A recent, local newspaper article that does a very good job of discussing the events that occurred at the Special Meeting held at PEC Headquarters on October 30th.
http://www.hsbbeacon.com/news/article/22706
Friday, November 06, 2009
Tuesday, October 20, 2009
An Argument For A Member-Adviser Selection and Vet Process
As Directors of PEC we are wisely required to submit to background checks to determine if a past history of unlawful or illegal actions exists. We also complete Non-Disclosure and Conflict of Interest forms. These steps are part of a defined system which protects the financial interests of our members.
To ask the same of "Member-Advisers" should not be any, if much different. To call the Advisers "member-advisers" and not pay them board meeting fees, etc. creates no negligible difference in our accountability to the membership. To accept member-advisers without understanding their backgrounds, intention and qualifications is tantamount to opening the hen-house to the foxes. At a minimum this Board should consider asking of any adviser that they would:
As a Board we have already had numerous lengthy and controversial discussions centered on the use and viability of either elected or appointed advisers to the Board of Directors. It was discussed as recently as the past two monthly meetings that Mr. James Spellman's candidacy for Advisory Director would not be considered by committee until an even newer process is in place. How is this situation any different in that it doesn't have a formal process? If we are truly committed to protecting member's interests we need to formally ask and answer the following questions:
It is unconscionable to ignore the potential ramifications of an action that could place the cooperative at risk. Since these advisers are not democratically elected by the membership I think we owe it to our member-owners to scrutinize these candidates before they are considered for member-adviser appointment.
Furthermore, neither the Board nor the committees seeking to appoint member-advisers have determined any minimum qualifications or criteria for selection. To select one member over another without any predetermined and approved process leaves the Board in prime position for accusations of bias and cronyism. If there is to be no selection criteria, no minimum qualifications, and no position description for these member-advisers then how are we to responsibly and ethically determine who to select? if we select six advisers over the remaining volunteers without a template then how will we make selections that are not based on a personal preference and that do not create a platform of prejudice? In fact, in the absence of all normally accepted criteria shouldn't we accept all twelve applicants as advisers?
I remain very concerned by the fact that the majority of this Board is willing to push previously promised Bylaw revisions out a year, but is not willing to take the time to put into place a process that either scrutinizes or defines our member-adviser candidates. At the very least this sounds an awful lot like we are conveniently ignoring policy, procedures and processes so that we can do what want now regardless of long term consequences.
I have made my arguments in open session regarding this issue and I now believe that this Board is giving more consideration into the ramifications of putting advisers into place without proper scrutiny, and the harm that it could cause the cooperative. I do believe we have the time to make the right decisions without harming the initiatives that this board wants into place. But with the reluctance that was demonstrated by some Board members to commit to a member-adviser process that is fair, responsible and defined, I remain concerned.
To ask the same of "Member-Advisers" should not be any, if much different. To call the Advisers "member-advisers" and not pay them board meeting fees, etc. creates no negligible difference in our accountability to the membership. To accept member-advisers without understanding their backgrounds, intention and qualifications is tantamount to opening the hen-house to the foxes. At a minimum this Board should consider asking of any adviser that they would:
- Be willing to submit to a background check
- Provide proof of PEC membership
- Provide a professional resume
- Sign a Non-Disclosure statement
- Complete a Conflict of Interest form
- Be approved by a majority vote of the Board of Directors in Open Session
As a Board we have already had numerous lengthy and controversial discussions centered on the use and viability of either elected or appointed advisers to the Board of Directors. It was discussed as recently as the past two monthly meetings that Mr. James Spellman's candidacy for Advisory Director would not be considered by committee until an even newer process is in place. How is this situation any different in that it doesn't have a formal process? If we are truly committed to protecting member's interests we need to formally ask and answer the following questions:
- What is the difference between an Adviser/Member-Adviser and an Advisory Director?
- Do the Bylaws provide any opportunity to seat advisers on sub-committees or other? What about the removal of these same advisers? Will this panel be termed as a sub-committee?
- Will this panel/sub-committee be chaired by a seated Director?
- Will this panel/sub-committee be approved by the Board prior to action?
- Will there be a specific charter for this panel/sub-committee?
- Do the Bylaws allow for compensation for non-elected advisers?
- Will these advisers expect compensation for travel or time? Will they expect a services contract?
- Have the proponents of the issue taken the time to consider the potential costs if compensation is to be considered and ultimately awarded to the advisers?
- What powers are granted by the Bylaws to volunteers, advisers, or member-advisers?
