Changes could make Cobb EMC a statewide model

Cobb EMC, one of the state’s largest electric co-ops, is hoping a more transparent operation could restore a reputation battered by a customer-filed lawsuit and the indictment of its former CEO on numerous counts of racketeering and other offenses.

A state lawmaker thinks what’s good for the Marietta-based utility might be good for the state’s 41 other electric membership corporations.

Last month, new Cobb EMC CEO Chip Nelson rolled out a pack of transparency initiatives, including opening the meetings of the board of directors to the 190,000 customers making up its membership and creating a member advisory panel. The utility’s board could approve the moves next week.

State Rep. Wendell Willard, R-Sandy Springs, sees the moves as an opportunity to push harder to require all the state’s co-ops to open up board meetings to their customers. Unlike investor-owned utilities, the co-ops are considered self-regulating because they are owned by the customers, who elect boards of directors to run them. The co-ops — which serve about 1 million customers in metro Atlanta and 4 million in Georgia — face limited oversight by the state’s Public Service Commission and are not required to disclose detailed information to regulators, lawmakers or even their own members.

In that environment, Cobb EMC, led by then-CEO Dwight Brown, established a for-profit company called Cobb Energy that was owned by Brown and other co-op insiders. Cobb Energy then took over operation of Cobb EMC at a markup that eventually reached 11 percent.

In a lawsuit filed in 2007, customers argued that the arrangement led to the co-op’s assets being siphoned off by Cobb Energy to unjustly benefit insiders. A two-year criminal investigation followed, and now Brown has been indicted on 35 counts of racketeering, theft and witness intimidation. In an atmosphere of deep mistrust by customers, four Cobb EMC board members have decided not to run for re-election, including the chairman and vice chairwoman.

For Willard, the episode demonstrates that statewide transparency is overdue.

“We don’t want another situation like in Cobb where word is that nobody knew what was done until after the fact,” Willard said.

Willard wants to revive a bill he introduced during the past legislative session that included minor changes to the law regarding the place, time and notice required for EMC board meetings. The legislation didn’t make it out of committee this year, facing resistance from the co-ops and some of Willard’s fellow House members who felt the initiatives went too far. He plans to tweak the bill to require board meetings be open to members and that notice be given of those upcoming board meetings. Board committee meetings would remain closed.

But Rep. Don Parsons, the chairman of the House Energy, Utilities and Telecommunications Committee where Willard’s bill stalled, said “it would appear from what I did hear, in general, there is no problem with EMCs in Georgia when it comes to records and transparency.”

“It all centered on Cobb EMC and some of the issues there,” said Parsons, a Republican from Marietta, “and now it looks like the process in Cobb is being addressed.”

If Willard revives his bill next year, Parsons will once again let the legislation run through the committee process for consideration.

“I think we would have to be very careful to extending the Open Records Act to private corporations, and that’s what the EMCs really are,” he said. “It’s a slippery slope, and I think we would have to be very cautions about doing that.”

Terri Statham, a spokeswoman for Georgia EMC, the statewide trade association that serves Georgia’s co-ops, said it would be premature to comment on Willard’s proposal before seeing it.

During the past two legislative sessions, the advocacy groups Common Cause and Georgia Watch have pushed unsuccessfully for changes to the law related to electric co-ops. Their proposals would have required co-ops to presume that members seeking to review co-op records were making the request for good reason. State law allows members to view the records, but it also allows co-ops to deny such requests in some cases if the request would violate privacy restrictions or hurt the co-op.

The transparency pitches at the state level are very familiar to Larry Landaker, a board member of Pedernales Electric Cooperative in Texas that experienced problems similar to Cobb EMC’s.

In 2009, PEC’s former general manager and top outside attorney were indicted on charges that included money laundering and theft. Like Cobb, the indictments followed a customer-filed lawsuit over lavish executive pay and spending, and lax oversight and questionable actions by the board. Since then, new members have been elected to the board, including Landaker, who was board president the past two years. PEC implemented a member bill of rights entitling members to open board meetings and open records, and creating a whistle-blower policy for employees to report fraud, waste and abuse.

Patrick Lavigne, a spokesman for the National Rural Electric Cooperative Association, said situations like Cobb EMC’s and PEC’s have not occurred elsewhere.

“If members feel [their co-ops] are not transparent enough, they make it known through board elections,” he said. “There will be disagreements in places because these are business enterprises, and they all have systems in place to deal with those things democratically. Everybody has a vote.”

Willard’s legislation is a step in the right direction but doesn’t go far enough, said Clare McClure, the senior counsel for Georgia Watch and director of the organization’s Consumer Energy Program. Georgia Watch would still like to see more access to EMC books and records, as well as legislation requiring the co-ops to respond to information requests within the same three-day limit in the state’s open record law.

Landaker, speaking as an individual member and not on behalf of the board, said the changes at PEC occurred in stages over a few years.

“We’re still reforming the co-op, but we’ve turned the corner. ...” he said. “But I look around and see other co-ops, and their day is coming. ”