Co-op gets feedback from customers
About 25 local businesspeople, school administrators and officials from government entities were alerted to upcoming electric rate increases at a meeting held at Socorro Electric Cooperative offices Thursday morning. Though those who attended might not have liked what they heard, at least they know it’s coming.
“Thanks for the heads up,” Yvonne Manzano-Brown, assistant director for facilities management at New Mexico Tech, said as the hour-long meeting wound down.
Richard Lopez, interim general manager at the co-op, told the gathering the increase would probably be coming in February 2011. He said the time and the extent of the increase would likely be known by November or December.
With help from Catt Cobb, a rate analyst for SGS Engineering, a consultant for the co-op, Lopez explained the co-op was not meeting the profit margins it needed to keep up with loan payments to the USDA Rural Utilities Service. As a consequence, customers would see an increase in electric bills as a means for the co-op to move toward meeting its margins.
Lopez said afterward he decided to call the meeting late last week, and he started calling people on Monday to invite them to what he termed an “informational” meeting.
“The whole approach was just to get it out front,” Lopez said. “As critical as the questions were, we need to hear where they’re coming from.”
Tough Sell
Lopez withstood criticism from Socorro Mayor Ravi Bhasker on two fronts.
As a business owner, Bhasker questioned the breakdown of city and county taxes and the franchise fee built into the bill for one of his hotels.
As the mayor, he complained that the co-op never gave the city the option of getting a better rate for using electricity during non-peak hours.
“The city pays $600,000 for electric bills and was never offered off-demand, which you could have done,” Bhasker said. “Your business has to be accountable; I don’t see it.”
Dr, Cheryl Wilson, superintendent of Socorro Consolidated Schools, said cuts in education over the past two years have already put a strain on the school district. She pointed out the school district doesn’t have the same option the co-op does for solving its financial woes.
“I don’t have the ability to raise the cost of public education,” she said.
Magdalena Schools Superintendent Mike Chambers said his school district has already experienced a $220,000 cut from its budget and would suffer from a rate increase.
“Every penny right now is pretty tight. I can empathize with you, but I can tell you it’s going to be tough for us,” he said. “The other thing is, it’s a tough sell with all the stuff that’s been happening lately, and I hope the board will take that into consideration.”
The co-op’s board of trustees has been dealing with a lot of turmoil lately. In the past year, three long-standing incumbents were ousted in district elections, another resigned and two of the co-op’s four managers were fired in wake of an investigation into financial irregularities with the co-op’s accounting.
A forensic audit of the co-op’s books by an independent accounting firm could begin as soon as next week to further examine the discrepancies.
In addition, the board is embroiled in litigation that began with its decision to challenge three new bylaws that call for the board to conduct business with greater transparency. To do so, the co-op filed a lawsuit against all of its approximately 13,000 member-owners.
Though papers were filed last week to voluntarily withdraw the lawsuit, matters still need to be cleared up with those who answered the complaint and a countersuit targeting the trustees has been filed on behalf of member-owners.
The co-op board is also dealing with a complaint filed with the Equal Opportunity Employment Agency regarding one of the fired managers. Kathy Torres, former accountant-office manager, is charging the board failed to act on her complaint against trustee Charlie Wagner for sexual and racial discrimination.
The Bottom Line
Lopez told the audience he understood their frustration but, just like them, the co-op had a bottom line to meet.
He told them right now the co-op owed about $29 million to RUS, roughly $8 million of that was being refinanced and about $6 million was tied up in a project on the western end of the service area near Quemado.
Cobb told the group there were other factors that were beyond the control of the co-op.
“Now we’re finding because of the situation in Washington and with the state, there are issues of cap and trade,” she said, adding that rural economies and utility rates will be impacted by what the state and federal government does. “We’re basically trying to set rates at a certain level and anything over that they’ll bill us for.”
Cobb said it was imperative that the co-op make its loan payments.
“They have to move forward with their obligations and if they don’t, the federal government is going to come in and run the co-op.”
County Manager Delilah Walsh said Socorro County had to cut $1 million from its budget and asked what the co-op was doing to save costs.
Lopez said refinancing was one thing, and added that member-owners had imposed a cap on the board of trustees’ expenses, which totaled more than $480,000 in 2009.
Lopez said there were a lot of areas the co-op couldn’t afford to cut costs, such as personnel, training, tree trimming and maintenance because it would end up costing the co-op more in the long run.
Later in the meeting, Wilson brought the discussion back to what the co-op could do to save costs.
“Refinancing and (reducing) the cost of the board, that’s all you’ve said. And then you’ve said everything else is important,” she said.
Wilson said that, like the schools, the co-op “can’t ignore being efficient.”
Broadening the Vision
Other ways the co-op could improve financial efficiency were discussed during the meeting.
Mabel Gonzales, financial director for the city of Socorro, suggested that it might be possible to reduce its loan amount. She also asked whether the co-op was doing a good job of collecting delinquent bills.
“You can raise rates all you want, but if you’re not collecting it doesn’t do any good,” she said.
Lopez said customers could help reduce the cost of energy by using electricity during non-peak hours. He said some customers, the VLA being one, were saving money by paying at off-demand rates.
Cobb offered her help by extending the invitation to conduct a use-analysis. She wrote her office and cell phone number on a dry erase board so people could contact her.
Though no one was happy to hear they’d be paying more for electricity, the heads up will help officials prepare for what’s coming.
Walsh said knowing the time frame would help the county plan for it and could impact decisions that had to be made in the next few months.
Wilson said the dialogue needs to continue.
“I appreciate the fact that there’s discussion, but it can’t end here,” she said.
Lopez agreed.
“Right now we have a narrow vision that needs to be broadened,” he said, adding that another meeting could be held after more information becomes available.
After the meeting, Lopez, who stepped in as interim general manager five weeks ago, said he knew he might take a beating at the meeting, but he wanted to be up front with the co-op’s biggest customers about what they could expect in the coming months.
Despite the co-op’s problems, he wanted people to know it was looking for solutions and was willing to listen to their input.
“I think there were some good ideas generated. That’s what we needed — to get feedback from them,” Lopez said. “There are legitimate concerns, especially considering everything that’s happened in the last year. But we need to get past that and move on.”
Contact T.S. Last