Details of Cobb EMC settlement released

Details of a proposed settlement between Cobb EMC and its suing customers began going out in the mail this week, after neither side backed out within a two-week window that ended Monday.

The electric cooperative’s members are grumbling — including outspoken former U.S. Rep. Fletcher Thompson, who galvanized a fall membership meeting with his calls for reform. He has blasted the proposed deal in community newspapers.

But “although there are many things about it that I don’t like,” Thompson won’t oppose it at a court hearing scheduled for Dec. 2, he said.

He said he met with a plaintiffs’ attorney Tuesday and now is convinced the deal, despite its shortfalls, will ultimately benefit Cobb EMC: “I have to look at the big picture.”

“They totally captured Cobb EMC and this will get us out from under that noose,” he said. “Within a year’s time, we should be able to get control of Cobb EMC.”

The settlement deal, if approved next month, would end a year-long legal battle between Cobb EMC’s customers and the two companies that together supply electricity in five north metro Atlanta counties.

Since 1998, the for-profit Cobb Energy has operated the nonprofit co-op under a 40-year contract, charging a markup of up to 11 percent. Cobb Energy is run and partly owned by co-op insiders.

Customers sued the co-op and Cobb Energy last fall, saying the arrangement siphoned co-op assets and had enriched co-op insiders at the co-op’s expense.

The termination of Cobb Energy’s contract is a key part of the settlement deal now headed to court.

Plaintiffs attorney Pitts Carr said Tuesday that the deal would resolve a case that might otherwise end up with Cobb Energy in Chapter 11 bankruptcy, “which in our opinion, would be a disaster.”

If a bankruptcy happened, the for-profit could continue to collect its markup from Cobb EMC for the duration of the case — at a cost of roughly $5 million per year, according to plaintiffs.

Assets critical to the co-op’s survival also would be sold to the highest bidder, he said. Cobb Energy owns all the meters and computer equipment needed to run the co-op’s business.

A key sticking point, both for critic Fletcher and the plaintiffs themselves: Dwight Brown, the architect of the arrangement and CEO of both companies, will keep his job through February 2011.

The deal calls for Cobb EMC to buy out Cobb Energy’s shareholders, including Brown, who bought his $3 million stake with an interest-free loan from both companies, later forgiven.

Cobb Energy would sell a stable of side businesses, with proceeds going to Cobb EMC. It would keep a call center and a tree-trimming company, with ongoing profits going to Cobb EMC.

Carr has said the stock buyout would cost up to $14 million. Cobb EMC would also assume Cobb Energy’s debt, including an $18 million credit line.

Customers can comment on Dec. 2 in Cobb County Superior Court, but must tell the court and legal firms in writing.

The submissions are due Nov. 28.