The Coop Culture: Another Election (From Feb. 2008)

According to a 1998 New Mexico Law Review article, the New Mexico Supreme Court decided in Schein v. Northern Rio Arriba Electric Cooperative, Inc. that a coop member is allowed to inspect cooperative books and records when a member has stated a “proper purpose.”

Among other findings, the court apparently decided that a member, who happened to be a journalist, had the right to inspect coop expenses or facts related to legal fees. There’s no reason why audit findings, budgets, and receipts regarding travel and reimbursement should not fall under the principle of “proper purpose.”

For ten years, this writer covered the Coop and its battles with Tri-State. Currently, the Coop is refusing to provide rate protesters with information that has been made public in the past. Friction finds the Coop Trustees and Mr. Reyes present position disingenuous and mendacious i.e. “sin verguenza.” So we are posting stories from the past to give readers some history of the coverage, beginning with a Feb. 2008 story.

Activists Call for Transparency

High Rates and Trustee Travel

By Bill Whaley

Currently, the national, state, county, and municipal elections dominate the headlines. In May another election is coming up: the Kit Carson Electric Cooperative, Inc. (KCE) trustee elections. Seven positions are open. Although there have been no official announcements by current trustees, it appears as if all seven incumbents will run: Tim Cottam and Jerry Smith in the Angel Fire and Eagle Nest areas; Chris Durán and Ambrose Mascareñas in the Peñasco area; Luisa Mylet and Mike Arguello in the greater Taos area, and Art Rodarte in Ojo Caliente. So far, only Toby Martinez of Ranchos de Taos, a retired federal and state employee, has formally announced his intentions to challenge an incumbent the Taos area.

The top vote getters are seated as trustees. Candidates can run for the board by presenting petitions to the board, signed by at least 50 members. Or candidates can be nominated by a board-appointed nominating committee. Incumbent Trustee Luisa Valerio Mylet has compared the nominating committee process to the “Spanish Inquisition.” Toby Martinez has requested and been given a list of metered members so he can run an independent campaign. Before being seated, successful trustees must pass a background check and be of good character. Trustees, who have ignored the certification process for two terms are not allowed to run again, according to the bylaws. Felons are prohibited from holding office. Coop members with meters in their names, whether residential or commercial, are entitled to vote.

Tri-State Rates

Kit Carson Coop is one of 44 members who buy their electricity from Tri-State Generation and Transmission, Inc. According to Kit Carson trustees, Tri-State is basically an unregulated monopoly and has raised rates about 65% since the 2000 merger with Plains Electric, the former G&T provider. On January 1, 2008, Tri-State raised rates almost 12% for its 44 members, which includes 12 New Mexico coops. The New Mexico Public Regulation Commission will not hear rate protests from a Coop unless three individual coops file requests for hearings.

According to an Albuquerque Journal report, Wed., Jan. 23, 2008, “PRC May Hold Hearing on Rates” by Laura Nesbitt, Public Regulation Commissioner David King said he had received numerous complaints from coop members of the 17,000 plus members of Central New Mexico Electric Cooperative (CNME). CNME serves the Estancia Valley and southern Santa Fe County. Commissioner King said he was considering a hearing and had asked the attorney general for an opinion on the constitutionality of legislation prohibiting hearings unless three coops filed protests. CEO Luis Reyes of Kit Carson, with about 26,000 members, says the local coop does not itself increase rates but passes the Tri-State increase on to members.

On the electric bill the Tri-State increase is listed as a “fuel adjustment.” Reyes told Horse Fly that the Coop would need permission from the PRC to change the language on the electric bill form “fuel adjustment” to “Tri-State.”

Tri-State Policies

In addition to rate increases, Tri-State makes policy decisions that cost coops money, according to activists, trustees, and news reports. Part of the discontent by CNME members occurred because CNME claims it reduced the number of off-peak hours it bought from Tri-State as a cost savings measure. If you use electricity during off-peak hours, the cost is less. Typically, peak hours occur during the day when electricity demand increases and costs the coop more. But if the number of hours of off-peak service drops, there’s a corresponding rise in the length of peak hours, causing an indirect rise in electrical costs, according to consumers.

Kit Carson was once charged a $10,000 fee for an alleged late payment. In reality, Kit Carson was on time and Tri-State bungled the transaction, according to KCE board members. When KCE trustees appealed to the 44-member board for relief, their request was denied by the board of directors.

(Editor’s Note: The legendary “Hub”  Thompson ran Tri-State like his own personal fiefdom–Luis learned his lessons well.)

