Lamar W. Hankins : Texas' Pedernales Electric Coop Violates Cooperative Values

Then Vice President Lyndon B. Johnson at PEC headquarters in Johnson City, Texas, in 1961.

PEC violates cooperative values
and principles of liberty

Perhaps the greatest irony about membership in the PEC is that I have no choice about being a member if I want to purchase electricity.

By Lamar W. Hankins / The Rag Blog / March 26, 2013

SAN MARCOS, Texas -- In 2006, my wife and I built our retirement home in the City of San Marcos, but within a small area of the city where electric service is provided only by Pedernales Electric Cooperative (PEC). We had no choice about whom we bought electric service from -- it was PEC or no electricity. Had we been able to get service from the City of San Marcos, as our neighbors a few blocks away do, we would have been able to pay about half of what we currently pay for electric service.

PEC is unique among member-owned electric utilities. It is the largest electric cooperative in the nation and has operated for over 75 years in Central Texas, now serving more than 200,000 members over 8,100 square miles.

PEC’s service area is vast: it extends from Lampasas in the north, Liberty Hill and Manchaca in the east, Canyon Lake and Bulverde in the south, and Johnson City to the west, and includes a large area around Junction and Rocksprings farther west that is not contiguous with the rest of its service area.

It serves all or part of 24 Texas counties: Bell, Bexar, Blanco, Burnet, Caldwell, Comal, Edwards, Gillespie, Guadalupe, Hays, Kendall, Kerr, Kimble, Kinney, Lampasas, Llano, Mason, Menard, Real, San Saba, Schleicher, Sutton, Travis, Williamson. It boasts that its service area is larger than the state of Massachusetts.

Ever since PEC corruption was exposed in 2007, I have kept a closer watch on what PEC does, but it is not easy to accomplish. Until the reforms that began in 2008, PEC spent lavishly on its chief officials, including board members, whose median pay in 2006 was over $50,000 each; and the board president was paid $190,000 per year for minimal work (no office, no staff, no regular hours, no specific duties).

Spouses were taken on official trips at co-op expense. Travel for some was first class. The organization hired public relations services at considerable annual expense, lobbyists were used regularly at great expense, health insurance was provided to PEC board members and their families at PEC expense. In 2006, the 17-member co-op board paid itself over $1 million in compensation and benefits.

To put this situation in perspective, it may help to understand that most cooperatives are a special kind of nonprofit organization, operating under unique tax and legal requirements. They are supposed to exist for the benefit of their members. I have had experience throughout my adult life with service on nonprofit boards and organizing committees, including cooperatives, and have helped create several cooperatives. While I am not an expert, I have learned a few things about the responsibilities of nonprofit and co-op board members in the last 45 years.

The National Cooperative Business Association (NCBA), the leading national association dedicated to the creation and support of cooperatives, identifies the values that should guide all cooperatives:

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

In 1999, PEC was protected from the legislation that permitted many Texans to choose where they would buy their electric service. The inaptly named Electric Choice Act of 1999 was implemented throughout Texas in 2002 -- a time when PEC was mired in corruption, which is why it is no surprise that the PEC board then would not allow its captive members to choose another electricity provider. But we are in a different era now according to the current PEC board. However, we still don’t have the opportunity to choose a different electricity provider.

Randy Claus, a PEC member since 1990, pointed out in a recent letter that, “The sole business purpose of an electric cooperative is to provide safe, reliable and low cost electricity, but it’s not happening (with PEC).” The PEC board seems horrified by the idea of giving those living in its designated service area a choice of electricity providers.

Earlier this year, when Chris Perry, a PEC board member, wrote an op-ed favoring choice and introduced a resolution before the board that would have allowed choice, the board asked Perry to resign from the board, according to an article in the Austin American-Statesman.

The board then stripped Perry of his position as the board’s secretary-treasurer on the grounds that his article “violated the board’s code of conduct, communications policy and statutory fiduciary duties.” So much for openness (the freedom to speak one’s mind), social responsibility, and caring for others.

Perhaps the greatest irony about membership in the PEC is that I have no choice about being a member if I want to purchase electricity. Such a circumstance does not square easily with PEC’s principles that are explained in several of its organization documents that provide, in part:

Cooperatives are independent, private and not-for-profit organizations owned by the members they serve. The priorities of PEC’s members are represented through a democratic process, and every member is encouraged to monitor and regulate the business of our cooperative . . . Cooperatives such as Pedernales Electric are rooted in the Cooperative Principles first established by the Rochdale Society of Equitable Pioneers in 1844. As one of more than 900 members of the National Rural Electric Cooperative Association, PEC is guided by these seven principles.

These seven principles have been adopted, also, by the International Co-operative Alliance (ICA), which grew out of the movement begun by the Rochdale pioneers in the late 1800s. The ICA provides this definition of cooperatives, which comes directly from the seven principles: “A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. [Emphasis added]

The first principle that all of these organizations claim as their own provides that cooperatives, by their very nature, have “open and voluntary” membership, something no one now living in a PEC service area can have if it wants electric service, since PEC has a monopoly on providing electricity in its service area. I and others are involuntary members because PEC wants to keep it that way, though it doesn’t have to. We are pressed into involuntary servitude by virtue of where we live and PEC’s policies and practices.

Of course, PEC claims that it has debt and contractual obligations that must come before the liberty concerns of its captive customers. If PEC had clean hands, that argument might have merit, but its hands are far from clean considering the millions of dollars it squandered during decades of prodigal spending and opulent operations that benefited the few at the expense of the members.

It is past time to free the citizens living in PEC’s service area and permit them a choice of electricity providers. The liberty that we have come to expect as our birthright is held captive by the power given to PEC by the Texas Legislature to make its involuntary customers pay exorbitant prices created by PEC’s own past corruption.

[Lamar W. Hankins, a former San Marcos, Texas, city attorney, is also a columnist for the San Marcos Mercury. This article © Freethought San Marcos, Lamar W. Hankins. Read more articles by Lamar W. Hankins on The Rag Blog.]

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