House panel probes electric co-ops' actions


The Atlanta Journal-Constitution
Published on: 06/27/08

Washington —- A congressional oversight committee took aim at the nation's rural electric cooperatives Thursday in a hearing focused on questions of accountability and ratepayer abuse.

The hearing, by the House Committee on Oversight and Government Reform, focused largely on the implosion of the nation's largest electric cooperative, which sits outside Austin, Texas.

Pedernales EMC settled a costly lawsuit with its members in May, after the litigation and local newspapers turned up a number of examples of exorbitant compensation and waste.

But the hearing also touched occasionally on a co-op closer to home, Marietta-based Cobb EMC, which also is being sued by its members.

One committee member, Rep. Jim Cooper (D-Tenn.), said the issues in the Cobb case could raise even more red flags than the Pedernales one.

"You've got a co-op outside of Atlanta that subcontracted out its entire operation to a for-profit subsidiary secretly owned by co-op managers," Cooper said.

By comparison, some of the waste at Pedernales, including fancy chocolates and Celine Dion tickets, seemed "tame," he said.

Cobb's members sued the co-op last fall over its relationship with an affiliate, Cobb Energy, a for-profit company that operates the co-op.

A Georgia Republican on the congressional oversight committee, U.S. Rep. Lynn Westmoreland, said questions about Cobb are being vetted in court. He said Georgians have told him the co-op has served its customers well.

Committee Chairman Rep. Henry Waxman (D-Calif.) said the hearing was a way to begin focusing on "an important issue that has received little attention: electric cooperatives and the billions of dollars they control."

He credited Cooper, a longtime critic of co-op accountability, for bringing cooperatives to the committee's attention.

Cooper said he pushed for the review because of controversies at co-ops around the country, including Pedernales and Cobb.

Others included a co-op near Birmingham that went nearly broke branching into the propane business, and a co-op near Dallas that owned and operated a luxury hotel and golf course before filing for bankruptcy.

"I really regret that we have to have this hearing today," Cooper said. "My only goal is to bring co-ops back to their roots."

Two co-op customers and two Texas lawmakers told the Pedernales story.

They said they were shut out of co-op elections, barred from co-op information and had no other recourse but filing suit.

The lawsuit cost millions and forced Pedernales' general manager and board chairman to retire.

Both were subpoenaed for the hearing, but neither showed up.

Waxman said they couldn't be found. He said federal marshals believed one to be "hiding in a remote New Mexico ranch."

Even the Pedernales witnesses at Thursday's hearing appeared divided about what to do about co-op abuse —- or whether it was widespread enough to require action.

Westmoreland said he believed cooperatives have benefited Georgia.

He said co-op customers, who elect the co-op's board, can and do keep their electric companies under control in most instances, and that they need no further oversight.

Westmoreland said the courts will straighten out co-ops crossing legal lines.

"You're always going to have a few bad apples," he said in an interview, "and those apples need to be taken out."

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