City keeps up dialog about co-op franchise

........................................................................................................................................................................................

The Socorro City Council held another public hearing regarding its franchise agreement with Socorro Electric Cooperative during the council’s regular meeting Dec. 2, and the mayor speculated the franchise agreement likely won’t be ready before the city’s next election in March 2014.

The Dec. 2 public hearing was the third so far in the city’s process to develop its electric franchise agreement; the first two hearings were held during the regular meetings Oct. 7 and Nov. 4. Before the public hearings commenced, the city began its franchise agreement process during its regular meeting Sept. 16 with an informative presentation by the city’s attorney, Nann Winter of Stelzner, Winter, Warburton, Flores, Sanchez & Dawes in Albuquerque.

Mayor Ravi Bhasker kicked off discussion Monday by reading from the New Mexico state statute governing franchises. The law states a city grants a franchise through ordinance, but city residents can object to the franchise through a petition and make the city council put the franchise ordinance on a citywide ballot. The number of signatures required on such a petition is equal to 20 percent of the number of voters who participated in the previous city election.

During the Nov. 4 hearing, Bhasker reminded the council 112 people voted in the last city election.

According to the state statute, if a petition objecting to the franchise is presented to the council, the city must put the franchise ordinance on the ballot at the next regular election. If the next election is more than 90 days from when the petition is filed, then a special election must be held. The franchise applicant, in this case SEC, would have to pay the expense of publishing the ordinance and of holding the special election.

Some members of the co-op reform group spoke to the council after the mayor read the state statute. Alvin Hickox said the reform group wants openness in the co-op. He used the District IV trustee election as an example, explaining he and Marie Watkins campaigned for a candidate.

Hickox said the reform candidate got close to half the vote, even though they did not have the same information resources as the incumbent had to successfully campaign.

“I’d just as soon the co-op run the electric,” Bhasker said. “We (the city) don’t know anything about electricity — but if it turns out we need to do that, we will.”

Bhasker said the council needed to hear specific issues about the co-op during its effort to craft a franchise ordinance, which Hickox just provided. Bhasker said Hickox illustrated one way the co-op’s election process is not fair, and that was something the city needs to look at with its attorney.

Bhasker brought up the District III election, which the trustees had declared invalid when they determined the District III meeting didn’t have a quorum. Bhasker said the SEC Board of Trustees attorney talked to the other candidates, who said they didn’t want to run again, so then the attorney decided the election results would be OK.

“To me, that’s not what you pay a lawyer to say,” Bhasker said, chuckling.

Hickox said the city has the power to get what it needs from the co-op.

“We are just a bunch of yo-yos out here trying to get something done,” Hickox said of the reform group.

Hickox said after the co-op board of trustees filed its lawsuit against the member/owners, he was the only person to file an answer to the lawsuit complaint. He did it to make sure the trustees didn’t win the suit by default, which he thought they had expected to do. He said right after that, the co-op attorney called him asking him to withdraw his answer, which he refused to do. He said the reformers wanted a court to judge the situation correctly, “and they did.”

“Did you ever get the bottom line as to just how much that all cost?” Bhasker asked.

“Hell no,” Hickox said.

Watkins then spoke, telling the council it really bothers her how easily co-op elections can be manipulated. She said SEC management controls records, not letting member/owners see them beforehand; ballots are given to a third party vote machine person and co-op employees count the quorum at meetings.

“Who knows what numbers?” Watkins said. “I mean, it’s a flawed system, and if you mistrust the people it’s really a problem.”

Watkins said at one meeting, she asked a guy who was running a voting machine what date was on the list of voters that he had. He told her the list wasn’t dated. Watkins said the list should be up to date every election, and the list should include what date it was completed.

Watkins said another concern was about commercial votes. She said U.S. Department of Agriculture regulations specify all commercial votes must have incorporated entities standing behind them.

