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Customer-owned utilities should be leaders on clean energy. Why do most of them fail to deliver?

map shows territory of Rappahannock Electric Cooperative

The territory of the Rappahannock Electric Cooperative in Virginia, from the coop’s website.

More than one in six Virginia residents gets electricity from a rural electric cooperative rather than a big investor-owned utility like Dominion Energy or Appalachian Power. Co-ops don’t get much attention from clean energy advocates and the press, but that might be a mistake. Co-op members aren’t just customers; they’re owners.

In theory, that should put co-ops at the head of the energy transition.

The current reality is mostly quite different, both in Virginia and nationwide. While a few co-ops have adopted innovative customer-friendly programs, most actively resist change. Here in Virginia, a battle over reform of the Rappahannock Electric Cooperative (REC) shows how difficult it is for co-op members to make their voices heard.

According to the reform group Repower REC, the co-op’s management not only refuses to make changes that would save members money, it actively cuts members out of the decision-making process. Repower REC is endorsing a slate of reform board candidates and proposing amendments to the co-op’s bylaws that would give members the right to fair elections and to obtain basic information about REC’s management and finances.

The lack of transparency and democracy at REC turns out to be a common failing of co-ops. A 2016 report from the Institute for Self-Reliance described three reasons why co-ops are laggards rather than leaders in the energy transition: overreliance on coal, long-term contracts with suppliers and a failure of democracy in governance.

Coal accounts for 75% of energy generated by electric cooperatives nationwide, compared to less than 28% today for all utilities nationally. Worse, failing to see the promise of distributed generation, most co-ops have locked themselves into long-term supply contracts that give them little room for self-generation with solar and wind. Having tied their members to fossil fuels, it’s not surprising that co-op managers don’t want their governance scrutinized too closely.

In fact, stuck with the dirty black stuff, rural electric cooperatives are much more likely than investor-owned utilities to support coal and oppose climate regulations. This may even help explain why rural voters are so much more likely than urban voters to support coal even in non-coal states, and to doubt climate science. Certainly their co-ops, which are supposed to educate consumers about the electric power industry, are not helping to educate them about the realities of climate science.

But according to the Institute’s report, it’s the third reason that holds co-ops back the most. Co-op member-owners have the right to vote but mostly don’t, often because they’re presented with no real choices, and lack basic information needed to cast an informed vote.

A host of other barriers, such as a lack of transparency, and the practice of collecting blank “proxy ballots” that incumbent board members complete as they see fit, ensures the reelection of entrenched board members and their hand-picked successors. Board members pay themselves handsomely for very part-time work, with many staying on boards for decades if not life.

All of these problems are present at REC, according to Repower REC. Seth Heald, a Repower REC founder who’s been an REC member for over a decade, says “the total lack of transparency surrounding the co-op’s board meetings seems designed to keep REC members from knowing whether their board members are well-informed, engaged and advocating for consumers. It also prevents us from learning the extent to which management may exercise control over compliant board members.”

To be fair, other Virginia co-ops show the promise of the member-owned model. The only community solar programs offered in Virginia today are run by coops: BARC in southwest Virginia and Central Virginia Electric Cooperative in the Charlottesville area. BARC also installed solar on all three Bath County schools, putting it way ahead of larger and richer jurisdictions like Fairfax and Loudoun that get power from Dominion.

Virginia co-ops also reached a deal with the solar industry this year designed to ease some of the barriers to rooftop solar, a deal neither Dominion nor APCo would agree to.

But Virginia co-ops haven’t adopted the kinds of aggressive energy efficiency programs that have lowered energy demand and saved money for members of the nation’s most innovative co-ops, such as Roanoke Electric Cooperative in North Carolina and Ouachita Electric Cooperative in Arkansas. In both places, utility financing of efficiency improvements and federal grants from the Department of Agriculture have allowed even very low-income members to pay for insulation and appliance upgrades while simultaneously lowering electric bills.

(Ouachita also installed Arkansas’ largest solar farm in 2017.)

It’s hard to believe more co-ops wouldn’t offer programs like these if they truly had their members’ interests at heart.

