From mlmoden at gmail.com Sun Nov 13 16:08:29 2011 From: mlmoden at gmail.com (Merle L. Moden) Date: Sun, 13 Nov 2011 16:08:29 -0600 Subject: [Watchdogs] PEC's Electric Rate Gouge: Excessive Controllable Expenses and Excessive Debt Service Coverage Message-ID: <4EC03FDD.5060900@gmail.com> Watchdogs: *Excessive Controllable Expenses* Based upon recently received information, I have updated my estimates of PEC's excessive controllable expenses. As you may recall, the Navigant Report provided comparative data showing that the PEC was for 2002 through 2007 among the highest in annual controllable expenses per meter among the largest electric cooperatives in the U. S. The PEC, as the largest electric cooperative in the U. S., should be among the lowest in these controllable expenses per meter due to its economies of scale. Attachment 1 shows these updated estimates. My estimates show that between $36.9 million and $63.1 million are being wasted each year due to excessive controllable expenses. Splitting the difference, I estimate that we wasted at least $50.0 million in 2010. *Excessive Debt Service Coverage* The PEC has set its target debt service coverage ratio (DSCR) at 1.70. For the 12-month period ending in August 2011, the DSCR as actually experienced was 2.66. The exceptionally hot Summer accounts for some, but not all, of the surplus revenues. Attachment 2 shows the fiscal impact of the excessive debt service coverage. The 2.66 DSCR produces surplus revenues of about $57.0 million above that which is required for the target DSCR of 1.70 resulting in excessive electric rates per meter of $239.31 for this annual period. *Excessive Controllable Expenses Plus Excessive Debt Service Coverage* The combined fiscal impact of estimated excessive controllable expenses plus excessive debt service coverage is shown in Attachment 3. The combined annual cost per meter to PEC's member-owners is an estimated $449.37 using the PEC's target DSCR of 1.70; $499.15 using a DSCR of 1.50; and, $561.37 using a DSCR of 1.25. To be fair, the PEC did take some baby steps in the 2011 budget to begin to address excessive controllable expenses. However, given the magnitude of these excessive controllable expenses, these steps are analogous to selecting a tack hammer for the job, when a 20-lb sledge hammer is required. I have neither seen nor heard of any efforts to address excessive debt service coverage. It would appear that our "reform" Board of Directors (Board) is satisfied with the adoption of an Open Records Policy (that they appear to intend to gut with their proposed Competitive Matters Policy); the adoption of an Open Meetings Policy (which still allows many non-confidential issues of importance to member-owners to be discussed in Executive Session); and, other issues. The Board appears incapable of addressing the underlying cost-inefficient and wasteful service delivery model put in place by Bennie Fuelberg. Please pay attention to the man behind the curtains, as he (Bennie Fuelberg) is apparently still calling the shots at the "reformed" PEC. Lastly, this Board continues to operate outside the authority of the provisions of the PEC Articles of Incorporation, especially regarding the use of surplus revenues. You can look it up. -- Mr. Merle L. Moden 1111 Thompson Ranch Road Wimberley, Texas 78676-6129 512 847-1335 -------------- next part -------------- An HTML attachment was scrubbed... URL: -------------- next part -------------- A non-text attachment was scrubbed... Name: Attachment 1_ControllableExpense.pdf Type: application/pdf Size: 42782 bytes Desc: not available URL: -------------- next part -------------- A non-text attachment was scrubbed... Name: Attachment2_DebtServiceCoverage.pdf Type: application/pdf Size: 44495 bytes Desc: not available URL: -------------- next part -------------- A non-text attachment was scrubbed... Name: Attachment3_20110831_Mpact.pdf Type: application/pdf Size: 46208 bytes Desc: not available URL: