August 2022 SDCEA board meeting summary
SDCEA Board of Directors meeting highlights, Aug. 24, 2022
Director Education – A presentation by SDCEA attorney Casey Martin was given to board members on the fiduciary responsibilities of directors on the board of SDCEA. Board member fiduciary responsibilities are to the Corporation (SDCEA), not to oneself or other groups. Directors can be subject to personal liability for breaches of these duties, attorney Martin said.
Directors owe three main fiduciary duties to a corporation: A duty of care; a duty of loyalty; and a duty not to usurp a corporate opportunity. A director is shielded from liability by adhering to these duties.
Following the principle of duty of care, a director must act in good faith; with care and in a manner the director reasonably believes is to be in the best interests of the corporation.
Directors are ultimately responsible for the business and affairs of SDCEA. They are to make major decisions for the corporation; oversee business operations; regularly attend and participate in board meetings; appoint competent officers to run the day-to-day operations of the cooperative, and ensure those officers are preparing appropriate reports for the board; consult with legal counsel and experts as needed; and embrace discussing conflicts of interest and potential conflicts of interest to create a record which reflect the board considered them.
Directors serving as directors on co-owned associated organizations such as Tri-State and Western United have interests that are typically aligned. Directors owe a fiduciary duty of loyalty to both corporations, Martin said.
Potential conflicts of interest must be disclosed and known to other board members. Votes are then taken by a majority of directors who do not have a conflict of interest in a particular item.
Construction Work Plan – SDCEA’s Construction Work Plan (CWP), an engineering report analyzing past and projected performance of the cooperative’s electric system, was approved. To provide for expansion of the system, about $25,213,000 over the next three years will be spent by SDCEA to meet safety, growth and reliability goals outlined in the work plan.
The CWP process is used to determine and document construction that will be required during the planning period to provide adequate and reliable electric service to the system’s new and existing members, per Rural Utility Service (RUS) stated guidelines, while considering environmental compatibility and system economics. The RUS administers programs that provide much-needed infrastructure or infrastructure improvements to rural communities.
The Work Plan report reviews ongoing needs of the electric system and includes a summary of the estimated expenditures required each year for routine construction such as member service extensions, increased service capacities, and other miscellaneous improvements. These items are developed to aid in determining capital requirements for the plan period as well as establishing a basis for needed financing. This report is part of an ongoing program that includes the Electric Load Forecast Study, the Long-Range Plan and the Construction Work Plan to insure economic expansion of the system. Basic data utilized in preparation of this plan was provided by SDCEA personnel.
SDCEA relies on ongoing financing to pay for infrastructure improvements. Approval of the plan is essential for SDCEA to gain financing for its infrastructure needs.
Chateau Chaparral – SDCEA is nearing completion of a two-year, $1.25 million electrical system replacement project in the Chateau Chaparral community in Chaffee County. The project, the backbone of electric service for residents in the area, was financed by the electric cooperative. It brings safety, modernization, and system compliance with state and federal electrical regulations to the community of 306 homesites.
In June 2021, the upgraded system was completed and energized. The Chateau Chapparal homeowners’ association and SDCEA encouraged property owners to switch over to the new system at that time. While SDCEA paid for the infrastructure for the new system, each individual property owner is responsible for paying for reconnection of their own home electric service to SDCEA’s new electric pedestals. Before homeowners switch over to the new system, they must meet Chaffee County electrical code requirements. For those who needed it, SDCEA identified electricians to homeowners who could do the work and provided more than a year’s time for residents to employ electricians to upgrade their electric systems and pass inspection. SDCEA also offered interest-free loans to residents to finance the costs of these upgrades.
On Sept. 6, 2022, the old electrical system in the park will be de-energized and removed. Homeowners who have not passed the County electrical inspection for switchover to the new service will not be allowed to access the new system until they have passed County electrical safety inspection requirements, per state and federal law.
Employee benefits – After meeting in executive session, the board reconvened the meeting and voted to approve employee group benefits, unchanged from 2022, for the calendar year 2023.
Donations – Motion carried to approve $35,000 for the 2023 scholarships.
The board approved a $1,000 donation to the Buena Vista Heritage organization as part of the organization’s fundraising efforts to restore the former courthouse building’s front door.
Financial report – Due primarily to a warm weather year and particularly low energy sales in January and February as a result, energy sales were stagnant in the first half of 2022. SDCEA’s revenues are 2.2 percent below budget year-to-date as the cooperative closed out the month of July.
Expenses are 2.9 percent over budget, which has improved over the 10.4 percent variance in April and 5.0 percent variance in June. Much of this can be attributed to the timing of payment to SDCEA’s vegetation management contractor for service and the unfavorable variance is expected to reverse by the end of the year. SDCEA incurred higher than usual costs during April winds & May snowstorms to restore outages, and some system maintenance was completed by contractors, which was not anticipated in the 2022 budget. In 2021 SDCEA pledged to donate to BV Schools to help them secure a grant for an electric school bus. In July 2022, SDCEA’s final donation was paid to the school, making the total $76,953 in cash donations. Installation of the new service for the charging station was also at SDCEA cost.