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Conn. bill aims to shut down muni co-op after Kentucky Derby trips

A Connecticut lawmaker filed legislation to shut down the Connecticut Municipal Electric Energy Cooperative after it was revealed the company had paid for lavish trips for family and friends to the Kentucky Derby and a West Virginia resort.

State Sen. Heather Somers filed Senate Bill 79 to repeal the statute that created the municipal electric cooperative, but CMEEC is fighting back with a campaign to "educate" members and lawmakers on the indispensability of the agency.

"This is systematic. There is no way a $340,000 trip to the Kentucky Derby for 44 people — only eight of which had a role on CMEEC — is acceptable," Somers said in an interview. "This is money that could be used to lower the rates for ratepayers."

CMEEC, headquartered in Norwich, Conn., is owned by municipalities including Norwich and Groton, Conn. It supplies wholesale power to its member utilities as well as other participating utilities. According to SNL Energy, an offering of S&P Global Market Intelligence, the utility owns 138 MW of generating capacity.

Somers' bills go well beyond other legislation by several other Norwich-area legislators to require CMEEC to detail and itemize all members' expenses and follow state transparency laws and post meeting agendas, minutes, financial information and business conducted. A second bill by Somers, S.B. 78, seeks to replace CMEEC with a more transparent agency.

"It's become clear that this is a $300 million agency that can't post agendas, that doesn't understand they have to take minutes, that has absolutely abused their position with lavish expensive trips with zero accountability," Somers said. "It is not the way that an organization should be run that is supposed to be in the public's best interest and in the public's trust."

SNL Image

Kentucky Derby tickets that the mother-in-law of a Jewett City, Conn., utility commissioner posted on her Facebook page, since taken down.

Source: Screenshot of image published by the Norwich Bulletin, Oct. 15, 2016.

News of the agency's $342,330 trip to the 2016 Kentucky Derby in Louisville, Ky., for 44 people, including Norwich Mayor Deb Hinchey and four executives of CMEEC-member Norwich Public Utilities, first broke in October 2016. As reported by The Norwich Bulletin, the Louisville trip included a private charter jet booked for approximately $42,355, reimbursements of at least $10,400 for other attendees who took commercial flights, and more than $6,000 in transportation to and from the airport in two 16-passenger stretch SUVs and two 14-passenger vans.

The mother-in-law of Jewett City utility commissioner Louis Demicco posted on her Facebook page photos of the May 2016 trip with an accompanying caption: "Private jet Louisville...;$$$...Four days in a luxury hotel...;$$$...Tickets to the Trophy Room for The Oaks and the Kentucky Derby...;$$$...Long weekend spent with my daughter...; PRICELESS!!" The photos have since been removed.

In November 2016, the CMEEC board of directors reacted to public outcry over the expenses by voting to limit future trips to New England, New York and New Jersey and restricting them to only board members, staff and related personnel. These "strategic workshops" would also be required to have an agenda and meeting notes. Since then, the agency has come under increasing scrutiny from an FBI inquiry, the U.S. Department of Justice and a state ethics probe. These investigations have uncovered additionally expensive "strategic retreats" to Churchill Downs, the home of the Kentucky Derby, held annually since 2013 and a more than $100,000 weekend trip in 2015 to the Greenbrier resort in Sulphur Springs, W.Va., where expenses included 17 scarves purchased at $118 apiece.

Somers on Jan. 31 filed a state Freedom of Information request asking CMEEC to provide her with its budget figures dating back to 2013 "to examine their pricing operation and how it matches up to the market." She also invited cooperative officials to a hearing scheduled for Feb. 7 by the state General Assembly's Energy and Technology Committee on the bills she has introduced.

Founded in 1976 as a "publicly directed joint action supply agency," CMEEC provides wholesale power to six municipal utilities covering Groton, Norwich and Jewett City as well as to the Mohegan Tribal Utility Authority and Groton Utilities Inc.'s Bozrah Light & Power Co. No taxpayer money goes toward the CMEEC and its only source of revenue is through sales contracts to public and private entities. According to CMEEC, 100% of the agency's net value creation is returned to its owners.

CMEEC CEO Drew Rankin said in a statement that Somers' legislation is "an over-reaction to an issue already addressed" by CMEEC's governing board that would usurp its regulatory oversight responsibility and result in higher electricity prices and stranded investments. CMEEC has saved its customers and members more than $127 million since 2012, he said.

"Without CMEEC, the average resident would have paid $25 more per month for electricity in 2016 and $34 more per month in 2015," Rankin said. "At least four large employers in the region would have paid over $22,000,000 more for electricity in 2016. Eliminating CMEEC means eliminating significant resident and employer value."

Somers questioned if CMEEC actually delivers electricity at the lowest costs and said a former member of CMEEC delivers electricity at cheaper rates.

Rankin said CMEEC is confident Somers' bill will fail "due to the sustained high value created by CMEEC in our communities and with other customers, as well as sustained positive relations and recognized contribution to Connecticut with local and state governing bodies."

Rankin also noted that for the CMEEC to be dissolved, all owners must agree to it and that there can be no outstanding debt. CMEEC has debt on generation and transmission assets, he said.