PEC, Envision merger might not go far enough

Though officials say the process will take until 2010 to complete, the reform-minded move will close a chapter on questionable business practices that have recently plagued the co-op. 

Still, it might have been better if the co-op had just sold off Envision, especially in light of the announcement they are paying employees bonuses even though Envision has lost millions.

Envision, which was started in 1986 and was later acquired by PEC, has posted operating losses totaling $22 million for 2004 through 2006.

Envision General Manager Eddie Dauterieve this week has asked co-op directors to give the green-light on a cross-company committee with the goal of merging PEC and Envision sometime during the next two years.

The move to merge is better than nothing, considering Envision’s rocky history with parent PEC. Envision attracted public scrutiny last year after PEC’s members learned the company lost millions of dollars during the past few years.

At the same time, revelations emerged concerning a second subsidiary, a satellite Internet company PEC operated called Texas Skies. The utility later sold off that subsidiary after the public learned how deep Texas Skies was in the red.

According to income statements, Texas Skies lost $636,000 since it was started in June 2006 through June 2007.

Texas Skies was created to provide satellite Internet service to PEC members in areas where no other Internet service was available over telephone lines or business transmitters. Selling it off was the right move for PEC.

Now comes Envision, which creates and manages the billing software used by the co-op. 

PEC purchased a controlling interest in the company several years ago, then later bought the company outright. Today, PEC is Envision’s only customer. 

The company’s operating costs regularly top more than $200,000, while its revenue for September 2008 was just $4,800.

General Manager Juan Garza  of PEC has said he wants to merge the two companies as a way of saving costs by eliminating some of Envision’s administrative overhead.

Garza was brought on board in February after Bennie Fuelberg stepped down as general manager and W.W. “Bud” Burnet left as president of the board.

So far, Garza and some like-minded new board members are undertaking sweeping reforms to bring PEC, the nation’s largest member-owned co-op with 220,000 souls, more in line with fiscally responsible practices.

A merger or a sell-off should have happened a long time ago, but under the previous regime such an operation would have been highly unlikely.

Talk of the merger coincided with Dauterieve’s request for $141,000 to pay for annual bonuses for the Envision staff. So, not only does the subsidiary lose money, but it needs a financial shot in the arm.

The year’s challenges included a significant upgrade to Envision’s billing software, and all of the company’s employees will receive a bonus.

The PEC board approved the request, along with $234,000 more to pay for Envision’s November operations.

This still seems hard to swallow, especially in light of a 13 percent rate hike PEC announced earlier this year for customers. Yet the cooperative continues to support Envision, a business operating at a deficit.

PEC officials have said they want to listen to members and institute reforms. Selling off Envision would be another step in the right direction. If there is a merger, then PEC officials should take great pains to make sure Envision at least breaks even.

A lawsuit now on appeal between PEC and members charging the co-op’s leadership with breach of fiduciary trust has claimed PEC board members have wasted ratepayers’ money by operating the for-profit business known as Envision.

Rather than merge, it might be better if PEC just put the brakes on Envision. Still, a merger is at least some kind of a solution, provided it stops flushing dollars down the drain.