- What powers do the Bylaws give to the Board in seating/contracting volunteers, advisers, or member-advisers?
- What cooperative policy or process discussed and defined advisers?
- What cooperative policy or process provides the mechanism for seating advisers? We've already heard that we cannot seat advisory directors without a new policy so what governs the member-advisors?
- How do we ensure that the advisers are competent, represent the true best interests of the membership, and that they have nothing to gain financially from the experience of being on a committee?
It is unconscionable to ignore the potential ramifications of an action that could place the cooperative at risk. Since these advisers are not democratically elected by the membership I think we owe it to our member-owners to scrutinize these candidates before they are considered for member-adviser appointment.
Furthermore, neither the Board nor the committees seeking to appoint member-advisers have determined any minimum qualifications or criteria for selection. To select one member over another without any predetermined and approved process leaves the Board in prime position for accusations of bias and cronyism. If there is to be no selection criteria, no minimum qualifications, and no position description for these member-advisers then how are we to responsibly and ethically determine who to select? if we select six advisers over the remaining volunteers without a template then how will we make selections that are not based on a personal preference and that do not create a platform of prejudice? In fact, in the absence of all normally accepted criteria shouldn't we accept all twelve applicants as advisers?
I remain very concerned by the fact that the majority of this Board is willing to push previously promised Bylaw revisions out a year, but is not willing to take the time to put into place a process that either scrutinizes or defines our member-adviser candidates. At the very least this sounds an awful lot like we are conveniently ignoring policy, procedures and processes so that we can do what want now regardless of long term consequences.
I have made my arguments in open session regarding this issue and I now believe that this Board is giving more consideration into the ramifications of putting advisers into place without proper scrutiny, and the harm that it could cause the cooperative. I do believe we have the time to make the right decisions without harming the initiatives that this board wants into place. But with the reluctance that was demonstrated by some Board members to commit to a member-adviser process that is fair, responsible and defined, I remain concerned.
Sunday, October 18, 2009
Clearing the Smoke and Mirrors with PEC Bonuses
The word “bonus” is a pretty dirty word these days. It brings to mind corporate greed, excessive executive bonuses, and everything that is wrong with the American financial situation of today. But before bonuses became an incentive that some corporations handed out like free candy, they were actually a useful tool for providing motivated workers with a road map for exceeding average goals. In return, any overachievers up to the task of meeting bonus goals were rewarded for their assistance in making their company a stronger institution.
When I joined the Board of the Pedernales Electric Cooperative last year I discovered that they also had a practice of handing out large financial bonuses to their general manager that had no ties to work performance. PEC had a long-standing tradition of awarding these “performance” bonuses to its managers. In fact, the General Manager received bonuses in excess of $300,000 without any basis or plan to be measured against. Bonuses were expected yearly and were based solely upon a rank, tenure, or even just a recommendation. The quality of performance of the respective manager had no bearing upon what or how much was rewarded.
This archaic method of reward without exception did little more than create a system of entitlement. There were no benefits to the cooperative in adhering to this old bonus system—it forced no improvement in processes and did not support corrections to problems. Initiative was stymied and growth—collective or individual—was stunted through lack of goals. I saw in PEC a mirror image of the corruption and greed we currently see in our U.S. banking institutions and corporations who we are now burdened to support through government bailouts.
Knowing this situation was critical, I began to develop a 2009 Performance Management Matrix for the General Manager in 2008. Following open discussion, the 2009 Key Performance Indicators (KPI) was unanimously approved in our March 16 board meeting. The new bonus plan consists of quantifiable measurements that accurately reflect what we believe to be the critical success factors of the cooperative. For 2009, the KPI includes goals for safety, cooperative cost control, member satisfaction, relevant industry comparisons, and program development. These KPIs manifest the cooperative’s new goals in that they are critical to improving our bottom line, promoting a safe environment for employees, creating more efficient work processes, and ultimately restoring the trust of the membership.
The General Manager will use the Key Performance Indicators that have been established for him as benchmarks for his staff. All PEC employees will then become partners in achieving the measurable goals the board has defined. Every department and employee will be recruited to work in synergy towards our overall success.
The PEC’s bond rating was recently dropped due to poor past business practices such as this unhealthy bonus system. It was also recognized by Fitch, the bond rating service, that PEC was under pressure to reduce costs and rebuild trust with its membership. The Fitch report is affirmation that the new KPI driven bonus plan is a step in the right direction. By establishing performance goals which promote financial stability for the cooperative we will both reduce costs and rebuild trust.
