Norwich — The Connecticut Municipal Electric Energy Cooperative board on Thursday reviewed draft bylaws changes covering how board members, officers and employees would be indemnified for future legal issues or alleged misconduct.

The board’s Governance Committee recommended the changes, which will be considered for adoption next week at a CMEEC membership delegation meeting.

The proposed changes would limit future indemnification to “reasonable costs and expenses,” CMEEC General Counsel Robin Kipnis told the board Thursday. If a settlement is reached, and the CMEEC party involved declines to accept it, the person would be liable for costs beyond the settlement.

The board in May adopted sweeping new bylaws reflecting changes to the state law governing the cooperative, owned by six municipal electric utilities in Norwich, Groton, Bozrah, Jewett City and Norwalk. The law mandates increased transparency on budgets, ethics and accountability to ratepayers and created new ratepayer representatives on the board.

The indemnification changes were recommended by Bill Kowalski, the state municipal electric energy consumer advocate, a position created in the 2017 state law.

Kowalski argued that the current indemnification language is too broad, potentially making CMEEC and its member ratepayers responsible for unreasonable legal costs.

Kipnis told the board Thursday the current clause mandated CMEEC indemnify board members and staff “in all instances except where there has been willful and wanton negligence in performance of duty.”

Instead, the revision calls for indemnification “mandated any time there is adjudication that is successful on the merits or successful in any other instance.” In all other cases, the board and its attorney would evaluate whether the board member, officer or employee conducted himself or herself “in good faith” and that their actions were not opposed to the best interests of CMEEC.

If a settlement is reached, and the board and its attorney deem it to be a “good settlement,” CMEEC would not pay for additional costs incurred by a party who rejects the settlement.

“In a lot of ways, it mirrors the indemnification statute for non-stock corporations,” Kipnis told the board. “I believe it is a fair indemnification provision that’s to the intent of how we would like our employees, officers and board members to conduct themselves and give the board the opportunity to evaluate conduct on an individual basis before determining whether indemnification or advancement is correct.”

Kipnis stressed that the provision would be for future cases. And anyone under current indemnification obligation by CMEEC would remain covered.

The call for increased scrutiny of CMEEC stemmed from public outcry to CMEEC-hosted trips to the Kentucky Derby from 2013 to 2016 for dozens of top staff, board members, their spouses and other family members and public officials from throughout Connecticut. The trips collectively cost $1.02 million and were funded through a Margin Fund of profits realized through CMEEC utility operations and contracts with outside entities. Money in the Margin Fund is slated to be divided among the member utilities for electric rate stabilization.

Since then, the FBI has launched an investigation into CMEEC and member utilities, including the Kentucky Derby trips, contracts, bids and financial information. In June, The Day obtained legal bills incurred by CMEEC related to the FBI investigation. The heavily redacted invoices totaled more than $362,000 from October 2016 through May 2018 but information on specific topics and names of CMEEC officials being represented were blacked out.

CMEEC also paid legal costs to defend derby trip participants in ethics violation complaints filed in Norwich and Groton.

The new bylaws on potential conflicts of interest were evident Thursday in a vote to renew CMEEC’s agreement to participate in two Hydro Quebec energy transmission projects from Nov. 1, 2020, through Oct. 31, 2040.

Board members were asked prior to the vote if they had any affiliation, financial interest or connections to Hydro Quebec that could be considered a conflict of interest in voting on the resolution. None spoke up.

c.bessette@theday.com