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CMEEC hopes to resolve dispute over legal fees before April trial

A legal dispute over who should be responsible for paying legal defense costs for five former electric utility cooperative defendants in a federal criminal indictment could be resolved by spring, which also is when the criminal trial is expected to begin, an attorney for the Connecticut Municipal Electric Energy Cooperative told the board of directors at its annual meeting Thursday.

CMEEC has been advancing legal defense fees for the five former officials indicted in November 2018 for their leadership roles in CMEEC’s hosting of lavish trips to the Kentucky Derby for four years, from 2013 to 2016, and to a West Virginia golf resort.

Former CMEEC CEO Drew Rankin; former CMEEC Chief Financial Officer Edward Pryor; former Norwich Public Utilities General Manager John Bilda, the former CMEEC board vice chairman; former board Chairman James Sullivan of Norwich and former board Treasurer Edward DeMuzzio of Groton were indicted in November 2018 and face charges of conspiracy and theft from a program receiving federal funds.

CMEEC has paid $3.422 million through October to advance legal fees for the five defendants, CMEEC CEO Dave Meisinger said, and to date has spent about $330,000 for CMEEC’s own involvement in answering various inquiries for documents and appearing at court hearings in the case.

CMEEC has filed a federal lawsuit against its liability insurance company, the National Union Fire Insurance Co. of Pittsburgh, challenging the insurance firm’s refusal to pay the legal costs based on the cooperative’s liability insurance policy for board members and staff.

CMEEC staff attorney Robin Kipnis told the board of directors Thursday that CMEEC has filed a motion for a summary judgment to resolve the case against the insurance company. Replies to the motion are due in December, and Kipnis said she hopes for a ruling on the motion by spring. The motion for summary judgment has been sealed and is not available on the court docket.

The trial has been rescheduled to April, due to the COVID-19 impact on the New Haven federal court’s operations.

During the CMEEC annual meeting, the board set the 2021 budget and elected officers for the coming year beginning Jan. 1, 2021.

Revenues for the sale of electricity to the six cooperative member municipal utilities — Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities and Third Taxing District and South Norwalk Electric & Water, both in Norwalk — fell sharply in 2020, as did the cooperative’s expenses to purchase electricity, but the group hopes to return mostly to normal levels in 2021.

The CMEEC board of directors approved a 2021 operating budget totaling $97.4 million during the annual meeting Thursday, slightly lower than the $98.1 million 2020 budget, but that budget is expected to end the year almost $4 million under budget. Revenues for 2021 are projected at $102.4 million, budgeting $3 million for the so-called Margin Fund revenues that are distributed to the member municipal utilities based on their percentage of ownership of CMEEC.

The Margin Fund budgeted revenue for 2021 is down by $601,734 from the projected revenues at the end of 2020, a 16% drop. The actual projected 2020 revenues are about $100,000 short of the $6.7 million budgeted for the fund last November.

CMEEC CEO Meisinger said the cooperative’s electric revenue reflects the pass-through costs to supply electricity to its member utilities. Member utilities have seen roughly a 5% drop in demand for electricity from original forecasts for the year. Most of the reduction is due to COVID-19 impacts on customers, with mild weather also playing a role.

According to the budget, 72% of CMEEC’s budget is for purchased power and generation costs.

“With lower demand throughout the region, we have also seen the average spot market cost for energy decline, which reduces our cost for certain wholesale purchases,” Meisinger said. “These factors all translate to fewer costs that need to be passed through to our members, and thus less total revenue for CMEEC as compared to budget.”

c.bessette@theday.com

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