We’ve removed the smoke and mirrors from the PEC bonus system and provided intelligently defined targets that give the board, the management, the employees—and even the membership—the benefit of a high-level, real-time view of the progress of our cooperative. As with all Key Performance Indicators, the target will change as the organizational goals change and as the organization gets closer to reaching a milestone. This serves as incentive to ensure that the cooperative management remains flexible and nimble to a changing climate and membership.
Typically, a bonus plan is not a newsworthy or even very interesting topic. Many companies annually define or redefine their goals to provide incentive for the executive officer to drive company performance. Yet for PEC this is another historic moment. PEC now has a clear direction of what needs to be done to meet goals, make improvements, and ultimately serve the membership.
http://www.sanmarcosmercury.com/archives/7352
New PEC Policy Promotes Open Communication
On Jan. 26, the Pedernales Electric Cooperative Board of Directors passed a board communications policy. The board followed a democratic process to review, debate, revise, and ultimately pass a final policy. I have written and disseminated this account of that process under those new board communication guidelines.
In researching this policy, it became clear that many companies, both public, private, for profit and not for profit, have communication policies. These policies fulfill many needs: they protect entities from lawsuits resulting from libelous statements; they guide board communications through defined channels; and they educate the public on how they can expect to hear from their elected representatives. And in the case of our cooperative, it also protects the members from unnecessary expenditures of the PEC staff and resources that they pay for.
Our new communications policy is a process that helps us define when a statement from the board is an official PEC communication or a personal statement. Once this determination is made it guides the person making the statement on how they can transmit that to the public. Official PEC Board communications will be disseminated through our communications department. Personal board communications will be disseminated through the board members’ own accord.
The policy contains no restrictions on the individual board member’s communications other than that it must contain a disclosure clause at the end stating the piece reflects their personal opinion and not necessarily that of the cooperative. The policy suggests that the board member submit it to our Board General Counsel to review it for any libelous statements. This is offered for the board member’s own protection, not to alter the content or tone of their message. The individual board member is free to distribute their communication to whomever he or she wishes in any manner they desire.
The policy also contains guidelines for internal communications. The policy requests that any board member wishing to communicate with PEC staff go through the General Manager. This is done to respect the PEC working hierarchy and company resources that the membership pays for through their electric rates. The policy does not in any way restrict the content of a Board member’s communications with the staff. The policy merely asks that they make arrangements to do so through the General Manager so that the managers and their supervisors are aware of it.
I appreciate the input received from PEC members, PEC staff and Board Members in drafting this policy. While some people were under the impression that the policy might hinder board members from communicating freely with the public, I want to assure our members that this policy as adopted is intended to have quite the opposite effect. By having a set of standards all board members can now communicate with the public within a process that they can trust and that protects both them and the cooperative. All board members can now communicate openly with the public without fear of unintended legal consequences. The result of this is that our communications policy creates a safe environment, which encourages communication between the board members and the staff, membership, and media.
The events leading up to the adoption of the policy have been an excellent challenge for the PEC board to test its commitment to frank dialogue and debate in a forum open to our membership. The experience detailed here shows the challenges in making “openness and transparency” more than just a phrase.
I am encouraged by the debate among our board members on this and other issues. The fact that we have disagreements is proof that we have a diverse board. Our willingness to accept that diversity and still work together is what will support our efforts to remake the Pedernales Electric Cooperative into an institution of respect and reliability.
http://www.sanmarcosmercury.com/archives/6456
Monday, June 23, 2008
Thursday, June 19, 2008
Voting Slow for Co-op Board Election
http://www.statesman.com/search/content/news/stories/local/06/19/0619pec.html
It is so disappointing that these large block voters have chosen to abstain from voting. I personally contacted the great majority of these organizations and offered to meet and discuss the issues and concerns that I have with the current Board and my vision of where it should go into the future. Apathy can never be defended.
Friday, May 30, 2008
Junction, TX GM Meeting
The Junction General Manager’s was well attended (or much better than in Georgetown) by some 15 or so members, another ten employees and two candidates, David Hall and myself. I purchased a current copy of the Junction Eagle while driving into town and found two references to the forum, one on the front page and the other was my letter to the editor asking members to attend to learn more about the opportunities facing PEC.
The meeting format was very similar to the other GM meetings that I have attended. It was another opportunity to meet the local district manager and his staff followed by Juan’s presentation of recent key events and his plan for taking us into the future. Of course it ended with a Q&A session. Since Juan’s message was so similar, I won’t bore you with those notes but I did want to present what I learned from his answers to some of my questions.
