Bill that would boost state control of CMEEC debated at hearing

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Hartford — A legislative committee heard differing opinions Tuesday on whether the Connecticut Municipal Electric Energy Cooperative is recovering from excesses that led to federal corruption charges against five officials, or needs additional state oversight.

A proposed bill before the General Assembly’s Energy and Technology Committee would require annual state audits of CMEEC’s finances, boost the pay for the municipal electric consumer advocate from $50,000 to $70,000 and add $30,000 for consultants and would require CMEEC to implement recommendations of a state-ordered forensic audit recently completed.

The bill also would require CMEEC to seek reimbursement of legal fees paid by CMEEC for officials facing criminal charges if they are found guilty.

State Sen. Heather Somers, R-Groton, who proposed much of the bill's language, testified for an hour during Tuesday’s public hearing. She told the committee CMEEC has not yet recovered from its actions that led to criminal charges tied to lavish trips to the Kentucky Derby, a West Virginia golf resort and CMEEC’s reimbursement of nearly $100,000 in personal expenses to former board chairman James Sullivan of Norwich.

Sullivan, CMEEC CEO Drew Rankin, Chief Financial Officer Edward Pryor, former Norwich Public Utilities General Manager John Bilda and former Groton board member Edward DeMuzzio were indicted in November on federal corruption charges.

The derby and golf resort trips became public in 2016 and led to a 2017 state law that created the municipal electric consumer advocate position and the five-year forensic audit and required CMEEC board functions to be held in-state.

Somers on Tuesday credited Municipal Electric Consumer Advocate Bill Kowalski with persuading the CMEEC board to make some reforms and with ferreting out additional questionable CMEEC expenses contained in the forensic audit.

“Without him there, we don’t have a truly independent voice,” Somers said.

Under the 2017 law, Kowalski’s compensation was reduced in the second year from $70,000 to $50,000. The new proposal would keep his compensation at $70,000 and would allow him up to $30,000 for consultants to study complex electric rate structures and contracts.

Committee members questioned wording that would limit CMEEC’s ability to invest in power production projects, such as the solar power projects in Norwich, a fuel cell at the Naval Submarine Base in Groton and several micro-generation plants used during peak times and as power backups for host facilities, including The William W. Backus Hospital.

State Sen. John Fonfara, D-Hartford, the committee's vice chairman, said those power investments generate about $15 million in revenues for the six member utilities and help to stabilize rates.

Groton City Mayor Keith Hedrick, chairman of the Groton utilities commission and a CMEEC board member, opposed the bill, saying all the transgressions occurred before the 2017 reforms. He said the reforms and new board members will protect ratepayers.

Hedrick said the three board leaders who attended the trips were re-elected in the fall to ensure leadership experience, with 11 new board members. He said he expects they will be replaced in new board elections in November.

Hedrick said Rankin was re-appointed as CEO in November — a week after the indictments — because he had not yet been placed on leave. A CMEEC special committee is investigating Rankin’s role in the allegations and expects to make recommendations to the full board March 28.

Hedrick supported keeping the municipal advocate’s salary at $70,000 but objected to the added $30,000 for consulting fees.

Hedrick also objected to the provision that states: “no municipal electric energy cooperative may invest in anything other than the purchase of power that is deliverable to such municipal electric energy cooperative customers.” He said the power-generating projects provide $5 million to $14 million in “direct” return to CMEEC member utilities and help offset peak power costs.

Somers earlier said CMEEC still could make investments in power projects but would need legislative approval first.

The bill also would mandate that CMEEC implement the recommendations of the five-year forensic audit, including that CMEEC return those revenues to the members each year. Currently, CMEEC retains revenues for each member in dedicated funds until the members request release of the funds.

Hedrick said the forensic examination was just completed in December and the board was reviewing its contents and recommendations.

State Sen. Paul Formica, R-East Lyme, asked Somers if she felt CMEEC was “beginning to move forward” under the scrutiny of the municipal advocate.

Somers responded she sees “slight movement forward” but said the cooperative needs more transparency, with portions of its budget still redacted and power procurement contracts concealed as trade secrets.

Somers said the proposed changes “lay the groundwork for what I believe will be a multiyear process of reforming CMEEC,” including annual state audits.

CMEEC interim CEO Mike Lane opposed the bill and told the committee the provisions would “add substantial cost to CMEEC and to its member utilities and customers.” He said CMEEC has made many changes since October 2016.

“I want to assure the committee that we acknowledge our mistakes,” said Lane, who joined CMEEC in October 2016 and did not participate in the trips. “We have learned from our mistakes. We have taken a number of concrete actions to ensure proper governance and oversight at CMEEC, and promote transparency and accountability, consistent with our public charter.”

He asked the committee to allow CMEEC to continue to make improvements under the 2017 law without added restrictions in the new proposed bill.

c.bessette@theday.com

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