[Watchdogs] Charity money paid out by PEC

Mon May 25 16:36:07 CDT 2009

I'd like to know the total amount PEC contributed to the Wholesale Power 
Alliance, how much was contributed by all the utilities, what WPA did with 
the money, and who were the lawyers for WPA.  Also, did the money 
contributed by the PEC actually end up being paid over to the WPA?

You'll forgive me for being suspicious about where the money went, 
considering who had a hand in that pot.

A cite for the PEC 2006 Annual Report is shown below.

Carlos

http://www.gvec.org/nl_pdfs/rev32n6.pdf

June 2006

WHOLESALE POWER

ALLIANCE

As General Manager of GVEC, one of my main responsibilities is purchasing 
wholesale power that will supply our 60,000 accounts. I take this 
responsibility, of purchasing adequate supplies of power at the most 
reasonable cost possible, very seriously. Over the past 18 months, staff 
members from the Lower Colorado River Authority (LCRA) and I have been in 
discussions regarding GVEC's wholesale power contract and the future of GVEC's 
relationship with LCRA. (GVEC currently purchases about 90% of its power 
from LCRA.) As in any type of business negotiations, GVEC and LCRA staff 
have differing views on some points concerning the future of the electric 
industry. Other electric utilities have also been involved in these same 
types of discussions with LCRA, as many of the power companies' contracts 
will expire over the next 5-10 years. GVEC, along with several other 
utilities, decided to pool our resources and knowledge of the wholesale 
power issues and have formed the Wholesale Power Alliance (WPA), with the 
goal of formulating a different kind of wholesale power relationship that 
better serves the needs of our individual memberships. On behalf of the 
Alliance, GVEC Board President Lewis Borgfeld, along with other members of 
the WPA, recently attended the monthly meeting of the LCRA, formally 
announcing the formation of the WPA, stating its goals, and requesting a 
meeting between the WPA and LCRA to discuss the Alliance's core objectives 
for a new wholesale power relationship. The concepts adopted by this 
Alliance are fundamentally different from those in existence today. They are 
also fundamentally different from any options the LCRA has proposed in its 
negotiations with other electric customers. However, these strategies are 
very similar to those that are already in place and working well in other 
parts of the country. The members of the WPA are the City of Yoakum, the 
Kerrville Public Utility Board, the City of Boerne, San Bernard Electric 
Cooperative, Central Texas Electric Cooperative, the City of Georgetown, 
Bandera Electric Cooperative, the City of Seguin, New Braunfels Utilities, 
Fayette Electric Cooperative, and the Guadalupe Valley Electric Cooperative. 
The combined electric loads of these eleven utilities represents 
approximately 43% of the total electric sales of the LCRA. The members of 
the WPA typify LCRA's diverse customer base, representing systems of all 
sizes and load characteristics. This diversity of load was taken in 
consideration in designing this new wholesale power arrangement. We believe 
that the proposed concepts will fully allow the LCRA to maintain its 
financial and operational objectives now, and in the future. We also believe 
there is value for the LCRA customers, as well as the LCRA, in coming to 
terms on a mutually beneficial agreement for the future. The LCRA must be 
prepared, however, to make fundamental changes to the structure of the 
current relationship prior to the Alliance's willingness to negotiate a new 
wholesale power contract. While the Pedernales Electric Cooperative (PEC), 
which represents approximately 30% of LCRA's electric sales, is not a member 
of the WPA, PEC's General Manager Bennie Fuelberg attended the LCRA meeting 
in support of the Alliance. Fuelberg addressed the LCRA Board, saying, 
"While PEC is not formally associated with the Alliance, we have been 
working closely with the WPA and support their proposed concepts." We are 
working diligently to design a wholesale power portfolio that will serve 
GVEC, and the memberships of the other WPA members, well into the future. We 
believe there is strength in numbers and are happy to have the support of 
these other utilities as we go into the process of long-term contract 
negotiations. I will keep you informed as the process continues. ANNUAL 
MEETING I invite you to attend the Annual Meeting on Friday, June 23rd, at 
the Gonzales High School and participate in the business of your 
cooperative. If you will not be able to get to Gonzales that day, you can 
still participate by voting by proxy until June 16th. Proxies are available 
at all GVEC offices. Sincerely,

October, 2006

Who's Paying for LCRA Growth?

Central Texas wholesale customers organize for agency changes

BY AMY SMITH

View a larger image

Drawing on the theory that there's strength in numbers, 11 Hill Country 
cities and electric cooperatives are demanding big changes from their power 
supplier -- the Lower Colorado River Authority -- and for once, it seems, 
the indomitable utility isn't holding all the cards.

The group of unhappy customers organized in May, under the name of the 
Wholesale Power Alliance, which as a group represents 43% of the LCRA's 
electric sales in some of the region's fastest-growing communities. The WPA 
emerged about the time the utility began calling on its wholesale electric 
customers to extend their contracts through 2041. The existing contracts 
don't expire until 2016, but by lining up long-term commitments now, the 
LCRA would be better positioned to plan, budget, and finance its growth, 
with the presumed blessing of the bond market.

But the formation of the WPA wasn't part of the LCRA's game plan. Never in 
its history has the agency been forced to engage in a form of collective 
bargaining with some of its biggest customers. The WPA appears determined to 
change that equation.

