[Watchdogs] Charity money paid out by PEC
CarlosTX at sbcglobal.net
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.
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,
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
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
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."
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:
Guadalupe Valley Electric Cooperative (Gonzales)
Central Texas Electric Cooperative (Fredricksburg)
Bandera Electric Cooperative (Bandera)
San Bernard Electric Cooperative (Bellville)
Fayette Electric Cooperative (La Grange)
New Braunfels Utilities
Kerrville Public Utility Board
The Wholesale Power Alliance is also mentioned in the PEC 2006 Annual
In this report you'll also find a lot of verbiage about how well the
management looks after the owners of the PEC.
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