DCEC changes bylaws to pursue gas project; motives for move challenged by some at meeting

By Matthew J. Perry
At a meeting open to all of its members, the Delaware County Electric Cooperative (DCEC) voted on January 26 to change its by-laws and allow for the creation of a subsidiary company that will begin to convert methane gas into electricity on the site of the county’s Walton landfill.
With the by-law changes in place, the DCEC will follow a tight production schedule that begins with a purchase order of a site engine slated for February 1, and is projected to end in commercial operation by November of this year.
DCEC received the rights to develop a contract for what is now called the Landfill Energy to Gas Project in January, 2006. On December 12 the contract was approved by the board of supervisors. Under the conditions of the contract, the county will receive 20 percent of net profits produced by the project, which DCEC conservatively projected as $200,000 annually. Currently, the county receives no revenue from the landfill gas, 10 percent of which is burned off while the remainder escapes into the atmosphere. Because methane is both a rich energy source and a heat-trapping greenhouse gas, this project is being touted as a win-win proposal for all parties involved.
Despite overwhelming support for the energy project, and a 152-22 vote in favor of the amendment to by-law Article XI, debate over the changes was extensive and at times sharp.
DCEC has been advised to create a subsidiary entity to control the landfill project as a means of protecting the cooperative should any issues of liability arise. CEO and general manager Greg Starheim described the project as “a big next step” because for the first time, DCEC will be generating power instead of buying it from other markets.
“When you’re transmitting energy, in this case a flammable gas, accidents can happen,” Starheim said in the meeting. “The co-op’s assets must be adequately protected.” The existence of the subsidiary would also protect DCEC from any financial problems that could arise during the project, which is expected to last 20 years or until supply of gas in the landfill cells is exhausted.
The by-law changes allow for the subsidiary to exist as either for profit or non-profit entity; Starheim and DCEC attorney, Bob Tyson, both stated repeatedly that DCEC’s board had not decided which would be the most prudent option, and both appealed to co-op members to trust that their interests would always be kept in mind.
Some members in opposition to the changes expressed frustration over what was described repeatedly as a lack of clarity over the make-up of the subsidiary company, while others remarked that a for-profit entity would alter the nature of the co-op itself. There were several requests for the vote to be delayed until the subsidiary’s details are mapped out.
Starheim and Tyson argued that clearly defined financial blueprints were impossible so long as the by-laws remained unchanged. And any further delays to the project, Starheim argued, would cost money. Both expressed doubt that the project would go forward unless the changes were approved.
“If you wait even two more months, construction costs go up since you’ll be working into next winter,” said Starheim. He noted that the amount of gas trapped in the landfill is finite, and with every year there is less to be converted into electricity. “That’s not a threat; it’s a fact of life.”
There were many calls from members to let the vote proceed as planned. When one member announced that he felt “rushed” into a decision, another responded, “as a member, I feel like I’m being filibustered.”
Starheim informed the meeting that a NYSERDA grant of $500,000 had been acquired to finance the project, with the remainder of costs being covered by 15-year, zero-interest Clean Renewable Energy Bonds. Running at capacity, DCEC expects the project to generate $1 million worth of electricity annually while costing $800,000. The profits would be used to stabilize energy prices for co-op members.
“Your rates won’t go down because of this project, but it will help us to keep from raising them,” said Starheim.
The co-op also voted to rephrase several by-laws as part of a “clean-up” that brings the articles into tighter conformity with the 1942 Rural Electric Co-op Law and “into the 21st century”, according to Tyson. Most debate focused on Article 5, which was amended to reduce the advance notice of a director’s meeting from five days to two.
After the meeting, co-op president Frank Winkler expressed satisfaction with the outcome. “I thought the changes would pass, but not by this much,” he said. “We had a good discussion, and we’re lucky to have so many well-informed members.”
Starheim emphasized that “we have a lot of work to do now, and I’m very pleased that support was as strong as it was.” He described the questions about corporate transparency as “unfortunate.” “We have no intent to hide anything,” he said, while arguing that many business discussions require confidentiality.