BEC looks beyond bankruptcy to new management
By Eleanor Guerrero
Carbon County News
October 2, 2014
Lower Valley Energy Cooperative, Inc. (LVEC) is slated as the possible new manager of Beartooth Electric Cooperative (BEC), at the BEC’s annual meeting in Roberts, Sept. 27.
Making the comment was keynote speaker rod Jensen, Vice Chairman of LVEC.
If hired, LVEC’s CEO Jim Webb and his management team would replace Richard Peck whose interim management contract ends this year. Jensen would be liaison to the BEC board.
BEC Board member Arleen Boyd said this management “would work to achieve the goals we all have agreed to and will agree on as additional plans roll out.”
She explained that he will, “employ his resources and people for operations at Beartooth.”
She said the proposed contract will have a “per meter base payment” and that Webb "would still be accountable to the BEC board just as they must exercise their fiduciary judgment with any management.”
Roxie Melton, BEC Board Chair, said the management term would likely be for three years.
Melton made it clear there would be no merger or takeover.
“We will still be in control of our cooperative, our offices will be here.”
Jensen expressed hope for the future of BEC after a bankruptcy lasting almost three years and said bad times are occasionally where great leaders emerge.
“You guys have done a great job,” he said. “Job well done!”
He said the Southern Montana Electric Transmission and Generation Cooperative Inc. (Southern) bankruptcy is in the past and finally BEC can turn to final payment determinations and the final power contract negotiations.
“For the first time you can move from crises in management. You have the ability to focus on these challenges,” said Jensen.
Jensen is a 22-year cooperative veteran and president/founder of Wyoming’s Bank of Star Valley. His responsibilities at LVEC include managing and coordinating gas and power distribution and supply activities.
Peck is a former manager of LVEC and Peck, Jensen and Webb have worked together.
“I can understand your reluctance,” said Boyd, to one person’s comment that he was not so quick to accept the board’s inclination to hire new management just because they recommended it, acknowledging the challenge of regaining member trust.
As Boyd explained, however, in her Due Diligence Committee report, “We are smarter and more focused now than when we started. We locate and examine information, quantify and compare alternatives, and enlist experts as needed.”
She said the volunteer committees spent over 2,000 hours in the bankruptcy and in going forward.
“Lower Valley has an outstanding management team and track record under Jim Webb’s management,” said Boyd.
Jensen said BEC is on track.
“This board really wants to reduce rates, provide customer service and transparency.” He quoted LVEC, “If we can’t provide lower rates then why are we in business?”
Jensen saw a real potential for downward migration in rates by paying off the Southern debt, being freed to access the wholesale power market for lower power costs and improving management.
Peck said, “Some may be going. We will reduce expenses. We’re going to provide great value, great service.”
Peck added there will be some safeguards in place for any such contract and the future relationship with LVEC and that would include the ability to take back management, merge or have the same contract (extended/renewed). Contract negotiations are ongoing.
But, said Peck and BEC’s counsel, Laurence Martin, any merger decision must be put to the vote of the whole membership and requires two-thirds majority.
Some members seemed confused about the role of LVEC. Martin said all the contract would do is replace employees in management services. LVEC’s office is located in Afton, Wyoming, and serves two counties in Idaho, Jackson, Wyoming and the southern quarter of Yellowstone National Park.
Melton confirmed, “There is no buy-out—we are combining services.”
Martin also made clear that BEC does not owe Southern $20 million dollars. It owes its share, which is approximately $3.5 million.
When asked whether the other co-ops would let BEC leave Southern, Melton simply said, “I hope so.”
Negotiations are ongoing with the remaining cooperatives in Southern: Fergus Electric Cooperative, Inc., Mid-Yellowstone Electric Cooperative, Inc., and Tongue River Electric Cooperative, Inc.
Boyd said it is better for BEC to leave Southern early than to stay because of the ability to lock in rates in the wholesale market and focus on business at BEC.
Peck was clear that LVEC management was the way to go.
“You want to remain in high costs you can remain here. You have a distribution system of 1,750 miles of lines (which needs ongoing maintenance and repair). We tried a lot of different ideas and solutions but this third party contract is the best solution.”
Boyd encouraged members to comment and inquire so they understand the board’s actions as they proceed.
Boyd is hopeful. It has been a long haul for BEC since the old board rejected a due diligence study (cost analysis) for the Highwood Generating Station that, according to Boyd, “cost over $100 million, provided no revenue and was about to be approved for another $215 million investment.”
She reflected, “We have examined the potential here and need to develop a contract that will work for all of us.”