Garkane Energy hosted a meeting on Oct. 11 to clear the air with stakeholders and answer questions.

The meeting came after several letters were printed in local newspapers criticizing Garkane Energy’s board for authorizing scholarships, how it pays out capital credits and other issues.

In order to help answer some of the questions, CEO Dan McClendon gave a summary of how co-ops came to be, as well as a history of Garkane Energy. “We want to be responsible and charitable,” McClendon said.

Garkane Energy’s history is tied to the establishment of the Rural Electrification Administration, which came to be due to an executive order issued by the Roosevelt White House in 1935. The U.S. Congress later supported Roosevelt’s executive order with the Rural Electrification Act of 1936.

This paved the way to the establishment of electrical cooperatives.

“Co-ops are not run for profit,” McClendon said. He said each customer of the co-op is part owner of it. An elected board runs the co-op, with major decisions voted on by the users.

Garkane services approximately 13,000 connections in an area that covers some 16,000 square miles through southern Utah and northern Arizona.

“We are very spread out,” McClendon said. He said the huge geographic area serviced by Garkane creates some challenges and additional overhead. However, Garkane still delivers some of the lowest electricity rates in the state.

Money paid by members of Garkane is used for operational expenses, maintenance and debt service. Money not used for that is called “margin,” McClendon said. The margin is allocated back to owners in the form of capital credits.

Money received by members paying their power bill contributes to the cost of distributing electricity. Anything leftover at the end of the year is considered margin, and that gets allocated in the form of capital credits to all those who contributed that year.

Capital credits is money that is owed to members of the co-op, but is held in reserve to use for infrastructure improvements and other needs. It can also help manage the co-op’s debt ratio.

Having capital credits available also helps keep monthly power rates low, McClendon said. Capital credits is an accounting term to refer to member equity, which helps keep rates low.

Capital credits are eventually “retired,” at which point they are returned to the owners of the co-op, McClendon said. At this point, Garkane retires capital credits on a 30-year basis, which means capital credits acquired in 1988 will be retired in 2018.

McClendon said the Garkane board is working on implementing a 20-year retirement cycle.

Through the years, many people who have moved out of the area serviced by Garkane can no longer be found by the co-op. This means Garkane doesn’t know where to send their annual allocation of retired capital credits, which after three years, become classified as unclaimed.

State law requires that the unclaimed capital credits be returned to the state, or used for a charitable purpose, such as education. The origin and use of unclaimed capital credits is at the heart of questions posed by LaVoy Tolbert, a Loa resident.

“I’ve been a member of Garkane for 54 years,” Tolbert said. He said he doesn’t like the scholarship program because he feels it is using co-op member’s money for giveaways.

Garkane awarded 22 scholarships last year ranging from $500 to $1,000. Some of the scholarships were deferred until those who earned them start to attend college.

Don Torgerson, board member, said the scholarships program was undertaken as a way to more evenly spread the unclaimed capital credits to the various school districts serviced by Garkane. He said in the past, board members would request funds for schools in the area they represented, which would result in some schools getting large projects and others getting nothing.

The scholarships are used to evenly distribute the funds to all the districts, while still being substantial enough to make a difference, Torgerson said.

“I have never been on a board that is more sensitive and frugal with your money,” Torgerson said.

Tolbert said he is also critical of how the co-op disperses capital credits. He said if he were to die, the approximately $700 worth of capital credits may be lost to his children.

However, McClendon said Tolbert’s children would be entitled to the amount of capital credits on Tolbert’s account that are retired each year.

In other words, Tolbert’s children couldn’t demand a check for the entire $700, but they could claim the annual dispersed amounts.

Garkane’s investments in solar plants was another topic Tolbert took issue with.

“I don’t know why our co-op would invest in a very wasteful solar plant,” Tolbert said. He said generating electricity from solar is not cost effective, and can be as much as 30 times more expensive than using power from the coal plant owned by Deseret Power, which Garkane purchases its electricity from.

McClendon said the move toward solar is something members have a choice to participate in through the co-op’s SHINE program. The Solar Hydro Investment in the Environment program is optional, with members paying extra on their monthly power bills in order to participate.

“Those who want it are paying for it,” McClendon said.