to eliminate Saturday hours for the five cooperative offices that are open that day, including the Canyon Lake, Cedar Park, Kyle, Lake Creek and Manchaca offices. The five offices will remain open on Saturdays until members are notified of the change.

PEC directors also approved a resolution presented by PEC Deputy General Manager Paul Hilgers to authorize revisions to the Cooperative’s Member Assistance Program to aid members in financial distress who are unable to pay electric bills. The board approved funding the program with an amount not to exceed $500,000. Each qualifying member will be limited to receiving a maximum of $500 in assistance funds per calendar year.

Earlier in the meeting, the board also approved a recommendation from its Governance and Oversight Committee to review the cooperative’s charitable giving and community service programs.

The board heard reports on solar energy, changes to the Internal Revenue Service’s Form 990, upcoming public meetings and KPMG’s status in presenting PEC’s 2007 financial statements. A final audit is expected from KPMG by the end of March. The board also approved a proposed determination on federal ratemaking standards pursuant to the Public Utility Regulatory Policies Act (PURPA), and the directors also approved adding additional liability insurance coverage for the cooperative and its officials.

PEC’s next board meeting will be held April 20, at 10 a.m., at the cooperative’s Johnson City headquarters. In addition to making a decision on rates, the board is also expected to announce the slate of candidates running for open board positions.

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