State oversight for electric cooperatives

A bill passed by the House (H.3145) would subject electric cooperatives to state oversight, increase transparency requirements, and impose basic ethics guidelines for board members.

This would create a major shift in state utility policy, as cooperatives are not currently subject to state oversight. Under this legislation, the Office of Regulatory Staff (ORS) would audit electric cooperatives in order to ensure compliance with the law, and the Public Service Commission would have jurisdiction to resolve disputes between the ORS and the cooperatives. While individuals with complaints can currently appeal to the courts, there is no mechanism in place otherwise to make sure the laws are followed (other than by their ratepayers, who elect the boards).

An audit could be triggered in response to a complaint, or simply upon the initiative of the ORS executive director. Once finished, the ORS would bring forward any issues discovered to the cooperative’s board of trustees. If the two parties are unable to resolve the issues internally, the Public Service Commission would have the final say on the matter. Individuals with complaints would submit them to the ORS, and could only petition the courts if the ORS fails to resolve the issue.

The bill would also implement a number of transparency measures. For example, each cooperative would be required to post on its website a breakdown of board member compensation, including daily per diem amount, compensation for all meetings attended, and food, travel and entertainment expenses paid by companies that have a business relationship with the cooperative. Regular meetings would need to be posted 10 days in advance, while meetings held for the purpose of an election must be posted 30 days in advance.

During emergency meetings, all votes would have to be taken in open session, except for those that relate to employees, contracts, legal advice, and unsurprisingly, economic development.

Finally, it imposes basic ethics rules on board members, similar to those for lawmakers and public officials. This would prohibit board members from using their position to secure an economic gain (other than authorized compensation) or from getting a family member a job with the cooperative.

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While this bill would improve transparency and accountability, it fails to address the root problem – the fact that all power providers enjoy a state-protected monopoly over their service territory.

If electric cooperatives were truly private entities, such regulation would be inappropriate and unnecessary. The problem is that they are not. Customers cannot choose their electric companies, even when reports of abuse and wasteful spending are unearthed. Regulation is a poor substitute for customer choice, as the V.C. Summer fiasco abundantly demonstrated.

True reform means abolishing the energy monopoly itself, rather than simply tweaking the system. The best prices and service are driven by a free market system where customers are empowered to choose their energy provider.

This bill passed the House and the Senate Judiciary Committee, and is now on the Senate floor calendar.