Patrick Rose

State Sen. Troy Fraser and Rep. Patrick Rose propose reforms to ensure that state’s electric co-ops operate in the open and remain accountable to member-owners. The Legislature should approve them.

Austin American-Statesman, Editorial
Friday, February 20, 2009
State Sen. Troy Fraser, R-Horseshoe Bay, and state Rep. Patrick Rose, D-Dripping Springs, have applied lessons learned from the Pedernales co-op scandal in legislation they filed Wednesday. The proposed reforms in Senate Bill 921 and House Bill 1390 are much needed.

The fundamental problem at Pedernales Electric Cooperative Inc., based in Johnson City, was an insular, self-perpetuating group of board members, dominated by a long-serving and self-serving general manager, Bennie Fuelberg. The board and Fuelberg richly compensated each other and succeeded for years in stopping co-op members from learning details about the co-op’s finances, including their own pay and expenses.

The scandal at Pedernales has drawn a criminal investigation directed by Attorney General Greg Abbott. The co-op’s board and a new general manager, Juan Garza, have introduced major reforms.

The reforms proposed by Fraser and Rose would apply to the state’s 74 electric co-ops, though some are aimed solely at Pedernales.

In general, the Fraser-Rose reforms would require co-ops to conduct their business in open meetings and open co-op records to members. Appropriate safeguards are included for executive sessions, trade secrets and the like.

The reforms also would limit the ability of co-op boards to steer elections toward favored candidates or keep out challengers. They would require co-ops to adopt written policies on travel spending, expenses for board members, managers and employees, conflicts of interest and whistle-blower protections. And state legislative officials could order the Office of the State Auditor to audit a co-op.

In addition, co-op members would get the right to appeal to the Public Utility Commission for help with a grievance against a co-op board or management. If the commission could not resolve the issue, it could refer the dispute to the State Office of Administrative Hearings.

Pedernales co-op members who were denied information by the old regime had no place to go except court. Their lawsuit — and extensive reporting by the American-Statesman — succeeded in forcing the board and management to account for their actions, but the process has been enormously expensive.

Critics rightly warn that an administrative appeal process should not be allowed to bog down in continuous delays or block a lawsuit against a co-op. We agree — the courts should remain an option. But most co-op members probably couldn’t afford a lawsuit, and a well-designed administrative system could handle most complaints quickly, fairly and at far less expense.

Fraser and Rose expect stiff opposition to the legislation from many of the state’s co-ops, which are largely unregulated and will argue that they shouldn’t be punished because of one rogue and unusually large co-op, Pedernales.

But there’s nothing punitive about these reforms. In fact, they don’t really require anything that well-run co-ops shouldn’t be doing already or could do with little fuss.

Another argument is that co-ops are private corporations, not government agencies.

But co-ops are not for-profit companies operated on behalf of shareholders who put their own capital at risk voluntarily. They are nonprofit companies owned by their customer-members, and they operate with a state-sanctioned monopoly — members are not free to sell their interest in a co-op or switch to another utility provider if they suspect wrongdoing.

It’s important to note what these bills do not do: They do not regulate the electric rates charged by co-ops; a co-op’s elected board will still set those. The bills do not regulate the salaries or wages of co-op management or make them file financial reports with the state.

Few bills are not subject to improvement in the legislative process, but Fraser and Rose bring some hard-won wisdom to their proposals, and the Legislature ought to enact them.