First we discussed the election and the voting practice of one meter – one vote instead of what most of us assumed would be the one member – one vote policy as stated in IRS 501 (c) (12). I specifically was interested in if he was an advocate of the one member – one vote policy. He was non-committal in his response in that he would answer only by saying that he felt it should be looked at by the board. I replied that it was very apparent that the board takes his comments very seriously and that his stance on the issue is important as he can sway the board with a word. He once again was unwilling to take a side indicating to me that from a business standpoint he would not like to lose the revenue that is paid by the owners of multiple meters. My understanding is that each meter has its own associated member fee. If PEC were to change the policy, there is every expectation that the meter v. membership dues situation would have to change as well. This should definitely be looked at by the board at their first opportunity.
Next up was the LCRA contract status. As recently as two weeks ago, Juan stated that he hoped to present to the board the LCRA contract for review and approval by the annual meeting. When I asked if he was still confident that the contract was progressing to a June closure, he replied that they had hit some snags in the negotiations. PEC is aligned with the Wholesale Power Alliance and it appears that this alliance is slowing the contract proceedings down. Juan did not appear happy with all of the alliance’s objectives prompting me to ask why we would continue to be a part of something that may not be working in our best interests. Juan answered that they wanted to continue with trying to work through it with them for a while longer. A while longer seemed to be into late summer, early fall. My statement would have to be that any alliances that don’t make our (PEC) considerations a top priority is a bad alliance.
We discussed the Navigant report briefly. I asked Juan if PEC would consider a continuation of the Member Comment/Vote page that is on the website now to allow the members to express with a vote or comment their feelings of satisfaction or dissatisfaction with how the company was being run. He answered that PEC is indeed going to set this up on their website but that it may not be for voting purposes—only for comments. I would like to see it expanded to include possibly an annual “Say on Pay” opportunity. This is something else for the new board to consider following the elections.
Juan has been very complimentary of the renewable energy programs offered by Austin Energy. I asked him how many of these they were bringing to us at PEC. He responded that AE is positioned differently than PEC in that they are profit driven whereas PEC is not. He reiterated that the cost of renewables is more expensive than traditional. I responded that it is obvious that there are some members more than willing to accept the additional cost. He told a story about AE and the quick sale of alternative energies that just confirmed my statement regarding the market for renewable energy. I also asked if we could bring more balance to the power supply from LCRA and AEP to include more wind energy than what we are getting now from AEP. He was non-committal on this point as well. When I asked about rebates he once again said that AE was in a better position than PEC to offer rebates due to their different mission objectives but that they could explore it with LCRA. I thought this was a good idea so I asked if that was part of the on-going negotiations at this time. He replied that it wasn’t. Overall he did not come across as very encouraging regarding renewables in this meeting. He wanted to emphasize conservation. Conservation is absolutely a great subject but I personally don’t think it’s wise to discount the renewables as easily as he did last night. Too many of the members feel very strongly about it and we are uniquely positioned at this time to make a move in providing more clean power. Why wait? Why not make the move? As I said, it was disappointing discussion.
There was significant discussion about capital credits as well. But it was more to do with the 5 year payouts of the $23 million and the future plans regarding the retirement of the credits and the continued infrastructure maintenance and development. Nothing new here that wasn’t already placed on the website.
As a note, Juan said that although the website hasn’t been updated and that the customer service department hasn't been briefed on it, PEC does buy power back from at least two member-suppliers of wind energy. He said they paid full price. So there is a little hope for the interested parties out there who have indicated that they want to consider placing the turbines on their properties.
The meeting format was very similar to the other GM meetings that I have attended. It was another opportunity to meet the local district manager and his staff followed by Juan’s presentation of recent key events and his plan for taking us into the future. Of course it ended with a Q&A session. Since Juan’s message was so similar, I won’t bore you with those notes but I did want to present what I learned from his answers to some of my questions.
First we discussed the election and the voting practice of one meter – one vote instead of what most of us assumed would be the one member – one vote policy as stated in IRS 501 (c) (12). I specifically was interested in if he was an advocate of the one member – one vote policy. He was non-committal in his response in that he would answer only by saying that he felt it should be looked at by the board. I replied that it was very apparent that the board takes his comments very seriously and that his stance on the issue is important as he can sway the board with a word. He once again was unwilling to take a side indicating to me that from a business standpoint he would not like to lose the revenue that is paid by the owners of multiple meters. My understanding is that each meter has its own associated member fee. If PEC were to change the policy, there is every expectation that the meter v. membership dues situation would have to change as well. This should definitely be looked at by the board at their first opportunity.
