Taos Coop: Part V. High Wattage Conversation

Editor’s Note: The story below is an update from the Dec. 2008 edition of Horse Fly. Taos Friction will post more stories later this week, giving members background on the current rate hike fracas. KCEC CEO’s Reyes remarks below and friendly tone suggest a transparent and even hospitable or rational discussion of issues in  comparison to today’s reactionary remarks and attacks on members (according to press reports). Now, the Trustees have filed a lawsuit against members that is nonsensical in its attack on its own prescribed by-laws. KCEC sounds more and more like the board of the Socorro Coop, which sued its own members i.e. “itself.”

By Bill Whaley

During their regular Nov. 26, 2008 meeting, KCE Coop trustees and management were expected to discuss issues related to the 2006-2009 Work Plan. The plan is financed by a $39 million loan from the USDA’s Rural Utility Services (RUS). It includes the contract for work at Taos Pueblo, subject of Attorney Anthony Lopez’s letter to Trustee Virgil Martinez (Horse Fly, p. 4). Horse Fly sources say the Taos Pueblo contract was bid at less than half a million dollars but has ballooned to slightly over $1 million—due to change orders. According to KCE CEO Luis Reyes, the contractor responded to unanticipated requests from tribal government and discovered aging underground infrastructure, which required fixing.

On Mon., Nov. 25, prior to the regular meeting, Reyes spent a couple of hours giving the pesky insect an engineering and accounting tutorial. Of $39 million dollars loaned to the Coop in about 2006, $10 million has been spent on improving local electricity delivery throughout the Coop service area. The overwhelming number of projects is being squeezed by time constraints, Reyes says. If the Coop doesn’t use the low-interest loans by the end of 2009 or so, they will have to reapply to RUS for an extension.

Part of the loan repayment process comes through reducing line load losses or leakage by replacing old transformers and inadequate lines in addition to extending service for new residences and businesses. The Coop projects a 2% growth plan. In turn, the Coop bases loan repayment on a conservative growth rate of less than 2%. Leakage can amount to losses of between 6 and 16 percent, depending on the decay of decrepit lines.

In response to questions about contractors and projects, the Rabbit furnished Horse Fly with a paper trail much longer than your arm: three ring binders, invoices, financial projections, notes, memos, amendments, punch lists for contractors and documents signed by independent consulting engineers. Reyes says the paperwork is vetted by the PRC, RUS, engineers, and approved by the board (in general?). The CEO and the Chairman of the Board sign off on amendments to projects. Regarding the number of changes and amendments to contracts, CEO Reyes says, “We’ve always done it this way.”

Reyes says the Coop has kept electric rates the same for fifteen years. The cost of purchased power, however, has been raised by Tri-State, the Coop’s generation and transmission provider. The Coop is currently redefining language on the monthly bill to try and clarify the issue of the pass-through fuel adjustment clause. That clause reflects Tri-State charges. Tri-State buys most of its energy from coal-fired power plants, some from natural gas generating plants, and less than five percent from renewable energy resources, such as solar, wind, and hydro..

During the Nov. 26th meeting , trustees spent an inordinate amount of time discussing a $2600 easement issue. Trustees frequently spend time on minor issues—expenses associated with the purchase of gas, tires, and use of credit cards—while ignoring details about the construction costs of large projects. The Coop is a ninety-million-dollar enterprise, engaged in cutting-edge solar alternative energy projects at UNM-Taos, for instance—but you’d never know it from the conversation.

According to audit reports, the Coop has lost millions of dollars on its investments ? in propane and the Internet service. Reyes says the Coop has an exit strategy. Based on analysis, the trustees can decide to sell the divisions or set them up as self-sustaining solo ventures or try to capitalize on these ventures as long-term investments.

After spending several hours on Nov. 26 discussing minor issues, the trustees adjourned to executive session to discuss audits, policies and procedures for contracts. Trustee Manuel Medina, who arrived late and left early, said to me in the parking lot that nothing would happen, regarding an audit and alleged violations of policy. The Rabbit told the pesky insect that he could do a better job of informing the board about change orders. But he also points out that trustees receive packets about change orders and contracts.

Still, here’s a press release from the Coop that pertains to some of the questions that have been raised by trustees, issued on Dec. 12, 2008.

The Kit Carson Electric Cooperative, Inc. Board of Trustees has announced that an independent audit of the Cooperative’s financial procedures related to the 2006-2009 Work Plan and loan process that includes construct projects underway has been completed. In addition, a review of the Work Plan and loan process was conducted by the Field Representative of the USDA, Rural Utilities Service, in order to ensure compliance with applicable regulatory requirements. The Board of Trustees decided to take these measures due to questions and concerns that arose alleging improprieties and mismanagement related to construction projects. At this time the Board is pleased to report that both the audit and the regulatory review reflect that the Cooperative is in compliance with all laws and regulatory requirements. The Board has also initiated steps to update construction, management, and bid practices.