REC members will be voting this month on board candidates and Repower REC’s proposed bylaw amendments, using proxy/ballot forms attached to the cover of the July Cooperative Living magazine. Forms must be mailed back in time to arrive by Aug. 19. Members may also vote through REC’s SmartHub online tool by Aug. 19, or in person at the August 22 annual meeting.

Ivy Main's picture

Thank Ivy for the Post!

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Bob Meinetz's picture
Bob Meinetz on Jul 2, 2019 4:45 pm GMT

Ivy, welcome to EnergyCentral.

Why do most customer-owned utilities fail to deliver on clean energy? Probably because most of the customers who own utilities, like most shareholders of big investor-owned utilities, care more about making money or getting electricity on the cheap than generating clean electricity.

It was somewhat predictable - and interesting to see you, after years of railing against Dominion and Appalachian, almost come to their defense.

I think you might be coming to the realization that big investor-owned utilities - when properly regulated - solve a host of problems. Before de-regulation of the 1990s, and particularly before the 2005 repeal of the Public Utility Holding Company Act of 1935 (PUHCA), investor-owned utilities were required to submit their books to the SEC for annual review. They were prohibited from both making campaign donations, and lobbying. They were prohibited from conducting affiliate transactions - buying natural gas or coal from themselves (a shell company set up as a supplier), then billing ratepayers for it as an expense. 

Now they're all doing it with abandon, for the simple reasons it's legal and they can make more money. A lot more.

The big utilities regulated under FERC continue to get more scrutiny, but it's nothing like what they were subjected to under the Securities and Exchange Commission. Then. they were required to act in the public interest, a phrase of deliberately vague legal intent which appears throughout PUHCA. Now, state PUCs under the thumb of fossil fuel interests are partners in crime.

The situation we're in now is reminiscent of the 1920s, when both investor-owned utilities and small electricity co-ops were unregulated, and took advantage of their captive customers. Sound familiar? It's apparently one of those lessons of history we have to learn all over again.

 

Matt Chester's picture
Matt Chester on Jul 2, 2019 5:52 pm GMT

Thanks for the read, Ivy. I also would have anticipated there'd be a certain amount of 'eat your vegetables' mentality to it-- that is to say, customers may know that cleaner energy is better and they should support it, but when presented with the option to pay more to support it they balk; when instead if an authority simply said 'no, you're doing this' then they would adapt and do it. Kind of the same reason I know I should be energy conscious and not waste energy, but the moment I'm in a hotel and the power bill is no longer my responsibility the temptation to blast the AC soars. Do you think there's anything to that in this situation?

Bob Nikon's picture
Bob Nikon on Jul 17, 2019 1:52 am GMT

Hi everyone, thank you for the post. Your post gives me some subject to talk about. That is decentralize our energy structure which is righteous for humans. That means you have full control over all aspects of your life but why are we still failing to have a complete energy transition and still depend mainly on fossil fuels. No matter what. We don't use our own energy to attain what we want in life like animals. We outsource energy from some things that are compatible with our energy needs and we have such a brain to match. That leads us to stay on and build up codependency on fossil fuels in different forms( liquid, solid or gas). They are the ones to give us compatiblity. That is the only reason for this codependency. There is nothing anybody can do to change this. At the mean time, all of the renewable ones that you've mentioned as the alternative are non-compatible with our energy needs. I call this "entrapment for humankind" If we go on this route there will never be any complete energy transition as long as we exist. unless we come up with brand new perspective to pull it off. Just like Albert Einstein has said" problem can be resolved only by the level of cognizance higher than the one that created it"

   I will have a lot more to talk about it. Just follow me.

 

 

 

Matt Chester's picture
Matt Chester on Jul 17, 2019 11:19 am GMT

Interesting take, Bob. The idea that we're co-dependent and created a 'trap' for ourselves with fossil fuels is something I've seen before-- such as how some anxiety over switching from gas cars to EVs is because it forces us to reevaluate and reframe how we think about driving, 'filling up' at gas stations, etc. 

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