Tuesday, July 22, 2008


I am involved in a billing dispute with a small electric cooperative in rural Eastern Oklahoma, Cookson Hills Electric Cooperative. It is my contention that, among other things, they generated unnecessary service charges far out of proportion to the amount due and then demanded extortionate terms to restore service.

After speaking to Cookson Hill's attorney, I decided to exercise my right as an Oklahoma citizen to file a complaint with the Oklahoma Corporation Commission. However, I was informed by the Oklahoma Corporation Commission that Cookson Hills Electric Cooperative OPTED OUT of regulation by the Oklahoma Corporation Commission several years ago.

Wow what a trick. Can I do that? Can I "opt out" of regulation by the Oklahoma Bar Association and continuing practicing law? For that matter, can I "opt out" of regulation by the Oklahoma Tax Commission and stop paying taxes? How about "opting out" of regulation by the Oklahoma Turnpike Authority so that I don't have to pay tolls. Can I do that? I don't think so. It must be nice to be small, rural, public utility and be able to choose to ignore the primary state regulatory authority for your industry.

Unhappy with what I found, I began looking for Federal Regulatory authority over Cookson Hills Electric Cooperative. While they are subject to certain provisions of the United States Code under the Rural Electrification Act by and large it appears that they are basically an unregulated public utility. Wow. What a trick. Totally unregulated in operation but operating under a federally mandated monopoly.

So, I began looking for evidence of any contact between Cookson Hills Electric Cooperative and an outside regulatory authority or auditing agency. Returning to my original contention that Cookson Hills had generated unnecessary costs far out of proportion to the amount in question, I "Googled" the terms "Cookson Hills cost analysis." Two documents came up on the top of the list.

The first hit, a FEMA audit of disaster funds granted to Cookson Hills, dated August 9, 2004 (LINK) stated in part:
The Co-op did not follow federal procurement regulations to contract for $907,274 in disaster work. As a result, fair and open competition did not occur and FEMA had no assurance that contract costs claimed were reasonable. Further, the Co-op claimed $255,462 ($209,231 FEMA share) of costs that the OIG found questionable. The questioned costs consisted of ineligible labor costs ($176,080), duplicate costs ($37,974), improperly categorized costs ($17,122), markups on contract costs ($15,442), and an accounting error ($8,844).
A quarter of a million dollars in "questionable" costs. That's a lot of money. The second hit, a Department of Homeland Security audit of procurement policies in electric cooperatives (LINK) stated the following:
As shown in the table below, electric cooperatives used non-competitive, time-and-material (T&M) contracts without cost ceilings, did not maintain sufficient records for procurement history, and did not perform cost analyses.
Cookson Hills was one of nine rural electric cooperatives in the nation cited for failure to perform, among other things, appropriate cost analysis.

So, in summary, what did I find? A virtually unregulated public utility that operates under a federally mandated monopoly that has been cited by the Federal Government for failure to use good financial judgment and appropriate procurement practices.

While speaking to the folks at the Oklahoma Corporation Commission, I asked them just exactly who does regulate Cookson Hills these days? They told me that I would have to talk to my legislators about that.

I think I will.


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