Next up was the LCRA contract status. As recently as two weeks ago, Juan stated that he hoped to present to the board the LCRA contract for review and approval by the annual meeting. When I asked if he was still confident that the contract was progressing to a June closure, he replied that they had hit some snags in the negotiations. PEC is aligned with the Wholesale Power Alliance and it appears that this alliance is slowing the contract proceedings down. Juan did not appear happy with all of the alliance’s objectives prompting me to ask why we would continue to be a part of something that may not be working in our best interests. Juan answered that they wanted to continue with trying to work through it with them for a while longer. A while longer seemed to be into late summer, early fall. My statement would have to be that any alliances that don’t make our (PEC) considerations a top priority is a bad alliance.
We discussed the Navigant report briefly. I asked Juan if PEC would consider a continuation of the Member Comment/Vote page that is on the website now to allow the members to express with a vote or comment their feelings of satisfaction or dissatisfaction with how the company was being run. He answered that PEC is indeed going to set this up on their website but that it may not be for voting purposes—only for comments. I would like to see it expanded to include possibly an annual “Say on Pay” opportunity. This is something else for the new board to consider following the elections.
Juan has been very complimentary of the renewable energy programs offered by Austin Energy. I asked him how many of these they were bringing to us at PEC. He responded that AE is positioned differently than PEC in that they are profit driven whereas PEC is not. He reiterated that the cost of renewables is more expensive than traditional. I responded that it is obvious that there are some members more than willing to accept the additional cost. He told a story about AE and the quick sale of alternative energies that just confirmed my statement regarding the market for renewable energy. I also asked if we could bring more balance to the power supply from LCRA and AEP to include more wind energy than what we are getting now from AEP. He was non-committal on this point as well. When I asked about rebates he once again said that AE was in a better position than PEC to offer rebates due to their different mission objectives but that they could explore it with LCRA. I thought this was a good idea so I asked if that was part of the on-going negotiations at this time. He replied that it wasn’t. Overall he did not come across as very encouraging regarding renewables in this meeting. He wanted to emphasize conservation. Conservation is absolutely a great subject but I personally don’t think it’s wise to discount the renewables as easily as he did last night. Too many of the members feel very strongly about it and we are uniquely positioned at this time to make a move in providing more clean power. Why wait? Why not make the move? As I said, it was disappointing discussion.
There was significant discussion about capital credits as well. But it was more to do with the 5 year payouts of the $23 million and the future plans regarding the retirement of the credits and the continued infrastructure maintenance and development. Nothing new here that wasn’t already placed on the website.
As a note, Juan said that although the website hasn’t been updated and that the customer service department hasn't been briefed on it, PEC does buy power back from at least two member-suppliers of wind energy. He said they paid full price. So there is a little hope for the interested parties out there who have indicated that they want to consider placing the turbines on their properties.
Wednesday, May 28, 2008
Article in the Marble Falls Newspaper (05.27.08)
Meters, not people to determine PEC board
By
One person, one vote is not the way it works in The Pedernales Electric Cooperative.
In the midst of its first wide-open board election ever, the PEC has acknowledged that its 222,524 "members" are actually meters - with 47 entities controlling 99 or more meters, each with a vote.
The sprawling electric co-op's customers consist of 203,592 individuals and 18,932 meters on commercial property, causing some candidates to court those who have the largest number of meters.
Anne Harvey, spokesperson for the PEC, said the members with the largest amount of votes (meters) include developers/home builders, schools, government entities, multi-family housing and utilities.
The most votes one member has is 566 votes; however, it is believed Time Warner Cable is one of the largest PEC customers and may have as many as 1,700 votes. The PEC would not identify the various groups and the number of their 'meters.'
This was my response to the Editor at the Highlander.
Dear Editor,
Is this how we as PEC members should be measured? As a meter? PEC continues to take one step forward and two steps back. How can PEC ever re-establish the missing and/or damaged trust that has occurred due to the years of board neglect if we continue to see these types of examples of inadequate and maybe even illegal policies? The time is now to make a difference. Please speak out with your vote and elect candidates with relevant experience and qualifications to set PEC back on the right path. With energy prices sky-rocketing we cannot afford three more years of this type of oversight.
James E. Williams, PEC District 2 Candidate.
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