Jesse Tilton CEO ElectriCities - Do you remember this?

Friday, May 5, 2000
ElectriCities' plan blasted
Triangle Business Journal - by Karine Michael

RALEIGH ¬ A controversial $500,000 compensation plan for the top executive of the ElectriCities of North Carolina Inc. is throwing another wrench in the complicated fight over resolving the state's $5.6 billion municipal debt crisis.
Chief Executive Jesse Tilton III renegotiated his employment contract with ElectriCities' board in January, but legislators only learned of it in the past week.
The contract calls for two payments of $62,500 upon resolution of the group's outstanding indebtedness with Duke Power Co. and Carolina Power & Light Co. He will receive another $125,000 upon approval of a deal by the Legislative Utility Review Commission and another $250,000 upon passage of legislation for providing payment and discharge of all debts.
In each case, the board must agree with the decisions. Tilton's incentives contract is good through September 2002.
ElectriCities is a not-for-profit organization that represents 51 municipalities that operate their own power distribution and generation systems. Most of the debt stems from nuclear generation facilities that the group's municipal power agencies helped finance in deals brokered with Duke Power and Carolina Power & Light Co. in the late 1970s.
At the time, the utilities needed financial backing from the cities, which believed they were tapping a low cost source of power in expectation of sharply rising demand. But demand slowed, the cost of the plants mushroomed, and the debt has risen sharply over the years and now represents two-thirds of North Carolina's overall public indebtedness.
Legislators have argued for years how to resolve the matter and formed a study commission two years ago to come up with a plan by this spring. No resolution has been found, however, and it remains unclear if all North Carolinians will wind up bailing out the 51 cities, which include Wake Forest, Apex and several eastern N.C. towns.
Tilton, 52, joined ElectriCities in 1995 with an annual salary of about $255,000, which has now risen to about $303,000. He also has a severance plan that would pay him about $764,000 if forced out of a job ¬ which is unrelated to the incentives.
Tilton is an electrical engineer who worked for rural electric co-ops in Pennsylvania, New Jersey and Indiana before coming to North Carolina.
He says the revised contract is necessary because he is working himself out of a job and deserves financial security.
"It's legal," says Samuel Noble, the town manager of Tarboro and an ElectriCities director. "The board approved the incentive plan and our attorneys looked the contract over. He's representing our best interest here and we believe he deserves an incentive for his work."
North Carolina law prohibits public employees from receiving incentives based on passing legislation. But Tilton, as chief executive of a trade organization-type nonprofit, is technically not a public employee and therefore not subject to that law, says State Treasurer Harlan Boyles.
But Boyles says some members of the General Assembly are upset over Tilton's contract and he predicts it will be another obstacle for ElectriCities as it seeks resolution of the debt. "The contract is not in their best interest," he says.
Boyles also notes that Tilton's contract is with ElectriCities rather than the two municipal power agencies, which may call into question the contract's validity. Because the assets and liabilities are the responsibility of the agencies, the contract "may not be worth the paper it's written on," Boyles says.
But ElectriCities' board may see the incentive plan as a way to protect the individual cities' distribution systems, including jobs of meter readers and others, says a study commission member, who asked to remain anonymous.
What to do with those systems is one of the toughest political issues in the controversy.
If ElectriCities' members held on to their distribution assets, they would have the money to pay Tilton.
But the cities would probably again have to borrow funds to stay in business, some observers says.
The contract throws a new dynamic into the difficult issue, says Norma Mills, legal counsel to Marc Basnight, president pro tempore of the state senate.
"Everyone on this committee has worked so hard thus far and I hope that these incentives don't compromise Tilton's agenda in acting in the best interest of the industry and citizens he represents," she says.


DO you remember this little controversy?

News and Observer
By Pat Stith

ElectriCities of North Carolina sent 16 board members and executives -
and 15 of their spouses - to a Marriott hotel in Orlando in June 2000
for a three-day conference of the American Public Power Association.
The trip cost ElectriCities $43,889.

Board chairman John T. Walser Jr. defended ElectriCities' long-standing

practice of paying for spouses to attend the conference, saying some
board members wouldn't go otherwise.

