From the Office of State Senator Troy Fraser

For Immediate Release
March 27, 2008

FRASER LEADS HEARING ON GOVERNANCE OF ELECTRIC COOPERATIVES

The Senate Committee on Business and Commerce held a hearing on Thursday, March 27 to discuss the current governance structure of electric cooperatives. At issue was whether there is a need for statutory changes to protect customers of electric cooperatives in Texas.

"Late last spring, my constituents began contacting my office to complain about the closed nature of the Pedernales Electric Cooperative Board of Directors," said Fraser. Members raised concerns about the board's nominations and elections process, the lack of transparency by the board of directors and senior management, the failure of the cooperative to return excess profits by paying Capital Credits, and the level of compensation and benefits received by board members.

"Over the past 11 months, it became apparent that the inability to elect anyone except for the candidates handpicked by the board itself allowed the Pedernales Electric Cooperative's Board of Directors to become a self-governed entity with no way to be controlled," said Fraser. "And with no one able to look over their shoulders, abuses occurred."

The purpose of the committee hearing was begin the process of examining the regulatory structure of electric cooperatives. "If the abuses happened at Pedernales Electric Cooperative, they could be happening at other cooperatives in the state," said Fraser. "The committee will look at all electric cooperatives to make sure that their members have an effective voice."

Since 1999, electric cooperatives have operated under no state oversight because they are self-governing entities. "It has long been my contention that if the members are unhappy with the decisions of the board of directors, they can and should vote them out of office," said Fraser. "But PEC Board's ballot process effectively kept members from electing anyone except for the candidates handpicked by the board itself."

Representatives from the Public Utility Commission and the Texas Electric Cooperative Association attended and provided testimony. Their testimony indicated that neither the state nor the voluntary association has the authority to regulate a cooperative board and prevent it from abusing its power. Under current law, the cooperatives are self-policing.

Directors from the PEC also participated in the hearing. The primary question asked of all of those who testified was why the state should not regulate electric cooperatives.

"Today was the first step in our review of electric cooperatives," said Fraser. "The committee will spend the next several months working on a solution to ensure these abuses do not occur again."

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