It’s been exactly 60 days since the PEC 2014 Annual Meeting. I have yet to hit the official two-month mark as a Board Director, and despite that relatively short length of time, I feel certain I have learned more than I ever thought possible. I have learned plenty about the electric industry in general. I have learned quite a bit about the world of electric cooperatives and the players within that world, both big and small. I have even learned a lot about and from my fellow directors and the PEC management. The amount of things to know is vast, and the learning curve is steep. As many have aptly put it to me who have been in a similar position in the past, it’s a lot like drinking water from a fire hose. And the hose has been on non-stop since June 21st.
Despite the deluge of information and advice, I have enjoyed tremendously my new position and feel blessed to be able to serve the PEC membership in this way. My hope is that now, after my first two official board meetings, I can pause for a minute and reflect on my experiences sitting at the dais. Many of you have asked that I keep you apprised of important goings-on at the co-op, and at this juncture, I have a few pertinent things to report.
To begin, the co-op is engaging in a multitude of improvement projects in areas such as communications, power supply, infrastructure, and technology. CEO John Hewa, to his credit, has taken on a host of PEC’s shortcomings and rallied his management team around a general initiative to clean up our co-op in a focused and timely manner. It has been a pleasure to witness his work ethic and dedication to bettering the overall PEC experience for the membership, and I am eager to see some of the projected outcomes. I think many of you will be very pleased. I don’t want to take too much time talking about specifics today because I’d like to report mostly on the August board meeting, but I encourage any interested members to visit the new and improved PEC website (http://www.pec.coop) and view some of the changes going on at the co-op yourselves. I do want to impress upon my fellow members that Mr. Hewa and his team are collectively working very hard to make PEC a high functioning and low-cost operation. I will continue to support their efforts – and ask lots of questions along the way!
The theme of “questions” is really the topic for today. Yesterday, at our August board meeting, many questions surfaced surrounding a proposed plan to conduct an Integrated Resource Plan (IRP) in conjunction with PEC’s potential plans to embark on solar plant construction. If you are like me and do not come from a background in the electric industry, let me quickly explain, as I see it, what an IRP is. An IRP, in laymen’s terms, is “a planning process that, if correctly implemented, locates the lowest practical costs at which a utility can deliver reliable energy services to its customers.”* An IRP is a thorough investigation, usually undertaken with the help of consultants, to determine a) if a utility needs to generate more power to meet its resource needs, b) why it needs to generate more power, and c) how it will generate more power. Taken in that scope, and IRP sounds like a pretty darn good thing if you are a person – like myself – that wants to make sure that one’s electric provider is giving her the best deal possible, while simultaneously planning for the future. The PEC Board passed as policy in 2010 that the co-op must initiate an IRP before proceeding with any generation plans, and thus again this proposal seems to be a prudent one.
When you dig a little deeper, however, you find out some things that muddy the waters when it comes to PEC and an IRP. First, IRPs are typically implemented by generating entities, or utilities that PRODUCE their own electricity. Throughout its 75-year existence, PEC has always been a DISTRIBUTION entity (i.e. we purchase our energy from elsewhere, mainly the LCRA, and deliver it to our members). It seems a little odd that we would embark on a plan to figure out what source of generation to potentially build when we have never actually built a generation plant before. Second, the IRP is being conducted in conjunction with the desire of some of the current board and previous boards to adopt a goal of hitting a 30% renewable capacity by 2020. What that means is that in six years time PEC must ensure that 30% of its energy capacity at peak hours be provided by renewable energy. This goal was set in place in 2008 and reaffirmed in 2012. In the last few months, PEC management has presented the board with a proposal to achieve that 30% goal by adopting a new solar program that could largely include the building of a PEC-owned solar plant. It is here that we see the idea of PEC generation coming into play. So it begs the question: are we initiating an IRP because we absolutely need to get into the generation business and will look at the most cost-effective and beneficial way to do that while considering all potential energy sources? Or are we embarking on the IRP because we intend to pursue solar, and board policy insists that we do an IRP before locking in a plan? Third, IRPs are not cheap, and they typically take a long time to execute. Being thorough in something as vast, detailed, and rapidly changing as the electric industry can be timely and costly. The projected IRP cost as presented to the Board was as high as $100,000. While a typical IRP takes a minimum of six months to complete, management projects PEC’s current IRP will wrap up by December 2014. There are other potential concerns than the ones listed here, but I believe these three are sufficient to demonstrate that I had concerns about moving forward with this IRP.
