Editor’s note: This column is from the Valley Electric Association Board of Directors and CEO Angela Evans.
Recently in this space, we reviewed how the proceeds from the sale of Valley Electric Association’s 230-kV sale were managed.
Most went to retire debt and to replace the unfavorable purchase power agreements, which would have required rate increase far more than those which will take place March 1.
We also shared that a forensic review of the cooperative’s finances by Hinton Burdick found “no significant transactions lacking supporting documentation, or of an unidentifiable nature, were noted.”
Copies of the Feb. 15 op-ed and the letter regarding the forensic audit are on the VEA website.
Today we want to share why assurances of rate stability to 2024 made by the previous CEO in 2016 were too ambitious. “What happened?” members have asked us. We understand this sentiment. The answer to this goes along with the answer to how the proceeds from the 230-kV sale were used. The board set aside $30 million from the transmission sale to offset power cost increases. If these funds had not been used to buy down the previous power contracts, a much higher rate would have been needed to pay for VEA’s power supply.
In addition, the former CEO was also counting on new revenue to subsidize VEA’s rates and keep rates stable when that promise was made. Those additional revenues have either not come on line or have not produced the level of revenue that was expected. In addition, during the period of 2008 to 2018, the cost of providing electricity to our members has continued to increase, just as the cost for fuel, material, steel and groceries. Therefore, we had to make difficult decisions.
We directed CEO Angela Evans to implement cost reductions across the cooperative, including a significant reduction to outside contractor expenses, sustaining reductions to the number of management and executive positions the co-op would maintain, freezing hiring (except for critical positions), freezing wages in 2018, offering a Voluntary Separation Incentive program and then involuntary reductions in employees.
These reductions in costs were implemented during the time Ms. Evans was appointed as interim CEO with the goal of minimizing rate impacts to our members. We refused to present our members with a rate increase if we had not first looked exhaustively at our organization.
This board takes its responsibility seriously and is ultimately responsible for the financial health of the cooperative, and the choices that were made in the past, and that are being made now. Even with all the expense reductions, a rate increase is unavoidable. We also acknowledge the lack of transparency prior to Ms. Evan’s appointment as CEO that has contributed to the questions members may have today.
We would like to end this op-ed article similar to how we did the Feb 15 article – with a pledge to continue to reliably serve our communities with a refocused Mission and commitment to serve those communities in the spirit of the Seven Cooperative Principles.
Ken Derschan is president of the VEA Board of Directors; Angela Evans is CEO; David Hall is director, Amargosa Valley; Richard Johnson is director, Beatty; John Maurer, director Fish Lake Valley; David Dawson is director, Pahrump Valley North and Pete Gazsy is director, Pahrump Valley South.