June 21st, 2010
Commentary: PEC must address its future

Commentary
By LARRY LANDAKER
Pedernales Electric Cooperative board President

(Editor’s note: Following is a speech Pedernales Electric Cooperative board President Larry Landaker gave to cooperative members Saturday at their annual meeting in Johnson City.)

Welcome to the annual meeting of the Pedernales Electric Cooperative. My name is Larry Landaker.

I am pleased to announce that, for the first time in the history of this cooperative, all members of the board of Directors will be fully elected by the members. This is truly historic and a rarity among electric cooperatives across the United States. We hope it lights the way. It is my hope that when Election Services, Inc., announces the results of the 2010 election in just a few minutes, the members of Pedernales Electric Cooperative will have ratified a Member Bill of Rights — another historic first. The Bill of Rights makes permanent open meetings, open records and open elections. This will be a truly historic and landmark achievement for PEC.

I would like to speak today about the future of PEC. However, I know many PEC members and employees are very concerned about the action the board of Directors took last Monday to terminate the employment agreement between the general manager and PEC. Many of you would like to know more about this action. Time has not permitted me until now to address this matter openly with you the members and our employees.

I wish I were at liberty to share some of the many and varied reasons for this action, but for reasons of confidentiality, I cannot. I can tell you this decision was carefully considered by the board. It was not made rashly or impulsively. It was not made in anger. The debate was respectful and considerate at all times. All voices were heard. A majority of board members came independently to the same conclusion. Our decision was based on information, reasoning and judgment. History will judge whether it was the right decision.

Some have suggested that this action lacked transparency, that the board met in secret. In truth, the word secret is not appropriate. The appropriate word is confidential. boards of directors everywhere meet on personnel matters in closed executive session. When you meet with your doctor or lawyer, they have a duty under the law to protect your confidentiality. When a board discusses personnel matters, it has the same duty, even when the discussion involves the general manager. Even with PEC’s open meeting policy, personnel matters are explicitly addressed in private. Under our policy, PEC posts the executive session agenda three days in advance. After an executive session, if any action is taken, we report the outcome in open session, just as we did last Monday. But it is not a secret meeting.

Some have made this out to be the vengeful act of two departing directors and that we should have waited for the new board members to decide. Whatever you may think of the two outgoing directors or how they got here, they are duly seated and fully empowered board members. The fact of the matter is that the initiative to terminate Mr. Garza began with me. I introduced this action based on my firm conviction that our cooperative needed new leadership to meet its challenges. I had no idea who would follow. I was pleased to find that several board members agreed with me. To get anything done it takes a majority and sometimes you don’t know who is going to be with you until the vote is taken. I have been on the opposite side of the ring all year with the two departing directors. Let me be clear. This vote included a coalition of the diverse.

I am sorry things did not work out with Mr. Garza and the board. The board must accept its share of the blame in that failure. Juan is an honorable man with a human touch. With his own unique leadership style, he guided the cooperative over some very troubled waters and his work is truly appreciated. Will you please stand and thank him.

But as we look ahead, the board believed a new kind of leadership was called for.

In American public discourse, we are often fast to react and quick to anger. What I would ask is that you not be too quick to judge. It is always tempting to jump to conclusions on the basis of limited information.

The board acted in what it considered the cooperative’s best interests. When the board considers the best interests of the cooperative, we are considering the best interests of our members and our employees. Our employees are our front line responders and the most vital part of this cooperative. Our members pay the freight. Without both of them we could not function.

Whenever there is change, people understandably have questions. What about me? Is my job safe? Do I need to be afraid?

