A Successful 2015-2016 Year at PEC Capped Off by Exemplary Annual Meeting

PEC held its Annual Membership Meeting at the Performing Arts Center of Dripping Springs High School this past Saturday. More than 600 members came from across the PEC service territory to vote in the 2016 Board Director elections; peruse employee exhibits; enter drawings for door prizes; hear about the status of their co-op from PEC CEO John Hewa; and snag some breakfast tacos and snow cones while they were at it. For the past eight years, Directors and Employees alike have been working hard to recover from the damage we incurred under past leadership. Finally, at this year’s meeting, both member and PEC employee alike felt as if the familial quality we lost in those darker days had been regained. Members were proud of their linemen. Employees were excited to greet their members and answer questions about their electric service. Member comments were resoundingly positive, and Board Directors were ready to hear member suggestions and constructive criticisms in hopes of identifying creative solutions that put the members first above all else. It was a wonderful example of what a Co-op should be and can be when the right people and the right attitudes are involved.

 

The day marked the capstone of a Co-op year (June-to-June as our PEC calendar goes) in which we have accomplished so much. Some of the highlights of note include: six consecutive rate reductions that will be followed up by a 7th reduction (2 mils) due to roll out in August; a successful switchover to a new enterprise software system that has already saved the Co-op millions of dollars in less than a year of its operation; an on-Bill solar financing program that is a unique and creative way to help interested members pursue rooftop solar without needing subsidization from their fellow members (the opposite of rebates); a complete overhaul of our charitable giving programs that puts more control in the hands of members (this will be the topic of my next post); and the release of a new rate study that will soon yield decreased Service Availability Charges for members who choose eBills and Bank Drafts. The rate study will also yield long awaited Time of Use rates that will allow participating members the opportunity to alter their energy habits, consume more off peak power, and further decrease their electric bills. Without a doubt, CEO Hewa and his highly capable Executive Team and staff have delivered on what the Board has asked them to deliver. We now have a more efficient, more responsive, more member-oriented, more nimble co-op that is showing us the real meaning of being “always on” for our members and the communities we serve.

 

At the Annual Meeting, Survey and Ballot Systems (SBS) – the firm that has run the PEC Director Elections the past few years – announced that District 5 Incumbent and Board President James Oakley had resoundingly won re-election, and Jim Powers, who ran unopposed to fill the seat left by retiring District 4 Director Chris Perry, had claimed a spot on the Board as well. Oakley won by more votes than any Director-Candidate had ever received in a contested election since the reform elections of 2008, a further indication that members are behind the improvements the Co-op is delivering these days.

 

Following the Annual Meeting, the Board held an organizational meeting to elect its 2016-2017 slate of officers. I was honored by my colleagues at that time with my election to the office of Board President. Oakley was elected Vice-President, and District 6 Director Paul Graf was re-elected Secretary/Treasurer for a second consecutive year. I must take a minute to thank Director Oakley for his outstanding leadership this past year as Board President. He managed to do the impossible – which was oversee our transition from at least two board meetings a month to just one, as is written in the PEC bylaws. By cutting down on the number of times we meet each month we are saving the Co-op money and saving our staff precious time that they can now use to further the Strategic Plan we have in place for them. Members must know that decreasing the number of our meetings was no small feat – prior Boards had been attempting to cut back on our trips to Johnson City for years, and under Director Oakley’s leadership, we were finally able to get it done. He also made sure we got through an aggressive amount of agenda items each meeting by keeping our conversations on point and attentions in the Board Room focused on the topics at hand. As a mother with small children back home, I was particularly appreciative of the improved efficiency – the difference between arriving home at 5:30, as opposed to 7:30, to two (now three!) little ones makes a big difference to me, and I know PEC staff and the rest of the Board Members feel the same way. I also thought Director Oakley’s method of asking for questions or commentary from our member audiences kept things fresh and kept the free flow of ideas between members, employees, and Board Members at the forefront of our Board Meetings. No doubt I’ll have big shoes to fill, and I’ll have my work cut out for me in ensuring we continue on an upward trend towards the big successes we on the Board envision for PEC in the future.

 

It’s been a pleasure to serve on the PEC Co-op Board for the past two years. I never dreamed in 2014 when I first joined this body that we would change so much for the better. While we can attribute much of our success to the strategic vision we’ve put in place at the Board level, far more of the credit belongs with our hard working Executive team, led by CEO Hewa, and the tremendous PEC employees, whom consistently demonstrate their commitment to making the Co-op experience a positive one for our members. The future at PEC is bright, and I look forward to seeing all that we have yet to accomplish in the Co-op year ahead.

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2015 Summer Recap

The hot summer months have come and gone in the Texas Hill Country. Well, almost at least. While Central Texans were busy going on family vacations and soaking up the sun, a lot was happening back at Pedernales Electric Cooperative. I want to make sure you aware of some of our recent PEC progress, and I plan to write several posts in future weeks to cover key topics in depth.  For the purposes of today’s post, however, I’ll give a highlight reel of the past few months and preview some exciting new improvements coming this Fall.

