Friday, December 11, 2009

PART II - Editoral From Beartooth Co-op Member

Here, I posted Part I of an editorial by Arlene Boyd, a member of the Beartooth Vigilance Committee.

Here is Part II:

Supporting three co-ops, Beartooth members lack information
It’s been nearly a year since Beartooth Electric Co-operative members were hit with a steep rate hike, and some members still question the decision-making that led to the increase. This is the second in a four part opinion series exploring concerns about electricity rates, power generation, and the future of rural electric cooperatives.

By Arleen BoydBeartooth Vigilance Committee

Members of Beartooth Electric Cooperative (Beartooth) finance three cooperatives: Beartooth, Southern Montana Electric Generation and Transmission Cooperative, Inc. (Southern), and SME Electric Transmission and Generation, Inc (SME).

Most members do not understand the need for two G&T cooperatives. Some see a hierarchy with SME at the top, planning to generate electricity that Southern will buy and then sell to Beartooth, which has contracted to buy all of its power from Southern through 2048.

The farther up this electricity supply chain members go, the less information they find about their co-ops.

Tim Gregori, General Manager of Southern and Director/Registered Agent of SME says Beartooth members actually are not members of his two cooperatives and, therefore, are not entitled to information. Their lawyer agrees.

After Gregori denied Beartooth members permission to attend Southern’s annual meeting last March attorney Brian Holland listed the co-ops belonging to Southern and SME and wrote, “Each of these cooperatives has its own members, but being a member of one of these cooperatives does not make one a member of either Southern or SME.” He added that Southern’s bylaws “are not available to the public.” Holland’s promised response to requests for clarification of Southern versus SME responsibilities and a Highwood financial report has never arrived.

There is much about these three co-ops that members have been denied access to or simply cannot reconcile. This is an uneasy position for co-op members who are being asked to take on hundreds of millions of dollars in debt to build a power plant, without information about its justification or how the bills will be paid.

This opinion piece looks at Southern and SME. Next week’s piece will examine the structure and advantages of cooperative organization and look at how Beartooth Cooperative measures up.

What do and don’t we know about our generation and transmission co-ops?

Many cooperatives have excellent websites with access to financials, bylaws, plans, and staff. Southern has a one-page site listing its members and sources of power. SME has no website.

Southern and SME share an address.

Southern: our sole source of energy, not much information

Southern was formed when Tim Gregori and five co-ops (Beartooth, Fergus, Mid-Yellowstone, Tongue River and Yellowstone Valley) left Central Montana Electric Cooperative in 2003. Gregori and Prinkki cite unfair rates as the reason for leaving. Central Montana members also recall disagreement with Gregori’s wish to build a power plant.

Southern buys power from Western Area Power Administration, Bonneville Power Administration, and PPL to supply wholesale electricity to its member cooperatives. Southern plans to build a gas-fired generation plant. No business plan or financial justification for Southern’s proposal has been presented to Beartooth members.

Tim Gregori says that Southern has only six official members, so Beartooth members are not entitled to attend its annual meetings, even though other non-members routinely attend. John Prinkki, Beartooth board president and one of Southern’s six members has not reported on Southern’s meetings or financials to Beartooth members.

Southern will not supply its 2007 tax return to Beartooth members, but it appears on which provides information on nonprofit organizations. Southern’s accountant reports that its 2008 Form 990 should be available on that site soon.

Southern will not provide its bylaws. They are filed with Yellowstone Valley Electric Cooperative’s lawsuit against Southern which is available at the County Courthouse in Billings from the Clerk of District Court.

Beartooth policies require written, witnessed requests for information. Requests sent to Beartooth on November 18 asking for Southern’s Form 990 and the tax return for SME have not been answered.

SME: follow the money, if you can

In April, 2008 SME was incorporated in Montana as a nonprofit cooperative, excluding YVEC from membership after YVEC filed suit to leave Southern.

John Prinkki says that SME is responsible for building the Highwood Generating Station while Southern will fund it. He says that SME pays no salaries and does not compensate its board members. Southern pays Tim Gregori more than $200,000 per year and reports board member fees and expenses of $123,316 in 2007 and $53,570 in 2008.

It appears that SME has no bylaws, no financial reports and no tax documents available to the public. It is not clear how money goes from Southern to SME or how decisions are made between the co-ops.

SME is the registered owner of the Highwood plant land in Cascade County and has paid for services at the site. The Electric City Power executive director has said that SME spent approximately $20 million of the $40 million spent on the failed Highwood coal-fired plant.

Economic control by members and democratic decision-making are guiding principles for co-ops. By defining this cooperative narrowly (four members) SME withholds the right to information from Beartooth members while holding them financially responsible for its business.

SME filed with the Montana Attorney General’s office as a nonprofit cooperative. Asked about finding SME’s federal nonprofit tax return on, however, SME’s accountant reported that “SME, unlike Southern, does not need to file a 990 – the way it is incorporated does not require it.” This may mean that SME recorded less than $25,000 in revenue, allowing it to file a 990 short form or that it filed a corporate 1120 tax return, which would be harder to understand. Either way, the return will not be seen by the public.

Conflict of interest The triple co-op structure creates many conflicts of interest. One example is support for conservation programs. As board president, John Prinkki is responsible for conservation efforts at Beartooth. As Southern’s board vice-president, he suffers when Southern sells power back to PPL at a loss because of Beartooth’s reduced consumption. As vice-president of SME, Prinkki’s mission is to build a power plant and sell its electricity. If SME is a co-op, 85 percent of that power must be sold to its members. Prinkki’s three responsibilities conflict.

With Beartooth members seeking information and circulating a petition to require member approval for major spending, Gregori and Prinkki need to answer these questions:

Why do we need two generation and transmission cooperatives?

Why do we need a power plant?

Why is information about Southern and SME being kept from Beartooth members?

How will you increase transparency at the co-ops?

1 comment:

Anonymous said...

Thanks for the informational post. The Tribune is so far behind on this sort of investigative reporting it is pathetic. At least the blogs stay on top of the news-Thanks!