Outspoken electric co-op leader both admired, reviled

A strange thing happened at an Oglethorpe Power board meeting nearly two decades ago, as the power supplier for 39 Georgia electric membership cooperatives called for a vote on a routine refinancing that would save co-ops millions in interest costs.

Out of a field of bored “ayes” rose a resounding “no.”

It came from the new head of Marietta-based Cobb EMC, Dwight Brown, and it took the air out of the room. The measure required unanimous approval. Brown had just taken the refinancing hostage.

The move set in motion a Brown-led coup that eventually broke Oglethorpe into three parts and saved Georgia co-ops — especially those in metro Atlanta — hundreds of millions in power costs over the next several years. Brown used the blocked financing as leverage.

His “no” vote also introduced the staid nonprofit rural electric co-op world to a colleague who played by his own rules, wasn’t afraid to shake up the status quo and didn’t back down: Brown’s entrepreneurial approach would eventually earn him friends, enemies, national acclaim and, last month, a criminal indictment.

Brown, 65, is set to retire at the end of this month with a dark cloud over his head. A Cobb County grand jury indicted him in January on 31 charges of theft and racketeering at the co-op he has led since 1993.

The indictment details more than $50 million since 1997 it says was taken out of the co-op or not properly paid to the co-op by Cobb Energy, a private company Brown also headed and partly owned. Brown’s lawyers have asked that the charges be dismissed.

However the story ends, the indictments have stained Brown’s final chapter at Cobb EMC’s helm. And his storied insistence on charting his own path may be partly to blame.

Brown’s admirers call him innovative, daring, decisive, tenacious — sometimes to a fault — and a utility world anomaly. “Most people in the utility business are risk-averse,” said Cobb County consultant Shawn Davis.

“Dwight is a rarity in that he often puts everything on the line for something he believes in — and up to now that has served him well.”

He’s blunt, said friend Stan Wise, the state Public Service Commissioner. “He is one that says ‘this is the right way to go,’ and then he goes.”

And he’s loyal, said Randall Meadows, retired CEO of Snapping Shoals EMC (based in Covington), who said that co-op owes its survival to Brown’s take-no-prisoners approach to Oglethorpe: “Dwight’s as good a friend as I’ve got. And his ego is as big as he is. If you’re not on his side, Dwight’s a hard guy to like. He’s a good friend to have. He’s not a good enemy to have. I can’t work the way he does. But we all need people who can.”

The criminal charges — and a civil lawsuit before them — have torn Cobb County, said Earl Smith, a former county commissioner.

“We’re all friends with people on both sides of this. We’ve worked together on a lot of things. This has been very difficult. Friends are important. You don’t come by them every day.”

Businessman and civic leader Edgar “Bo” Pounds was among those who sued Brown over Cobb Energy in 2007. “I think Brown is brilliant” in the electric business, he said. “Everybody says so. But I disagree with everything else he’s done. I wish he had stuck to the electric business.”

Early achievements

Dwight Brown was born Feb. 10, 1946, in Centre, Ala. He grew up humbly, he told an interviewer years later: “I grew up in rural America. I actually handpicked cotton. To be able to go from there to where I am today is a tribute to what makes our country great. I was fortunate enough to be able to take advantage of it.”

Brown graduated from Auburn University in 1969 with an engineering degree. Then he did what a lot of engineers do. He joined Georgia Power.

Langdon Sheffield, a retired Americus businessman, said he remembered Brown from the days when Brown was the utility’s district manager there.

Brown earned his way into Americus lore by taking up a tennis challenge from one of the city’s own — a man known for his bluster.

Brown clobbered the man.

Sheffield said he and Brown served on civic boards, where Brown was a fundraising whiz. In the button-down Georgia Power world, Brown was entrepreneurial, “a maverick,” he said. “We all liked him. He was very, very smart. I respected him a lot. “

The two men would talk when Brown ferried local leaders to sporting events in Atlanta. The subject? “Money,” said Sheffield, laughing. “Ambition.” Brown’s goal was “to own a co-op,” he said, meaning to lead one.

A breaking point

Ten years after joining Georgia Power, Brown became vice president of engineering and operations for Cobb EMC, a nonprofit co-op with 42,000 customers in the northwest Atlanta suburbs. He became CEO 13 years later, in 1993. By then the co-op was the nation’s largest, with more than 100,000 customers. It has nearly twice that now.

It was a wild time in the electric business. Congress had just deregulated wholesale electricity, bringing new independent companies into the market with cheap power to sell.

But Georgia co-ops couldn’t buy it. They were contractually bound to buy from Oglethorpe, a condition of Oglethorpe’s federal financing.

Oglethorpe was hyper-democratic. Each co-op had one vote, regardless of its size. Big suburban co-ops were outnumbered by small rural ones. “The tail was wagging the dog,” said former PSC member Robert Baker.

