Thursday, August 10, 2006

Golden Valley Electric Association asset transfer shorts members

Golden Valley Electric Association (GVEA), the Interior Alaska monopoly electric company is a cooperative under Rural Electrification (REA) standard. Yet there are times when the internal organization acts without fair consideration of the membership.

GVEA, in filing U06-060 and U06-069 before the Regulatory Commission of Alaska is proposing to transfer all generation and transmission assets to a new corporation called GVEA Generation and Transmission (G&T). The stated intent is to reduce margin requirements as the market looks at capital assets as tangible. GVEA estimates a long term savings of $31 million.

I have serious concerns over the composition of the G&T in that it cuts the GVEA members out of participation in the tangible assets of the cooperative. The only member of the G&T is the GVEA corporation, the board members are self selected. GVEA has stated that the GVEA board members will serve as G&T board members, but the bylaws do not require this. This arrangement is very loose and is both nepotistic within the corporation and does not allow for any redress by the membership of GVEA for any reason.

As constituted, GVEA cooperative members will be totally excluded from participation in either election of G&T board members and will be not be considered as members, thus not allowed to attend monthly or annual meetings of the G&T.

GVEA is very liberal with its treatment of executive session and confidentiality. I have sat outside GVEA meetings when the board forgot to get out of executive session. The minutes will not reflect anything in executive session.

GVEA cooperative members have pointedly and purposefully been excluded from being in either monthly or annual meetings of Alasconnect, a totally GVEA cooperative owned subsidiary, though other “consultants” have been allowed in. The rationale was that it was a competitive business entity and it was necessary to maintain strict rules regarding confidentiality of its operations. GVEA members, when asking, are given only vague and general information about assets and endeavors of Alasconnect.

GVEA has, in its filing with the RCA, requested confidentiality for some of the filings in its request for approval of the G&T. The RCA granted it only for detail, but not for summary. However, if GVEA transfers its tangible assets to the GVEA G&T, cooperative members will give up all rights to know anything about its assets in any kind of meaningful way.

GVEA’s assertion of a savings of $31 million is an estimate and should be validated by independent entities who have no stake in this transfer.

GVEA’s assertion that no additional staff will be required is curious, since productivity must go down for staff would would necessarily have to document more complex time allocation amongst the various subsidiary organizations. If this is NOT done, the defacto allocation between the two entities will be wrong and perhaps harmful to either of the entities. Bookkeeping and legal fees of an additional entity will cost more.

GVEA should provide more background on the development of this particular plan. Items of interest: other cooperative’s experience in doing this, including details of incorporation, organizational and legal cost of proceeding forwarding with this divesture of GVEA tangible assets to the G&T, a critical analysis of concerns in developing this plan. GVEA always provides a one sided positive view of any action which it submits to the membership. This does not allow for adequately and responsibly educating the members on an issue facing the cooperative. It is always external individuals or organizations that present any contrasting view.

To summarize, the G&T proposal gives up most of the cooperative’s tangible assets to an entity outside of member control. The proposal does not fairly state costs of establishment or state any risks to the membership. It leaves the members' cooperative as a mere shell dedicated to not much more than consumer billing.


List of filings and orders:

Submission of GVEA

Request for confidentiality:

Ruling on first set of issues:


Blogger Deirdre Helfferich said...

I spoke with Tom DeLong about this, briefly--he says that almost all public utilitities in the Lower 48 separate their distribution and their physical generation assets like this. Neither he nor I are convinced that it's necessarily a good idea just because the others are doing it. For my part, I really dislike the erosion of public oversight in our utilities--I hated it that MUS got sold (it'll be cheaper for users! they cried--yeah, right).

2:14 PM  

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