“I know for a fact that some of the votes are just made-up businesses that don’t even exist,” Watkins said. “So that needs to be cleaned up and needs to be kept clean every election.”

Watkins named several other concerns about the co-op, including the high employee turnover rate over the past few years. She also suggested having the franchise agreement expire yearly for a while to “keep them on their toes for a while, till we know that they’re giving people good service.” Bhasker said the city was considering something like that. He also said the city will demand yearly audits.

Bhasker said the city has a list of rates for 10 co-ops around the state, and SEC is in the top five cost-wise for an average of 500 kilowatts used.

Bhasker said the franchise fees the city has received over the last 12 years has gone up and down, between $95,000 to $140,000 per year.

“And we really have never verified that,” he said. “So that’s kind of what our audit would be for.”

Paul Steyer said he heard SEC had $10 million or $15 million accumulated over a period of about 30 years in its capital fund.

“That’s an awfully big cookie jar just sitting there,” Steyer said. “What are they doing with that? Why aren’t they retiring it on a formal, periodic basis? To me, that’s an opportunity for temptation or whatever.”

Steyer also encouraged people to attend SEC board meetings. He’s attended quite a few and said he was surprised at how casually the board seemed to spend money, as in $10,000 purchases. He said the board should do more analysis before spending the co-op’s money.

Bhasker said he heard someone in Magdalena was owed thousands in capital credits by the co-op and the person complained to the Public Regulation Commission. The PRC directed the co-op to refund the money, but they still didn’t refund it. Bhasker didn’t know if the SEC didn’t have the money to return to the person, or if there is an audit of capital credits performed. He said the city needs to look into it.

Bhasker said the city is compiling a list of concerns and will present them to the city’s attorney. He expressed doubt that the city could get the franchise agreement done by next March, which is when the next city election occurs. He then invited Joseph Herrera, co-op manager, to speak.

Herrera said the SEC is a nonprofit organization and is regulated by the U.S. Department of Agriculture Rural Utility Service. SEC does annual audits that are GAP required.

“There’s not a pile of money,” Herrera said.

Herrera said when the co-op has years with certain ratios of equity, SEC has to get approval from its bankers to issue capital credits.

Regarding the elections, Herrera acknowledged the SEC’s bylaws “are a little screwy” and need a lot of work. Bylaws are basically SEC’s charter and SEC must follow them. He said no SEC employees touch any ballots; ballots are handled by a third-party administrator, and there is a cost for that.

Herrera said the co-op needs to do a lot of education to let members know SEC is not sitting on a pile of money.

“We have to book that, and it does accumulate,” Herrera said.

He said the co-op has existed 67 years and patronage capital credits build up.

Herrera said the bylaws have been revised many times. One bylaw contradicts state law; another bylaw contradicts itself.

“You try to do your best because these bylaws have been piecemealed, amended,” Herrera said. “So when you work with those, I mean, the bylaws are what we’re trying to do and that’s the best guidance that we have.”

Herrera said RUS requirements are strict, and SEC’s audits have gotten better. He said the SEC wants to cooperate with the city to get the franchise done. The franchise expired in 2009 and the SEC wants to get a franchise agreement both the co-op and city can live with.

Herrera said the co-op has to submit its gross receipts to the PRC, as well as an annual report. He said the PRC collects fees from the co-op based on its receipts; the PRC can also audit the co-op if it doesn’t feel entries are correct.

“We report to the PRC, we report to the RUS, we report to our bankers,” Herrera said. “I mean, the bankers want to make sure they’re gonna get paid, right? So they want to make sure everything is equitable.”

Bhasker noted the city’s ordinances sometimes conflict, so the city hired a codification company to straighten it out. He said that may be helpful for SEC as well.

The mayor also noted Herrera mentioned several entities who hold SEC accountable, such as its bankers.

“But you didn’t say the members,” Bhasker said. “That’s one of the people that you have to respond to also, is the members. I think that’s what I hear, that’s what’s caused a lot of this turmoil.”