The disadvantage showed up in price. Oglethorpe charged Cobb as much as 46 percent more than some rural co-ops, Brown said later in a deposition: “We set about to change that. And it was very long and tedious and difficult to get that done.”

Snapping Shoals’ Meadows said his metro co-op’s board was considering disbanding before Brown made his Oglethorpe move. It was paying more for wholesale power than Georgia Power charged retail. “We were thinking, ‘We can’t justify being here.’”

Then Brown voted against the refinancing. “Dwight figured out how to make them listen,” Meadows said. “And then he just did it.”

Tom Kilgore, the Tennessee Valley Authority CEO and former head of Oglethorpe, said the fight ended in 1996, “[when] I said, ‘Fine, if you can find power cheaper elsewhere, then I want to go with you.’ That was kind of the break point, and we started to work together.” News reports say Kilgore nearly quit first.

National spotlight

Oglethorpe’s generation, transmission and operations functions split into three companies. Co-ops could buy some power on the market, and Kilgore and Brown found new deals for Oglethorpe itself.

Afterward, Brown was featured in Electrical World magazine and invited to speak to national utility groups and co-ops across the country. “Without question, cooperatives around the country are watching,” the head of the National Rural Electric Cooperative Association, Glenn English, said then.

“In the utility world, the Oglethorpe restructuring was historical, revolutionary,” said the PSC’s Baker. “He was the Henry Ford of co-ops.”

The changes gave co-ops cheap power for years, said Jackson EMC CEO Randall Pugh: “Between 1997 until 2006, the EMCs, because of the changes we made at Oglethorpe, and because of the access to other sources of power, saved hundreds of millions of dollars.”

As Brown’s troubles began unfolding in 2007, Cobb EMC bought full-page ads in the Marietta Daily Journal extolling the power deals, saying Cobb EMC saved $400 million.

Cobb EMC’s rates are still higher than those of other metro Atlanta co-ops, according to PSC and U.S. Department of Energy data.

Branching out

Two years after sealing his Oglethorpe victory, Brown was at it again. This time, he tore up Cobb EMC itself.

The intent was to gear up for a competitive electric market, then widely considered imminent. Deregulation would let customers choose power marketers just as Georgians now choose gas marketers. Brown wanted Cobb to compete by offering a menu of non-electric services bundled into electric bills.

The concept was part of a national trend, Fitch Investor Services analyst Alan Spen said in 1998.

For Georgia electric co-ops, it was against the law. The state banned them from getting into other businesses and a state Supreme Court ruling said they couldn’t use subsidiaries to get around that ban.

Cobb’s solution was to create a side company, the for-profit Cobb Energy, to expand into new businesses. The co-op gave the new company, also led by Brown, its meters, its employees and a 40-year contract to operate its business for a markup. Cobb EMC’s ownership in Cobb Energy was then reduced, which was supposed to limit exposure to the Supreme Court ruling. Ownership by others, including employees, Brown and other co-op insiders, rose.

Asked in a 2008 deposition whether Cobb could legally diversify, Brown said, “Certainly some of my counterpoint managers brought that question to mind.”

By 2001, electric competition had stalled for the foreseeable future. Brown kept going.

By 2007, Cobb Energy was selling pest control, mortgages and other services, while operating the co-op for an 11 percent markup. Most of the side businesses lost money, according to court filings. Brown was earning $865,500 per year, including guaranteed Cobb Energy stock dividends. And Cobb Energy had become a big civic player, paying $20 million to name a new performing arts center and more than $1 million to Cobb County school athletic facilities, with a special appropriation for Lassiter High, where Brown’s son played football and Brown headed the booster club.

“He made decisions based on business,” said Smith, the former county commissioner who helped on the naming rights deal. “Dwight Brown can make a decision. And he makes his decisions based on looking at a business model. He sees the school system as an economic piece. He sees the arts center as an economic piece.”

Civil lawsuit, charges

To critics, the largess came from captive ratepayers who might have supported the spending, but who weren’t asked. Brown “did a lot of great things around here, using Cobb EMC money,” says customer Tripper Sharp, reflecting assertions in a civil lawsuit in which he was also a plaintiff.

The lawsuit, which followed an Atlanta Journal-Constitution investigation, said the co-op violated state co-op law and had diverted co-op assets to enrich co-op insiders. The parties settled in December 2008, in a deal that unwound the co-op’s financial tie to Cobb Energy: Cobb EMC paid $47 million to get back its assets and buy out Cobb Energy’s stockholders, including Brown. Auditors said the settlement helped resolve “significant” liquidity problems at Cobb Energy.

Brown was unbowed. Just days after the settlement was signed, the co-op violated its terms, an appeals court ruled in April. The co-op has asked the Georgia Supreme Court to reverse that decision. And on Thursday, the co-op sued the customers who had sued it, for allegedly instigating the criminal investigation.

Brown is set to retire Feb. 28. A hearing on the criminal charges against him is set for March 3.