Let me be straightforward. The duty of the board is to insure that PEC will survive so that our employees have jobs — now and in the future. Our task is to take steps to make sure we are not gobbled up by a giant Wall Street public utility interest. We must make sure our rates remain competitive and fair. The energy industry faces daunting challenges that threaten the economic model of all utilities. For 70 years, we have enjoyed a protective fence around our market. Our customers are captive. They have no choice in electric providers. But technology or legislation, or both, may one day change that, just as cable changed television, just at the Internet changed everything. An energy technology revolution is at our doorstep. How long will it be before someone leaps over that fence and steals our customers? Two years? Five? Change is coming and it is coming faster than many of us are moving. Yesterday, someone suggested to me that it could take five-seven years to bring about change in an operation like PEC. Ladies and gentlemen, we do not have five-seven years. The wolf is on his way to our door and our challenge is to get our financial house in order now.

All of you may have read about the recent woes of Austin Energy. They are deep in the red — in the millions. Their general manager recently said, “We need a new business model or we go bankrupt.” Because they overspent and deferred critical decisions for years, they will have to raise consumer rates 6.5 percent in 2012, with more to come.

PEC must not make the same mistakes. We cannot overspend and we cannot defer critical decisions.

Here is what you need to understand about your board. We value our labor force — from the linemen to the IT department to the call centers. We like it that our members know you and depend on you. We have never engaged in any discussion of layoffs — ever. And I hope we never have to. We have never discussed changing our basic benefits package — ever. And I hope we never have to. We are committed to maintaining exceptional customer care. We are committed to sustaining the same high standard of providing safe, reliable electricity to our members. We are committed to providing opportunities for our employees to earn well, grow professionally and save for the future. We intend to continue supporting the local communities we serve and helping those who can least afford electricity. We want to continue to see the tradition of dedicated people retiring happily after 30 years or more of service. But if we are to sustain all of these things, we must find smarter and better ways of operating. We must be innovators and we must be creative.

An author named Jim Collins wrote a fine book called How the Mighty Fall. Arthur Andersen¸ Enron¸ Merrill Lynch, Radio Shack, Kmart, Circuit City — all giants of their time … all gone. In his book, he describes five ways a company can decline. You don’t have to remember all five. You only have to remember the first. The first is hubris. Hubris is Greek for “arrogance,” but the modern definition might be, “too big to fail.” When companies believe their own notices and people begin to believe that success will continue no matter what the organization decides to do or not to do, or because we do things the way we have always done them, then that is a company in decline.

PEC must not be imprisoned by its circumstances or its history. The path to our good health lies within our own hands. We must control our own destiny.

Since I have been on the board, I have been in awe of the importance this cooperative plays in so many lives. Just one year ago, during last year’s annual meeting, an older man approached me to shake my hand. I’ve looked for him today, but I don’t see him and I am sorry I never got his name.

“I don’t know you”, he said, “but I want my grandkids to feel proud toward PEC the way I once felt. I can tell you, Mr. Landaker, that we never had a family picnic when the subject of PEC didn’t come up. When I grew up it seemed like it’s all mamma and daddy talked about … Roosevelt, LBJ and PEC. You see, PEC is not just the electric company to us. It’s like family. It’s in our blood. Way back when, it’s what made things possible and gave us a chance. PEC set us free.”

This cooperative matters to people. And this board understands how important it is to preserve it.

This is a detour, not an abyss. Change is good for the soul. Don’t fear it. Change tests us and breaks us from our comfort zone. In doing so, change can free us. Some will rise to the occasion, some may not. Such is life. But where there is change, there is opportunity. Smart, enterprising people seek the opportunity in change. You do not need a company to empower you — you already have the power, in your mind, in your talent, in your energy and in your voice. You need only to give yourself permission to unleash these gifts.

I am hopeful and optimistic about the future of PEC. In the weeks ahead, the new board will sit down and develop a strategic plan that will be easily understood by everyone in the coop. We will pass a new set of bylaws that will bring clarity to our governing rules. In November, we expect to launch an exciting and compelling new website that will be rich in content and information about PEC. We will ask management to bring forth plans to address deficiencies in the internal audit report. We will work hard with management to earn the trust of our members and employees. We will strengthen our resolve to meet and exceed our conservation and renewable energy goals. And by January or February 2011, I hope the board will be able to announce the appointment of a new general manager prepared to lead PEC into a brave new world. Thank you very much.