Co-op agrees to double fee paid to Cobb Energy

The Cobb Electric Membership Co-op agreed Tuesday to nearly double the fee paid to its management company, three years after the higher fee took effect.

The EMC’s board raised the fee, formerly 6 percent of operating costs, to 11 percent, a difference of roughly $2.5 million a year.

Though partly procedural, the board’s action has major financial implications for Cobb Energy, a for-profit affiliate that runs the co-op under a 40-year contract. The fee is a central issue in a lawsuit filed by several EMC members alleging financial mismanagement by the co-op and Cobb Energy.

At a hearing Monday, a Cobb County judge directed the co-op to escrow payments to Cobb Energy amounting to the difference between the 11 percent and 6 percent fee. That’s because the co-op’s board did not approve the increase, as required by its bylaws, when it took effect in 2005, according to a report filed with the court.

David Flint, an attorney for Cobb EMC, notified Superior Court Judge J. Stephen Schuster that the board’s action, effective July 7, eliminated the need to escrow any payments.

Pitts Carr, an attorney representing the suing members, questioned the board’s action.

The higher fee has raised the co-op’s payments to Cobb Energy by $10 million since 2005. Carr told Schuster that the co-op should be placing that much money in escrow, along with $3.5 million for an unrelated Cobb Energy debt to the co-op.

In an interview, Carr said the board’s action Tuesday was “completely inconsistent” with findings of an EMC board committee released last month. The committee determined the increase was not properly approved and the co-op should recover unauthorized payments.

In its resolution Tuesday, the co-op reserved the right to retroactively increase the fee from 2005, which would effectively cancel the

$10 million debt.

“It suggests that … the board of the EMC is going to continue to subsidize the finances of Cobb Energy,” Carr said.

After months of behind-the-scenes skirmishing, parties to the lawsuit are preparing for a high-stakes court battle this fall.

Schuster ordered the co-op on Monday to delay the election of new board members, set for Sept. 4, until it establishes a more democratic voting method. Co-op rules allow for votes to be cast in person at the annual meeting or by proxy delivered during the meeting.

Schuster said the practice prevented members from voting easily. He suggested the co-op devise a means for members to vote electronically or by proxy delivered with customer bills.

At its meeting Tuesday, the co-op decided to hold the annual meeting as planned, minus the election of four directors. An agenda allots time to the co-op’s in-house attorney to discuss new and unfinished business, and to Dwight Brown, the co-op’s president and CEO, for the president’s report.

Schuster had pressed the co-op to post its audited financial statement for 2007-2008 on the Cobb EMC Web site by Tuesday. But Flint notified the judge that the financial statement, which includes detailed information about transactions with Cobb Energy, wasn’t ready.

The report would be posted to the Web site by Sept. 8, Flint said, four days after the annual meeting.