Thus far, according to LCRA spokeswoman Libba Letton, 27 of LCRA's 43 
electricity customers have signed the new contracts. The willing 
participants include the utility's third-largest customer, Bluebonnet 
Electric Cooperative, where former LCRA chief Mark Rose now serves as the 
CEO and general manager. As for the contractual holdouts, Letton said the 
utility is fully committed to reaching an amicable resolution with both the 
WPA and its major ally, the Pedernales Electric Cooperative. Pedernales 
just happens to be the LCRA's biggest customer (and critic) and the nation's 
largest electric cooperative. With the PEC now aligned with the WPA, the two 
forces combined represent nearly 75% of the LCRA's bread and butter. Thus 
far, the WPA members have been officially content to remain largely off the 
record, while the PEC voices their major complaints.

--------------------------------------------------------------------------------

Where's the Money Going?

The chief complaint of both the WPA and Pedernales is a long-held belief 
that electric revenues are effectively subsidizing the utility's water and 
wastewater projects and other agency operations. "We are consistently being 
told that the water part of the equation is paying for itself, but we have 
not seen evidence of that," said Pedernales spokesman Bill Cunningham.

Although the Pedernales and the LCRA have been hitched ever since Lyndon 
Johnson embarked on a mission to electrify the Hill Country during the late 
1930s, the two agencies have not always had the best relationship. It grew 
much chillier within the last three or four years, Cunningham said, when the 
retail water business in Central Texas took on a more competitive edge. The 
LCRA made its enterprising leap into the water and wastewater business more 
than a decade ago, and by taking on controversial projects in politically 
sensitive, semirural territory, the agency hasn't won many friends in the 
environmental community.

The customers also have a beef with the utility's generous spending on 
community outreach (i.e., public relations) programs, as well as its 
expanded police force, which they say goes beyond what's necessary to ensure 
lake safety and power-plant security. The utility insists that such a police 
force is needed in view of increased numbers of lake drownings and boating 
accidents in the Highland Lakes, including Lake Travis, and to fulfill 
homeland security obligations.

--------------------------------------------------------------------------------

Mixing Electricity and Water

"The LCRA wants to listen to what these folks have to say," Letton said. But 
it's uncertain what sort of resolution can come from the disgruntled 
parties' demands for lower electricity rates and changes to the LCRA's 
overall financial structure. Small but booming cities like Georgetown, 
Kerrville, and New Braunfels are said to be among the most dissatisfied of 
LCRA's customers and reportedly joined the WPA to try to gain a more 
prominent place at the agency's table. If that's true, Georgetown's Jim 
Briggs, who oversees the city's utility division, tempered any 
dissatisfaction he might have with cautious diplomacy when he spoke to the 
Chronicle earlier this month. "I feel like there is a lot of progress being 
made," he said, "not necessarily in the contract discussions, but in the 
strategic decision to negotiate as a group, which I believe will benefit the 
ratepayers and consumers in Georgetown."

The timing of LCRA's contract renewal efforts didn't exactly help matters. 
The agency began calling on customers just as natural gas prices soared, 
which in turn caused electricity rates to jump. "They can invoke fuel 
escalation charges because of the flux of the market; we recognize that," 
Cunningham said. "So we believe it's prudent that electric revenues go 
toward supporting the best possible electric system, and that water revenues 
go to support the water projects."

With 90% of LCRA's $1 billion revenue coming from its wholesale electricity 
sales, it's logical to assume that these dollars help pay for other agency 
functions. LCRA spokesman Robert Cullick defends the agency's spending, 
saying that it is fulfilling its river authority mission as directed by the 
Legislature.

Not everyone buys that argument. "We want the LCRA to focus more on the 
electric end of the business," Cunningham said. "Some of the programs they 
run are very nice programs, but they don't pay for themselves. This should 
be a time for tightening belts."

Historically, the LCRA's competitive electric rates have served as its best 
weapon against major industry rivals. But as some of the agency's largest 
customers see it, for the amount of dollars they put into the nonprofit 
agency, in return they should be getting lower rates. "We're not complaining 
about the quality of electric service," Cunningham said. "We feel that if 
the [electricity revenues] were not being spent on the water end of the 
business, we could sell electricity cheaper."

--------------------------------------------------------------------------------

Bargaining Power

The Wholesale Power Alliance - an 11-member group of Hill Country co-ops, 
municipal utilities, and cities - seeks more input in how the Lower Colorado 
River Authority sets its rates and spends its money.

WPA members represent 43% of the LCRA's electric sales; LCRA's largest 
customer, the Pedernales Electric Cooperative, is not in the WPA but 
remains closely allied with it.

WPA members include:

Electric Cooperatives

Guadalupe Valley Electric Cooperative (Gonzales)

Central Texas Electric Cooperative (Fredricksburg)

Bandera Electric Cooperative (Bandera)

San Bernard Electric Cooperative (Bellville)

Fayette Electric Cooperative (La Grange)

Municipal utilities

New Braunfels Utilities

Kerrville Public Utility Board

Cities

Georgetown

Seguin

Boerne

Yoakum

The Wholesale Power Alliance is also mentioned in the PEC 2006 Annual 
Report.

http://www.pec.coop/Documents/2006Report.pdf

In this report you'll also find a lot of verbiage about how well the 
management looks after the owners of the PEC.

-------------- next part --------------
A non-text attachment was scrubbed...
Name: clip_image001.gif
Type: image/gif
Size: 112 bytes
Desc: not available
URL: <http://103.greenbuilder.com/pipermail/watchdogs/attachments/20090525/9a5f0214/attachment.gif>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: clip_image003.jpg
Type: image/jpeg
Size: 18695 bytes
Desc: not available
URL: <http://103.greenbuilder.com/pipermail/watchdogs/attachments/20090525/9a5f0214/attachment.jpg>