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Scholarly Articles
Electric Co-Operatives: From New Deal to Bad Deal?
Harvard Journal on Legislation
United States Congressman Jim Cooper
45 Harv. J. Leg. 335
Most people who live or work in rural America must buy their electricity from their local co-operative, a unique and largely unregulated type of utility. Electric co-ops are owned by their customers who are called “members.” This Policy Essay by Congressman Jim Cooper focuses on the primary obligation electric co-ops owe their members: “at-cost” service, i.e., the lowest feasible electric bills. To meet this obligation co-ops must provide low electric rates and timely return of equity. They must also reduce the quantity of unneeded electricity purchased. This Essay demonstrates that most distribution co-ops have a financial incentive to sell more electricity, not less. It also shows that co-ops have sought to conceal information from their members—information to which owners are entitled in other business contexts.
America’s 930 electric co-operatives are the sole source of electricity for homes, farms, and businesses for parts of 47 states. Although 66 co-ops also generate and transmit wholesale electricity (“G&Ts”), the 864 distribution co-ops (“co-ops”) simply resell and deliver electricity to retail customers across the crucial “last mile” between the national electric power grid and the co-op members that ultimately use that electricity. Nationwide electrification is considered by engineers to be the greatest accomplishment of the twentieth century. It is hard to imagine life without it.
Editorials
Carroll Electric Cooperative (Arkansas)
1984 revisited?
Open house -- insert sock
The Lovely County Citizen
Friday, July 3, 2009
One of the most dearly held tenets of living in a democracy is that
citizens have a right to speak out. Before major decisions are made,
normally public hearings are held where people speak out, expecting
that their views will be taken into consideration....
It appears Carroll Electric Cooperative Corp. (CECC) has gone one step
farther than the Delphi Technique. Although it is a non-profit,
member-owned cooperative, it doesn't even pretend to operate in a
democratic fashion. Members are not allowed to attend board meetings or
get full minutes of board meetings. Members are not allowed to speak or
ask questions at the annual meeting. And bylaws have been rewritten so
it's virtually impossible for members to nominate someone to the CECC
board or put a resolution before CECC members.
While claiming they are spraying herbicides to save money, CECC
board members (the only ones who get to decide who else is on the
board) are compensated at more than $30,000 per year, and last year
(not a good year for the economy!) handed the CEO a $100,000 per year
pay raise. And a recent lawsuit alleges CEO is hoarding members' money
for "unjust enrichment."
PEDERNALES ELECTRIC COOPERATIVE (Texas)
Many enablers led to indictments in scandal
Austin American-Statesman
Saturday, June 20, 2009
It
took a civil case, a criminal investigation and relentless reporting by
the American-Statesman to shed light on how the ousted leadership of
the Pedernales Electric Cooperative spent ratepayer money.
All of that probing and digging resulted in a civil settlement, a
stack of newspaper articles and now criminal indictments accusing
Bennie Fuelberg, the former PEC general manager, and Walter Demond, the
co-op's longtime legal adviser, of felonies. If convicted, both men are
looking at lengthy prison terms.
Patronage & Capital Credits
Members and Capital Credits
Rural Electric and Telephone Cooperatives belong to the "
Members" who have purchased electric or telephone service from the Coop. This membership interest is based
on Member equity investments known as "
Capital Credits" or sometimes "
Patronage Credits". It has similarities to the ownership of stock in a conventional corporation.
Margins or Profits
Every month when a Member pays the bill for electric or telephone service, the Coop
pays the expenses of providing that service. Any funds left over at the
end of the year are called "Margins" that in a conventional corporation would be "profit". These Margins provide equity for
the Coop and are allocated to the Members in
proportion to their purchases during the year. The Member's share of the Margins
is the member's Capital Credits or Patronage Credits.
Virtually every state law that authorizes the formation of these cooperatives requires them to be operated "
At Cost"
and legally obligate the Coops to either: (i) return the Margins to
the Members or (ii) reduce rates for service to absorb the Margins.
This is
not optional with the Coop and in fact the US Internal
Revenue Code requires cooperatives to operate at cost to be considered
non-profit and avoid taxation of these Margins.