Refining PEC Processes: Part 4

At long last we reach the final installment of my four part series, “Refining PEC Processes.”   Thus far we have dealt with election policy, governance, and a rate reduction. Today I want to delve into PEC’s community involvement, which is one thing that sets us apart from other types of electric providers.

While most electric providers exist as for-profit entities, co-ops are a little different. PEC is a non-profit corporation owned by its members. We operate under a set of seven principles shared by all cooperatives. Some of the more well-known principles are “voluntary and open membership” and “democratic member control.” Another important principle you may not have heard about is “concern for community,” in which cooperatives seek to enrich communities through member accepted sustainable development programs.

PEC has a long history of helping its member communities. Our scholarship program is a staple of that tradition. Every year, the Co-op awards exemplary high school seniors with scholarships to be used for college tuition and related expenses. In 2014, PEC provided 14 scholarships to graduates with amounts ranging from $2,500 to a single $10,000 scholarship. Another favorite example of the Co-op’s community support has been the Christmas light display at PEC headquarters in Johnson City, which draws visitors from far and wide.

In addition to the annual programs, PEC gets the opportunity to give charitably on a case-by-case basis. I recently had the pleasure of participating in an employee event honoring a military veteran. Operation Finally Home, a national charity that builds mortgage-free homes for severely wounded veterans across the country, recently began building a home for USMC veteran Ray Coffey and his family in the Liberty Hill area. Read more about PEC’s involvement in this touching story.

While our Co-op’s involvement in our member communities can be a powerful and wonderful thing, we must keep a close eye on the annual cost of our charitable programs. Members have criticized the PEC Board in the past for not being good stewards of member money and not scrutinizing carefully enough the ways we contribute to our communities.   For example, as much as people love to see the PEC Headquarters lit up every year around Christmas, few people realize that the grand display is a very expensive undertaking. Our 2014 cost for this program will be over $275,000! As the Board and staff move into the 2015 Budget cycle, criticisms over costs like that of our Christmas lights deserve our attention, as we want to make sure that Co-op giving matches up as closely as possible with our members’ interest in using their dollars to do so.

PEC staff recently introduced an idea to adopt a program that several other co-ops have used for sometime that might alleviate concerns as to how we give charitably each year. The program, called Operation Roundup, has been successfully implemented by many Texas co-ops. Through Operation RoundUp, every member bill would be rounded up to the next even dollar, and that “round up” amount would be put towards funding the co-op’s charitable giving. The idea is that by everyone giving a few cents each month, collectively PEC would be able to give substantially to our communities without using a portion of our annual budget to fund such measures – with the adoption of the new program, the co-op would take charitable contributions out of its budget. CEO John Hewa, during the Operation RoundUp presentation to the Board on October 13th, mentioned that with the adoption of the program could come a modest rate reduction, as the removal of charitable contributions from PEC’s budget could provide the relief necessary to further lower rates for members. (Read more here, beginning on p. 136)

PEC has been a great contributor to its service territory, and we want to ensure our co-op remains committed to sustainable development in our communities. However, as we tighten our belts internally and examine all cost centers, we must be open to adjusting our charitable giving, too. Perhaps Operation Roundup will allow us to maintain our cooperative principles and Hill Country traditions without driving up operational costs. That should make a lot of our members very happy.

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Refining PEC Processes: Part 3

Welcome back to my four part series on current events at our co-op. Today’s topic of rates is one that has invited discussion for some time. Throughout the 2014 Director Election, I heard time and time again from members that our rates are too high. That criticism is fair. Our rates are too high, and the Board and Management should be making every effort to lower PEC’s monthly bills. There are several things that account for the Co-op’s higher rates, including some inescapable debt obligations that are set to expire in the next few years. Beyond that are controllable costs, costs associated with growing infrastructure, and then a power supplier (LCRA) that’s own wholesale rates need some serious adjustments in order for us to be able to pass along lower rates to our members. I believe all of these contributing factors are on track to improve, which should collectively yield substantial rate relief for PEC members, and this past week we announced the beginnings of that desired trend. Here is a copy of a release from the PEC website concerning Tuesday’s announcement of a small rate reduction effective December 1, 2014:

     “At a special meeting on Tuesday, Sept. 30, the Pedernales Electric Cooperative Board of Directors voted to reduce the Co-op’s per-kilowatt-hour delivery charge effective with electricity purchased beginning Dec. 1, 2014.

 ‘The Board of Directors has worked with management the past few years to get the Cooperative in a very stable and strong financial position,’ said PEC Board President Dr. Patrick Cox. ‘Our current financial projections and careful analysis by the Co-op’s staff signal this is the right move to make at the right time.’

The reduction will affect all rate classes that have a delivery charge. For residential members, the reduction will amount to $5 per thousand kilowatt-hours consumed. PEC’s average monthly residential use is 1,275 kwh, so the majority of members should see even greater savings on their bills.

 ‘We continue to increase equity, debt service is far above required levels and we’ve had substantial reductions in bad debt and write-offs,’ said PEC Chief Executive Officer John D. Hewa. ‘We find this a great opportunity to provide a responsible rate reduction to the membership.’

The current per-kwh delivery charge of $0.03212 for residential members will be reduced to $0.02712, and while the decrease goes into effect Dec. 1, some members will see it reflected on later bills, depending on when billing cycles fall within the month.

The Co-op leadership also is actively working with LCRA and other power providers to further reduce costs. ‘Power supply accounts for 65 percent of all the Co-op’s expenditures,’ Hewa said. ‘We are actively exploring ways to reduce our power costs in an effort to lower member bills and anticipate more good news in the next few months.’

Two thoughts come to minds when seeing this very modest rate reduction. Since the first thought is probably critical in nature, I’ll address it first. This rate relief is not nearly deep enough. I completely agree – it’s really a “drop in the bucket,” as another Director pointed out, in terms of what PEC needs to ultimately achieve in terms of lower rates for our members. Please keep in mind that the Board and Management are fully aware of this shortcoming and know this initial rate reduction is merely a first of many gains necessary to get our rates in line with Texas’ low cost electricity providers. The second reaction to this rate decrease, hopefully, is that it is a step in the right direction. From my viewpoint as a Board Member, it’s wonderful to know that we are in a financial position to respond positively to our biggest member concern. Pedernales’ CEO John Hewa said in his statements to the Board on Tuesday that this initial cut could be the first of a handful of cuts in the coming months, and I am optimistic that the Co-op can deliver on those projections. The hope is that following a series of rate reductions and with a continuing effort to tighten the screws on the operational side, the impact to you in the form of your monthly bill will be profound enough to make a difference in your monthly budget. You, as members, deserve that from us. You deserve for us to hit our goal of being the lowest cost LCRA provider, and I’ll be working to ensure we see that outcome.

Stay tuned for the fourth and final part of the series “Refining PEC Processes.”