Trick or Treat Part II: KCEC’s Rate and Debt Charges

By: Bill Whaley
31 October, 2016

Ali Baba and the 42 Thieves

If you own a business, you might ask yourself why KCEC “commercial” or non-residential electric bill rocketed up last month but appeared to decline this month. And there’s more increases scheduled if not yet approved for residential users.

1. Compare the number of days KCEC charged for each month.

2. Look at the cost of fuel in the “Fuel and Purchased Power Cost Adjustment Clause. Regulators govern the per kilowatt cost but the electric Coop can adjust for the cost of buying fuel to generate power on residential and non-residential rates.

3. The PRC allowed KCEC to proceed with a non-residential rate increase despite protests by interveners in written form and their presence at the meeting.

4. Chairperson Valerie Espinoza hurried to adjourn the meeting (above) because the staff
had prepared a birthday cake for her.

5. Business owners will soon be paying even more because their residential rates will increase as well just as their tax-obligations to support rate increases for the public sector at the Town and County.

6.The rate increases for local government were supported by the Mayor, and the County Commissioners.

7. Commissioners congratulated KCEC CEO on his devilish $37 million dollar buyout of Tri-State in the Guzman deal: $37 million plus fiscal responsibility, an unknown figure, for the maintenance of Transmission lines.

8. Luis convinced Commissioners that KCEC was now worth $200 million and passionately invested in “economic development” for the community as a whole despite the same “naysayers” Mayor Barrone has bad-mouthed.

9. Neither Town nor County nor members of the business community joined the protest and the interveners, who sought a “just and reasonable” rate increase at the PRC hearings.

10. The Taos News blacked-out the news coverage thanks to threats about “advertising.” in praise by omission of Corporate Taos.

11. Reyes, Fambro, Blankenhorn, and Barrone smugly enjoy the attitude of “Father knows best.” Neither Town nor County nor Hospital opposed the rate increase.

12. All Luis has to do is mention “renewable energy” or “economic development” and your “Good Old Boys and Gals” go weak at the knees.

13. Borrow and Spend (like tax and spend at Town and County) is the name of the game at KCEC.

14. The more the Coop charges, the more it can borrow from your friendly federal government’s “RUS” i.e. (Rural Utility Services) under the aegis of New Mexico bureaucrat Terry Brunner.

15. About the Broadband 64 million dollar grant and loan project, Brunner told me and another Intervener that KCEC was the worst performing Coop in the country.

16. The Hearing Examiner, who has missed the deadline for completing her recommendations on the “residential rate increase,” denied the interveners’ request for a subpoena to Brunner as a witness and then denied a motion to recuse herself due to an alleged “conflict of interest” or alleged “ex parte communication.

17, Despite admitting that she had talked to Mr. Brunner when he called her, whom he personally knows, interveners say the “message meant something”: RUS is watching.

18. RUS is KCEC’s banker and has a mortgage lien on all its assets due to Broadband and the Command Center loans. The latter generates no income and the former very little from its 2800 customers compared to expenses of more than $64 million, the cost to taxpayers and Coop members.

19. When Mr. Reyes testified, the Hearing Officer asked him if he feared for his job since the Coop did not make TIER six out of the last eight years? (Tier is an RUS benchmark or gross profit figure of somewhere between 1.1 and 1.3 %, which KCEC has NOT MADE for the last eight years except for 2013 and 2014). No tier, no more loans.

20. Basically making TIER for this Coop means they can borrow more money to pay their interest only loans. They still owe and pay on the $5 million owed for the Plains-Tri-State merger back in 2000. The defunct Command Center costs another $120,000 a year plus insurance, utilities, taxes, m&r.

21. Now the Coop has moved on to Guzman’s alleged “greener pastures” costing $37 million for the Tri-State buy-out, which included zero assets for the money.

22. Ever since KCEC got into “economic development” at the Call Center, Command Center, Propane, Internet-Telecomm (prior to Broadband) they have collectively incurred about $8.5 MILLION dollars plus or minus in debt plus time lost and operations compromised.

23. Despite spending $64 million on the installation of Broadband, the system is not complete. You commercial owners and homeowners, who can’t get BB hook-ups should know that the KCEC needs about $8 to $11 million to complete the drops delivered so close to your residence or business but remain, alas, so far away, due to a lack of technological and management competence.