As it turns out, I was not the only Director to have questions. Last Monday, at our meeting of the committees, several directors seemed to be against an IRP. (for recordings of our meetings, visit PEC Board Meetings and Notices) Many said outright they would not vote for one because they thought it would be redundant and potentially throw us off our timeline for our renewable goals. Some said the policy itself was outdated and should be scrapped. Some said it would cause us to incur unnecessary costs. One director, however, pointed out several reasons why PEC must conduct an IRP before moving into any sort of generation for several reasons, not least of which being the policy that most of the directors had voted into place a few years ago. As the newest director, I sat back and listened attentively to the dialogue, and I came away from the meeting with several thoughts. We had a policy in place that we should either uphold or amend, but I didn’t think it proper to circumvent it. We also had a potential expense that may not be necessary, but if we plan on moving forward with generation, I, for one, want to be sure we get all of the facts and figures and see which generation source would be the best. After thinking about it all week and talking with the CEO, I actually arrived at Monday’s board meeting thinking I would vote for the IRP and probably do so as a minority opinion on that vote.
What actually happened on Monday was quite different. When the time came to vote on the IRP, one of the directors who had previously stated he would not support the IRP actually proposed a resolution to move forward with one with one caveat: this particular IRP would be operated in a shorter time frame. Most of the others on the board that had also been against an IRP now supported it. I was dumbfounded – what had changed?! To make matters more complicated, the one director who had supported an IRP the week before now said he did not support the newly proposed one because of the reduced timeframe, as well as some other new concerns. I tried to use the discussion time to listen to the back-and-forth between directors and management so I could decipher whether or not to vote for this narrower IRP, but when time came to cast a vote, I still felt conflicted. On the one hand, I wanted to support staff and give them the proper resources to do their jobs. I also wanted to make sure we set out getting all the information necessary to make an informed decision about our renewable generation plans. What I did not want was to vote for something that was not only unnecessary, but also potentially contradictory to our mission of low cost power delivery. And then there were the questions surrounding my colleagues’ about-face on the matter.
So what did I end up doing? How did I cast my vote?
And everyone else voted yes.
Maybe that leaves me the odd woman out, but I am okay with that for now. Sometimes its better to say don’t have enough answers to vote either way than to succumb to pressures you don’t fully understand, or go along with the crowd for the sake of appearances. I am more than happy to support the decision of the board, and I’m glad I can give Mr. Hewa and his staff what they need to get important information regarding PEC’s future energy plans. I’m also glad, though, that I trusted my instincts and didn’t vote for (or against) something that didn’t seem clear to me.
At the end of the day, I will always circle back to my primary responsibilities as a board member: to ensure we provide safe, reliable, and low cost power to our members; and to exercise the highest level of fiduciary care when making decisions that cause us to spend your money. When it came time to vote, I heard some things that kept me from voting an outright “no,” but I had not satisfied enough of my questions to feel good about voting “yes.” I didn’t know enough about why we had reached this juncture of deciding on an IRP. I still had questions about costs. I still had questions about necessity. I had questions about why the board changed positions so quickly and so dramatically. And I still have questions about whether or not it is appropriate for us to have a mandatory goal in place for renewables. My feeling is that if solar, wind, or any other type of renewable is the most cost-effective option, and we have the ability to incorporate it into our power supply, we should move forward with doing so for those reasons rather than to satisfy a political agenda.
I’ve added a lot of items to my list of things I’ve learned during the past two months. I know a lot more about electricity and co-ops. I know a lot more about PEC and the communities we serve. I know that the votes we cast in the boardroom affect the lives of hundreds of thousands of people – what we do in there is important. And knowing when to abstain is a lesson I’ll take with me for years to come.
*(“Best Practices in Integrated Resource Planning,” p.4 see more at Regulatory Assistance Project Library).