Considering the PRC Hearings and Kit Carson Coop Assets

During the upcoming PRC hearings in Taos, date and time TBA, the members of KCEC will be afforded the opportunity to ask questions or raise concerns about the way the Coop is financing a 60 million dollar grant and loan package for Broadband. The KCEC board of trustees and its management have, allegedly, mortgaged the assets for a number of loans from the federal government Rural Utility Services program (RUS), including Broadband.

Some members say management has put the Coop at risk.

We are told that state law restricts loans for non-electric ventures to 20% of the assets. Yet, we are also told the Coop has mortgaged 100% of the assets. We might ask how much more debt the Coop plans to take on? Insiders say the Coop will soon have some $93 million in loans, collateralized by its assets—electricity infrastructure and energy revenues. The members deserve a transparent report from the Coop regarding its fiscal status.

If you subtract the liabilities from the Coop’s assets on the balance sheet, what is the true net worth of the company? What is the cash flow? Allegedly the Coop today is in default on its RUS loans for the third straight year.

A PRC order last year required the Coop’s to spin off the Broadband as a separate entity. So far, the Coop has refused, saying the feds collateralized the venture with a 40 million dollar grant and 20 million dollar loan.

We don’t see why the Feds wouldn’t allow the Coop to spin off the Broadband project as an independent entity, given its 40 million dollar grant and investment. Activists have contacted the RUS bureaucrats, who say the project was conceived in confusion and approved under deadline pressure without appropriate due diligence. It’s time to re-do the financing arrangement.

The Coop‘s history of losing money ($10 million) on side ventures like Propane, Internet, and the Command Center suggest a more prudent approach to the Broadband project is necessary to protect the members’ longtime investment in the cooperative’s rural electrification mission.

Supporters of the Broadband project have engaged in ad hominem attacks against activists, who are merely asking the PRC to enforce its order. Everybody pretty much supports the idea of Broadband but prudent members oppose financing the project on the backs of members, who suffer financially from electricity rate hikes. More rate hikes are coming next year and the year after.

Calling for sound fiscal management is not radical or conspiratorial but sensible.

In today’s raging capitalist climate, financiers and promoters tend to make decisions that should be left up to professionals and their customers. Insurance agents and their progeny decide who receives medical care instead of doctors. Financiers decide what products industrialists will make and whom they will hire instead of manufacturers. Investment bankers have turned Wall Street into a gambling den and rule over the housing and construction industry instead of local banks, contractors, and customers. Today’s form of capitalism favors large corporations over entrepreneurs and small local business.

At the local Coop, a smooth talking management team, despite a history of promoting failed diversification, has turned the elected trustees into a rubber stamp board and saddled the Coop with debt. We KCEC members are not in the merger and acquisition junk bond business like Bain capital. We don’t have offshore bank accounts. We can’t export our need for electricity to China or India.

In many ways, little has changed since the beginning of the REA. Regardless of naysayers, KCEC has an honorable history of satisfying the need for electricity in the Taos area. Outages are far less frequent today than thirty years ago. All things considered, a cadre of trained employees provides pretty good electricity service.

But the fast-changing world of technology, Internet service aimed at satisfying the contemporary appetite for transmitting information and entertainment, requires a different kind of cultural investment. KCEC has been unable to provide adequate Internet service during its decade long experiment in its telecomm venture. Affirmations of belief in Broadband are not an adequate substitute for technological know-how.

Competitive and experienced Internet providers already provide service to many KCEC members. The PRC, KCEC Trustees, the members and RUS need to base financial and technical decisions regarding Broadband on sound practices—not on wishful thinking.

Why not spin off the Broadband and let the technology geeks, who know how, guide us through the electronic—information age? 

Responses

A reader writes, “My suggestion… take a deep breath, hold it and give KCE time to build the infrastructure.  They are well on their way and they do have the ROW/easements which no one else can touch.  Once built, then it is a far more attractive asset so KCE could sell it to TaosNet, Century Link, ATT, Vz, Comcast or some other company that has the technical depth and financial resources to operate it.  In the worst case, they could, actually, sell it for the money they will need to pay-off the loans, I guess.  Or they could lease the whole operation to one of the communication outfits at a rate that will pay off the loans.