24. KCEC has, its worth repeating, about 2600 or 2800 BB hook-ups out of the 5,000 to 10,000 that Luis promised.

26. When asked for “feasibility studies” or a simple “business plan” KCEC said they had none and blamed the “decisions” regarding “diversification” i.e. “economic development” on an annual meeting back in June of 2000, when the “members” said they wanted the Coop to engage in Propane and Internet services, etc. (Like the Town of Taos re: the Holiday Inn high rise and Don Fernando, there have been no “feasibility studies” presented to the public.)

27. The members never assented to debt levels on the “consolidated balance sheet” of more than $100 million today plus the contractual obligation of $37 million to Guzman and they wait for $37 million in Capital Credits owed to themselves.  The unknown unknowns KCEC refuses to reveal despite the Supreme Court’s decision in “Schein,” which said all members should have access to the Coop books, remain unknown unknowns.

28. Every 4 years KCEC, like all Coops, must submit a work plan, which starting in January of 2016 – amounts to 33 million dollars.

29. As became clear under questioning by the Hearing Examiner and Staff testimony, the consolidated balance sheet does not accurately serve standard accounting procedures but muddles up and “co-mingles” funds in ambiguous line items.

30. Neither Reyes nor his consultant William Seeley could adequately explain the discrepancies even as they contested the analysis of the balance sheet by the PRC’s brilliant economist, who shed light on the source and purpose of co-mingled funds aimed at diversification.

31, The staff recommended that the PRC analyze the “Community Solar Gardens,” which appear to be subsidized by all the members but serve the few in violation of New Mexico statutes.

32. The Trustees and the CEO have answers, however, just as Luis did in his presentation to the County Commissioners, who mistook Luis’s “devils food cake” for the Angel Food variety.

33. Blame the Taos Citizens and the Interveners. Blame the members. Blame the naysayers. Blame the federal government. Blame Tri-State. Blame the nation-state economy. Blame the second homers. Blame the low users in Taos. Blame Politics. Brunner and Reyes both blame the difficult terrain in Taos for the high price of Broadband installation, as if KCEC hadn’t been laying down line and digging postholes in the terrain since the inception of the REA back in the 30s.

34. But don’t blame the CEO or the Board of Trustees, some of whom have been on the Board for decades as KCEC slides down the slope into more and more debt.

35. Despite the dearth of money and their the worst year ever in 2015, according to the file, KCEC Trustees voted to travel to New Orleans in early February just as the rate case was being vetted in 2016.

36. Trustees serve as the collective unconscious of the Coop brain trust i.e. the committee on wish fulfillment and they dream not of “economic development” but of Vegas, Hot Springs, New Orleans, Washington D.C. or closer to home of Albuquerque, Ruidoso, Santa Fe, or even Red River. One Trustee used to charge for mileage from El Prado to Taos Pueblo.

37. Yet the VCA  (Varrio Cruz Alta) Trustees won’t admit that Chevron Mines will increase income by an estimated cool million a year.

38. The Coop allegedly spent several extra million dollars from electricity revenue on “Broadband” for pole replacement but claimed the poles were aging and inadequate though the evidence suggests the opposite.

39. Al Baba and the Thieves are waiting for the rate increase and Chevron Income so they can go out and borrow more money to pay the interest on the dough they borrowed and try to finish the Broadband project, which has wasted millions on the “Contracts for Cuates” program.

40. According to the Interrogatories on which all this info is based as well as staff testimony, CEO Reyes spent 40% of his time on “Broadband.” He failed to make “Tier” six out of 8 years. But he doesn’t fear for his job. Though he screws up he always gets a raise cause the Trustees always get to travel on the company dollar.

41. Now the local politicos are knocking on Luis’s door, and like The Taos News, the Town embraces corporate America. Why the Taos News bragged how Coca Cola will rescue Valle Vidal, and the Town how the Holiday Inn Express will rescue tourist industry. As Nervous Jervis once said, the fix is in: “Father Knows Best.”

42. And that’s the way seven of us spent the spring, summer, and fall, digging into KCEC and finding out what we feared most: the Coop appears to be headed toward insolvency i.e. going broke. It’s hard to argue with a lack of incompetence no matter that they spent an estimated $500,000 this year on legal fees to fight pro se Intervenors. They are borrowing from Peter to pay Paul and Peter is getting suspicious.

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