Skip to main navigation.

General Manager's Message - January 2021 by Mike Kezar

On December 16, 2020, the Boards of Directors and Staffs of STEC and San Bernard Electric Cooperative (SBEC), came together in San Antonio to commemorate the execution of a Memorandum of Understanding (MOU) between the two cooperatives. The MOU will serve as the governing document as SBEC is integrated into membership in STEC. The December 16th event was the culmination of efforts that began in February of last year, when SBEC General Manager Billy Marricle and I met over lunch in Austin to determine if SBEC had an interest in being considered for membership in STEC.

 

After determining that at least conducting a feasibility study would be prudent, we executed a Non-Disclosure Agreement and went to work. Over the next 10 months, an extensive evaluation was conducted to determine the costs and benefits to both SBEC, and the current 8 Members of STEC, associated with SBEC becoming the 9th Member. That evaluation included cost analysis under differing ERCOT market pricing assumptions, debt analysis, preparation of a comprehensive load forecast, evaluation of existing agreements to which SBEC is a party and that would need to transfer to STEC, and the transmission assets that would be transferred to STEC as part of the overall transaction.

 

I met with the SBEC Board, early in the process, to give a presentation on STEC and to answer questions. Later, the full SBEC Board of Directors attended STEC Committee & Board Meetings, and the Board Members spent time getting to know one another. The comprehensive cost/benefit evaluation was completed, and the results were presented to the STEC Board of Directors in November. After consideration of the information provided, the Board took action to authorize STEC management and legal counsel to take the steps necessary to complete the process of SBEC becoming a STEC Member, and authorized the execution of the MOU.

 

Reaching the December 16th milestone would not have been possible without the significant efforts of several individuals. Billy Marricle worked with me to ensure that our respective staffs had the resources they needed to perform the evaluation. Mike Ables and James Jouett from SBEC, and Jane Krause, Clif Lange, John Packard and Cory Allen from STEC exchanged data and worked together to support the evaluation and preparation of key documents. Carl Stover and Justin Proctor with C.H. Guernsey performed the evaluation. STEC General Counsel Diana Liebmann, San Bernard General Counsel Melissa Sykes ensured that we didn’t color outside the lines as we performed the analysis and generated the information necessary for the respective Boards to make sound and well-informed decisions. Finally, the STEC and SBEC Board Members took the time to thoughtfully consider this significant transaction, with a desire for a mutually beneficial outcome, and dedicated time to travel and to get to know one another.

 

During the December 16th event, I had the opportunity to address the STEC and SBEC Board Members, Staffs, and attorneys that assembled to commemorate the signing of the MOU. An excerpt from my remarks follows:

 

Everyone in this room is an advocate for the cooperative business model. If we weren’t, we wouldn’t be cooperative members or employees. The reasons that electric cooperatives were formed are still valid and critically important to the members at the end of the line. But I want to take a moment to discuss the G&T – Distribution Cooperative relationship. Generation and Transmission Cooperatives were formed, by distribution cooperatives, to provide risk mitigation and to leverage scale to secure credit and to provide services that would be more difficult for an individual distribution cooperative to achieve on their own. And despite what you might read in the trade press, properly implemented and managed, the G&T – Distribution Cooperative model still functions well, provided that two key elements are in place: 1. That the G&T understands why it was formed, who formed it, and the manner in which the value it provides its Members is measured. 2. That the interests of the G&T and all of its Members are aligned. I firmly believe that every decision by a Distribution Cooperative to either join a G&T, or to leave a G&T, is directly attributable to at least one of those key elements. Now that doesn’t mean that in a well functioning G&T – Distribution Cooperative relationship there won’t be conflict, or disagreement, or challenges. But what we can take comfort in is the fact that, if we keep these elements in mind, we can truly affirm that we are "Stronger Together".
Powered by Touchstone Energy Cooperatives Logo
Co-op Connections logo Cooperative action network logo