From the Office of State Senator Troy Fraser

For Immediate Release
April 22, 2009
Contact: Janice McCoy
(512) 463-0124

Fraser's Electric Cooperative Reform Legislation Adopted by Texas Senate

AUSTIN — Legislation authored by Senator Troy Fraser (R-Horseshoe Bay) that would ensure that electric cooperatives are open and responsive to their members was adopted by the Texas Senate on Wednesday. It now goes to the Texas House of Representatives.

The legislation addresses the rights of members to access board meetings and cooperative records. It further requires electric cooperatives to hold fair and open elections so that all members have a voice.

"I am a strong supporter of electric cooperatives," said Fraser. "The beauty of the electric cooperative system is that members are able to determine how best to run the system through the election of a board of directors. The three million Texans served by co-ops need the protections provided in this legislation to have the guarantee of earnest and lasting local control."

During the legislative interim, light was shed on problems concerning management practices at the Pedernales Electric Cooperative (PEC). Those practices included the lack of transparency by the board of directors and senior management in both meetings and records and the lack of fair elections.

While the law governing electric cooperatives establishes a rough framework for organization and operation of the entities, the bylaws adopted by the board have the biggest impact on how an electric cooperative functions and how board members get elected.

This was evident in the case of PEC. The board had the ability to utilize a cooperative member's vote via proxy for a "board approved" slate of candidates, thus undermining the cooperative members' potential to affect any change at the board level.

"If members do not like the policies set by the board of directors, they can and should vote them out of office," said Fraser.

In theory, a democratically elected board should act and vote in a manner that best suits not just the cooperative, but also the membership of the cooperative. While the current statutory framework harbors good intentions, its delegation of much of the authority to the board through the establishment of the cooperative bylaws provides an avenue for manipulation and malfeasance.

That is ultimately what happened at PEC. A dictatorial general manager paired with an impotent board of directors led to excessive compensation to the general manager and those board members, as well as a board whose membership perpetually remained the same.

There were also other important issues that arose during the PEC investigation, such as excessive compensation to both board members and other officers of the organization, and a failure to return capital credits. While a civil lawsuit has been settled, Texas Attorney General Greg Abbott has convened a grand jury to investigate the mismanagement at PEC.

"I am committed to ensuring that what happened at PEC does not happen again - at any electric cooperative. My legislation will require electric cooperatives to hold open meetings, to have an open records policy, and to have open and fair elections," said Fraser.

Senate Bill 921 would amend the Utilities Code to:

"This legislation will retain local control of electric cooperatives, while ensuring that all cooperative members have a voice and have the ability to know how and why a board of directors is making decisions," said Fraser.