At the Mora-San Miguel Electric Cooperative, Inc. (Mora), with 10,000 members, former manager Jerome Lucero says Tri-State violated its own policy by reneging on participation in sharing costs for the construction of the Rainsville substation delivery point. Lucero says the substation was built to insure reliability and to serve an increased load. According to Lucero, Tri-State paid for a similar project for Chama’s Northern Rio Arriba Electric Cooperative, Inc.’s (NORA) with its 4,100 members. (See letter below.)

Money and Politics.

Jerome Lucero got fired from his job as manager at Mora because he spoke up at a PRC meetings, saying Tri-State had ignored its responsibilities. He has compared the treatment of Mora to NORA, who got better treatment because NORA president, Tony Casados, is “buddies with Hub.” Harold “Hub” Thompson, the CEO of Tri-State, has been a frequent character in these pages during stories about the “David and Goliath” battle between Tri-State and Hub and Kit Carson Coop and Luis “Little Hub” Reyes, the KCE coop manager. Trustees say Hub keeps Tri-State board members in line by offering them tickets to ballgames, travel opportunities, and extra committee assignments and meetings. Tri-State board members receive about $400 a day plus per diem reimbursement as directors when they go to meetings or meet in committee at Tri-State HQ in Westminster, Colorado.

Recently, Lucero and other activists persuaded Mora Coop members to vote on a referendum reducing the number of trustees from eleven to seven thereby hoping to save more money for operations at the perennially broke coop. Mora board members receive about $129 a day plus full medical benefits. Mora’s trustees received a total of about $101,000 in compensation for meetings, according to their 990 IRS Return filed in 2006, found at guidestar.org.

The Kit Carson board members were dubbed “The Traveling Trustees” in an article by reporter Fabi Romero years ago in Horse Fly. According to the KCE 990 IRS return filed in 2006, KCE trustees received about $135,803 to attend meetings. This summary, found at guidestar.org, does not include travel expenses, such as airfare, hotels, and reimbursement for dining abroad. In comparison, the Jemez Mountains Electric Cooperative, which serves much of Rio Arriba County and several other counties, with just over 30,000 members, paid its board of trustees about $85,812.97, according to its 990 IRS return filed for the year 2006, found at guidestar.org. Trade meetings for trustees are frequently held in places like Orlando, Fla. (Disney World); New Orleans, La. (Bourbon St.), San Antonio, Texas (River Walk); Anaheim, Ca. (Disneyland); and, especially, Las Vegas, Nevada (Name Your Sin). Without specific reports from the coops, it is difficult for the members to judge whether or not trustees are being held accountable for their expenses. In other words, are these trips necessities or luxuries?

During the last month or so, KCE Trustees have been struggling with a purported request from their CEO, Luis Reyes, who had asked for a contract. Historically and currently, Reyes has always worked without a contract (or a bodyguard). Given the sensitive nature and fractious behavior of the eleven trustees, some of whom occasionally challenge one another to “step outside,” it’s no wonder Mr. Reyes might want contractual reassurance from the highly politicized board.

The Energizer Bunny

According to form 990 filed with the IRS and posted at guidestar.org, Mr. Reyes has received the following compensation: 2004) $149,262 plus $17,474 in benefits; 2005) $157,997 plus $17,098; and 2006) $162,913 plus $19,072. As far as we know, this does not include the use of the Coop credit card, car and gas expenses for travel, or compensation for sitting on the board of directors of national organizations.

In March of 2006, Reyes was elected to the board of directors of the National Rural Telecommunications Cooperative Association (NRTCA). As Horse Fly understands it, a NRTCA 990 tax form filed with the IRS in 2005 (prior to Mr. Reyes’ selection to the board) and obtained at guidestar.org, directors received $5,000 per meeting, plus $1200 for travel expenses for NRTCA meetings.

Mr. Reyes is a busy man, who attends meetings at trade organizations from time to time, Tri-State, the New Mexico Rural Electric Cooperative Association (NMRECA, aka Statewide); the National Rural Electric Cooperative Association (NRECA), and the NRTCA, as mentioned above, or in Taos as a private citizen—he’s president of the Taos County Chamber of Commerce, Vice President of the ersatz Hispano Chamber, and current member of the Town of Taos Planning and Zoning Commission. Asked if he thought being a member of the P&Z commission and CEO of KCE was a conflict of interest, Mr. Reyes dismissed Horse Fly’s close reading of the ethics question by saying, “As a private citizen I can serve my community.”

For the sake of comparison, Town of Taos Manager Tomás Benavidez receives, reportedly, $100,000 plus benefits and expenses. Taos Health Systems, Inc. d/b/a Holy Cross Hospital’s CEO Kean Spellman receives $215,695 in salary, plus $45,831 in benefits, and $7,260 in expenses, according to the hospital’s 990 filed in 2005. Apparently, the hospital has yet to file the 2006 tax return.