"This is a capitalist operation," he said. "If you're gonna play in the

enterprise game, you gotta act like an enterprise. You've gotta be able

to play like Duke and CP&L."

For all its capitalist ambitions, however, ElectriCities is a
government agency - and a financially troubled one at that. The debts
of the municipal power agencies it represents far exceed their assets.
But at times ElectriCities acts like a profitable private company.

The board of directors spends freely on travel, meets often behind
closed doors and pays its members generously. And when ElectriCities
needed someone to handle a half-million-dollar advertising contract, it

hired a firm headed by the husband of one of its top executives.

Five or six years ago, ElectriCities' board meetings were almost always

open to the public.

But when the organization began looking for a way to shift billions of
dollars of debt to customers of Duke Power and CP&L, the board started
meeting more frequently in closed sessions.

Now it goes into executive session so often - several times per meeting

is typical - that the board has adopted a policy of starting each
meeting with an executive session.

Board members who are not directly employed by one of the electric
cities receive $500 a meeting for up to two meetings a month.

By comparison, members of the State Board of Transportation, which
oversees the state's road-building program, get $15 a day.

Longtime board member William H. Batchelor said the $500-per-meeting
payment is a pittance, considering all the hours he works.

"This is a public entity," Batchelor said. "But it's unlike any other
government board you're gonna find anywhere. In the magnitude of what
they manage in terms of the investments, the revenues and the staff."

Franz F. Holscher, another board member and a former chairman, said the

$500 payments help assure attendance.

"We used to have to fight to get a quorum," Holscher said. Now, he
said, attendance is 100 percent at just about every meeting.


Hiring a husband:

Top officials at ElectriCities do not agree on how the organization
hired Mike Davis Public Relations Inc. to run a series of advertising
campaigns costing $496,842 in 1999 and 2000. Mike Davis, president of
the firm, is the husband of Alice D. Garland, director of public
affairs at ElectriCities.

Garland said her division hired her husband's firm.

"Well, actually, I mean, to be technical, Maureen Shields hired Mike
Davis PR, but Maureen worked for me so, yeah, my division hired Mike
Davis PR," said Garland, who is paid $127,957 a year by ElectriCities.

"I just have always just been very aware that there would be folks who
would view having my company, my husband's company, working for us as
being a conflict of interest."

But she added, "I absolutely believe he was hired because he was very
good at what he does and he was absolutely not hired because he's any

ElectriCities CEO Jesse C. Tilton III gave conflicting explanations on
how Davis was hired.

When asked if he saw anything wrong with Garland's division giving the
contract to Davis, he replied: "No, because she didn't award it. Her
division did not award it. That was a board decision. ... I have a
crystal clear recollection."

After Tilton was unable to produce minutes showing when the board voted

to award the contract to Davis or any discussion about hiring the firm,

he offered a new explanation.

In a memo to The News & Observer, Tilton said the board approved the
"concept of the campaign" in a closed meeting on June 10, 1999.

"They were not asked to approve engaging Mike Davis PR because that
consulting firm was already engaged by the organization," Tilton said.

Minutes of the June 10 executive session say nothing about spending a
half-million dollars on an image advertising contract.

ElectriCities also hired a company and directed it to hire Davis to
give his wife public relations advice.

Garland said ElectriCities hired McCorkle Policy Consulting of Durham,
and McCorkle hired Garland's husband. That arrangement was approved by
the board of directors, according to the minutes of a meeting on Jan.
22, 1999.

"We actually had McCorkle engage Mike, basically, so that I hadn't
engaged Mike," Garland said.

Garland said ElectriCities paid McCorkle $122,000 in 1999 and 2000. Of
that amount, she said, McCorkle paid $26,000 to her husband.

She said she talked with the McCorkle team every week or two about how
to handle legislators and how that was going to play in the press.

"When we're talking about, you know, tweaking our position, or changing

our position, you know, they are saying, don't do that, or if you do
it, say it like this," Garland said. "And they're constantly gauging
how we're doing within political circles and telling us what we ought
to be doing. Mike Davis was in on all those calls."

Al Manning, retiree, native of eastern NC and proud of it, plenty of time to read, research and get annoyed about the lack of accountability in elected leaders these days. Married to a real southern lady and we live with two labs and two airedales who run