As I wrote in my last post back in the early summer, we held our annual Board Elections and hosted our PEC Annual meeting in June. At that meeting, we welcomed two new Directors to our Board – Paul Graf, Dist. 6 and Amy Akers, Dist. 7. Director Graf has decades of electric utility experience, and Director Akers is an attorney as well as a Director on the Edwards Aquifer Board. They both are poised to offer great depth and valuable input to the PEC Board. Incumbent Director Cristi Clement, Dist. 1, secured her third term as well. With this most recent election, PEC now has a Board with a lot of relatively new faces. Four of the seven Directors have yet to serve out a full three year term. For many years we have heard a lot about the “reform” Board that came into being following the ousting of disgraced (and now jailed) former GM Bennie Fuelberg. With all of these new faces, we now see a move away from a reform mentality and towards one of refinement and innovation. I’m excited to see where the next few years will take us.

So where, now, is the PEC headed? First and foremost, the current Board seems collectively focused on lowering rates for members. Whereas the past seven years have been about putting into place basic corporate functions, such as audits and a working budget, the Board’s new focus is streamlining operations and reworking power supply options to lower member electric bills. On one hand, PEC is pursuing rate reduction through internal improvements and operational tightening. Three examples of internal cost cutting come quickly to mind. For starters, in the last two years, PEC has reduced its controllable costs and improved its employee headcount. We are currently operating with 714 well-trained, highly-utilized employees, whereas at our heftiest a few years ago, PEC employed upwards of 900 employees. Secondly, major cost reduction will be achieved in the next year following our new NISC software system launch in October. Our current SAP software system has been a nightmare to operate, update, and maintain the past few years, and shedding its largesse and associated inefficiencies will immediately benefit our bottom line. Once NISC is running on all cylinders, its Co-op specific processes will yield even further operational reductions. A third substantial internal cost-saving measure will be the closure of certain payment centers that have outlived their efficient usefulness. For years, PEC has been criticized for its overbuilt brick-and-mortar presence, and its time for us to become physically leaner, starting with some of these under-utilized payment centers.

In addition to our own operational cost reductions, PEC has sought rate relief through its major power supplier, the Lower Colorado River Authority (LCRA). LCRA GM Phil Wilson has been trimming fat from his organization since his arrival in 2014, and we have begun to see LCRA pass ensuing rate relief onto PEC and its other power supply customers. Concurrently, fuel costs have noticeably come down since last fall, and that has been an added benefit to PEC. In December, PEC will likely see its fourth rate reduction in 12 months, in this instance due to lower power bills from LCRA. In 2016, PEC members could see another rate reduction resulting from operational improvements within PEC. Five rate reductions in under two years should signal to our members our commitment to getting rates as low as possible.

In addition to lowering rates, the current PEC Board has been focusing on increasing service choices for our members. For example, the new NISC software system will create a user-friendly platform that includes tailored options for users. SmartHub, the program that will host member accounts, will contain all member information and will provide a host of options. Members can set billing dates, track usage, report outages, and opt-in to paperless billing, which may yield a bill decrease pending Board approval in the coming months. Outside of our software, future conveniences will also include increased payment locations – we are currently looking at opportunities for PEC bill payments at kiosks and local grocery stores, where currently our members can pay other utility bills.

Other member options may include choices in the actual rate structure used to calculate monthly bills. Currently, one formula is used to calculate a member’s rate [(amount of Energy used x Price of each energy unit ($/kWh)]. In September PEC will wrap a Cost of Service Study (COSS), which could result in Board adoption of Time of Use rates. These rate types allow members to select a rate that charges different values for energy used at various times of day. For example, if electricity prices are highest between 2pm-7pm in the summer months, on a Time of Use rate a family could make choices to run the dishwasher and dryer in the early morning and later evening to avoid higher midday prices. In this scenario, a member might spend less per month on electricity than they would using their current flat rate. The COSS will also assess our tariffs and service fees to see if other bill relief opportunities exist.

Another program coming in the near future to PEC members is a smart, on-bill solar financing program. I am personally not in favor of solar-rebates for members because they would be subsidized by other members, but this program makes residential solar installations more accessible without subsidy. Through PEC access to lower-than-market interest rates offered by Co-op lenders, members can secure loans for residential solar systems and pay for them in monthly installments tacked on to their monthly bills. Non-participating members will not be subsidizing this program because any administrative costs or potential risk from loan default will be allocated into the interest rates in the financing. This program expands options for those members that have their own solar energy plans and are looking for ways to make them into a reality.

Finally, the Board just voted almost unanimously to institute an Opt-In Operation Round Up program to collect member donations for charitable giving in PEC communities. Now, after years of requests for this program, members can choose to participate in PEC charitable giving practices as opposed to the previous practice of the Board making these decisions unilaterally. Charitable giving is on its way to being a generous choice, not a hidden mandate.

With all these changes, what is remaining the same at PEC? For starters, we still have top notch reliability. During a summer when ERCOT hit its all-time peak load, PEC still operated with no major system breakdowns or longterm outages. We have a solid system operated by our highly-capable, extremely professional linemen and field staff, and that means the commitment to being “always on” at PEC remains at the very top of our priority list. Our members also remain very satisfied with their cooperative, and our JD Power Customer Satisfaction Score went up to 692 from 674 in 2015. The PEC Board and your PEC management will continue to perpetuate the tenured spirit of our Cooperative, which has always been carried on by the commitment and hardiness of our employees and our members.

I hope this provided you a glimpse into all the continued improvements happening at your Cooperative. I will write in further detail in the coming weeks on the topics of our new software system, COSS, updated policies, and more rolling forward. Stay tuned, and happy Labor Day Weekend!

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.”