Mr. Reyes has been praised and blamed by trustees as well as activists for many sins, including an outage during a Bronco game in 2006, which Mr. Reyes hastened to point out was “Tri-State’s responsibility.” No one argues that outages have been reduced, service improved, and coop growth implemented under the energizer bunny’s management as well as advances in propane, telecom, and Internet services.

Praise and Blame

Mr. Reyes credits the propane division of Kit Carson, developed under his leadership, with saving the community some $20 million, according to a KCE newsletter, by forcing propane sellers to compete and reduce costs to consumers due to KCE’s entry in the propane sweepstakes. His detractors point out that the propane division has lost about five million dollars for 2001 through 2005. The losses, according to one reading of the consolidated balance sheet obtained by Horse Fly, affects the members’ capital credits negatively and increases interest costs to the Coop. The coop’s estimated debt, according to the 2005 consolidated balance sheet, stands at about $83 million: $30 million due members for capital credits; $45 million in notes, loans, and leases; and current liabilities of about $6 million. The board has recently negotiated for another $6 million loan for expansion, as Horse Fly understands it.

For the calendar year ending on Dec. 31, 2005, the auditors noted an ongoing finding that thousands of dollars in receivables were due from employees and directors, including travel advances that needed documentation or resolution. Auditors found that propane division accounts were not reconciled on a monthly basis, meaning that numerous errors occurred.

KCE Policy

Members who wish to speak to the board at their regular meeting, usually the last Tuesday of the month (but on Fri., Feb. 29th this month) must submit a request in writing prior to the meeting. Candidates for the board of trustees must submit a request in writing for membership lists or financial information. (The Coop has forms for these requests.) Most policy decisions are ultimately up to the board and, according to the by-laws, can be amended, changed, or modified by a vote of the trustees.

According to a 1998 New Mexico Law Review article, the New Mexico Supreme Court decided in Schein v. Northern Rio Arriba Electric Cooperative, Inc. that a coop member is allowed to inspect cooperative books and records when a member has stated a “proper purpose.” For instance, a member, the equivalent of a shareholder, might want to inspect the records for the sake of determining whether board members and management are conducting business legally or in terms of best management practices. Among other findings, the court apparently decided that a member, who happened to be a journalist, had the right to inspect coop expenses or facts related to legal fees. There’s no reason why audit findings, budgets, and receipts regarding travel and reimbursement should not fall under the principle of “proper purpose.”

Concerns

(Pictured, Jerome Lucero (hat) and retired finance chief Art Ortiz discuss their concerns with CEO Luis Reyes.)

In their message to coop members, the KCE Board of Trustees frequently flogs the slogan: “Owned By Those We Serve.” Current activists say Kit Carson Electric trustees do not respond promptly to members’ concerns. Here is a sampling of such concerns. Requests for information are stonewalled or made difficult. Activists question why the KCE doesn’t have a policy in place regarding the rotation of bank accounts among the local financial institutions. When a member requests reimbursement for damages, due to surges or outages, members say the Coop tries to avoid its responsibilities. Activists also say Trustees allow board members whose character has been questioned or who haven’t abided by board policy regarding the certification process to serve.

Despite Horse Fly’s well-known appreciation of drama, such behavior as denouncing each other at board meetings, or challenging a fellow trustee to go outside, is seemingly beyond the purview of acceptable board member behavior for such an important organization.

Solutions

When several board members congregate at either in-town or out-of-town meetings, activists question whether they should all be paid per diem rates of $150. Activists say one or two representatives might better serve the Coop’s economic interests at trade meetings.

In their obsession with Tri-State regulation, regardless of the merits of their argument about the need for regulation, activists, other New Mexico Coop Trustees, and politicos of some importance, say that diplomacy must be substituted for KCE’s big stick approach.

If the “Traveling Trustees” want to garner support for short-term and long-term objectives, activists say Trustees and their CEO should consider an open, more flexible, transparent, and diplomatic process when responding to Coop members, employee concerns, and their colleagues throughout the state.

KCE usually holds its board of trustee meetings on the last Tuesday of the month. But in February the meeting will be held at 9 a.m. on Fri. Feb. 29th, at its headquarters on Cruz Alta. The message from Mora is: Don’t ignore the membership.

Editor’s Note: The next post details the shocking and scandalous trip to Vegas when trustees went wild with member’s money. Like O.J. Simpson, the Trustees broadcast their doings in “Sin City.”