Kit Carson Electric Coop and the Community

The PRC hearings for the KCEC rate increase request have finished. According to reports, the hearing examiner will make a decision about the rate increase in late August or early September. Observers estimate that the Coop has spent close to $500,000 for legal fees, expert witnesses, and on its public relations campaign plus per diem pay for trustees. Activists—interveners who protested against the rate increase spent little but their own money and time, while saving members, conservatively, at least a million dollars in energy costs during the 10-month hearing period.

The Coop will probably receive a portion if not all of the requested rate increase, due to their “technical” insolvency–due to RUS requirements. Despite poor fiscal management, the PRC is not about to allow the coop to go under due to debt and risky financial behavior. But the future does not look good.

Staff at the PRC has confirmed that KCEC has risked more than $10 million in diversification projects: Propane, Internet, and Command Center. The Coop was $62 million in debt at the time the hearings began. Now, the Coop has taken on another $20 million in debt to expand Broadband—Internet service throughout parts of northern New Mexico. So observers estimate the Coop’s indebtedness at about $82 million.

When the Broadband project is finished the Coop’s assets will amount to about 120 million dollars. But  as CEO Luis Reyes has told this writer, “The Coop is a debt driven enterprise.” That concept sounds odd to an average entrepreneur.

Though we, like the members of the electric coop, support the historic mission of distributing electricity, diversification has created a financial black hole for the members. The Coop culture is well suited to the delivery of electricity in a monopolistic environment but can’t compete with private enterprise—according to its record.

1. The Propane enterprise has lost $5 million. Currently, KCEC Propane is not competitive with its smaller, more efficient rivals. Propane consumers can buy cheaper from the independent suppliers. And, reportedly, KCEC is saddled with poor propane credit risks. How can KCEC expect to recoup the $5 million “loan” or “investment” owed to the electric side?

2. KCEC Internet service, a $2 million loser, has a poor reputation. In the beginning local members subscribed out of loyalty or necessity but soon found the service inconsistent and switched to other providers. Technology changes rapidly and one can’t imagine that KCEC’s slow-moving Internet culture will adapt to Broadband and compete with either Taos Net or the successor to Qwest.

The company that purchased the Qwest phone service is already laying fiber optic cable to Arroyo Hondo. We suspect the well-financed provider will offer consumers living in high-density areas or among the posh residential areas deals that KCEC can’t match. Further, unlike electricity, which today is perceived as a necessity, Internet service has yet to penetrate the consciousness of the consumer culture in rural New Mexico. It’s very likely that private providers (Taos Net, Qwest successor) will scrape the cream off the top just as the independent suppliers have done in the propane business.

Regardless, whether due to competition or perceived necessity, Broadband offers services designed to serve the appetite as much for entertainment as for business. The benefits of Broadband can be more accurately compared to cable TV than to electricity service. Given the shortcomings of rural northern New Mexico, it is doubtful that we shall experience more than a marginal bump in the high tech commuter benefits associated with business and Broadband activities.

There’s more to daily life for most Taosenos than a high-speed connection to the Internet.

3. The “white elephant” ($3 million) KCEC Command Center was not conceived of as a profit center but as a public safety incident and communications center. Though the concept has been at play in the community for about eight years, neither the town nor the county, neither the state nor the federal government has become a participant. Further, changes in technology have made the Command Center obsolete.

The technical justification of the Command Center’s location on expensive property has come under fire at the PRC. And, allegedly, perjured testimony has been offered at the hearings, according to witnesses. The mayor, manager, and council can’t agree on whether they support and/or are in negotiations with Reyes and the Coop. The project has tarnished those involved, while raising the hackles of trustees and community members alike. I am reminded of Popeye Doyle (Gene Hackman) when he sees the “dirty” car in the French Connection.

Meanwhile, the U.S. Forest Service operates its telecommunications center for fires out of Albuquerque. The state police operate out their communication center from Espanola. The Town of Taos and County of Taos operate the E911 Dispatch center on Civic Plaza Drive right next to Qwest headquarters, where DSL service is generally efficient.

KCEC has never presented either the town or county with cost-benefit analysis for the Command Center. Elected officials are under some pressure to avoid buying a “pig in a poke”–unlike the Coop trustees. The Mayor may support his buddy Luis but support ends at the Mayor’s office.

While KCEC has been trying to get the Command Center off the ground, the Town has doubled the size of city hall, the county has built a new 135,000 square foot complex, and, even the schools have built a new football and baseball field, while renovating old buildings. The state has given the town the old Mary Medina building adjacent to Cruz Alta Drive for a cop shop—which needs much in the way of dollars for renovation—but is projected to cost less than the cost of occupying the KCEC Command Center.

Call the Command Center “Luis’s folly.”

4. The political culture at the Coop is marked by mendacity. Both the CEO and Trustees have misrepresented the financial condition of the member-owned entity for years. They have consistently attacked the press and activists who have sought to draw attention to the financial risks and excessive expenses. Trustees themselves have discussed instances of insider dealing by the CEO and fellow trustees with this writer.

The gerrymandered districts and disproportionate representation of the villages by self-serving trustees, who’d rather travel than work is a consistent sign of the benefits trustees enjoy. The trustees who represent the greater Taos area and live in El Prado and Ranchos have broken their promises to protect the members. The protestors and PRC hearings have laid bare a public relations debacle at the Coop not unlike the British uproar over the Murdoch News family hacking scandal in England. The Coop will never recover from their exposure as alleged self-serving artists, who look to their own pockets before looking after the members.

As for us members, we have learned much from last winter’s gas company failure. Mixed sources of energy, wood, electricity, gas, solar, offer residents an antidote to the monopolistic and high-handed methods of the member-owned but trustee-hijacked coop. Today’s world of rapid technological change requires increasingly rapid adaptation. Unless dramatic changes take place in the Coop culture, the good old boys in charge will preside over the demise of the once and future distributor of electricity.

In effect, the invisible hand of the market has come calling at the Coop. Maybe not today, maybe not tomorrow, but some day and for the rest of their days, the current trustees will be remembered for having mortgaged the future of the Coop. And the epitaph on their tombstones will say,  “The Coop was my game; Folly is my name.”