DEL.ICIO.USCo-op members have choice to make
COBB COUNTY
Saturday, December 13, 2008
The fallout between Cobb EMC and its for-profit, but money-losing affiliate, Cobb Energy, is not likely to go away quickly now that both parties have agreed to settle the lawsuit that so rancorously split the utility over the last year.
While the EMC’s members have their company back, what they still may lack is any confidence that the utility’s executives and board of directors really understands what happened.
MY OPINION
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TIME FOR ME TO BE GOING
Mark Twain famously said it was a terrible death to be talked to death. He also had this to say about journalists who feel compelled to write valedictories when they end their careers: "If there is anything more uncalled for ... it is one of those tearful, blubbery, long-winded "valedictories" — where a man who has been annoying the public for ten years can not take leave of them without sitting down to cry out a column and a half."
My last day at the newspaper was Friday. It has been a pleasure over a 37-year career to have had a chance to annoy you, first as public editor and more recently as an editorial columnist, for the last eight years. Thanks to the newspaper for the platform and to you for reading.
Indeed there are still rumblings within Cobb Energy’s management and stockholders that the whole affair was much ado about nothing. They contend it was created by an unholy alliance between this newspaper — which revealed details about the financial arrangements between the two companies that most co-op members had never known — and greedy trial lawyers trying to make a quick buck by representing a handful of disgruntled members.
Now that the lawsuit is behind them, company executives and the board of directors can go back to the primary business of providing affordable electricity to nearly 200,000 customers in much of Cobb County, or so the rationalization goes.
Well … yes, but not really.
That probably won’t and can’t happen until the majority of the EMC’s 10-member board gets replaced. There are two elections next year where members will have a chance to do that — one that had to be postponed from this year because a judge had no faith the company’s officials were going to make it easy for members to participate. That says a lot about how distrustful the EMC’s members have become about the leadership.
From a strictly financial standpoint, the settlement makes sense. The co-op members had to pay $47 million to buy out Cobb Energy’s stockholders, assume the company’s debts and return employees and equipment to the co-op. In return the co-op will no longer have to pay the affiliate to manage Cobb EMC’s business, a savings of $170 million since Cobb Energy essentially got to dictate its price for running the nonprofit utility.
But the settlement was merely a financial agreement to get Cobb EMC out from under Cobb Energy. No one; not the executives, nor the board of directors and certainly not the preferred stockholders — who were guaranteed a nice return on their stock even if Cobb Energy lost money — is being held accountable for the bad decisions that forced the lawsuit in the first place. No one is paying a price for deciding it was a good idea in 1997 for an electrical membership co-op to create a separate, for-profit company to get into the bug-spraying, home-security and satellite-dish installation business, to name just three of the company’s unprofitable enterprises.
The often-heard reason for spinning off the new company was that Cobb EMC was ripe for a takeover by a big, bad corporate utility, which would raise customer prices and not provide the level of service Cobb EMC had been known to provide. Whether that threat indeed existed was irrelevant. CEO Dwight Brown convinced the EMC’s board of directors it was the smart thing to do.
While utility experts credit Brown for making some shewed moves in the early 1990s to put his co-op in a strong position to grow and prosper, the decision to turn a nonprofit, member-owned cooperative into a sinecure for a for-profit enterprise was obviously a bad one. Yet he gets to keep his job (until his contract expires in February 2011), his $300,000 salary as head of the EMC, the $500,000 that he would have received as head of Cobb Energy and get paid $3 million for the 120,000 shares in preferred stock he holds.
Not bad for such a stellar performance. The co-op members may be stuck with Brown, but they aren’t stuck with the directors who gave him such a sweet deal in the first place.
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